UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

For the Quarter Ended March 31, 20162018

OR

For the Transition Period From _______to ________

Commission File Number:333-173048001-38106

PLYMOUTH INDUSTRIAL REIT, INC.

(Exact name of registrant as specified in its charter)

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 ☑   NO☐

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files). YES  ☑☐    NO  ☐☑

Indicate by check mark whether the Registrantregistrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of "large“large accelerated filer," "accelerated filer"” “accelerated filer,” “smaller reporting company,” and "smaller reporting company"“emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

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 Exchange Act Rule 12b-2). YES  ☐    NO  ☑

As of May 1, 20163, 2018 the Registrant had outstanding 1,327,8593,556,043 shares of common stock.

PLYMOUTH INDUSTRIAL

Plymouth Industrial REIT, INC.

Inc.

INDEX TO QUARTERLY REPORT ON FORM 10-Q

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

PLYMOUTH INDUSTRIAL REIT, INC.

UNAUDITEDCONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share amounts)

The accompanying notes are an integral part of the condensed consolidated financial statements.

PLYMOUTH INDUSTRIAL REIT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

UNAUDITED

(in thousands, except share and per share amounts)

The accompanying notes are an integral part of the condensed consolidated financial statements.

PLYMOUTH INDUSTRIAL REIT, INC.

UNAUDITEDCONDENSED CONSOLIDATED STATEMENTSSTATEMENT OF OPERATIONSCHANGES IN PREFERRED STOCK AND EQUITY (DEFICIT)

UNAUDITED

(In thousands, except share and per share amounts)

The accompanying notes are an integral part of the condensed consolidated financial statements.

PLYMOUTH INDUSTRIAL REIT, INC.

UNAUDITEDCONDENSED CONSOLIDATED STATEMENTSTATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)CASH FLOWS

UNAUDITED

(In thousands, except share and per share amounts)

The accompanying notes are an integral part of the condensed consolidated financial statements.

PLYMOUTH INDUSTRIAL REIT, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

The accompanying notes are an integral part of the consolidated financial statements.

Plymouth Industrial REIT, Inc.

Notes to Condensed Consolidated Financial Statements
Unaudited

Unaudited

(all dollar amounts in thousands, except share and per share data)

(1)1. Nature of the Business and LiquidityBasis of Presentation

Business

Plymouth Industrial REIT, Inc., (the “Company” or the “REIT”) is a Maryland corporation formed on March 7, 2011. The Company is a full service, vertically integrated, self-administered and self-managed organization. The Company is focused on the acquisition, ownership and management of single and multi-tenant Class B industrial properties, including distribution centers, warehouses and light industrial properties, primarily located in secondary and select primary markets across the Eastern half of the U.S.  and Texas.  All references to “the Company” refer to Plymouth Industrial REIT, Inc. and its subsidiaries, collectively, unless the context otherwise requires.  Our subsidiaries consist principally of our Operating Partnership, a wholly owned subsidiary, Plymouth Industrial OP, LP (the “Operating Partnership”), and special purpose wholly-owned subsidiaries of our Operating Partnership for each of the acquired properties.

The Company has operated in a manner that will allow it to qualify as a REIT for federal income tax purposes. The Company filed its initial Form 1120-REIT as its tax return for the tax year ended December 31, 2012. The Company utilizes an Umbrella Partnership Real Estate Investment Trust (“UPREIT”) organizational structure to hold all or substantially all of its properties and securities through an Operating Partnership.

Liquidity and Going Concern

As of March 31, 2016,2018, the Company had an accumulated deficit ofthrough its subsidiaries owns 49 industrial properties comprising approximately $87,835 and had limited amounts of available liquidity evidenced by our cash position of $925. The Company continues to maintain arrangements with certain of its vendors to limit future expenses related to certain professional services.9.2 million square feet.

The Company derivescompleted its initial public offering (IPO) of common stock (Offering) on June 14, 2017, which resulted in the capital required to purchaseissuance of 3,060,000 shares of common stock, including 160,000 shares of the underwriters’ over-allotment exercised on July 12, 2017, at $19.00 per share in exchange for gross proceeds of $58,140 and originate real estate-related investments and conduct our operations$52,559, net of offering costs. The Company utilized a portion of the proceeds from the proceedsOffering to redeem $20,000 of $25,000 non-controlling interest held by Torchlight. The Company issued 263,158 shares at $19.00 per share issued in a private placement with Torchlight, which occurred contemporaneously with the Offering, for the redemption of the remaining $5,000 non-controlling interest.

On March 29, 2018, the Company repurchased and retired the 263,158 shares of common stock owned by our investor Torchlight in a privately negotiated transaction of $19 per share, or, $5 million in the aggregate. In conjunction with the repurchase, we amended the Stockholders Agreement to terminate all rights under the agreement other than customary registration rights related to shares of our prior offering, from secured financings from banks and other lenders and from any undistributed funds from our operations. On October 28, 2014,common stock that may be issued upon the Company entered into a loan agreement (the “Senior Loan”) with third party investment entities. The Senior Loan as described in Note (4) provided for secured loans in an aggregate amount up to $192,000, with cash funding amounts through March 31, 2016 of $165,000 and $20,000 of original issue discount. The Company used $155,000exercise of the net proceeds to acquire 20 industrial properties totaling approximately four million square feet, and additional net proceeds were utilized to repay former indebtedness, to pay fees and expenses and for working capital purposes.warrants held by the Torchlight Entities. (see Note 5).

The Senior Loan bears interest at a current pay rate equal to 7% per annum, coupled with payment-in-kind features with respect to the remaining interest at varying rates. The loans initially matured on April 28, 2015, and have been extended to February 29, 2016. The Company’s obligations under the Senior Loan are also guaranteed by Plymouth Industrial REIT, Inc. and each of our Operating Partnership’s subsidiaries.

As of February 9, 2016, the loan was transferred to a new entity, “Holder” and as of February 29, 2016, the Company was unable to pay the full amount of the loans due. The Company and Holder entered into a forbearance agreement acknowledging the default under the loan for non-payment in full at maturity and providing for a forbearance of action through April 30, 2016. On April 29, 2016 the forbearance agreement was extended by the Company and Holder to May 30, 2016. During this period, the Company will seek to restructure the loan, obtain alternative debt, additional equity or other capital.

The Company’s ability to meet its working capital needs and repay its borrowings under the Senior Loan is dependent on its ability to restructure the Senior Loan, issue additional equity or secure additional debt financing. There is no assurance, however, that additional debt or other forms of capital will be available to the Company, or on terms acceptable to the Company.

These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Plymouth Industrial REIT, Inc.
Notes to Consolidated Financial Statements
Unaudited

(2) Significant Accounting Policies

It is suggested that theseaccompanying condensed consolidated financial statements be read in conjunction withinclude the consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-Kfollowing entities:

* See note 7 for the fiscal year ended December 31, 2015. There have been no material changes in the accounting policies followed by the Company during the current fiscal year.discussion of non-controlling interests.

Basis of Presentation

These interimThe Company’s condensed consolidated financial statements include its financial statements, and those of its wholly-owned subsidiaries and controlling interests. All intercompany accounts and transactions have been eliminated in consolidation.

These interim condensed consolidated financial statements include the accounts of the Company and have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”("GAAP"). All significant intercompany transactions have been eliminated in consolidation. These interim condensed consolidated financial statements include adjustments of a normal and recurring nature considered necessary by management to fairly present the Company’sCompany's financial position and results of operations. TheThese interim consolidated financial statements include the accounts of the Company on a consolidated basis for its wholly owned subsidiaries. These interimcondensed consolidated financial statements may not be indicative of the financial results for the full year. It is suggested that these interim condensed consolidated financial statements and notes thereto should be read in conjunction with the Company's audited consolidated financial statements and the notes thereto for the years ended December 31, 2017 and 2016 included in the Company’s Form 10-K as filed March 8, 2018.

Income TaxesUse of Estimates

The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Management makes significant estimates regarding the allocation of tangible and intangible assets or business acquisitions, impairments of long-lived assets, stock-based compensation and its common stock warrant liability. These estimates and assumptions are based on management’s best estimates and judgment. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment. Management adjusts such estimates when facts and circumstances dictate. As future events and their effects cannot be determined with precision, actual results could differ from those estimates and assumptions.

Plymouth Industrial REIT, Inc.

Notes to Condensed Consolidated Financial Statements

Unaudited

(all dollar amounts in thousands, except share and per share data)

1. Nature of the Business and Basis of Presentation (continued)

Risks and Uncertainties

The state of the overall economy can significantly impact the Company’s operational performance and thus impact its financial position.  Should the Company electedexperience a significant decline in operational performance, it may affect the Company’s ability to make distributions to its stockholders, service debt, or meet other financial obligations.

Liquidity and Going Concern

The accompanying condensed consolidated financial statements have been prepared on a basis which assumes that the Company will continue as a going concern and which contemplates the realization of assets and the satisfaction of liabilities and commitments in the ordinary course of business.

The Company believes the cash on hand at March 31, 2018, available borrowings under its line of credit and cash expected to be taxed as a real estate investment trust (“REIT”) underprovided by future operating activities will provide sufficient liquidity for it to operate through at least twelve months from the Internal Revenue Codefiling of 1986, as amended, and has operated as such beginning with its tax year endingthis Form 10-Q.

2. Summary of Significant Accounting Policies

The accounting policies underlying the accompanying unaudited condensed consolidated financial statements are those set forth in the Company's audited financial statements for the years ended December 31, 2012. To qualify as a REIT,2017 and 2016. Additional information regarding the Company must meet certain organizational and operational requirements, including a requirement to distribute at least 90% of its annual REIT taxable income to stockholders (which is computed without regardCompany’s significant accounting policies related to the dividends-paid deduction or net capital gain and which does not necessarily equal net incomeaccompanying interim financial statements is as calculated in accordance with GAAP). As a REIT, the Company generally will not be subject to federal income tax on income that is distributed as dividends to the Company’s stockholders. If the Company fails to qualify as a REIT in any tax year, it will be subject to federal income tax on its taxable income at regular corporate income tax rates and generally will not be permitted to qualify for treatment as a REIT for federal income tax purposes for the four taxable years following the year during which qualification is lost, unless it is able to obtain relief under certain statutory provisions. Such an event could materially and adversely affect the net income and net cash available for distribution to stockholders. The Company intends to continue to be organized and operate in such a manner as to qualify for treatment as a REIT.follows:

Segments

The Company has one reportable segment–industrial properties.  These properties have similar economic characteristics and also meet the other criteria that permit the properties to be aggregated into one reportable segment.

Business CombinationsRevenue Recognition and Tenant Receivables and Rental Revenue Components

In accordance with Financial Accounting Standards Board, (FASB), ASC 805-10 “Business Combinations”,Minimum rental income from real estate operations is recognized on a straight-line basis.  The straight-line rent calculation on leases includes the assetseffects of rent concessions and liabilities acquired are recorded at their fair values asscheduled rent increases, and the calculated straight-line rent income is recognized over the lives of the acquisition date. Acquisition related costsindividual leases.  The Company maintains allowances for doubtful accounts receivable and straight-line rents receivable, based upon estimates determined by management.  Management specifically analyzes aged receivables, tenant credit-worthiness and current economic trends when evaluating the adequacy of the allowance for doubtful accounts. At March 31, 2018 and December 31, 2017 the Company did not recognize an allowance for doubtful accounts. The Company did not have any bad debt expense or write-offs during the three months ended March 31, 2018 and 2017.

For the three months ended March 31, 2018 and 2017, rental income was derived from various tenants. As such, future receipts are recognized as expensedependent upon the financial strength of the lessees and their ability to perform under the lease agreements.

For the three months ending March 31, 2018 there were no tenants that represented 10% or greater of rental revenue. For the three months ended March 31, 2017, there were two tenants, Pier One and Perseus, who represented 10% or greater of rental revenue at 12.7% and 10%, respectively.

Rental revenue and tenant recoveries is comprised of the following:

Cash Equivalents and Restricted Cash

The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. There were no cash equivalents at March 31, 2018 and December 31, 2017. The Company maintains cash and restricted cash, which includes tenant security deposits and cash collateral for its borrowings discussed in Note 4, cash held in escrow for real estate tax, insurance and tenant capital improvement and leasing commissions, in bank deposit accounts, which at times may exceed federally insured limits. As of March 31, 2018, the periodsCompany has not realized any losses in which incurred.such cash accounts and believes it is not exposed to any significant risk of loss.

Plymouth Industrial REIT, Inc.

Notes to Condensed Consolidated Financial Statements
Unaudited

Unaudited

(all dollar amounts in thousands, except share and per share data)

2. Summary of Significant Accounting Policies (continued)

The accounting for business combinations requires estimatesfollowing table presents a reconciliation of cash, cash equivalents and judgment asrestricted cash reported within our condensed consolidated balance sheet to expectations for futureamounts reported within our condensed consolidated statement of cash flowsflows:

Fair Value of the acquired business, the allocation of those cash flows to identifiable intangible assets, andFinancial Instruments 

The Company applies various valuation approaches in determining the estimated fair value forof its financial assets acquired and liabilities assumed. The amounts allocated to lease intangibles (leaseswithin a hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that observable inputs be used when available. Observable inputs are inputs that market participants would use in place, leasing commissions, tenant relationships, and above and below market leases) arepricing the asset or liability based on management’s estimatesmarket data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the inputs that market participants would use in pricing the asset or liability and assumptions,are developed based on the best information available in the circumstances. The fair value hierarchy is broken down into three levels based on the source of inputs as follows:

Level 1— Quoted prices for identical instruments in active markets.

Level 2— Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.

Level 3— Significant inputs to the valuation model are unobservable.

The availability of observable inputs can vary among the various types of financial assets and liabilities. To the extent that the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for financial statement disclosure purposes, the level in the fair value hierarchy within which the fair value measurement is categorized is based on the lowest level input that is significant to the overall fair value measurement. Level 3 inputs are applied in determining the fair value of warrants to purchase common stock in the amount of $112 at March 31, 2018. See Note 5.

Financial instruments include cash, restricted cash, cash held in escrow and reserves, accounts receivable, senior secured debt, mezzanine debt to investor and deferred interest, line of credit, accounts payable and accrued expenses and other current liabilities. The values of these financial instruments approximate their fair value due to their relatively short maturities and prevailing interest rates.

Debt Issuance Costs

Debt issuance costs are reflected as a reduction to the respective loan amounts in the form of a debt discount. Amortization of this expense is included in interest expense in the condensed consolidated statements of operations.

Debt issuance costs amounted to $6,740 and $6,475 at March 31, 2018 and December 31, 2017, respectively, and related accumulated amortization amounted to $1,368 and $982 at March 31, 2018 and December 31, 2017, respectively. Unamortized debt issuance costs amounted to $5,372 and $5,493 at March 31, 2018 and December 31, 2017, respectively.

Stock Based Compensation

The Company grants stock based compensation awards to our employees and directors typically in the form of restricted shares of common stock.  The Company accounts for its stock-based employee compensation in accordance with ASU 2016-09, Compensation— Stock Compensation Improvements to Employee Share-Based Payment Accounting.  The Company measures stock-based compensation expense based on the fair value of the awards on the grant date and recognizes the expense ratably over the vesting period. Forfeitures of unvested shares are recognized in the period the forfeiture occurs.

Comprehensive Loss

Comprehensive loss includes net loss as well as other information compiled by management, including independent third party analysis and market data and are generally amortized over the remaining life of the related leases excluding renewal options, except in the case of below market fixed rate rent amounts, which are amortized over the applicable renewal period.

Depreciation

Depreciation of buildings and other improvements is computed using the straight-line method over the estimated remaining useful lives of the assets, which generally range from 11 to 34 years for buildings and 3 to 13 years for site improvements.  Building improvements are capitalized, while maintenance and repair expenses are charged to expense as incurred.  Significant renovations and improvements that improve or extend the useful life of the assets are capitalized.

Amortization of Deferred Lease Intangibles - Assets and Liabilities

Deferred lease intangible assets consist of leases in place, leasing commissions, tenant relationships, and above market leases. Deferred lease intangible liabilities represent below market leases. These intangibles have been recorded at their fair market value in connection with the acquisition of properties. Intangible assets are generally amortized over the remaining life of the related leases excluding renewal options, except in the case of below market fixed rate rent amounts, which are amortized over the applicable renewal period.

Impairment of Long-Lived Assets

The Company assesses the carrying values of its respective long-lived assets whenever events or changes in circumstances indicateequity (deficit) that the carrying amounts of these assets may not be fully recoverable.

Recoverability of real estate assets is measured by comparison of the carrying amount of the asset to the estimated future undiscounted cash flows. In order to review our real estate assets for recoverability, the Company considers current market conditions, as well as our intentresult from transactions and economic events other than those with respect to holding or disposing of the assets. Our intent with regard to the underlying assets might change as market conditions change, as well as other factors. Fair value is determined through various valuation techniques, including discounted cash flow models, applying a capitalization rate to estimatedmembers. There was no difference between net operating income of a propertyloss and quoted market values and third-party appraisals, where considered necessary. If the Company’s analysis indicates that the carrying value of the real estate asset is not recoverable on an undiscounted cash flow basis, the Company recognizes an impairment chargecomprehensive loss for the amount by which the carrying value exceeds the current estimated fair value of the real estate property. The Company has determined there is no impairment of value of long lived assets atperiods ended March 31, 2016 or December 31, 2015.2018 and 2017.

Plymouth Industrial REIT, Inc.

Notes to Condensed Consolidated Financial Statements
Unaudited

Unaudited

(all dollar amounts in thousands, except share and per share data)

2. Summary of Significant Accounting Policies (continued)

Earnings per Share

BasicThe Company follows the two-class method when computing net loss per common share as the Company has issued shares that meet the definition of participating securities. The two-class method determines net loss per share is calculated by dividing net loss by the weighted-average sharesfor each class of common stock outstanding duringand participating securities according to dividends declared or accumulated and participation rights in undistributed earnings. The two-class method requires income available to common stockholders for the period.period to be allocated between common and participating securities based upon their respective rights to receive dividends as if all income for the period had been distributed. Diluted net loss per share is the same as basic net loss per share assince the Company does not have any common stock equivalents such as stock options. The Company haswarrants are not granted any stock options or stock based awards under its 2014 Incentive Award Plan.included in the computation of diluted net loss per share as they are anti-dilutive for the periods presented.

Financial Instruments

The Company estimates that the carrying value of cash, restricted cash, senior debt and deferred interest approximates their fair values based on their short term maturity and prevailing interest rates.

RecentRecently Adopted Accounting Pronouncements

The Company has evaluated all ASUs released by the FASB through the date the financial statements were issued and determined that the following ASUs apply to the Company.

In AugustOn May 28, 2014, the FASB issued ASU 2014-15, Disclosure2014-09, Revenue from Contracts with Customers (“ASC 606”). ASC 606 establishes principles for reporting the nature, amount, timing and uncertainty of Uncertainties Aboutrevenues and cash flows arising from an Entity’s Ability to Continue as a Going Concern, which provides guidance on determining when and how to disclose going concern uncertainties inentity’s contracts with customers. The core principle of the financial statements. The new standard requires managementis that an entity recognizes revenue to perform interimrepresent the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The FASB subsequently issued additional ASUs which provide practical expedients, technical corrections and annual assessments of an entity’s ability to continue as a going concern within one yearclarification of the date the financial statements are issued.  An entity must provide certain disclosures if conditions or events raise substantial doubt about the entity’s ability to continue as a going concern. The standard applies to all entities andnew standard. ASC 606 is effective for annual reporting periods, endingincluding interim reporting periods within those periods, beginning after December 15, 2017. ASC 606 permits the use of either the full retrospective transition method or a modified retrospective transition method.

We adopted ASC 606 on January 1, 2018 and elected to use the modified retrospective method. As part of our assessment and implementation of ASC 606, we evaluated each of our revenue streams to determine the sources of revenue that are impacted by ASC 606. We evaluated the impact of ASC 606 on the timing and pattern of revenue recognition and determined there was no change as compared to current accounting practice.

In August 2016, the FASB issued Accounting Standards Update No. 2016-15, Classification of Certain Cash Receipts and interim periods thereafter, with early adoption permitted.Cash Payments (“ASU 2016-15”).  ASU 2016-15 is intended to clarify guidance on the classification of certain cash receipts and payments in the statement of cash flows and to eliminate the diversity in practice related to such classifications.  The Company is evaluating the effect that ASU 2014-15 willadopted this pronouncement effective January 1, 2018 and its adoption did not have a material impact on its consolidated financial statements and related disclosures.statements. 

In JanuaryNovember 2016, the FASB issued ASU 2016-01, Financial Instruments – Overall: Recognition2016-18, Statement of Cash Flows (Topic 230) - Restricted Cash (“ASU 2016-18”).  ASU 2016-18 requires a statement of cash flows to explain the change during the period in the total of cash, cash equivalents, and Measurementamounts generally described as restricted cash or restricted cash equivalents.  Amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of- period total amounts shown on the statement of Financial Assetscash flows.  The Company adopted ASU 2016-18 as of January 1, 2018 and Financial Liabilities.has reflected the adoption retrospectively to all periods presented. The Company’s statements of cash flows include restricted cash with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on such statements.

In May 2017, the FASB issued ASU 2016-01 requires equity investments (except those accounted2017-09, “Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting” (“ASU 2017-09”), which clarifies when to account for undera change to the equity methodterms or conditions of a share-based payment award as a modification. The new standard does not change the accounting or thosefor modifications but clarifies that result in consolidation of the investee) tomodification accounting guidance should only be measured at fair value with changes in fair value recognized in net income, requires public business entities to use the exit price notion when measuringapplied if the fair value, vesting conditions, or classification of financial instruments for disclosure purposes, requires separate presentationthe award changes as a result of financial assets and financial liabilities by measurement category and form of financial asset, and eliminates the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost. ASU 2016-01change in terms or conditions. The new standard is effective for fiscal years, and interim periods within, beginning after December 15, 2017. Early adoption is permitted. A reporting entity must apply the amendments in the ASU prospectively to an award modified on or after the adoption date. The Company adopted ASU 2017-09 as of the required effective date of January 1, 2018 and its adoption did not have a material impact on the Company’s financial statements. The adoption of ASU 2017-09 will have an impact on the accounting for the modification of stock-based awards, if any, to the extent stock-based awards are modified.

In January 2017, the FASB issued ASU 2017-01Business Combinations (Topic 805) Clarifying the Definition of a Business. The ASU clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. Key differences between business combinations and asset acquisitions include: Transaction costs are capitalized in an asset acquisition but expensed in a business combination. Identifiable assets, liabilities assumed and any non-controlling interests are generally recognized and measured as of the acquisition date at fair value in a business combination, but are measured by allocating the cost of the acquisition on a relative fair value basis in an asset acquisition. Public business entities should apply the amendments to annual periods beginning after December 15, 2017, including interim periods within those fiscal years.periods. Early applicationadoption is permitted. The Company is currently assessingearly adopted ASU 2017-01 for acquisitions subsequent to June 30, 2017. There were $304 in acquisition costs capitalized for the potential impact thatthree months ending March 31, 2018 relating to the adoptionacquisitions in Note 11.

Plymouth Industrial REIT, Inc.

Notes to Condensed Consolidated Financial Statements

Unaudited

(all dollar amounts in thousands, except share and per share data)

2. Summary of ASU 2016-01 will have on its consolidated financial statements.Significant Accounting Policies (continued)

Recently Issued Accounting Pronouncements

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842)(“ASU 2016-02”), which requires that a lessee to recognize the assets and liabilities that arise from operating leases. A lessee should recognize inon the balance sheet for operating leases and changes many key definitions, including the definition of a liability to makelease. The update includes a short-term lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying assetexception for the lease term. For leases with a term of 12 months or less, in which a lessee is permitted tocan make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. In transition, lesseesLessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. The modified retrospective approach includes a number of optional practical expedients that entities may elect to apply as well as transition guidance specific to nonstandard leasing transactions. The new standard requires lessors to account for leases using an approach that is substantially equivalent to existing guidance for sales-type leases, direct financing leases and operating leases. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, includingand interim periods within those fiscal years. Early adoptionThe Company is permitted. Thecurrently evaluating the impact the adoption of ASU 2016-02 will have on the Company’s financial position or results of operations, and plans to adopt this standard effective January 1, 2019.

At March 31, 2018, we have one office space lease that will require us to measure and record a right-of-use asset and a lease liability upon adoption of the standard. The Company is in the process of evaluating the impact of this pronouncement on our condensed consolidated financial statements.

Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on the Company’s consolidated financial position or results of operations.

Plymouth Industrial REIT, Inc.
Notes to Consolidated Financial Statements
Unauditedstatements.

(3) Investments in3. Real Estate Joint VenturesProperties

The Company, through its Operating Partnership, hasReal estate properties consisted of the following investments in real estate joint ventures, which are accounted for on the equity method of accounting based on significant influence over the entitiesat March 31, 2018 and lack of control over the entities:December 31, 2017:

The Company performed an analysis to determine whether or not these entities represent variable interest entities (“VIE”s),Depreciation expense was $3,815 and if the Company is the primary beneficiary (“PB”) of the VIEs.

The Company concluded that CHCR II was a VIE. The Company determined that it was not the PB of the VIE as the Company did not have the ability to make decisions over the activities that most significantly impacted the performance of CHCR II. The Company accounted for the CHCR II investment as an equity method investment through the date of liquidation of its investment.

The Company concluded that 5400 FIB is not a VIE. The Company accounts for the 5400 FIB investment as an equity method investment.

A condensed summary of results of operations of the real estate joint ventures is as follows:

Distributions amounted to $49 and $13,$1,888 for the three months ended March 31, 20162018 and 2015,2017, respectively.

Management4. Borrowing Arrangements

The Company’s secured mortgage debt, net of the Company monitors the financial positionunamortized debt issuance costs, is as follows:

$120,000 AIG Loan

Certain indirect subsidiaries of the Company’s joint venture partners. To the extent that management of the Company determines that a joint venture partner has financial or liquidity concerns, management will evaluate all actions and remedies available to the Company under the applicable joint venture agreement to minimize any potential adverse implications to the Company.

Plymouth Industrial REIT, Inc.
Notes to Consolidated Financial Statements
Unaudited

(4) Senior Debt

On October 28, 2014, the Company, itsour Operating Partnership and certain subsidiaries of its Operating Partnershiphave entered into a senior secured loan agreement (Senior Loan) with investment entities or the Funds, managed by Senator Investment Group LP. The Senior Loan was a $192,000 facility with $71,000 designated as Tranche A, $101,000 designated as Tranche B and $20,000 designated as Tranche C and the deemed original issue discount.AIG Asset Management (the “AIG Loan”).

The Company has borrowed $69,200 under Tranche A and $95,800 under Tranche B for a totalAs of $165,000. At March 31, 20162018 and December 31, 2015,2017, there was $165,000$120,000 of indebtedness outstanding under the SeniorAIG Loan. The AIG Loan bears interest at 4.08% per annum and $20,000has a seven-year term maturing in October, 2023. The AIG Loan provides for monthly payments of fully amortized original issue discount, which had been accreted overinterest only for the initial termfirst three years of the Senior Loan. Additionally, Payment-in-Kind (PIK)term and thereafter monthly principal and interest payments based on a 27-year amortization period.

The borrowings under the AIG Loan are secured by first lien mortgages on the 20 LLC properties. The obligations under the AIG Loan are also guaranteed in certain circumstances by our Company and certain of our Operating Partnership’s wholly-owned subsidiaries.

The AIG Loan agreement contains customary representations and warranties, as well as affirmative and negative covenants. The negative covenants include restrictions on additional indebtedness, restrictions on liens, fundamental changes, dispositions, restricted payments, change in nature of business, transactions with affiliates and burdensome agreements. The AIG Loan contains financial covenants that require minimum liquidity and Net Worth. The AIG Loan is also accretedsubject to debt. Accordingly, there was $199,500 and $196,800acceleration upon certain specified events of Senior Loans, outstandingdefaults, including breaches of representations or covenants, failure to pay other material indebtedness, failure to pay taxes or a change of control of our company, as defined in the senior secured loan agreement. The Company is in compliance with the respective covenants at March 31, 20162018. The Company has no right to prepay all or any part of the AIG Loan before November 1, 2019. Following that date, the AIG Loan can only be paid in full, and a prepayment penalty would be assessed, as defined in the agreement.

Plymouth Industrial REIT, Inc.

Notes to Condensed Consolidated Financial Statements

Unaudited

(all dollar amounts in thousands, except share and per share data)

4. Borrowing Arrangements (continued)

The borrowings amounted to $116,729 and $116,700, net of $3,271 and $3,300 of unamortized debt issuance costs at March 31, 2018 and December 31, 2015,2017, respectively. There was

MWG Portfolio Secured Term Loan

On November 30, 2017, certain of our indirect subsidiaries entered into a loan agreement, the MWG Loan Agreement, with Special Situations Investing Group II, LLC, as lender and agent, which provides for a loan of $79,800, bearing interest for the first year at a rate per annum equal to LIBOR plus 3.10% and for the second year at a rate per annum equal to LIBOR plus 3.35%. The MWG Loan Agreement matures in November, 2019 and has one, 12-month extension option, subject to certain conditions. The borrowings under the MWG Loan Agreement are secured by first lien mortgages on the 15 properties held by wholly-owned subsidiaries of Plymouth MWG Holdings LLC. In addition, the obligations under the Loan Agreement are guaranteed in certain circumstances by the company and certain of our operating partnership’s wholly-owned subsidiaries.

The MWG Loan Agreement contains customary affirmative and negative covenants for credit facilities of this type, including limitations with respect to indebtedness, liens, investments, distributions, mergers and acquisitions, dispositions of assets and transactions with affiliates. The MWG Loan Agreement also $15,696contains financial covenants that require the borrowers to maintain a minimum ratio of net cash flow (less management fees) to the outstanding principal balance under the loan agreement of at least 9.0%. In the event of a default by the Borrowers, the agent may declare all obligations under the MWG Loan Agreement immediately due and $8,081payable and enforce any and all rights of deferred interest payable outstandingthe lender or the agent under the MWG Loan Agreement and related documents. The Company is in compliance with the respective covenants at March 31, 20162018.

Borrowings outstanding amounted to $78,871 and $78,731, net of $929 and $1,069 of unamortized debt issuance costs at March 31, 2018 and December 31, 2015,2017, respectively.

The SeniorCompany also has the following borrowing arrangements:

$30,000 Mezzanine Loan initially matured on April 28, 2015, and was extended to February 29, 2016. On February 9, 2016, the holders of the Senior Loan sold the Senior Loan to a new entity, “Holder”. On February 29, 2016, the Company and the Holder

20 LLC has entered into a forbearancemezzanine loan agreement wherebywith Torchlight as partial payment of its prior Senior Loan. The Mezzanine Loan has an original principal amount of $30,000, and bears interest at 15% per annum, of which 7% percent is paid currently during the Company acknowledged its inabilityfirst four years of the term and 10% is paid for the remainder of the term, and matures in October, 2023. Unpaid interest accrues and is added to repay the amounts dueoutstanding principal amount of the loan. The Mezzanine Loan requires borrower to pay a prepayment premium equal to the difference between (1) the sum of 150% of the principal being repaid (excluding the accrued interest) and (2) the sum of the actual principal amount being repaid and current and accrued interest paid through the date of repayment. This repayment feature operates as a prepayment feature since the difference between (1) and (2) will be zero at maturity on February 29, 2016maturity.

As additional consideration for the Mezzanine Loan, 20 LLC granted Torchlight under the loan, which represented an eventMezzanine Loan, a profit participation in the form of default,the right to receive 25% of net income and the Holder agreed to a forbearance of action through April 30, 2016. On April 29, 2016, the forbearance agreement was extendedcapital proceeds generated by the Company Portfolio following debt service payments and Holder to May 30, 2016.

During this forbearance period,associated costs (the “TL Participation”). The TL Participation was terminated as of June 14, 2017 in consideration of the Company will seekissuing warrants to restructureTorchlight to acquire 250,000 shares of the loan, obtain alternativeCompany’s common stock at a price of $23.00 per share. The warrants have a five-year term and are more fully discussed in Note 5. The profit participation was zero for the three months ended March 31, 2018 and the year ended December 31, 2017.

The borrowings under the Mezzanine Loan are secured by, among other things, pledges of the equity interest in 20 LLC and each of its property-owning subsidiaries.

Borrowings under the Mezzanine Loan amounted to $29,330 and $29,364, net of $670 and $636 of unamortized debt additional equityissuance costs at March 31, 2018 and December 31, 2017, respectively.

Deferred interest amounted to $1,575 and $1,357 at March 31, 2018 and December 31, 2017, respectively, and is presented separately in the condensed consolidated balance sheets.

Line of Credit Agreement

On August 11, 2017 the Company’s operating partnership entered into a secured line of credit agreement (Line of Credit Agreement) with KeyBank National Association, or KeyBank and the other capital. The relevantlenders, which matures in August 2020 with an optional extension through August 2021, subject to certain conditions. Borrowings under the Line of Credit Agreement bear interest at either (1) the base rate (determined from the highest of (a) KeyBank’s prime rate, (b) the federal funds rate plus 0.50% and (c) the one month LIBOR rate plus 1.0%) or (2) LIBOR, plus, in either case, a spread between 250 and 300 basis points depending on our total leverage ratio.

On March 8, 2018, the Company entered into an Increase Agreement to our credit agreement with KeyBank National Association, or the KeyBank Credit Agreement, to increase our revolving credit facility to $45,000. All other terms of the borrowing arrangement are as follows:KeyBank Credit Agreement remained unchanged.

Plymouth Industrial REIT, Inc.

Notes to Condensed Consolidated Financial Statements

Unaudited

(all dollar amounts in thousands, except share and per share data)

4. Borrowing Arrangements (continued)

The Line of Credit Agreement requires the Company to maintain certain coverage and leverage ratios and certain amounts of minimum net worth as well meet certain affirmative and negative covenants for credit facilities of this type, including limitations with respect to use of proceeds, indebtedness, liens, investments, distributions, mergers and acquisitions, dispositions of assets and transactions with affiliates. The Company is in compliance with all covenants at March 31, 2018, except for the distributions covenant per Section 8.7 of the Line of Credit Agreement. KeyBank has provided a waiver for the distributions covenant for March 31, 2018. The Line of Credit Agreement is secured by certain assets of the Company’s operating partnership and certain of its subsidiaries and includes a Company’s guarantee for the payment of all indebtedness under the Line of Credit Agreement. Borrowings outstanding amounted to $22,823 and $20,837, net of unamortized debt issuance costs of $502 and $488 at March 31, 2018 and December 31, 2017, respectively. Borrowings available under the Line of Credit Agreement amounted to $10,435, net of a letter of credit totaling $93, at March 31, 2018.

5. Common Stock

Common Stock Warrants

On June 14, 2017, the Company issued warrants to Torchlight to acquire 250,000 shares of the Company’s common stock at a strike price of $23.00 per share, which expire in 2022.

The warrants were accounted for as a liability on the accompanying condensed consolidated balance sheet as they contain provisions that are considered outside of the Company’s control, such as the holders’ option to receive cash in lieu and other securities in the event of a reorganization of the Company’s common stock underlying such warrants. The fair value of these warrants is re-measured at each financial reporting period with any changes in fair value recognized as a change in fair value of warrant liability in the accompanying condensed consolidated statements of operations.

A roll-forward of the common stock warrants is as follows:

8. Incentive Award Plan

In April 2014, the Company’s Board of Directors adopted, and in June 2014 the Company’s stockholders approved, the 2014 Incentive Award Plan, or Plan, under which the Company may grant cash and equity incentive awards to eligible service providers in order to attract, motivate and retain the talent for which we compete. The aggregate number of shares of the Company’s common stock and/or LTIP units of partnership interest in the Company’s Operating Partnership, or LTIP units that are available for issuance under awards granted pursuant to the Plan is 750,000 shares/LTIP units. Shares and units granted under the Plan may be authorized but unissued shares/LTIP units, or, if authorized by the board of directors, shares purchased in the open market. If an award under the Plan is forfeited, expires or is settled for cash, any shares/LTIP units subject to such award may, to the extent of such forfeiture, expiration or cash settlement, be used again for new grants under the Plan. However, the following shares/LTIP units may not be used again for grant under the Plan: (1) shares/LTIP units tendered or withheld to satisfy grant or exercise price or tax withholding obligations associated with an award; (2) shares subject to a stock appreciation right, or SAR, that are not issued in connection with the stock settlement of the SAR on its exercise; and (3) shares purchased on the open market with the cash proceeds from the exercise of options. The maximum number of shares that may be issued under the Plan upon the exercise of incentive stock options is 750,000.

The Plan provides for the grant of stock options, including incentive stock options, or ISOs, and nonqualified stock options, or NSOs, restricted stock, dividend equivalents, stock payments, restricted stock units, or RSUs, performance shares, other incentive awards, LTIP units, SARs, and cash awards. In addition, the Company will grant its Directors restricted stock as part of their remuneration. Shares granted as part of the Plan vest equally over a four-year period while those granted to the Company’s Directors vest equally over a three-year period. Holders of restricted shares of common stock have voting rights and rights to receive dividends, however, the restricted shares of common stock may not be sold, transferred, assigned or pledged and are subject to forfeiture prior to the respective vesting period. The following table is a summary of the total restricted shares granted, forfeited and vested for the three months ended March 31, 2018:

The Company recorded equity-based compensation in the amount of $200 and $0 for the three months ended March 31, 2018 and 2017, respectively, which is included in general and administrative expenses in the accompanying condensed consolidated statement of operations. Equity-based compensation expense for shares issued to employers and directors is based on the grant-date fair value of the award and recognized on a straight-line basis over the requisite period of the award. The unrecognized compensation expense associated with the Company’s restricted shares of common stock at March 31, 2018 was approximately $2,483 and is expected to be recognized over a weighted average period of approximately 3.2 years.

No awards9. Earnings per Share

Net loss per Common Share

Basic and diluted net loss per share attributable to common stockholders was calculated as follows:

Plymouth Industrial REIT, Inc.

Notes to Condensed Consolidated Financial Statements

Unaudited

(all dollar amounts in thousands, except share and per share data)

9. Earnings per Share (continued)

The Company uses the two-class method of computing earnings per common share in which participating securities are included within the basic EPS calculation. The amount allocated to participating securities is according to dividends declared (whether paid or unpaid). The restricted stock does not have any participatory rights in undistributed earnings. The unvested shares of restricted stock are accounted for as participating securities as they contain non-forfeitable rights to dividends.

In periods where there is a net loss, the weighted average number of common shares outstanding used to calculate both basic and diluted net loss per share attributable to common stockholders is the same. The Company’s potential dilutive securities at March 31, 2018 include the 250,000 shares of common stock warrants and 163,157 shares of restricted common stock. The stock warrants and restricted common shares have been grantedexcluded from the computation of diluted net loss per share attributable to date undercommon stockholders as the Plan.effect of including them would reduce the net loss per share.

10. Commitments and Contingencies

(6) Employment Agreements

On September 10, 2014, theThe Company has entered into employment agreements with Jeffrey E. Witherell, the Company’s Chief Executive Officer, Pendleton P. White, Jr., the Company’s President and Chief Investment Officer, and Daniel C. Wright, the Company’s Executive Vice President and Chief Financial Officer. As approved by the compensation committee of the Board of Directors the agreements provide for base salaries ranging from $200 to $300 annually with discretionary cash performance awards. The agreements contain provisions for equity awards, general benefits, and termination and severance provisions, consistent with similar positions and companies.

(7) CommitmentsLegal Proceedings

The Company leases space for its corporate officeis not currently party to any material legal proceedings. At each reporting date, the Company evaluates whether or not a potential loss amount or a potential range of loss is probable and reasonably estimable under the termsprovisions of a sub-lease. Rental expensethe authoritative guidance that addresses accounting for operating leases, including common-area maintenance, was $80 for bothcontingencies. The Company expenses as incurred the three months ended March 31, 2016 and 2015. Amountscosts related to such legal proceedings.

Contingent Liability

In conjunction with the issuance of minimum future rental commitments under the operating leaseOP Units for the remainderShadeland Portfolio acquisition, the agreement contains a provision for the Company to provide tax protection to the holders if the acquired properties are sold in a transaction that would result in the recognition of 2016 are $115.taxable income or gain prior to the sixth anniversary of the acquisition. The Company intends to hold this investment and has no plans to sell or transfer any interest that would give rise to a taxable transaction.

(8)11. Subsequent Events

On April 29, 2016,9, 2018, the Company acquired a two-property portfolio of Class B industrial buildings totaling approximately 270,000 square feet in Chicago, Illinois for an aggregate contractual purchase price of approximately $15,675. Management has not finalized the asset acquisition accounting and Holdertherefore is not able to provide the disclosures otherwise required by GAAP.

Effective April 13, 2018, the Company entered into an interest rate swap agreement with JP Morgan Chase in relation to the MWG Portfolio Secured Term Loan. The notional value of the Seniorswap is $79,800 with a fixed interest rate of 4% and expires on December 5, 2019. The 4% fixed interest swap represents a cash flow interest rate hedge against the Company’s borrowings under its MWG Portfolio Loan, agreedwith interest bearing for the first year at a rate per annum equal to LIBOR plus 3.10% and for the second year at a 30-day extensionrate per annum equal to LIBOR plus 3.35%, and matures in November 2019.

As of April 30, 2018, certain direct subsidiaries of our Operating Partnership entered into a secured loan agreement with Minnesota Life Insurance Company, in the amount of $21,500. The Loan bears interest at 3.78% per annum and has a ten-year term maturing on May 1, 2028. The Loan provides for monthly payments of interest only for the first year of the forbearance agreement from April 30, 2016 to May 30, 2016.term and thereafter monthly principal and interest payments based on a 30-year amortization period. The borrowings under the Loan are secured by first lien mortgages on seven of the Company’s portfolio properties.

ITEM

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

We make statements in this Quarterly Report on Form 10-Q that are forward-looking statements, which are usually identified by the use of words such as “anticipates,” “believes,” “estimates,” “expects,” “intends,” “may,” “plans” “projects,” “seeks,” “should,” “will,” and variations of such words or similar expressions. Our forward-looking statements reflect our current views about our plans, intentions, expectations, strategies and prospects, which are based on the information currently available to us and on assumptions we have made. Although we believe that our plans, intentions, expectations, strategies and prospects as reflected in or suggested by our forward-looking statements are reasonable, we can give no assurance that our plans, intentions, expectations, strategies or prospects will be attained or achieved and you should not place undue reliance on these forward-looking statements. Furthermore, actual results may differ materially from those described in the forward-looking statements and may be affected by a variety of risks and factors including, without limitation:

Any forward-looking statement speaks only as of the date on which it is made. New risks and uncertainties arise over time, and it is not possible for us to predict those events or how they may affect us. Except as required by law, we are not obligated to, and do not intend to, update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

The following discussion and analysis is based on, and should be read in conjunction with our unaudited financial statements and notes thereto as of March 31, 2018 and 2017 and audited historical financial statements and related notes thereto as of and for the yearyears ended December 31, 2015.2017 and 2016.

Overview

We are a full service, vertically integrated, self-administered and self-managed REIT focused on the acquisition, ownership and management of single- and multi-tenant Class B industrial properties, including distribution centers, warehouses and light industrial properties. The Company Portfolio at March 31, 2018 consists of 49 industrial properties located in nine states with an aggregate of approximately 9.2 million rentable square feet leased to 82 different tenants.

Our strategy is to invest in singlesingle- and multi-tenant Class B industrial properties located primarily in secondary markets across the Eastern half of the U.S. and Texas;; however, we may make opportunistic acquisitions of Class A industrial properties or industrial properties located in primary markets. We seek to generate attractive risk-adjusted returns for our stockholders through a combination of stabledividends and increasing distributions and potential long-term appreciation in the value of our properties and our common stock.

As of March 31, 2016, the Company owned and operated, or had an interest in, 21 industrial properties located in seven states with an aggregate of approximately 4,350,000 rentable square feet which we refer to as the Company Portfolio. As of March 31, 2016, the portfolio of owned and operated properties, or those which we have an interest in, was approximately 98.0% leased to 37 separate tenants across 16 industry types with a weighted average remaining lease term of 3.9 years. Approximately 88.7% of the annualized base rent payments from the Company Portfolio as of March 31, 2016 was from triple-net leases, pursuant to which the tenants are responsible for all operating expenses relating to the property, including, without limitation, real estate taxes, utilities, property insurance, routine maintenance and repairs and property management. We expect this lease structure will insulate us from increases in certain operating expenses and provide more predictable cash flow. Our triple-net leases are structured to generate attractive returns on a long-term basis. The leases typically have initial terms of three to ten years and generally include annual rent escalators. Therefore, our operating results will depend significantly upon the ability of our tenants to make required rental payments. We believe that the Company Portfolio will enable us to generate stable cash flows over time because of the staggered lease expiration schedule, the long-term leases and the low historical occurrence of tenants defaulting under their leases. As of March 31, 2016, leases of the Company Portfolio representing 4.8%, 12.7% and 8.0% of leasable square feet will expire in 2016, 2017 and 2018, respectively.capital appreciation.

Factors That May Influence Future Results of Operations

Business and Strategy

Our core investment strategy is to acquire primarily Class B industrial properties predominantly in larger secondary markets across the Eastern U.S. and Texas. We expect to acquire these properties through third-party purchases and structured sale-leasebacks where we believe we can achieve high initial yields and strong ongoing cash-on-cash returns. In addition, we may make opportunistic acquisitions of Class A industrial properties or industrial properties in primary markets that offer similar return characteristics.

Our target markets are comprised primarily of larger secondary markets because we believe these markets tend to have less occupancy and rental rate volatility and less buyer competition relative to primary markets. We also believe that the systematic aggregation of such properties will result in a diversified portfolio that will produce sustainable risk-adjusted returns. Future results of operations may be affected, either positively or negatively, by our ability to effectively execute this strategy.

We also intend to pursue joint venture arrangements with institutional partners which could provide management fee income as well as residual profit-sharing income. Such joint ventures may involve investing in industrial assets that would be characterized as opportunistic or value-add investments. These may involve development or re-development strategies that may require significant up-front capital expenditures, lengthy lease-up periods and result in inconsistent cash flows. As such, these properties’ risk profiles and return metrics would likely differ from the non-joint venture properties that we target for acquisition.

Rental Revenue and Tenant Recoveries

We receive income primarily from rental revenue from our properties. The amount of rental revenue generated by the Company Portfolio depends principally on the occupancy levels and lease rates at our properties, our ability to lease currently available space and space that becomes available as a result of lease expirations and on the rental rates at our properties.

Occupancy Rates.    As of March 31, 2016,2018, the Company Portfolio was approximately 98.0%91.3% occupied. Our occupancy rate is impacted by general market conditions in the geographic areas in which our properties are located and the financial condition of tenants in our target markets.

Rental Rates.    We believe that rental rates for Class B industrial properties in our markets continue to recover from the 2008 financial crisis and subsequent economic recession, and accordingly we expect potential increases in lease rates upon renewal of upcoming lease expirations as market conditions continue to improve.

Future economic downturns affecting our markets could impair our ability to renew or re-lease space, and adverse developments that affect the ability of our tenants to fulfill their lease obligations, such as tenant bankruptcies, could adversely affect our ability to maintain or increase occupancy or rental rates at our properties. Adverse developments or trends in one or more of these factors could adversely affect our rental revenue in future periods.

Scheduled Lease Expirations

Our ability to re-lease space subject to expiring leases will impact our results of operations and iswill be affected by economic and competitive conditions in ourthe markets in which we operate and by the desirability of our individual properties. The leases ofDuring the Company Portfolio scheduledperiod from April 1, 2018 through to expire during the remaining nine months of the year ending December 31, 2016 represent approximately 5.6% of the pro forma total annualized rent for the Company Portfolio, which we believe is a stable revenue base. In the year ending December 31, 2017 through the year ending December 31, 2018,2020, an aggregate of 22.4%48.6% of the annualized base rent leases in the Company Portfolio are scheduled to expire, which we believe will provide us an opportunity to adjust below market rates as market conditions continue to improve.

During 2017 and 2018, leases for space totaling 1,017,458 square feet (11% of the Company Portfolio) either was subject to renewal or expired. Approximately 40% of the expired space was renewed and an additional 132,863 square feet was leased long term with new tenants. At March 31, 2018, the vacancy rate of the Company Portfolio was 8.7% factoring in the vacancy rate associated with the properties acquired in the third and fourth quarter of 2017.

During the year ended December 31, 2017 and three months ended March 31, 2018, we negotiated 9 leases with durations in excess of six months encompassing 452,791 square feet and negotiated 2 leases with a duration of less than six months encompassing 48,580 square feet. Renewed leases made up 84.3% of the square footage covered by the 9 leases in excess of 6 months, and the rent under the renewed leases increased an average of 4.3% over the prior leases.  Leases to new tenants comprised the other 15.7% of the square footage covered by the 9 leases in excess of 6 months, and the rent under the new leases increase an average of 71.4% over the prior leases. The rental rates under the 9 leases in excess of 6 months entered into during 2017 and 2018, increased by an average of 9.9% over the rates of the prior leases.

The table below reflects certain data about our new and renewed leases with terms of greater than six months executed in the year ended December 31, 2017 and the three months ended March 31, 2018.

Conditions in Our Markets

The Company Portfolio is located primarily in various secondary markets in the Easterneastern half of the U.S. Positive or negative changes in economic or other conditions, adverse weather conditions and natural disasters in these markets are likely to affect our overall performance.

PropertyRental Expenses

Our propertyrental expenses will generally consist of utilities, real estate taxes, insurance and site repair and maintenance costs. For the majority of the Company Portfolio, rental expenses are controlled, in part, by either the triple net provisions or modified gross lease expense reimbursement provisions in tenant leases. However, the terms of our tenant leases vary and in some instances the leases may provide that we are responsible for certain rental expenses. Accordingly, our overall financial results will be impacted by the extent to which we are able to pass-through rental expenses to our tenants.

General and Administrative Expenses

WeAs a newly public company, we expect to incur increased general and administrative expenses, for the remaining nine months of the year ended December 31, 2016, to be consistent with the results of the three months ended March 31, 2016, including legal, accounting and other expenses related to corporate governance, public reporting and compliance with various provisions of the Sarbanes-Oxley Act. In addition, we anticipate that our staffing levels will increase slightly from thirteen employees as of the date of this quarterly report on Form 10-Q to between 14 and 16 employees during the 12 to 24 months following March 31, 2018 and, as a result, our general and administrative expenses will increase further.

Critical Accounting Policies

Our discussion and analysis of our Company’s historical financial condition and results of operations are based upon our consolidated financial statements which have beenare prepared in accordance with GAAP.U.S. generally accepted accounting principles. The preparation of thesethe condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions in certain circumstances that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amountamounts of revenuerevenues and expenses induring the reporting period. Management makes significant estimates regarding the allocation of tangible and intangible assets or business acquisitions, impairments of long-lived assets, stock-based compensation and its common stock warrants liability. These estimates and assumptions are based on management’s best estimates and judgment. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment. Management adjusts such estimates when facts and circumstances dictate. As future events and their effects cannot be determined with precision, actual results could differ from those estimates and assumptions.

During the three months ended March 31, 2018, there were no material changes to our critical accounting policies. Our critical accounting policies are described under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Significant Judgments and Estimates” in our Annual Report on Form 10-K filed with the SEC on March 8, 2018 and the notes to the financial statements appearing elsewhere in this Quarterly Report on Form 10-Q. We believe that of our critical accounting policies, the following accounting policies involve the most judgment and complexity:

Accordingly, we believe the policies set forth in our Annual Report on Form 10-K filed with the SEC on March 8, 2018 are critical to fully understanding and evaluating our financial condition and results of operations. If actual results or events differ materially from the estimates, judgments and assumptions used by us in applying these policies, our reported financial condition and results of operations could be materially affected.

Results of Operations for the (amounts in thousands)

Three months Ended March 31, 2016 and 20152018 Compared to March 31, 2017(Dollars in thousands)