High yield publicly traded companies are available in the current market, for example the Plymouth REIT yields close to 6%.
For example, Jeff Witherell runs the highly regarded industrial Plymouth REIT.
Jeffrey E. Witherell, CEO and Chairman, Plymouth Industrial REIT
“The data will show you that the smaller spaces are performing better than the larger spaces.
And again, there are more users for 50,000 square feet than 500,000 square feet, just by definition.
An example would be Columbus, Ohio.
If you looked at their vacancy rate last year, it was approaching 14%, but 10% of that was the bigger box and 4% was the smaller buildings.
You can see the same with Indianapolis; most of the vacancy is sitting in the larger boxes.
The second part of that is that when a developer builds a warehouse doing speculative development, outside of just the cost of doing it, the developer can make more money by building a bigger building and then selling it.
It’s just that economy of scale in the sense that if they can put $100 million to work in a large building and they can make a profit off of it, it’s probably going to be larger than if they built a 100,000-square-foot building.
There’s a variable cost, obviously, of the construction of a larger building, but your design, permitting, bringing water, sewage, power to the facility, things like that, those are fixed, whether you’re building 200,000 square feet or 1 million.
The speculative development over the last three or four years has been mostly concentrated in the larger buildings — it’s more profitable for them to build those — and that’s where we’ve somewhat overbuilt.
That’s not my opinion, that’s the data.
The data shows that these 1-million-square-foot buildings are sitting empty for extended periods of time, where we are right now.
That should get absorbed over the next several years, and we should be back to a much healthier market for those sized buildings.”
The high yield from Plymouth will be supported by well researched trends in the marketplace.
“At the very end of the year, we announced the purchase of a portfolio of properties in Cincinnati for about $20 million.
That was Phase 1 of the portfolio; Phase 2 should be closing soon, and that is going to add another $20 million of real estate in Cincinnati.
So the second part of that should be closing here momentarily, and then we have a few other things under contract.
This Cincinnati property is a Plymouth property.
It’s a perfect example of what we would call shallow bay, about 260,000 square feet.
There are about 20 tenants in there, and the WALT that I mentioned before is just under three years.
Again, we like the ability to work with smaller tenants, be able to renew them, and then obviously mark-to-market the rent.
The rents in those spaces are going to be below market, and when the renewal comes up over the next two to three years, we’ll be marking those rents to market, so there will be an increase in rent for us.
That’s how you grow the business, and that’s how you increase income and dividends to shareholders.”
David Spreng , Founder, Chairman, President, CIO & CEO Runway Growth Finance Corp.
“Runway Growth Capital was founded in 2015 to be the investment adviser to Runway Growth Finance Corp., formerly Runway Growth Credit Fund Inc., a private business development company that is now publicly traded under the ticker symbol RWAY.
Shortly after inception, I was joined by Tom Raterman, our CFO and COO, and Greg Greifeld, our CIO and Head of Credit.
Over the course of the next 15 months, the balance of the BDC was raised.
We went public in 2021.
Our mission is to support passionate entrepreneurs in building great companies.
We are like venture capital, except VCs invest in equity, i.e., they own a piece of your business, while we invest in debt or make a loan so that your ownership isn’t diluted.
We lend capital to companies looking to fund growth with minimal dilution, primarily in the technology, health care, and select consumer industries.
In turn, we aim to produce superior risk-adjusted returns. We do this through our publicly traded BDC, as I mentioned, RWAY, and our private partnership, LPGP funds.
We operate from office locations in Silicon Valley where I sit, Chicago, New York and Boston.
In October of last year, we announced a definitive agreement for Runway Growth Capital to be acquired by BC Partners Credit, the $8 billion credit arm of BC Partners, a leading alternative investment firm with approximately $40 billion of AUM.
Through careful growth and strategic partnerships, we’ve been able to expand our offerings and continue building a portfolio that totals approximately $1.3 billion of AUM for Runway.”
The high yield is supported by a superior position in the balance sheet.
“We specialize in providing first lien loans.
That means first money out if something goes wrong.
They’re all senior secured debt financings to late- and growth-stage companies with investments typically ranging from $10 million to $100 million.
Though we expect our target range to increase to $30 million to $150 million following the combination with BC Partners Credit.
Our strategy is focused on constructing a high-quality portfolio of senior secured loans to differentiated companies in tech, health care, and select tech-enabled consumer services, including both sponsored and non-sponsored opportunities.
We are a principal preservation, credit first, downside focused private debt manager, prioritizing lending to established businesses with substantial revenues, significant enterprise value, and proven in-demand products or services well beyond the prototype stage.
I can give a couple statistics on the portfolio.
Roughly, our average company is doing well over $100 million in revenue.
It’s been around for more than 15 years and it’s raised more than $150 million of equity capital.
So, we believe these aren’t high-risk startups.
These are very advanced, late-stage, venture backed, and occasionally PE-backed companies.
One might historically think of venture debt as being focused on early-stage companies.
That is not the case.
We do not lend to early-stage venture companies that present equity-like risk.
We’re very much focused on credit first, a considerably safer investment in as advanced companies as we can find.”
New Lake sports a high yield of over 10% at current prices, albeit in a sector that has its issues.
Anthony Coniglio, President, CEO and Director, NewLake Capital Partners Inc.
“We founded NewLake back in early 2019, when we saw the opportunity to provide much-needed real estate capital to this emerging high-growth industry that is the cannabis industry.
What was unique about it was the opportunity to step into an industry that was highly regulated but had a significant disconnect between state and federal law that drove a significant gap in the capital available to the industry.
In particular, we noted that real estate was critically important to this industry — to cultivate, manufacture and dispense — and because of the federal prohibition on cannabis, it eliminated all traditional forms of real estate.
Most real estate carries debt, and those debt provisions include a restriction on leasing only to businesses that are legal, and so cannabis businesses by definition violate all those real estate debt agreements.
Therefore, you had a significant gap in the properties available to the industry versus the needs of the industry.
We thought we could get above-market yields, and indeed we did and continue to get above-market yields that reflect the uniqueness of what we do, the lack of competition, but also there’s an element of risk premium that’s in the pricing as well.
Having been around business for over 35 years now, I’d say there are few stories where the competitive landscape is better six years after you started versus when you did.
We sit here today in January of 2025 as the second-largest owner of cannabis real estate in the United States.
We own 32 properties across 13 states with 12 of the leading cannabis operators in the country, names that people who are familiar with the industry would be well aware of, like Curaleaf or Cresco or Trulieve.
We continue to have what we think is the best portfolio that’s out there, and it’s a testament to the underwriting approach.
And so to summarize, the opportunity set was, there was very little competition providing real estate capital to the sector.
We stepped in, we started the company, we’ve deployed over $400 million, second-largest owner, and quite frankly, many of the competitors that were existing when we started and were developed during our life cycle have fallen away.”
The high yield is supported by extensive real estate investment experience.
“But because we’re also a real estate investment trust, we complemented that with lots of real estate experience.
Some of the readers may be familiar with our Chairman, Gordon DuGan.
He was the CEO of W. P. Carey, one of the largest triple net lease REITs in the world. He left W.P. Carey to run Gramercy Property Trust, and took that business from a roughly $300 million market cap company and sold it to Blackstone for over $7 billion.
He’s been involved in real estate for his nearly 40-year career, as has Peter Martay and David Weinstein, other people on our board, so significant real estate experience.
What we’re trying to do is marry that cannabis experience with the real estate experience, and develop an underwriting approach that combines that expertise. Here are two examples.
One is the deal structure.
We understood this is an emerging industry, and so from the beginning, when we structured our leases, we always included provisions that would anticipate financial difficulty or regulatory uncertainty.
One example would be, we always cross collateralize security deposits and cross default leases amongst the different properties, in a way that makes it easier to preclude default and position us well should there be financial difficulty.
We also look at the jurisdiction.
This is critically important, because we focus on jurisdictions that are limited license.
When you think about cannabis, this is very much a state-by-state business.
The way New York approaches cannabis is different than the way Pennsylvania does, and different from Florida, different from Illinois, etc.
Understanding those nuances is critically important.
We focus on those states where there’s not a proliferation of licenses, the way you would see in Oregon or Michigan or in Colorado, where many of the financial difficulties have been.
It’s a state such as Pennsylvania, where you have to go to a package store to purchase liquor, where there’s a limited number of licenses and those licenses have intrinsic value, and they also create a better operating environment for the tenant, which improves the cash flow profile of the property.
If you improve the cash flow profile of the property, you’re improving the likelihood you get paid rent.
I’m going to leave it there, and say this combination of significant real estate experience with significant cannabis experience and focusing on these limited license states — that has allowed us to preserve and grow value for our shareholders.”
All these interviews with high yield public companies and more are available exclusively in the Wall Street Transcript.
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