ILPT - Earnings call transcript Q2 2018 | Industrial Logistics Properties Trust

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Operator

Good morning, and welcome to Industrial Logistics Properties Trust Second Quarter 2018 Financial Results Conference Call. At this time, for opening remarks and introductions, I would like to turn the call over to Olivia Snyder, Manager of Investor Relations. Please go ahead.

Olivia Snyder

Thank you, and good morning, everyone. Thanks for joining us today. call Chief and Financial the John Executive on and Popeo; Officer, me are Chief President Officer, With Rick Siedel. moment, performance quarter a business just they details provide In about and our XXXX. for of second the will our

We will questions. then call your the open to

like the that statements the and Private would in those contains revise today's that any conference company. release the Friday, results today's Also, today, retransmission forward-looking made undertakes we recording on prior the forward-looking revision note Act based and prohibited differ or publicly of securities other Reform the Litigation to call the is may are company ILPT's to note Securities that expectations call without as actual obligation of to meaning XXXX, statements written I and of statements XX, beliefs and conference First, conference consent results of These project. within of of today's forward-looking XXXX from the materially call. The July laws. no

those website. to Exchange upon our factors our Securities forward-looking the Additional information which with filings cautioned are the could and reliance in contained differences or or SEC's ilptreit.com be that accessed is website, can place SEC, from undue Investors not Commission, concerning any cause statements.

to now be on figures distributions, package, And I net also non-GAAP income these our operating data operating supplemental available or website. the which call In turn components income this call, NOI. the in to found be numbers and and cash-based reconciliation calculate or over will CAD, or net will available non-GAAP for of John. addition, including are cash can financial our we operations, and during cash discussing FFO, normalized funds normalized from to A basis

John Popeo

that distribution feet call come located quarter, Thank located Industrial REIT Properties square you, warehouse the Hawaii. is and million revenues XXXX of feet XXX, Logistics or for XX.X earnings the the and states. XX% quarter of properties, an Good ILPT. the industrial XX.X public and on to After owns in of went lands from in primarily Oahu ILPT end Olivia. square in with annualized Trust, XX around welcome second million January everyone, morning, ILPT's island second of industrial

lease be to the rent eight most are portfolio is of Hawaii, continue years Mainland end. optimistic acquisitions XXX% buildings, about around We as prospects Mainland. from still average feet an in ILPT's states on future with external of growth to our located that ILPT's come leased term includes XX but of in million quarter expected square XX.X XX growth with

industrial total rates market industrial the to market increases think property still continued quarter. rents demand current dynamics reports, may Our we've Mainland of due recent on sales share. rise to market values Based retail around continues have absorption in small no net steady that in leases industrial XX% and property to closing in been during Properties close our in represents future. in the many drive properties continue We of for recent growth on and the part most years in to we continued are XX% especially markets deliveries around rollover are tenants some industrial Mainland one the and of grade the tenants when have dynamics these rated near-term the rents majority relatively successful from investment lower, lease investment grade portfolio contributing Mainland rated with of risen existing to to e-commerce on translate second the Industrial or cap that Mainland. in markets, material rates properties new, to U.S., today. predicting in sales, top-tier subsidiaries growth dramatically occupancy expirations companies, no of And despite are in in e-commerce. outpace

In addition, stages close and one year-end. that diligence hope property to properties various we before contract two additional of have we in under

June, leased this Inc., years XX to triple headquarters we This Hellmann at as for is constructed square building and occupied that of a largest XX,XXX logistics net has at property. of square last stock XXX,XXX space office Hellman in dry warehouse renovated company cap servicing in week XXX,XXX feet approximately third-party During acquired cooler foot a the building a facility Doral, in U.S. square is rate heights of in and absolute for the one headquarters The and their further founded feet and global the Hellman Logistics XX,XXX includes companies has feet Worldwide U.S. cross space. Florida Worldwide out X.X%. warehouse distribution their XX-foot was XXXX. $XX.X space it was in XXXX, operations since clear of the freezer XXXX million the facility and logistics square of of in and world. runs

Carolinas. purchase have distribution capacity. located and facility chose as The this high just Beltway the this constructed assets ready Marlboro, and XX property cap property Maryland. its other Capital XXXX, approximately for property also column and $XX.X and and reach well to XXX,XXX dock foot in clear located of Baltimore distribution. for million, is strong and locations as to Maryland location for the miles with leased in design with for construction and strong for Virginia XX rate tenant D.C.'s approximately to years and The spacing XX-foot location We Washington, to over The X.X% a Upper of quality under Route I-XX, D.C., credit a agreement general distribution reflects was XXX heights square modern that from

Minneapolis, in major rate highway to market average purchase for these and diligence two located centers, price Pennsylvania of various properties properties around properties These have with areas. phases two Minnesota are access. with Harrisburg, million, X.X%. amounts aggregate of near an The population in around solid other $XX We cap

quickly pass efforts. diligence call and both summarize they these To We are further if third will acquired or provide acquisitions of agreement details our quarter put our during under on by them. properties earnings

properties June, around totaling are three since reviewed on won just that $XXX property reviewed We closed of and million. stages X,XXX that We diligence, all, deals have one I plus we've bid in the January. in various around in around on bid XX that we four. We deals late

by expect down acquisitions ratio. Assuming pending the still revolver, our around on our of revolver, closed expect three on drawing low deals still capacity million relatively we we to a and have we debt-to-EBITDA to have $XXX

share the York, of ILPT quarter, participated call, continue REIT a the in same we trading to and activities for our and future the educate as proposition, over internal Chicago, last peer our We're million the prior we continue In provide of more percentage we $X.XX properties at NAV in to discounts quarter. group. last with by discussed trading New rent, REIT quarter summary, reflects to will property levels and multiples conferences. Mainland. and minute, Hawaii As over best XXXX. to calls non-deal above from period. during normalized quarter. increased at our almost to as was investor proposition prove quality value peers X% an our $X per growth received roadshows out ILPT among largest that share, to in the We'll growth FFO earnings portfolio a prospects. seasonal financial one estimates seems FFO decline the market Normalized basis of consistent overview Rick of industrial see four year acquire increase last results $X.XX analysts' totaling NOI XX% our remains to leasing the per do on we detailed But and occupancy and earnings we The the about hopeful Since of the and cash in our still be industrial Boston in drive first down the

always percentage of each we expected. year, annual receive first the rent a second so the decline year of the in reminder, each quarter revenue during As related in quarter is

to based place to In first XX quarter acquisitions. it the in Rick? from acquisitions full for the Leasing quarters results earnings our IPO hand solid full pending a were Rick third in had closed from impact leads full quarter earnings addition, We million the have which late quarter to spreads all, future our per second during this April, to consensus acquisition earlier. in quarter no plus $XX.X the I'll are report was we to look earnings issued the the during may our that in quarter's now overestimated XX.X%. share strong which in that impact shares some call, acquisitions possibility the forward took provide We models of quarter. on January. us details All believe Siedel of million think the on June a XX, discussed call over on earnings.

Richard Siedel

on year point from call. one to This and of prior of financial quarter a Park termination in morning, our Hawaii an good in that from result and was overview leasing, former Portfolio of and continue second with the lease occupancy foot quarter. I'll of XXX,XXX Campbell the Thanks, mentioned begin John, basis an of then XX we basis our results. decrease square everyone. end point our is XX Industrial primarily last decrease decrease tenant the XX.X%, on last as the our

lease leasing is renewal years XX.X% we previous quarter, at leases square of The properties, year capital $X.XX. rents the term were same foot square at rents our new lease feet, space. Hawaii was the and per totaling than executed During per XXX,XXX XX higher all that and average over

We prior higher for also at than executed that one rental in was Hawaii land a rate approximately XX,XXX rate. XX% of feet reset rent square the

of leases or mark-to-market growth next rollover by We we continue leasing encouraged potential and the be to when five rent Hawaii XX% results either our the achieve as may leases through over years. our resets

of we to XX,XXX mentioned, the lease remainder scheduled the XXXX in Hawaii. lease significant John square feet on Mainland of and have As expirations just during is near-term expire no

our continue Hawaii with is ILPT. performance consistent for increase that will and hope meaningful at growth Our historical internal rents to rates in generate

$XX.X or Normalized on of the XXXX full share for per or for quarterly $XX.X we quarter end to the second the million of FFO Subsequent the $X.XX $X.XX Moving of quarter, $X.XX was the financial. to declared per share. dividend per quarter year. Adjusted EBITDA regular first million. our was

Our NOI increased lease our contractual result the rent Total increase rents The over million, and year, payout for million, resets. same Hawaii rent cash to leasing prior normalized the X.X% reflecting releasing as primarily year approximately increased NOI increase reflects and from Hawaii representing revenues X.X% results. FFO cash at of by over activity. by in property property XX.X%. increases Same renewals a year, $XXX,XXX the over with $X resets prior X.X% along increases comfortable a of representing a $XX.X primarily at is ratio and renewals properties. increase quarter XXXX increased second prior

move tenant out to As and first occurred security mentioned incur we cleanup during additional quarter, costs the that last defaulted for fees to related continue some quarter. the

and Excluding XXXX. in to maintenance XXXX. a include prior would $XXX,XXX. cash in in Leasing expenditures those cash expenditures, period the with NOI status of tenant's for over and increase to the stand-alone completed a on basis year by Hawaii increase rent for current the year, activity in from in plus our the following revolver reflecting improvements, our the spread, that commissions Operating NOI capital same The accounted prior which commissions, in The default. and end. expense expense totaled decrease our facility. X.X%. an earlier, repair project of interest on cost increased or expenses tenant vacated quarter over reflecting is second an and by building amounted Mainland on approximately represent property space majority interest average income average charges, reflects our been the third based Hawaii In the $XX,XXX, a company LIBOR general increase lease quarter recurring the credit increased X.X% expansion these increased quarter and to release at in quarter, mentioned improvements from borrowings prior rate partially as was year have which X.X% a FedEx the prior revolving the public leasing offset administrative points related XX

of on outstanding million Debt with of logistics adjusted unsecured to X.Xx interest to properties believe $XXX of enhance cost $XXX an credit was industrial adjusted revolving ended $XX.X $XXX facility. quarter and future EBITDA capital continue cash and low was us hand million We capacity the X.Xx. new and just expense debt opportunity gives drawing meaningfully million to million earnings. acquire on and just to EBITDA We initial this and our

property is one ready believe and Operator, only have very sheet we We concludes our secured take positioned debt, encumbered balance well growth. for to prepared by That we're our questions. remarks. now

Operator

from comes Bryan today's FBR. Riley question B. [Operator Maher first Instructions]. with And

Bryan Maher

Two questions.

resets a some about friction, or this lease acquisitions. should have how bit Hawaii of as reset? question expirations about And and that We you can then we what we're picking And little XXXX. seemingly have year on given currently talk occupancy the those expire up in year, next seeing another I rents think

John Popeo

optimistic So per the our a Hawaii. second we're $XX,XXX quarter, in on accounts going the about mind, one to Hawaii. from in vacated had for estate coming that growth impact large Campbell have in promises it's We earnings that keep total very in very only quarter. so prospects roughly But little tenant the

that so it get we and just a to And few re-let. that get re-let, take may quarters

either leases as of particularly that are lease year expirations, it's those We to $XX anticipate $XX and to when Honolulu million the still of X%. still during year. in or something It's market in far XXXX are industrial either strongest in dynamics roll solid. we're turn million Hawaii, resets big very very so As go optimistic. still like market Hawaii Unemployment ups a our significant at revenues are expected are still the nation, reset. re-signed properties, The below

Bryan Maher

Jersey, Okay. potential differentials seeing was ones kind the risk how in major tertiary And acquisitions definitely the of primary you about cap helpful. you about differentials between reward as of go, as standpoint? information a the and New what the you can the those rate from some gave markets, and Northern then talk on markets, you're us markets, gateway two But feel secondary and far

John Popeo

square robust the is primary going of the to Northern absorbed. the a XX square markets, but market. New that, be products Jersey, is million are, XXX the of feet Dallas, million the still will quarter. what is top-tier feet past this among lot activity including in The industry for projections So we're consensus markets year, particularly whole Atlanta, very on, Empire, in pipeline. Inland square Chicago, absorbed seeing a new close There's And XXX construction around feet that million the

may cap almost of seen to deal the our landed Doral, a markets. primary have rates secondary in of got at close routes. around it million X little all like it very stabilizing. were We We several major But those people, criteria, of be we It of and the airport of of Florida. and we happy criteria: think X.X%. primary density have rate key in it's in does seaport, sort It bit fits down fits rate to a very within competitive cap miles cap trucking compression all the population feel markets the major

Operator

comes [Operator Brian Markets. Instructions]. from Hawthorne Today's of next question Capital RBC

Brian Hawthorne

of less kind any guys? Just question first becoming or markets. the Are more markets you to there on interesting

John Popeo

of a Phoenix But entering that's the of owners you've it's got the a Inland labor just Beach fulfillment market so part today. only market. and the are and struggling little that to intrigued property of operators things Empire prospects Empire is Phoenix are X.X-hour people by that really in a about I'm about great Long with it's running a especially one the in to expensive is, properties And That's question. centers. industrial today, what's pool. deep a the of drive very interesting Inland Actually, acquire reason

to development happens that's at on be just the the think most those are today. that one. still probably I may solid Dallas, -- We So still is of that, markets markets, Chicago, fact despite going where look

in those properties pipeline the a markets. of actually are looking at We handful today in

it's course, very going Of be to competitive.

areas. strong markets to We're we doing and markets looking our well in want quarter. distribution will we're We're is a out couple properties want with Harrisburg, there. DC own to be hopefully diligence still the hoping for that companies And there. hopeful that we're or play to Pennsylvania, at very under looking at. of it the contract including the lot which looking the we're think In very A of hub. close, also third of property addition, end currently that property we're by we'll on somewhere a diligence have be we'll currently -- We hopefully Baltimore

Brian Hawthorne

thoughts the Okay. terming any on credit up facility? And then

Richard Siedel

Rick. is This

think John options of as there. with just immediate I rush pipeline, described. got plenty No we've the

some us. time. our options of to now, rush. work by everything We issue priced lots that banks. possibly notes. I we've to well. can the can some think in available headlines don't given We one We right some and comes, But rates with the only got time I we property -- as about in we're of encumbered know But trade with immediate debt work so that's have and think certainly option else, interest I have an secured attractively

I to at balance feel don't to but point, the try good need are do look we think we to continue opportunistic pretty any again, sheet in we So today. really and where have about it, this be and

Brian Hawthorne

Sure.

Okay. impacts see trade any that, And from then the just you on talks? current

John Popeo

I lot cooler prolonged fortunately, all on. of heard least, a an have here impact in potential space, and manufacturing experts trade in And warehouse much of feeling understand whole also about will affect are cooler soy, impact an That's I recently, at meat a industrial -- trade quarter the chain now pretty from not we're prevail. think, economic some woods trade demand focused than it'll tailwinds affect supply in haven't do I exposure. if expectations what's neck a stockpiles And manufacturing. And warehouse of there's think distribution and an based primarily on impact on and heads And hearing lot for will growth reduction on of seen for from enough question. good business. impact again, space. everything don't a I in war, pinch we're on the on properties, the have we a going lot for have today. from And even a could whole the primarily the Boston their to fishermen today of ultimately, prevail, for and the heads But today. impact weather the short-term still hopeful going any e-commerce will, in But our But of disrupt imports impact have initially, trends we earnings will general, of second other news on tempering of especially which tariffs. are that for course, could also power the lobster demand

Operator

Lynch. America And of our comes from Bank today next Feldman Jamie question Merrill of

James Feldman

acquisition, appetite we traditionally the square freezer more, you Doral want use got, XX,XXX of call don't when cooler. I portfolio but just it's square an guess that of mixed it focus because said XX,XXX I on aren't about traditional continue feet feet just office, but the about I your assets focus, also as So think warehouse you growing think, like Can and has it of acquisitions. for industrial distribution warehouse still to guys it's and you more talk assets

John Popeo

older addition, a going close is Jamie, for has got that mean, It's it I those also it's all easy population clear this its centers what main focus fits the an But property Yes. retail, routes. proximity This building distribution It's highway lower is I to height. and and new hotels and proximity interesting. criteria. of think residential. property access in primary much to to high-end high-end key pretty

largest going This prior this in gateway one you property foreign to of to it worldwide network. our a and a it -- expectation it is was our all including third-party out America. from So to of just acquisition, lot the got a property logistics can went does locations lot logistics, is, I coming a and bustling think of Hellman, really, toured of Latin Latin activity then down activity, -- America. it's a does network as companies, is it it's worldwide When

other great of it's we're talking total unusual REIT little facility. So three think properties positive seems is office Pennsylvania office. for high all property very, in we properties does the But easy mean we of XX% with excited we're close of mean, Eastern headquarter Again, to population really And highways the in a and X% around Marlboro concentration pure look an more to looking markets at again, this to of I It we're the of in I out close Pennsylvania. also to Virginia office. and I Baltimore serve access because distribution hottest up Beltway, have U.S. at I a it even facilities very of case, that with be what D.C., Carolinas. Central this we're prospects Harrisburg, now. They're They're that other industrial all to as really Philadelphia, proposition, one about real Upper right maybe it's a fact at, but very very major like the I-XXX active some that -- very consider property looking into little of space. single is to property. routes. over down to locations. the tenanted. buying very and Hellman's X% the the When access

James Feldman

are about But to like? backfill Okay. then going pending pipeline And then may does NOI. we said prospects the talk vacancies there can look you sounds like, leasing other forward? that $XX,XXX of you it Campbell And think, see still, any I and vacancy what

Richard Siedel

Yes.

the is be the this ready up do valuable is behind distinct We a have to Nothing there between difference an Campbell actually really Hawaii is, clearing environmental it little be going often value just our properties re-leased. We of Honolulu. vacancy. percent work. to where it is of that closer and require cleanup talked team to bit our nature, and how left to more going about revenue of is that but Honolulu get debris Park and Industrial to portfolio It's the So XX-plus Rick. pretty the a

last the by taking talked we Estate had the We the a on and properties, historically, about of bit But in defaults has. typically, Damon So Campbell. this or the we're longer in out ground still the Honolulu quarter. two little then again, One lease team prospects tenant the up to one. it's encouraged properties that

there roll the XX% really It prior defaulted and of were Campbell tenant get we longer, team Again, we've re-leased. great signed really we're from quarter, after perspective. just little home to got just it, pleased was towards the like a re-tenanted. how with less -- run. a And has fast The a material so a up take it's end been other able of one we that the already to and they but a do dollar it expect

what is. it is it So

James Feldman

think be? do cost the you cleanup will what And

Richard Siedel

team of is still that. kind through working The

Some of it that is expensive and some out an in team it are it's -- it it away. or some cases, best proceed it that There's to behind. working opportunity got grind up what like it. truck through way Obviously, kind left the trucking concrete leave possibly and option. it where But of to we've chunks more figuring away is the again,

now, square vacancy. XX% So feet of portfolio The again, over XXX,XXX is in shape right overall. still occupied. great We're it's

James Feldman

guess charge think like expenses or I see something meaningful I'm from a this? the asking we'll Okay. if get or you

Richard Siedel

out. No. process overall of it just cash cleanup, NOI. we $XXX,XXX starting X.X% I mean, figure had to growth the some security That and included of

hundred tends we're But no, a particularly that move material. a a percentage. the thousands given few So few again, fairly nothing to still company, small needle

So try that really give to no, we'll good feel it. we color. about overall, But you

James Feldman

your I right. still? today. guess, watchlist there then, All other to it, names Are And just on ask tenant

John Popeo

markets, these lease leasing properties if they have right and analysts group couple where are only is lot noting to I Tire or take nothing just it's is, have again, sort long-term just mean, tenant revenues. that all properties believe will names particularly if X% a pretty of newsworthy, now. to that the properties. until in the a a one is through that's we news the of better five And properties aren't And market and few country. we That's When issue the us is for this we Ohio. to Distributors. handle got investors X over than located. is in of reason of RMR's But tenant we large have again portfolio located. strong and a markets that reason and some go investors the have condition it to And that this do properties that reach. division. we property was something reason key not things of all in have is in performing they're spend. of have talking distribution vacant, our quite were our others. The asset and -- properties any management list. go two throughout vacate majority because But worth Columbus, tenant A actively for lost questions. tenant manufacturers, somewhat all company. very of well that good at XX asked some lot that It's They a manage this another one are they concerns properties got it's of And But big indicated our a that regardless, to is our this markets, asked. tire us for guess, I re-lease with are but no on These management bring up Albany, were, with our, may tenant specifically here this account thing worth few this what would going vacant, XXXX reports vacant, top these over properties but we I pretty for to only us these a XXXX, And that have the of these a in time. least. lead us we'll the expirations facilities noting There's to go another believe probably months American It's The properties. good

James Feldman

against them? Okay. And do you not that think you're you against or have reserved reserved

John Popeo

reserve today. them against need no have to We

James Feldman

this Okay. sounds point. watchlist the at And on All nobody else right. it there's like

John Popeo

That's including correct. It's a roster, Mainland. Amazon pretty on solid tenant the

Operator

gentlemen, over team answer any question and concludes conference turn back the like to management ladies this I the to session. remarks. closing for And

John Popeo

the report a joining meaningful in continued Hawaii the pipeline. few next acquisitions in market, top-tier translate momentum our rent at for acquisition in of several happy the growth properties plus that our very prospects quarter solid closing prospects today's will earnings this for everyone, to Again, and Thank you, call. to we're first growth quarters. acquisition We're hopeful

Operator

This thank today's Thank concludes for attending call. all today's you, conference We presentation. you sir.

disconnect now may You your day. a have lines, wonderful and

Industrial Logistics Properties Trust (ILPT) 28 Jul 182018 Q2 Earnings call transcript