ILPT - Earnings call transcript Q2 2019 | Industrial Logistics Properties Trust

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Operator

Good morning and welcome to the Industrial Logistics Properties Trust, Second Quarter 2019 Financial Results, Conference Call. [Operator Instructions]. I would now like to turn the conference over to Olivia Snyder, Manager of Investor Relations. Please go ahead.

Olivia Snyder

Thank you and good morning, everyone. today. us joining for Thanks With me Chief Yael President, Murray, is the Officer, Rick call Financial President, ILPT's Siedel John on and Duffy. Vice business the a details and followed answer just they'll analysts. and question our our with In by a performance quarter second moment, for session of XXXX, about provide

Securities XXXX may conference Private results to statements based and securities that Company. laws. recording July expectations Litigation prohibited written beliefs as the Tuesday, project. actual of the ILPT's and differ and the are I the statements materially other XX, without Reform of Act today's XXXX, First, today of prior forward-looking note from would retransmission note of These those call that on meaning and of today's we Also, like forward-looking within that is the contains conference call consent

obligation publicly revision today's Company revise to The forward-looking the any conference statements the to no made in results of undertakes or call. released

those in our website factors the Commission can from that accessed Additional Securities with website. be SEC's or SEC, is Exchange our differences could ilptreit.com information and the filings which concerning cause contained or

undue are not any Investors forward-looking cautioned statements. upon reliance place to

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

John Murray

reported million welcome everyone, morning, to morning, call. second-quarter per share. of or $XX.X Good FFO This normalized ILPT's Olivia. you, second-quarter earnings $X.XX and Thank we

revenues of located of come portfolio were rental XX% ILPT's Oahu, primarily in occupied. XX.X% the square million feet million feet, Approximately and from properties square with of of located second-quarter XXX, of Hawaii. end of island ILPT's XX warehouse the in states. distribution industrial the properties consisted annualized XX.X As XX.X They on

of square Mainland XXX% million XX.X consists leased. located portfolio XX Our that XX in with are states properties, feet

During our leasing our maintaining integrating and on into we the XXXX operations portfolio strong activity. existing a quarter, focused acquisitions

during Group's integrated on discussed XX.X the across more of with for into country. two Professionals in half portfolio calls, $XXX and prior XX containing square we National the million. the Real of our first feet As offices support portfolios Estate Platform year, The been have million the the XX approximately properties RMR of expertise than acquired

tenants X% Mainland our make rated and FedEx three Amazon, investment-grade annualized tenants representing revenues. or rated of tenant Procter are and Gamble, total subsidiaries XX.X%, up XX% rental entities top respectively. Our and revenues X.X% Investment-grade of

or leases. at tenants those subsidiaries land three revenues Looking quarters from or come our portfolio, Hawaii investment-grade secure the of entire nearly from

Our representing X.X% at top X.X% Indiana, annualized markets and after three XX% XX%, of Hawaii are Ohio rental and total respectively. revenues, Virginia our

the of feedback. closing to evaluation Board calls, quarterly when of many the peer share and possibility following two our ILPT's raising we A acquisitions. dividend $X.XX continued of be discussed On rates, including considers of with covered dividend prior ratio a investor payout well dividend setting XX.X%. the portfolio per factors

yield industrial group twice is peer average. dividend current nearly Our the

will are stock scoop Board questioned we Our share high the bringing or to more the price and whether the suggests credit draw well-covered and that them. higher yield not getting investors for yield

to use maintain from Board increased decided there levels other acquisitions to factors cash our know also is and the the these leverage equity level and about We this rather Considering flow than quarter dividend our leverage. our current investor raising issues. possible dividend and reduce concern to

we current equity share levels. price at common not issue have previously, said As we will

Hawaii, that to the earlier discuss over legislation pay Before call Governor Hawaii an stable will turn that for on growth creation win and taxes it would through quickly of is job important Yael other provide dividend disallowed mention to state, business This REITs. economic for this and ILPT REITs deduction doing have leasing development. month the I'll to I the our the continue income in vetoed as activity,

Yael Duffy

Thanks, John.

We second quarter, were prior rent the within square our Hawaii leasing was focused rents During activity higher leases XXX,XXX feet new at than for and renewal for portfolio. that entered approximately XX.X% per an square Leasing were rent the concessions quarter. for second lease-year. renewal There were approximately capital average XXyears. and new term no resets foot of lease in and leases per $X.XX

termination contractual to lease ahead we early of In negotiated nearly the QX, expiration. blow a FedEx with highlight a positive up a we at rent. a sign transactions. beverage a were with same to XX-year At able leasing lease an in local company lease Now few its XX% of time,

with in downtime. ability no with release pleased are the We credit and upgrade our property tenant the to

within prior time increase rent. rental businesses short rates. allowed in the temporary are occasionally to slight a show property Turning period with at may has the with illustrate occupancy. new demand default, than products to fail, July tenant a and contractual In transactions we we XX.X% decrease negotiated occupancy. decrease Hawaii to termination tenant's quarter-end in a strong April us These a that the our historically for was in rents The higher released small while lease in a same-store tenant in of release the that Hawaii while parcels

higher Also leased, for approximately decreasing XX XX,XXX total footage in will previous a in this QX, we reported square feet, rent had resulted our new square parcel. our property is while been we the this by nearly lease ground signed % previously for than lease rent that receive space

XX near-term for Hawaii, rent points expiring XXXX. we rents X% XXXX expirations over basis million significant total reset annualized the expiring million and only approximately in Mainland of the X.X remainder square is no end of scheduled for have XXXX. with one of feet, of $X.X by lease annualized lease the to On In

expect we the and to team, leasing have clarity months. has coming Our the tenant further with in begun discussions

their as maintain in jobs zone strong The value. continues trend industrials industrial fundamentals steady sector increase industrial to to land upward in nationally market continues display

rate is stronger, even with X%, the near a remain X%. On lows Hawaii vacancy Mainland vacancy of market historical rates just while of

with Specifically construction scarcity remain to and costs products developable demand expect in high. our for the we high of land, Hawaii,

now this turn over quarter's financial call I'll to details Rick provide results. the on to

Rick Siedel

And $XX.X good year-over-year. million of from EBITDA Normalized everyone. quarter Yael. Adjusted per per Thanks of last $XX.X quarter $X.XX share share, from for FFO quarter up quarter second $X.XX and morning, or the XXXX. XX% was the for million, was for second XX% up the XXXX

Total $XX results. increase increases as $XX a real tax XX% estate primarily million our rental second to representing by acquisition increase resets activity, expense as of increased leasing, XXXX rent reflects income prior million year from well for the This quarter and reimbursement. over

the acquired related back income following XXXX. This a $X.X quarter when the lease the also in a lease of place obligation elimination of below-market a million property in of included we that termination rental to was

cash reflecting by same-property same from Hawaii X.X% X.X% basis prior in increases new portfolio, over year. prior the Total in leasing over Hawaii basis NOI year, the and by increased rents increased property cash resets.

over basis properties in rent Mainland cash steps same contractual that of and X.X% at property recovery leases increased previously tenants reflecting certain prior year, primarily disputed. our had the expenses some NOI by

the $XX.X primarily The depreciation for acquisition expense expense quarter both expenses in million. million increase last second was our administrative activity, and totaled reflects year. General $X.X and since

that attractive of to million providing on X.X% a of and and full facility, January both growth. of obtained loan well million respectively, increases as expense on as balance at rate to million primarily sources external $XX.X by increased $XX.X interest revolving X.X% to $XXX credit fund our mortgage expense quarter low-cost in capital was XXXX, Interest our our rates of due

for expenditures quarter parking upgrades. The capital facades were the $X.X from building recurring sprinkler building and and Our Mainland, including improvements of these million. expenditures majority totaled roof the lots,

related discussed of on million Our expansion calls. $X.X to expenditures previous Iowa building redevelopment the capital in

EBITDA We on finished times. $XXX the resulting X.X debt-to-adjusted in with million revolver quarter of our outstanding

two the target We our were slightly but exceeded leverage. acquired, long-term opportunistic we portfolios with

mentioned remain dividend. and our the growing covered quarter, comfortable As operating predictable due and cash stable, business well this the flows at to last level we

reaching our coming times have organically amount cash Over mid-six time, to the from in we expect flows to years. fair reduce a portfolio leverage of

light we you new on and future. of across appreciation have in capital keep discussed portfolio, developments several the updated in and the on any However, a value recycling we taking including in investor partner, will feedback our strategies,

common reiterate to will our at we want We raise current not equity share that price.

questions. That concludes take our to we prepared now are ready remarks. Operator,

Operator

now roster. question-and-answer We will we session. At begin will Instructions]. time, our this [Operator assemble the momentarily to pause

first The Reilly go comes of FBR. B. ahead. question from Please Bryan Maher

Bryan Maher

leverage above that Good the But And and the from being an investment thanks rating the ILPT That's John, the XX% morning, that? stayed leverage view process have think of the long-term? the about thought dividend the thought RMR the helpful. most fact what's process that what's the that grade REITs ratings, investment area maintained on we of leverage on when in to have information And and Board. grade guys. over XX% on for and

Rick Siedel

Hey, this is. basis mentioned low But Rick. high these remember little assets other is that XX% just debt-to-total to that I it of The one is important some of would you point look how kind a thing metric assets out, our gross at in leverage does just our Brian, net to compared REITs.

XX% put XX%. that's to If drops you billion assets, were to there. our adjust the ratio the just on That financing high that would value of to Hawaiian about fair up $X.X down or

to metric But that peers look of again, bring investor than may due our patient with of little long-term move does the let a little So perspective, some and a But faster we target. higher. it's as over that some on or are portfolio our to really of John our mentioned, cash debt-to-EBITDA that. a a out-of-line and and time comfortable given if do we stability organically REITs, generate run. down but strength and ability not From other the we the feedback, little higher have take just are some we the portfolio to again, steps we're

achieve capital Looking things like us we're strategies recycling that at and is. it would our very help faster. target But where overall, comfortable various

Bryan Maher

the the given on thought that process process the I rating And RMR ILPT? grade what's longer-term. the the investment that thought had typically mean, over with REITs,

Rick Siedel

process at that and when financing than company. on attractively capital. did we other get It was rationale the was new old we an sources it the of less seasoning determined think source Hawaii, to was able priced just secured using ILPT, for better of year pricing our before the point had that were I a capital finished we that

John Murray

of lot I it no like easier financing credit get And eventually so the to contingencies makes I it some very to capital and you REITs rating like grade access deep an because properties. market think quickly. when -- investment have term pretty for offers a you're longer you to we'd the allows other RMR think say to do it making

raise to able I But being capital. a have reputation think pretty good we for

isn't that huge So and specific timeline. there's us, for no a concern so

to conservative we're we're XXXX there know, in or with portfolio not leverage You get growing maintaining trying high-quality levels. XXXX our necessarily, reasonably more properties, interested

a it. some bit metrics some -- may issues out, people pointed there's little that of Rick As quote of within the disconnected the the that portfolio are valuation because under-appreciate

we're to least secured focused for next be on investment at not comfortable grade and credit years as several primarily an So, the debt rating.

Bryan Maher

see acquisitions? industrial more Okay. maybe And trigger And to acquisitions basis -- year given on is then, new assets in John, activity That's to this year? rate first need to what how you the attractive the Rick was your strong in cap for helpful. for on degree, the maybe pull your marketplace actually availability a for then this what the currently is question for a half of would

Rick Siedel

think So and our is I leverage and revolver think financing so Rick, I got room piece, opportunistic that plenty under still is of guess, $XXX target, a capacity remained Bryan. a our I under million don't the we today start we've we've with longer-term think Again, have are I have still problem. to This but my covenant. necessarily or

the think falls really John. question squarely more to I So

John Murray

Well, right. portfolio I competitive, cap large think new high-quality transactions from when last X% been looking last the so know, I at All very X% some point. well-located, reasonably we've in cap that rate range, you we're for seen have a it's are basis, and properties as -- purchasing don't that during ILPT to properties expect that in to see the announced quarter price it's rates,

transact high-quality that identify on price are the we level. us would they see are that can in if transacting, high-fives, low-sixes, we in near-term, be acquisitions that available properties if other at You'll

Bryan Maher

you. thank Okay,

Operator

The of Carroll RBC go Capital Please Markets. next question comes Michael from ahead.

Michael Carroll

stay John, pat is you question, to or your I bit guess, a of acquire would kind that thanks. deploy talk desire leverage Yeah, off assets last to little until long-term of put want to you capital, right where Would go can closer given your you target? you now? and out your about leverage can

John Murray

managing focus it the existing managing asset is portfolio, bringing and Our down. on leverage primary

amount if existing do portfolio along might not and focused we the a said, on right was our we're take size, of of bite small we But Rick we're wasn't the acquisitions came have and currently, As opportunity. on leverage. managing transaction reducing focusing capacity, -- asset advantage

Michael Carroll

then are little a cash can you bit Mainland leverage you trend of happy it do a some bit to assets lower flow your or reduce letting that I mean, by metrics? your and such accelerate do want to Okay a goals little with bigger, reduction? retaining about to talk those you as something joint venture just

John Murray

drift to think allow to leverage I willing we're organically. Well, down

and years. limited And that there if for we we'd the probably follow couple acquisition have a be However, are in of limited growth of route, lot marketplace. opportunities

that select considering and also here pursuing joint to done And joint show REITs. managed including grow. RMR ILPT with other since in Mainland a we're we're and the to we ventures. effective our provide similar we've while could time, value of into think how an way to owned do path, strategic think I them capital that other so, group them increased continue have And I be period ventures opportunities, new and something assets to pursuing they've we've short And in

Michael Carroll

joint do it months? you're what over likely Or the the the and is a to debating Is on table that horizon still to next still transaction assume venture is fair to that on there? X XX in

John Murray

we a talking announce may like it talking it and are that but transaction within the not XX yeah, -- -- I we months think happen. are next I expect think or that might that's to reasonable it's happen it about may to-we

Michael Carroll

to to fair the lastly if the know is the increasing that dividend have the about just this change still improve then, provide several it on price Or something I over the that and if some is Board to stays $XX range? would current mean, you ratio, can stock is going I And think payout assume you healthy at what in you the leverage low stay thinking, going quarters? dividend as dividend, that next the you is insights us level Okay. on

John Murray

our times the think you on one know, I six board every we dividend. regular meets, year or of the a at and meetings, five course a discuss

might dividend. increase definitely rule out would not I that And so, we the

likely of to the dividend have and vicinity transactions price lowering of certainly share open bring safe that cash if think today, is the new I that have remain favorably rate the the dividend Board organically done, the idea the flows a we we the of and And think be any likelihood we're that things more secure, leverage and where that it is in increases would we've more share price I capital ratios. if a it's We very if reacts to would certainly predictable increase. payout that the flat. other do in very

the a dividend a there. being raise the our reduction high since is that we is message important Board dividend to there's It's just relative -- so, feels ability more is if do leverage So like increase to so our than the sent peers. wanted to dividend

Michael Carroll

All right. you. Thank

Operator

question next JMP Securities. go ahead. comes from Mitch of The Germain Please

Mitch Germain

to Rick, organically appreciate targeted how long try it get of pursue you JV on dividend don't to your asset target take how your us you to sort where levels, just debt-to-EBITDA would then reduce assuming thoughts leverage, or and is, quarters, sales? many the any if to

Rick Siedel

Sure.

that XX% Hawaiian that I the the rolls over or resets be So XXXX. of through remember our of one revenue helpful to might guess things market either is

few down mid think to in without else and times that anything that's years, would the the I doing us next of kind six the So take horizon say portfolio. I when

it's I are to longer-term we So strategies sooner. think some talking are us something again, to other about some than of willing wait. do recycling But capital

the more is needle. because to it longer bit the a So we a move it little than growing just little expected, takes is bit as portfolio

Mitch Germain

Great. potential discussion And Mainland been regarding correct? properties, always to JV just a regards your has with

Rick Siedel

more That is likely.

appraisal already like the somewhat doesn't things of day. our like that out I getting land through estate demonstrated financing Hawaii industrial and every there. that irreplaceable, our that value of come kind and real portfolio think is the we've along Hawaiian Also,

think, might and of were, there's you the opportunity with value handful are an got or those more that opportunistic on have of understand we the confusion good on We our them. show a and we know, how lot to I a number acquisitions just meet were to we properties our And demonstrate probably Hawaiian take properties recent also select a deal of assets. Mainland we investors -- think the I if

Operator

Alexander from go Merrill comes America of Please of question next Pernokas ahead. The Bank Lynch.

Alexander Pernokas

was better expand acquisitions? there we NOI breakdown, markets if you any Hi, picture these wondering and sub-markets Hawaii, that new into looking are forward as of move you're between a I just and me could again. or give to Mainland through your

John Murray

about, our amount There Currently come very XX land % a right just the revenues industrial come what's little from from about limited And Hawaii of there XX% infrequently. Hawaii. around in is of Mainland. transacts and over

and we've those the there. property generally in few vast expensive not our to be be I But we own -- experience of we'd majority of see very had and going more opportunities and that forward good because it's in and We'll should -- think that Hawaii there love on when the expectation the Mainland are far try So very between value. Hawaii. opportunities growth will

focused on the be Mainland. we'd So

those -- we We may Again, that try markets. coastal increase top to is concentration the know, target along markets. XX new. We of expensive over try our property coast. You like in properties we'd are time to target some more to

top have predominantly. markets United of that, XX So still been markets central like Indiana, States, the in more the recent part Ohio a acquisitions lot in but of the

Operator

Mitch Please follow from is up the next of question JMP And go Germain a ahead. Securities.

Mitch Germain

time on more rent Quick Yeah. for structure? that number assumption lease decline leases a question resets. traditional Is to it the scheduled reset will the safe over of

Rick Siedel

Mitch, opportunistic likely a we'll we and into lease have we've said that be steps, that. been with more a normal negotiate, times to converting reset if we often can do rent

resets year have it not us that increase partly year we reduce That's look to helps and for shocked year. so So we cash a of in with our the seen Hawaii they're portfolio the and as one in also giant increase after the number tenants, leverage our decrease.

sure little we a interesting It's over to resets stable period. particularly generally that think working way. been the make there's bit see I growth anything do the currently palatable try that do more that We But changing don't we're on. with

Mitch Germain

Thank you.

Operator

This concludes Murray, John our for remarks. turn to question-and-answer Officer, back Executive I session. President conference to the and like over closing any Chief would

John Murray

great today's Thank you, everyone, us a for rest joining summer. call. Have the on of

Operator

The conference today's Thank now for presentation. concluded. you is attending

You may now disconnect.

Industrial Logistics Properties Trust (ILPT) 30 Jul 192019 Q2 Earnings call transcript