ILPT - Earnings call transcript Q3 2019 | Industrial Logistics Properties Trust

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Operator

Good morning, and welcome to the Industrial Logistics Properties Trust Third Quarter 2019 Financial Results Conference Call. [Operator Instructions]. Please note this event is being recorded.

I would now like to turn the conference over to Olivia Snyder, Manager of Investor Relations. Please go ahead.

Olivia Snyder

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

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

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

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

to turn will I John. now the call over And

John Murray

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

last of feet industrial land leased, Hawaii. million end quarter. ILPT's portfolio the XX.X% quarter, were up on XX feet the properties XX.X% XX.X properties located come square of of from rental of ILPT's with XXX of states square located annualized and that million in from warehouse third revenues distribution Approximately Oahu of XX% in consisted As XX.X the

XX Our million later feet states our down by Last of leased. focused with properties We on consists long-term Mainland a located portfolio leverage in bringing the properties, call. Rick week, which discuss remain in XXX% secured detail are target XX-year portfolio to fixed-rate of interest-only square in obtained that we loan million, $XXX more range. XX Mainland a XX will X.XX% XX

is fourth this pursue which This close joint investments and private real actively our and of than in again markets, and transaction estate favorably the towards demonstrate to may we capital be value believe to the we transaction, first step valuing once quality continue venture portfolio. more hope public to the a quarter. the Currently, seems

XX by not this earlier Given announced an and properties we is Mainland strategic which by ILPT the investment-grade loan secured this seeking rating new for loans properties, credit secured the priority. a Hawaii year,

Class that height, Expolanka, transportation. tenant and specializes distribution weighted known LED years. sensors a with is A likely International With completed and properties are multi-tenant are newly storage, loading million. totaling access XXX% logistics and XXXX, to The lighting and ratios. properties with such lease built services. for logistics with $XX.X Columbus, acquisition are in during third term motion Rickenbacker's The global industrial the best-in-class the Airport, attractive term, a as immediate I-XXX, cargo EFL JV with or quarter, Rickenbacker third-party of we near also feet is XXXX The confidence facilities Freight, that in buildings multimodal the Ohio, primary square in as in of characteristics, Expo XXX,XXX X clear XX-foot located a near Properties rail average X.X leased provider

water the occupying freight supply Hague, transportation market; distributor are Forward William and and the of for buildings devices. R. medical air a Solutions, distributor, logistics Air TwinMed, filtration provider a Also

to to opportunities, continue levels. down selectively We evaluate acquisition even our manage we normal more while leverage

properties aggressive. industrial e-commerce-focused competitive very for market pricing is is and the However,

do for the additional activity balance anticipate significant I of So acquisition not XXXX.

the Yael leasing I'll call to now over turn our to discuss activity.

Yael Duffy

and good John, morning. Thanks,

of X our As respectively. of third investment-grade-rated parent rental make representing quarter, our up the X% of the end and and revenues, are Gamble, subsidiaries XX.X%, or of tenants Procter XX% Mainland Investment-grade-rated of top revenues. Amazon, FedEx tenants & annualized entities X.X% total

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

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

you suspect for was quarter XX.X% leasing square approximately occupied, renewal entered portfolio we third activity at in leases is that a minimal. the rents an rents with for would XX,XXX were and As prior years. over higher Hawaii, of feet lease new XX.X that than term In XX% average

majority than the that this replaced historical XXXX. should lease it May lower was our in While be XX.X% may the the averages, appear of signed that activity roll-up noted

Leasing $X.XX As X.X per for in square less capital per such, years. represents growth the foot concessions lease year. third this strong quarter and than roll-up were just

hearing to quarter, As square tenant has go scheduled early million reset QX to to in determine market rent XXXX. of Hawaii X.X for to annualized mentioned and the was and last for X million is leased chosen XXXX. rent feet approximately $X.X arbitration scheduled The

expect interest. will We roll-up see to due receive in any rent plus a increases and back rent

in Mainland, expirations no with total significant XXXX. less only the near-term On of over of lease rents expiring basis XX X% and annualized have points XXXX remainder the we than expiring

rents. and market discussions with and begun expect to We have see renewals tenants these already

Turning expenditures. to capital

spent with significant the made project the third million quarter. on of being $X.X in Toro progress expansion redevelopment have capital We

$X we $XX tenants XXX,XXX growing to approximately of XXX,XXX are complete will distribution adding be foot beginning in increased and in expansion you the may recall, in expected million facility existing The Toro's project XXXX. As foot to to is approximately million result needs. rents December accommodate square square

improvements parking lot for Mainland on with replacements $X.X and million We as also capital roof upgrades. site as invested for in the recurring well associated building

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

Richard Siedel

the as income our tax increase rent rental reflects to good share, representing Normalized everyone. third EBITDA was results. third of increased from quarter This from FFO million XXXX. up quarter resets activity XX% million for for prior the increase and as was $XX.X morning, of by and $X.XX quarter real for XXXX the XXXX a the year leasing, up for Yael, expense million, of $XX.X Thanks, $XX.X share third XX% $XX primarily $X.XX Adjusted per per or million, Total reimbursements. well quarter estate year-over-year. increases acquisition over

included against a or rent revenue share, tenant per charge primarily $X Hawaii. related to quarter a in $X.XX million straight-line default also This receivables following

be settlement this a gain Our team space. with the is need to to find reached we see new we if of or tenants to tenant working begin the parcels, possession for if can can so

increased steps X.X% cash Total from and increases NOI in X.X% same-property prior same-property year executed as leases in increase cash in a NOI past over basis same-property of cash portfolio renewal basis by and our the basis result rents year new rent in the a NOI. increase reflects leases. contractual Mainland and a over Hawaii X.X% This

activity. million. expenses third the $XX.X prior a quarter administrative expenses as from the was increased and our have depreciation for totaled result year million These General acquisition expense and $X.X of

containing secured total which interest-only facility revolving our over years feet this balance XX floating rate fixed-rate by mentioned, mortgage, We aggregate million XX, mortgage X and debt average our increased of X.X we and $XXX a XX-year out XX% our properties of September loan obtained million with to in credit portion X were As of last maturity week, lowered an of as Mainland states. John able to X.XX% of located our a approximately increased borrowing costs of square term the our XXXX. to debt

Following attractively rating demonstrated fund the earlier this closing credit do investment-grade secured second accretive seeking have would our not acquisitions year. priced to capital. completed capital we significantly to believe reduce our cost our the believe we of long-term of raise this And an ability financing year, large

to third finished million, adjusted the in of outstanding our higher expense the increased to $XX.X revolver, million with debt We X.Xx. balances. quarter year-over-year debt on in million to Interest $XX.X resulting $XXX primarily by due EBITDA quarter

sell reduce of properties coming our in a earlier, equity our Mainland that to joint partner properties. we As to our the leverage some value an would of Xx demonstrate below stated John stake months in venture the hope and

just even However, level, operate leverage venture, we joint FFO a continue to thanks and at the growing to without predictable our at and a normalized payout XX% dividend business well-covered current stable, cash flows our ratio. comfortably

for That open please prepared concludes up questions. remarks. our the Operator, line

Operator

[Operator Instructions].

comes question Riley first with FBR. B. Maher Bryan Our from

Bryan Maher

with or quarter, be possibly know but you question on thinking about later there the fourth in the the quarter they said into what of Are JV, with what that? you you type are wealth it sovereign participant quarter? would fourth type on investors potential Are the slip And first timing? I A are private this? they of funds? in secondarily, equity, what's speaking

John Murray

partners. that Our on the current focused it expectation funds time JV it's -- -- the quarter present fourth We've slip, closed yet, in is potential wealth so close anything will on not won't this and but we're is as possible. sovereign at

Bryan Maher

we guys would to XX% Boston, in or similar keep form headquarter with position majority? where with like it the what Vertex a maybe you saw Pharmaceutical take XX% SNH a And the

John Murray

add that -- be in SNH aiming this joint similar did, partner. Vertex an one that joint I but that yes, Vertex it approximately than Initially, this in think just to venture percent. think Yes. with joint that range, could around going so to additional venture. XX-ish is expect structure to we're investment we -- have one the -- And -- partner I We we to venture more may whereas we're partners, the

Bryan Maher

the be open between Or many those XX And that would XX it in the refinancing properties to it more the participants properties? just tie Mainland be recent some alluded to would of you properties, properties. the Is in JV?

John Murray

The X plus other those XX current plan property. is

-- potentially that so -- the transaction However, we could grow to we structure we it. that hope

So...

Bryan Maher

Okay. quarter. the higher And Is the there third run something that expectations then of for estate we quarter an real anomaly? on lastly third our seemed the taxes Or little bit Should kind consider a for there? was rate? going than me,

Richard Siedel

to Rick. or all was taxes, that where Hawaii, was about million taxes this to increase a there million comparable up in of majority and Bryan, We The XX% almost of so. in about related is $X.X estate that, went properties, in increase. increased assessment $X saw acquired million $X.X property it over is related vast real of

increase pretty that that's the don't recoverable that we'll real substantial. again. good The from where see is taxes XX% are certainly our of may be vast our us for the -- think tenants. this of majority news leases, under But estate So normal. recoverable over type I it's new

the tax going is values So down, where to we're can obviously but try to bring this burden now. tenants the for appeal work to normal we to probably with

Operator

comes next Securities. Germain Mitch JMP from Our question with

Mitchell Germain

So sell know a assets are it acquiring this hold? will you creating growth to you fund you'll creates But fund, X. the assets identified? that new that plus you're mentioned I going or just where vehicle future a XX coinvestment potential be as a be currently that you

John Murray

negotiating financing vehicle that to we But Yes. closed these yet. finer reached a finance It finally just properties. not just as hopeful we when portfolio will not hasn't way have still can some -- use of we're points. our of a agreement, it grow that well the XX and to We're be

with as we may venture properties and markets. time. -- It venture may It new So public and joint factors, acquired vehicle. acquire add properties is conditions into private to be from be We that lot including we really that markets venture the our over vehicle. the the in depends portfolio on the through other may of subsequently market joint new properties in put our the a price well share then joint as them where it

Mitchell Germain

totally helpful. capital, said Okay, of diversify your investment-grade you it wouldn't reduce the capital? of I rating understand that. cost that's won't your But sources Rick, that and

Richard Siedel

decisions, could capital using lower if It Unsecured would. we capital the a debt go think is route. the a unsecured at of the property were we than obviously more major because of allocating for cost you or equity capital to to for I of at to lower -- the end but successful attractive, day, any the lender be. can stack as and traditional try combination think JV seek approval But the this don't preferable really owners or look we get cost again, capital can about we secured need of it's and we is we the for leasing entity,

value to Hawaii the So was and this. I of market that's was mean we've those previously, understand think why the did wanted we thought CMBS done I important properties we there, it financing. appraisals the the the execution misunderstood. We because

there revolver most close for fixed-rate, bit. X.X%. about just And back that It's borrowed financing, at now the have than out I our repay so. mean our not a was this capital. bit past accretion. lowering every and was average X.XX% We loan of a But really on quarter to lower It's borrowing that recent cost it day, still a can gotten think now. story for we it has it and was revolver we pay and the positive little XX-year

Mitchell Germain

Yes.

of the it? missed Okay. The lease already into then short-term discussion, was renewals. Was a -- that quarter, that a think XXXX signed might about portion to and past that longer-term the a it. lease, upside the renewal you a Is have way that Hawaii this you that in short-term and I got entered you

Yael Duffy

was had last happened default. mentioned what into we've Actually, the Yael. gone is quarter tenant that This

space it within to month. we're we so got And lease the able back, X and

And time. such we the why a that's so in roll-up had short

Mitchell Germain

just Got this guess default you the And quarter. to way adjusting for Is so not Excellent. that it? you. I then that the on the charge. about think you're referenced

Richard Siedel

No.

to a adjust from for I these happen time So mean charge. time. no, we wouldn't things

last I charges revenue. You does. bad versus that went a it's year expense. the doesn't, year, difference was of this debt it it is year, reduction mean that the expense, through big but geography last this And like hope year,

we we include was So these that rental that it this for leases tenant this X income quarter's parcels numbers collected. probable don't annualized any not because determined

charge. these it these good is was the a of demand of similar A submarkets to that news I Hawaii. straight-line mentioned, areas, of million took just regions, lot is in future Yael this But $X we rent. mean So or story the for lot space there

So quarter, accounting charge. I a well, released these an tenant. we're standpoint, to hopeful needed settlement with this that, reach from or the we're that we'll to not opposed we'll as but we the mean take get

Mitchell Germain

how FFO, understand impact is impact? vacant, there's an was to the that the impacts and way. should about AFFO. other think I right just on there Or this space So no then it? the than FFO Is FFO

Richard Siedel

our is impacted of mean negative well. the charge so There charge, a wouldn't future quarter. FFO that have NOI cash unfavorable number took whole quarter is. about to is a why straight majority impact We GAAP it, is million. that I obviously, this as it line, $X small is by this it's printed The but NOI which we

do also current rent have we've that We reserved for. the

negotiate the in So we took quarter. no this and credit for space trying the revenue The still to tenant settlement. is a is

so. that So But conservative are in we some this are get of to stuff it that recognition hopeful pretty comes back the accounting we'll when of rules the future.

Mitchell Germain

Great.

is, So charge income it's where rental correct? sitting the basically effectively

Richard Siedel

Correct, yes.

Operator

next FBR. Our Bryan is Maher a Riley question with follow-up B. from

Bryan Maher

to kind kind think more you billion be see mid-Xs, Yes. I on to what like what cap take, going follow-up and was for just Liberty were around your there's of to I believe if guys that trading, X%. rate a are Prologis's wanted or $XX give the the thoughts and And of you that space, of acquisition the means M&A?

should little you how can you on Prologis' very the in sector just past about thought So year? give relative think a the us acquisitive guys we to

John Murray

by My of far, that owners ILPT important are factor. REIT industrial Prologis is. initial largest estate. how clear the of landscape, size the reaction in land, competitive. undervalued And very Blackstone it institutional another and it's But statement was is X owners an acquisition makes of it's real

aggressively, and portfolios. a I still plenty think think everybody it's I existing that those I -- going for continue both big transactions, in make but investing there's And both space -- you're of there's companies room think of of acquisition just think priced. sector. room. But estate see I through be makes real It's plenty to growing things So to aggressively to it continue to the makes just market in their the

We're this seeing focus underwriting going So this market. are see we're But coming I are the quarter, We're seller to we on ILPT expectations quarter. watching aggressive leverage. properties. for you'll don't expect acquiring properties any pricing. additional But to continue that

we do we what what about careful and do. being don't we're So

Operator

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

John Murray

We hopefully joining November. the to Thank conference on us forward NAREIT of today. seeing for look you a you at in the Thanks. bunch call

Operator

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

disconnect. may now You

Industrial Logistics Properties Trust (ILPT) 29 Oct 192019 Q3 Earnings call transcript