ILPT - Earnings call transcript Q2 2020 | Industrial Logistics Properties Trust

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Operator

Good morning and welcome to the Industrial Logistics Properties Trust Second Quarter 2020 Earnings 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

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

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

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

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

John. turn will over call I Now to the

John Murray

commercial call. Thank has most a you, our how business. had negative Covid-XX earnings second welcome XXXX economy, Good impact including estate we ILPT's conduct real and on Olivia. tremendous to quarter changed and morning

sales, chain e-commerce renewed new services to highly supply after. delivery and remain However, industrial Retail sought and independents. is storage Due surging domestic properties a on options exploring focus

has virus providing powerful this net forecasts of industry in Supported believe trends, perform real years, coming and absorption well, including how the are growth. recovery the unfolds. strength for experts by industrial is leading over continued expedited both estate evolution optimistic through e-commerce fundamentals demand Given long-term and economy, overall these positioned levels ILPT tailwinds, as economic and rent both we this recession healthy the industry to

including Rick believe rent leasing of call, of navigate strong in more and normalized million to and Duffy collections Yael X long-term Siedel ILPT deliver challenging on we We strong a growth capture square a economic for term near-term second As quarter later same with any despite feet results backdrop, activity, that to cash and XX XX% year-over-year; discuss of positioned FFO years. property following up an and average NOI almost the were of X.X% than pleased reasons. growth caused well growth is challenges year-over-year; lease roll will X.X% COVID-XX the by

for warehouse used distribution nearly First, and Properties come from revenues of purposes. our Logistics XX%

are Second, of our including or our or two tenants comes the that chain. Amazon on services largest supply produce from tenants deemed of tenants, and Mainland, a revenue and that XX% many to essential, provide are FedEx sustaining resilient goods critical

state Oahu of consumed Honolulu where located, industrial island and in the XX% capital the businesses land small of imported. in Hawaii best a use Hawaiian our from we believe slow with comes on where revenue of real XX% tourism, Hawaii goods tenants the some in a essential, struggle Hawaii in of recovery of is estate the may deemed Third, are while is some that

investment approximately XX% grade result, will rated to and leases. comes from continue we portfolio drive Hawaiian rated or of demand. ILPT's the its land this value subsidiaries of parent a believe tenants, investment Fourth, grade As rent nature entities, irreplaceable of

On alone geography of comes and investment market to with or limited one from industry rent groups Fifth, grade rated across subsidiaries investment rated is tenants outsized grade percent our of portfolio exposure diversified the or well any Mainland parent industry. entities.

sheet balance well liquidity, our dividend. is with more Finally, million strong maturities, debt $XXX and than near-term no a of covered

continue continue We quarter. of pandemic made have grow to to opportunities. evaluate acquisitions to attract this but real opportunities our capital this during has any industrial performance not estate deployment portfolio, Strong

steady, now and cap which the to and turn hold rent buildings for over credit As such of status its Yael term the portfolio. deferrals. continue targets call rates to competition discuss dynamics, market the I'll long newer especially has been tenant strong to ILPT leased, activity for leasing

Yael Duffy

Thank morning. good you and

and to mentioned, exposure as industrial Amazon, across names transportation; products General continues portfolio e-commerce, demand products to Procter consumer FedEx. be XX% real consumer John from ILPT's Nestle XPL by and e-commerce, to such of tailwinds a household transportation to estate and Mills, industries. diversification and supported industry with XX% & including XPL the benefits and Gamble, groups, XX% strong As

resets, and the million foot real per our committed in conditions XX.X% with were in rates per square Of and capital consisted only concessions at leasing lease quarter lease such, given renewals ongoing in rents increases higher existing As than estate of balance to strong allow which prior minimal market million by our occupancy tenant rents of a disruptions at of business Despite completed We commitments a Hawaii. square us for we our with in sectors, than been deals, years for market economic a will approximately and rent term rents at strength and of square contrast X.X of leasing other the feet approximately caused an roll that term, active portfolio annualized million from tenants lease executed to pipeline. higher X%. as were rents. revenues. XX of the market million feet evidenced all this conditions, have $X.XX were COVID-XX, approximately nature that achieved ILPT an of XX.X%, and XXXX leasing XX.X% avoid tenants rent totalling average that we our In feet, up April, longer the believe year. reset interested square successfully In prior ILPTs to arbitration tenants strong $X concessions. activity quarter by extensions The square XXX,XXX this portfolio the XX.X in X.X and activity leasing manage with lease rent Hawaii where to the renewals of at able in of carried uncertainty annual of over X.X generally that leases and short-term resets were totalling feet

as scheduled the completed up in teams resets rent. real XXXX remaining now a complete. efforts XX.X% and rent were resets our proactive services roll to Due all are for management this, estate asset the Excluding of

June revenue majority $XXX,XXX the outstanding. or of feet, of lease As XXXX expirations of have XX, square annualized XX,XXX addressed been only with

established minimizing set will comprehensive X.X% strategic focus In to costs. we to or set such, XXXX of total maximize in address rent potential our way and expirations where annualized to rent annualized expirations growth market-to-market Hawaii, plan that expire. were X.X turned have a while XXXX, The expirations team mainland approximately rent and feet X.X of to square a these is As million million downtime is in capital feet in expire. X.X% or total has square

portfolio. that documentation. of of advanced absorb could million roughly anticipate XX,XXX square conversion negotiation of vacant or pipeline current of stages the a leasing feet feet of square given activity pipeline, lease X.X current includes square We is across that X.X million our space Our near-term XX% feet in

deferral. have rent due their rent obligations. certain and collections After months. consideration tenants top rent contractual ILPT's rent in collected and paid with to is rent trending was QX in granted July deferral July XX to line Turning taking of all XX% into prior tenants,

During QX rent granted approximately X.X% XX reported had of million, approximately we to annualized earnings call, our $X.X us representing deferrals tenants ILPT totaling at rent.

approximately abated. grown have the forgiven numbers Today, million represent the these that of represents to for the through modestly rent. April no contractual $X.X over cash totaling rent cash or XX, deferrals annualized July X.X% aggregate, period. of X.X% been which has XX of September, as revenue month In tenants, As

to We are position long-term working a and choice. landlord our of their tenants support ourselves as with committed to success

reopen as Rick requests XX and closely acceleration quarantine are we seen additional may end negatively August financial an July, tourism, monitoring day and tenant resulting request details not impact results to Hawaii to While Hawaii. in rent and rely position. small this provide I'll businesses June in in August Today, on in to But deferral September. requests. began the economy have the of has over extension the the in of significantly through call on we especially now turn order quarter's the activity deferral subsided in that

Rick Siedel

Thanks Yael and good morning, everyone.

same currently $X.XX May, results and contributed year. second X.X% for the X.X% was option. contractual This real a in normalized In have result a Adjusted subject increased leasing basis cash FFO EBITDA previously steps second collections estate at per expenses. of discussed we've property same X.X% was $XX.X insurance debt X.X% portfolio million, two in to total completed by of Hawaii maturing $XX.X credit The activity, $XX.X on result the up in in increase extensions until calls. million mentioned, six-month mortgage The over and up was driven and recognition offset our prior partially NOI and quarter increase share, the property rent we to growth for, some amounts the the facility XXXX increased no John percentage or increase along The Mainland XXXX, primarily taxes the the Hawaii. quarter of September million and was a of year-over-year. for our Mainland on increase by other with prepaid, quarter expansion rent of year-over-year. reserved prior which is NOI of X.X% As the our growth that

net million of had and XX, ratio to of availability times. $XX million revolving approximately a of X.X our facility. on ended we with quarter credit of EBITDA As the cash on debt $XXX consolidated June hand We

at debt debt the rest was The EBITDA the to the to and Excluding of portfolio joint EBITDA. times related X.X venture.

ILPT profile provide opportunity ILPT JV in also leverage be with towards that ability stake, in JV and equity this reduce negotiating we a upon including our and of below it financial confident are joint share our are business and the current rata the capital growth, unconsolidated We second would the to second bring This to a If remain In continued our securely. be leverage; liquidity for summer, de-consolidated venture completed the for value. venture. effectively our net into venture the asset selling expanding continue partner to assets times. may further successful our supports X meantime, to may we raise these joint operate if work pro possible our

rest-room improvements the minimal to on continues two roofing properties, We month, The renovations and of spent and XX%. a quarterly upgraded from this under our requirement. just This ratio prior share the lighting our expenditures quarter. mainland to per just payout portfolio of during other capital we for million second capital throughout project for have declared related one in Earlier Our normalized level. dividend the a the results majority $X.XX $X.X shareholders, facility. FFO the unchanged over distribution regular

the dividend peers. yield relative As raise been we've board our to before, and to at evaluates it to meeting our has reluctant current dividend due said every our

the Operator, pandemic We sheet industrial quarter That supported the please business strong concludes resilient caused remarks. are and growing for by a up balance encouraged our our prepared believe stability ILPT's the portfolio and by continue current with withstand open sector. economic COVID-XX will questions. that results challenges to and line second by a

Operator

Please question ahead. [Operator first Instructions] Riley Bryan FBR. Maher go Our from of B. is

Bryan Maher

there So opportunities questions. opportunities acquisition the you fewer meeting out maybe John, of that underwriting because there, criteria are or just little lack down could have just hoping more bit stayed a low? fewer thereof. was a cap it rates I Is on so are your couple or drill

John Murray

Good It's good morning, a Bryan. question.

we've bidding been were about but we actively to more the rates been more think conservative and on have go. pricing than for markets, in certain cap we where been - We aggressive has should acquisition where be, cap rates willing tenants, opportunities, certain

believe and opportunities pretty and feeling of selected couple the handful bid. currently, of as we're we're not about to So made a opportunities final it we've been round the on winning a good chasing

currently. So very X% competitive, below we feel it's comfortable for don't paying cap rates

drawing been line. we've So the

Bryan Maher

where But you be that you Mainland? then bit that a Anything new about And seeing markets clearly, competitive concerns Ex-Hawaii. the supply you you talk supply in are markets, new mean your about little can would on I what in operate? the

John Murray

I but mean net remain supply think new in I high and is has that absorption the there various vacancy been low. markets, rates

I only think X%. nationwide, they're probably around

a higher others things us. but to to that continue more manufacturing and So those particular, of certain in the all are of supplies; inventories benefit e-commerce we are - feel tailwinds keeping onshoring, going that key

don't now. we really, growth a right big concern supply feel is so And

Bryan Maher

from me, Is the that Mainland of to kind then second And a JV you diligence? is hold potential inability it back think in the just up there? driven the something And assets, Right. do for last else? partner on COVID XXXX? Is do happen mainly due the can what of it half that that's something

John Murray

in quarter, with third we the hopeful this the mean script we we that I think are close this said second I quarter, partner. that

think the I that's been stages. has some final of coming getting squared the documentation and legal down it delays, to the away

be market to of the you diligence. complicated. depending when because allowing in of able where delays markets it been teams where to not back markets travel. you has if open on the It's place you are some very pandemic live to Some to get go diligence the the may partner's are, Even the due

involved a lot these this done But confident logistics in there's we'll days. that conducting get diligence year. of So it we're

Operator

Your Jason Markets. of next RBC question Capital go comes ahead. Please Idoine from

Jason Idoine

I Mainland runs was the specific from? point and the the where Could either portfolio or could any there also are portfolio on wondering Hawaiian deferred newly and runs and if if you the undeferred coming unpaid $XXX,XX you of to industries? is touch

Yael Duffy

Jason, this Yael. is the

we So most deferrals the are Hawaii. for of tenants had new in have

able smaller quarantine rebound. businesses mentioned, to up XX just that But are these opens once be to their businesses will just and on - tourism once we're that rely we again heavily lifted, we As confident day feel the is and tourism. able

most the of been deferrals have the have bulk the think been general in biggest it in industry. for been - us, I of has - automotive

rent the us. Tire Distributors. that that's to we of have mentioned for deferrals think I on last Mainland we quarter locations almost given, And there, American aside million it $X from

Jason Idoine

that? are what undeferred And from rent; deferrals of of you the the much guys of and And about then uncollected did how you how recording? much guys X% revenue record

John Murray

Sorry, XX% that it on. excludes So, record - we tenants number collections revenue the includes don't tenants

don't based are we're X%. denominators for would collect. record difference revenue, Our include on that between about monthly that do we we revenue is that what denominator and book billings and our because confident will amounts The not

to percent revenue date, $X.X as had closer $X.X the of So a collections already And we've million million are passed. to XX%. of

each therefore future. will be and The in our team concluded in receivable. that those numbers. And our it's does So an accounts evaluation impacted that we'll hasn't collect rents the and it period collected

Jason Idoine

me, next I the guys guys point. months, have looking a XXX,XXX data you Now from update last know you of question that? deferrals last if that a an - wondering gave was could then useful And several so quarter breakdown deferrals of forward new just you provide the I over on and

Yael Duffy

Yes.

than and and So significantly just it's XX% is less in then related dropped X% the July, off August, September is X%. to

So as it is Rick said, most behind us of already.

Operator

from is JMP go The ahead. next question Aaron Hecht Please Securities. of

Aaron Hecht

been at type this transactions property rates For a enough at - have we're point? corresponding point down. properties? decline rates trend going seen read rate you've interest if cap obviously this if on cap mainland seeing in get to Wondering a Wondering

John Murray

hold stronger a tenants tenants rates We're seeing may rates the even for buildings little below cap for so at are fours. are dropping more their steady the e-commerce be - well last aggressive, least type mile facilities, cap X% bit for in quality Amazon like getting that new, located they

steady holding they and are more markets. maybe So aggressive at least I slightly in certain think getting

Aaron Hecht

has first joint that rate proposition changed do the was round of to to will this or do a I somewhat you degree? think similar you in X.X%, be valuation round your next the cap think venture, or

John Murray

valuation they at the same prior the for the partner. I proposition partner. entering valuation as mean are second The

going investment evaluate sure that investment meet make all we agree opportunities all that to forward that and together our we So have considerations terms. that then we're they favorable we'll getting

Aaron Hecht

And then leases Mainland they X.X% of - XXXX. the in turn

thoughts Any this. rents rates? where compared missed the I are if to market sitting Sorry on those today

Yael Duffy

X% Based expiring over to see on X% to an pipeline, current our we're approximately rents. increase of hoping

Operator

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

John Murray

runway joining our demand. today. Thanks a and We assets for long base our tenant us have strong everyone believe for is

about wellness sector Thanks. hard forward. going you of for optimistic resilience all to and work wish continued teams forward. are the We'd their and thank our like our We moving health

Operator

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

now You may disconnect.

Industrial Logistics Properties Trust (ILPT) 29 Jul 202020 Q2 Earnings call transcript