ILPT - Earnings call transcript Q3 2020 | Industrial Logistics Properties Trust

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Operator

Good morning, and welcome to Industrial Logistics Properties Trust Third Quarter 2020 Financial Results Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Kevin Barry, Manager of Investor Relations. Please go ahead.

Kevin Barry

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

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

website. website not in statements. or factors upon can Additional contained 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 ilptreit.com reliance

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

John Murray

of robust fundamentals, morning quality our assets the call. the Thank you, stability XXXX third focused of e-commerce Industrial strength that third portfolio and ILPT quarter reflect and solid continues This Good warehouse welcome industry tenants. quality morning for ILPT's a reported benefit and Logistics distribution high we Properties. credit from portfolio earnings to and quarter Kevin. of results to high

During rates After third Despite giving of earlier demand strong the COVID-XX at effect modest occupancy with feet nearly and liquidity XXX,XXX impact year-over-year were cash and our XX% tenants certain economy, quarter NOI collected the same of strong. leasing regular increased the our month, rents we grew properties on Also remained distribution for maintained FFO the contractual executed holding property XX%. square our granted to shareholders. deferrals, we rent we to quarter. quarterly during steady to of this activity

excess XX about long-term our industrial its and by in acquisition real submitting to to market points tenant quarter, despite conditions to for are and we very continue value especially very second grow competitive attract The letters properties, acquisitions make buildings top portfolio. leased working estate for with million of any call. XX during with our since portfolio, experienced an interest $XXX evaluate We last earnings aggregate this of did not the opportunities for intent Consistent quarter, but the opportunities. for deployment in targets markets, rates or basis steady continues capital environment credit which newer, cap and aggressive ILPT's remains is declining

are While our to opportunities prepared acquisition to are opportunities steady complement react pipeline approach remains we a of to maintaining our investments, portfolio. quickly potential disciplined to we and

with line us This borrowings to for to $XX JV track dispositions, to in our plans million. remain Winchester, our further on of terms we We will is non-core square capital. agreement with minor sell with expand an In sale transaction, XXX,XXX reduce it that relatively an credit. Virginia a on entered reflects our approximately building opportunistic feet of into enable private

pandemic The made uncertain. due of has working However, documentation. and delays challenging have remains to it through some diligence been property complete the there timing closing

support over value results vehicle the We review as important an Yael growth ILPTs ILPT's turn venture and call to the this creation for continue to term. quarter. over view operating to to And the I'll long

Yael Duffy

and brief everyone. morning I'll to Thanks during essential are start assets products activity good across Today, leasing details United then overview John provide we services and our critical and in leases of a and supporting industrial and sustaining with that collections third the quarter. the States. on believe owns portfolio ILPT

warehouse XXX feet, are totaling states, of XX consists XX portfolio in XX.X% approximately that million properties and square Our leased. distribution

are Hawaii. leased. XX Our are million million and square Mainland ILPT's feet in land XX.X% valuable in properties of annualized XX% XX portfolio includes rental of XX XX square states Approximately feet revenues by totaling properties that industrial generated

tenants three top or X% Gamble, respectively. Procter entities, grade mainland representing and Investment rental total XX%, tenants our revenues. and rated are of X% approximately nearly two-thirds & rated Amazon, subsidiaries of up investment parent Our annualized revenues FedEx of make grade

tenants quarters rated term grade subsidiaries from of portfolio from secure comes total three weighted lease a land than The more remaining those portfolio average approximately nine entire years. our the revenue at or leases. Hawaii has of or Looking investment

strong rental feet same During despite for third year. XXX,XXX term rates occupancy there prior third was lease and executed leases years new with the XX.X%. capital XXX,XXX executed rates an existing for feet and and for than leasing approximately and higher industrial renewal rates quarter, XX an the the In space. than of for X.X square per ILPT leasing X.X% approximately per properties logistics were average quarter that market of in at $X.XX we commitments lease of X.X% square rental foot conditions our prior portfolio approximately square higher leasing active, aggressive in activity remains activity,

for facility our to renewal current our rent ILPT's historical Indiana. two in While XX% renewal for in demand million Hawaii property results rent In in while of resets should leases Wisconsin, excess were that X them due with in Amazon expected XXX,XXX improvements. acquisitions rents. were foot short-term this of averages, current we roll an was X.X% that down, we it at than impacted leading with sorting of the three feet underwriting XX.X% square income, activity noted exceeded this resulted the growing property. to executed balance amortization The X.X% totaling rental nearly a driver in we existing down The leasing space our prior e-commerce this roll consisted and rapidly a rent relatively our relationship the rents higher be below up in is square will October, of represents tenant Amazon pleased continue are early in is our of rent, negatively which annualized at Hawaii. by leases

four lease with focus continued are essentially will complete, lease coming expirations XXXX been the our of of by by lease X.X% total expirations be of the on square on majority XXXX rent the schedule feet the on in annualized tenants total In or the X.X% negotiations early resets tenants be our million driven rents. or rent. totaling of feet driven majority In expirations X.X XXXX, completed Amazon, Hawaii years. for mainland, X.X excluding million renewals annualized has As approximately in square will totaling

way of downtime to have management address and discussions these in that rent services costs. potential a - we'll many and minimizing with asset proactive estate while tenants plan maximize growth, these capital in teams and real expirations Our

in QX leasing XX,XXX could new across feet vacant X.X stages square XXX,XXX and current square space XX% current of of grown near approximately our our that levels feet a that million feet conversion of has roughly advanced portfolio. of partially million prospects includes million the is up the to such, As of feet from activity pipeline pipeline, anticipate square feet square term of or X.X We given documentation. negotiation lease of absorb X square

Turning to rent and rent deferrals. collections

quarter effects stabilize. After rent We continued granted QX that rent contractual referrals taking are in pleased collections who us XX% certain remained to Since and one deferral tenant our QX. in rent was into rent call new multiple consideration, deferral a to collected to during leases to from earnings request in the tenants, Hawaii. we rent report due of parcels strong third July, granted

today which our million. date, The in represents $X.X is outstanding of XX, rent to collected probably is X% current over As To deferrals $XXX,XXX we of tenants. the deferrals, is which of revenue million, we've balance of approximately contractual of granted October with XX deferral amount rent have $X.X cash total these deferred December. month deferral the

are option. Hawaii testing a encouraged has that the state we taken pre-travel Lastly, with steps to reopen

XX, departure. October travelers COVID negative two-week can of bypass quarantine As of with a hours the within XX test

rely are We step small the optimistic the in first tourism. local cautiously on and that reopening economy that businesses this supporting is

turn monitor Rick success on positioning while will as position. to I'll to our results tenant a of choice. this over and details activity long-term the support quarter's tenants our and financial to call continue with landlord work ourselves to provide now We

Rick Siedel

quarter our other activity, a in along contributed third EBITDA partially Total up $X.XX and third everyone. year-over-year. property increased for morning per the increase with normalized is X.X% facility primarily driven quarter good mainland X.X% on mainland to contractual same debt quarter discussed have result FFO Adjusted of two $XX.X We was credit This for our Hawaii. year-over-year the last in The up $XX.X leasing expansion extension year-over-year. Thanks Toro on XXXX, X.X% of growth that the Yael, our of and basis increase share, X.X% steps to offset call. currently by project or NOI option. subject increase by same with results which X.X% no six-month year-over-year. QX was until The and cash the million, million portfolio was a property maturing prior we've in that lower of December our year completed NOI occupancy Hawaii in increase rent a

of September cash and debt on million credit consolidated availability EBITDA of increased million As availability quarter facility, $XXX $XXX approximately revolving on to of X.X as ended has times. which the million with net had of XX, hand of to of our We $XX today. we

liquidity business operate to the rest and supports the X.X venture, related that confident the and EBITDA. remain effectively joint securely. Excluding to We and the at current to times profile that debt was EBITDA our our debt our portfolio ability financial of

on had the truck majority improvement improvement. a spend which two related $X.X pertained of quarter. requirements of to for minimal capital roofing to portfolio the during core expenditures, mainland property the the three other spent properties, third of of approximately Our We million and projects our capital were

million. a This this our balance quarterly Virginia As unchanged Earlier our distribution sheet $XX in entered prior we earlier of share, asset as is in which to for $X.XX from John property XX, declared agreement of is property sell Winchester, the we on for level. September month, sale mentioned shareholders reported as to held XXXX. per into regular October, an

Our just is normalized FFO under XX%. ratio payout

to to our relative has yield current evaluates dividend raise board dividend it due at meeting peers. the Our and been every to our reluctant

caused downturn by ILPTs We ongoing are our business believe encouraged by pandemic. third results continue the and economic that withstand to quarter will the

is Our Operator, strong, up and sector the remains sheet balance prepared open for line resilient support questions. continue expect stable results. and That growing industrial concludes our a will we remarks. our portfolio to our please

Operator

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

Bryan Maher

and for JV that I if Yes, and this, that good set you the thanks up? have information. morning, on did I any second was of all would A come maybe there and into JV update I missed couple potential But partner first quick that questions, apologize. that

John Murray

diligence was complete our documentation an because has because partner And is been the documentation adding final to through, now work some matters to there second been are update, being worked time expected There - more consent. to that took we the we that of the process, is it's pandemic. timing the get their and provided but just still lenders continue has that towards elusive, which than

it So get will that we're stages, and in confident believe the done. we we're we latter

Bryan Maher

I And that so we tourism, you think more give in when size this tenants, those deferrals. little us XX granted were I'm then related the guessing they're Are a grant, or to probably look that? Hawaii and tenants? all color that on And number at primarily were smallest can of

Yael Duffy

Hi Bryan, this is Yael.

that of for So rent interesting - of tourism. you're $X.X tenants million they has because were account two deferred granted of lot million. the these XX% the do with but tenants it's $X.X deferral to indirectly the only right we've And of Hawaii, a in

have cleaners, that hours] dry tenants we those. organize some [blue some and have We conduct

- So volume I might tourism, in the be not exactly they think support tourism.

has drop. start allowed with Hawaii really COVID negative we're unemployment And that encouraged we've actually seen in a test. back to even tourism So

it April, and XX% moving XX%, as direction. right September was so it's was think the I in it of in almost

Bryan Maher

sidelines? bidders capital been driven And me. you're the then that's much the private in on there from the against a these assets, comes equity two all other mix? for have they it change that just And When more to how really with has competing being of

John Murray

We when question. brokers when be substantially get good don't color gory to a bidders most But at. that, run there up of as then higher money we for details. pension do we other get we the - That's office that seem from - private the bidders the that all that family and we looking know we're common of And the that most REITs, well. properties equity, against number some

So are those I equity participants think all private is. active, of definitely

Bryan Maher

lastly, just think higher Is than been we there anything little bit expenses that had I there? model just going anything then modeling. be and a I thinking maybe property 'XX there And there bit, noticed taxes, a up as 'XX? is for about operating were we should on we

Rick Siedel

line. maintenance that certainly flowing bottom able But had to some escalate said, a Brian, we a was had think, to We it, bit unfavorable within tax. repair there we some real try run pretty of little time is certainly expense out decent you of I it's like chunk seasonal to the kind most expenses. in through that We No, increases knock as the well. and good projects were year, rate this some a of estate part, during but for the

Operator

[Operator of go Please James from Securities. Instructions] Bank America The ahead. of question comes Feldman next

Elvis Rodriguez

drove had This QX. quarter, versus $X.XX the has quarter? of quarter's on this a least at lease per this mentioned is in versus in maybe a you TI of leases for last question, discuss per $X.XX year the just in just you TIs and bit Elvis all little Rodriguez I Jamie. Can foot square done higher what quick

Yael Duffy

there do Sure. bit a new us we little usually And leases we four for - is were where had helped couple are a brokers, where the instances gave had of these to leases with who the typical some we which well. some actually of leases as of We were of these pay - a TI completed of us. give also

Elvis Rodriguez

mentioned maybe but of the the in how expectations. these, on down have Amazon then, talk in lease, you coming of And about, the a type of bit can these little than doing portfolio more years? better you your do many you a more bit little roll many How leases

Yael Duffy

tenants such Whirlpool, word think in as negotiators. tough have, they So Gamble, tenants And XXXX, Procter we have some I are big use really 'XX. purchasing the the Amazon, I I they so maybe rolling guess, & power,

some there think I rental be in that on rollouts versus market so leasing. best might we'll leases rates, so to is. expiring are amortized we might I --there into And of first seeing try see what that get leases rent these do might do roll the there, TI out have deals, generation but minimal our we're think we'll just to where It new rent. But

Elvis Rodriguez

those these a the within do it industrial the are options tenants have markets Because across, And these like pretty that across of space seems lot other located robust seems in? buildings country.

occurring surprisingly at roll it's downs is there that these leases? So here long

Yael Duffy

base TI rents. $X.XX their into guess, I Amazon for amortize lease, Well, had they again this in

was down. eight locations had for vicinity. So property different roll this we really the Amazon that the leases, But greater the in Indiana, within reason for

happening, they have And is construction have that and options. so there they

them, for to So felt us. where for deal. did it's again, it important important and We a us was market we retain

Elvis Rodriguez

And then XX in Can just U.S. question. I in just more discuss, know one you the like you're markets

U.S.? seeing market into the are So the head maybe we of just would to maybe rest each, more supply-demand your as dynamics into to relative drill XXXX, but have supply the

Yael Duffy

just think a there's I activity. lot of

I can't almost mainland And we're you and for I XX especially I pretty think, know, well on leased, so speak markets, all guess, the XXX%.

lot renewal activity. seeing potential been there with been the those has of this, We're acquisitions. I seen new from there also that construction of we've a reviewing And more some - of that activity side, But is even is land. around acquisitions conversations. really the a we've think available So lot

bring I happening competition. is - obviously construction there So think which will

Operator

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

Michael Carroll

does portion? small, that that tenants talk behind, get bit when the guys of you through but paid, and typically by Can And uncollected the that I unpaid how guess X% it's little pretty know reasoning I what guess, a some I rents, compared does other historically? about

Rick Siedel

Rick. it's she when some take stab I Mike, is can wants. But we and that I'll collections this over contractual really think at Yael add if metric, do. rent color it Maybe give a

actually process. don't haven't that book expect generally space, we some kind revenue revenue and There quite through X% and time. we is tenants on don't always So in the working this booked we for to pay some of that what

and our we're get XX% of in bit QX stage more - we XX% the this holding game QX, will not the plus at October, to the but So we'll because lot I revenue. had rents. to really mean some in can. collected it little down to continue smaller, payers breath realistically some will of in that the reflected collected been in and October, we're a nature the the of try come never chase cases team we've the a for our smaller that's with of collect beast, tends in slower. and We've it's what also slower we historically just in businesses But it little the Hawaii is a in dealing

Michael Carroll

Is get space X% but there just then to around is always so an you space it's that ability get that of, re-leased and have Or kind right kind of maybe back eventually? issues smaller range? other you that back that

Rick Siedel

- because some pretty the a line you straight pretty last debt we a kind It's time rent. contractual say of - potential year debt, We growth historically bad charges favorable a line had see been time have around GAAP you bad mean, of from year. that substantial have comp ago, year, do X% we to on I'll see around this growth growth NOI I

debt, but a a cash to move that we basis a could so of - basis bit, points. we ago. that's be don't and percent X one or see point little saw XXX revenue, bad or the of GAAP does our it somewhere QX, revenue around vary could it saw It basis last as points couple up in our what as we on typically line XX see You in averaging year the much, on which quarter recovery quarters cash

us move prior kind points And not compared as XX down. team space again, is using somebody a is that our amount, chasing possible. good to of revenue quickly And really pay which contractual So denominator as our pretty basis to it if them the bad normal as average maybe is somewhere of - out that's to does around debt. going about a bit as of getting XX in

Michael Carroll

can talk lease, and then was you was or the lease guess new And down it number this it on next guess roll cash bit you a how I a many X.X% the or Amazon year little was year? guess, I about do get GAAP that expired, years, that term, what I that number?

Yael Duffy

is Yael. this Yes,

of So with number. lease in roll GAAP them. we and XXXX a signed XX April expired a the lease months in down rent Their was

Michael Carroll

just us was you cash Can provide Okay. the there? what number

Yael Duffy

rent? cash The

Michael Carroll

Yes.

Yael Duffy

Yes.

So XXX foot X% square with increases.

Michael Carroll

in how compared And prior the lease? to cash roll the much rents down was

Yael Duffy

$X.XX.

Michael Carroll

that question me Or is JV Okay. happen of little bit still in mentioned earlier in what's expectation? guess, a your uncertain could still kind it And get year? is contract the last signed? Is you terms then timing, can guess bit something of until a next another year, this the what's there little just that - a I remarks. for prepared expectation I

John Murray

before it but it we're we'll that this quarter, uncertainty get year-end. some There later optimistic is so around cautiously still done

Operator

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

John Murray

many Thank to and joining look us upcoming [Nareit]. you for today with virtual everyone forward Thanks you. of speaking at we

Operator

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

disconnect. may You now

Industrial Logistics Properties Trust (ILPT) 28 Oct 202020 Q3 Earnings call transcript