ILPT - Earnings call transcript Q4 2020 | Industrial Logistics Properties Trust

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Operator

Good morning. And welcome to the Industrial Logistics Properties Trust Fourth Quarter 2020 Financial Results Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. to Investor conference Relations. like Barry, to now of Manager would turn over the Kevin I Please ahead, go sir.

Kevin Barry

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

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

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

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

John Murray

today’s key everyone, Thank results statistics fourth priorities begin you, morning, discuss our latest on Kevin. our results portfolio a leasing with and Good and review will On update our we activity recent and for brief and will in the made property progress during the financial joining call, Yael quarter, detail. I’ll us. Rick more thanks on

We will then take questions.

to with continued growth, solid our out our year activity, high venture acquisition. industrial Turning leasing and execution results, we quarterly reduced strategy, the closed joint leverage on quality financial

XX% we sustaining portfolio contractual to sovereign top pandemic. fourth adding earlier November, X.X% to equity of the $XXX modest normalized fund effect a FFO high leases global occupancy step XX% feet venture renewal We achieved JV rent approximately giving quarter another with rent deferrals square million while after for tier In and took executed collected for joint proceeds. a existing new in During at initiative our growth granted We in XXX,XXX our investment the of the with over forward property XX.X%. wealth year-over-year. tenants XX certain

This interest. XX% with The equity ILPT of priced provides vehicle owns an attractively XX% partner the maintained their source and remaining additional first stake ILPT capital.

have We’re continuing to pleased completed forward that and look growth. this to

e-commerce quality, to strategy and that high the is acquisition modern, needs growing consistent diversified assets in serve Our invest flows. of cash generate

same quarter. with during expansion offer as pursue high the showed develop expansion The increased returns intense top focused properties no the occupied XX as for access opportunities well time, abating primarily may signs rental we offer that into industrial that rate locations through competition the properties estate roll in industrial fourth to by land. ups, well real At quality credit located targeted infill smaller tenants. are We markets, on long-term of

for looking conditions face to market and similar a variety investors continue of opportunities. We aggressive

investments, of $XXX we quarter As submitted XXXX. we pipeline during value XX million continue values of the a and with for the are a disciplined billion $X.X for more with properties -- year approach. letters full properties exceeding eight We maintaining combined of to value than fourth intent evaluate steady a

competitive. Our underwriting remains

the We finalist XXX% pursue. of expands the turn closed Class U.S. a Yael term for The submarket rate. single-tenant review years. Kansas we market. into for in of In capitalization ILPT’s quarter. in that million. to remaining largest industrial and diversification $XX over City to XX purchase the now fastest on ILPT’s a is This leased has property and deals late are typically approximately industrial lease we geographic for and of another X.X% the I’ll price property building XXX,XXX-square-foot the of December, purchase a A Kansas results the top call growing acquisition City is reflects price This net operating

Yael Duffy

John, as summarize well Thanks, brief XXXX, leasing portfolio on quarter. for update ILPT’s everyone. trends, activity then assets morning, a with deconsolidation start and as good of the the of industry and venture joint I’ll an provide and overview market fourth the after

know, the for been estate to the pandemic for and consumer in accelerated area, supply stockpiling evaluating single home products, are demand optimization due groceries, industrial multiple you As meet improvements. real and warehouses a chain consumer furnishings needs. has Retailers inventory e-commerce catalyst to opting for

has strong pressure in on leisure Hawaii, As significant In to our demand. the reliance under due economy a been result, facilities its hospitality. and remain local

tenants business our well. XX% there Hawaii in confident beyond Approximately in ILPT’s of remain industries we serve However, tourism. as

remains to and high business location seaport. land relative demand to the prime district, our due its airport central in Additionally,

mainland Hawaii. to on Given of well-positioned and these growth serve ILPT occupancy while needs is existing factors, the growing our tenants, we both high maintaining in rent believe the and

As distribution approximately XXX were leased. totaling square million and XX.X% properties portfolio XX of warehouse of feet states XXXX, XX that consisted December in ILPT’s XX,

XX properties X.X reminder, to totaling contributed these feet square joint exclude the a were figures As that million venture. the

valuable of Hawaii, XX.X% XX at ILPT’s land portfolio that mainland of feet were balance leased revenues, rated grade end. represent feet Amazon, with parent annualized revenues. more Hardware, tenants industrial XX top total make XX of totaling and our are our Restoration properties FedEx XX.X% properties of million half total subsidiaries includes approximately square Now in Investment is rated states The million XX% of representing X% XX leased. portfolio revenues, mainland in XX%, were XX respectively. entities year rental annualized investment up and than square tenants grade X% the of comprised and which of rental

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

in of $X.XX we of at at square commitments and XX% rent resets lease also for per and for square per During than were concessions rents only lease foot years leasing year. XX.X% XXXX, that new million of that prior XXXX, higher an average XX land X.X renewal feet were and leases approximately capital higher we approximately entered feet rates square term rental prior X.X rents million Hawaii for than rental with In completed rates.

our Whitestone, square expansion XX-month Our believe maintaining year. were for combined facility venture. the and leasing foot of levels call with term renewals These the square higher average success per our is leasing of results of earnings We XXX,XXX on and foot million the strength XX industrial XX.X% rates X demonstrate than joint high last $X.XX sector. tenant results of in Amazon the a discussed feet driving and with these retention the that in which ILPT’s leases only for rental comprised prior capital of activity fourth in rates, square renewal lease now and rapid Indiana, that we years portfolio quarter strong at per exclude occupancy new a and commitments for an of part XX logistics lease

Looking pool to expire total expirations is annualized annualized X.X% revenue driven of Hawaii to leases where XXXX, will revenue are lease with XX.X% ILPT’s of X.X% rolling with total larger ahead annualized XXXX. rolling, of modest, in expirations, a In upcoming expire. revenue scheduled near-term mainly relatively by of

Hawaii -- year, Given the volume plan brokers engage efforts. we releasing Hawaii to with of high to next assist our in explorations

back While efforts support utilizing will growth XXXX, incremental brokers into rent and maximize leasing minimize in and of this XXXX the half downtime. potential will drive ILPT’s to costs

square square and of X.X prospects the consists portfolio. includes of square pipeline XXX,XXX across leasing XXX,XXX could of space current that million the feet Our new partially absorb feet feet vacant

total to deferrals to-date. above strong monthly million we million. more Our have collections granted than trend collected rent rent Repayment rent been as $X $X.X has XX% total activity deferrals granted and of or continue XX% over

While requests, of deferral be the COVID-XX throughout the which we impact businesses. strong resiliency new to the country, continues felt tenants we their no and received demonstrates of our believe have

to position. challenges. completed Rick we believe ILPT and risk XXX,XXX-square-foot December, and property potential on a in in given Winchester, turn of disclosed, I exiting details previously results million. the now We call approximately for for sale this age quarter’s the over future leasing reduce $XX this financial we Virginia will warehouse to property’s that provide the As building

Rick Seidel

you, of fourth quarter same and year-over-year. during in to of the amendment Total a everyone. fourth property decreased of basis due change good from for recognition lease XXXX. percentage was X.X% timing Yael, rents the This primarily Thank morning, for resulted that our decline execution portfolio NOI cash the quarter

amended and million randomly XXXX. on discussed As recognizing throughout that previous calls, lease we began $X approximately

basis property Hawaii, Hawaii points rent property same in change, type same basis in same of X.X% excluding XX a a cash percentage NOI NOI NOI perspective, cash we X.X% that the reported impact in year-over-year. increased year-over-year. the Excluding property From basis change, increased decrease timing property cash

a cash NOI declined less million performance per normalized to occupancy X% quarter slightly same joint and $X.XX year. non-escalating NOI our venture half due or property property Our lower FFO a contributed from The expenses than mainland in share. same of slightly with over year properties the fourth to higher FFO quarter of $XX.X ownership XX% along

share. JV benefits value to capital use transaction and second secured substantially reduced gains from the of interest down of net the including per earlier, $XXX ILPT owned We outstanding $XXX If sale on as and entire been of result mentioned had $XX deconsolidated on XX% two-fold. this raise transaction for us and our and pay we for million continuing It the XX% fourth to a asset joint in million proceeds related recognized adjust fourth revolver. are the venture have financial normalized John the enabled leverage. quarter joint liabilities, added equity of additional venture we our efficiently in during a $X.XX our to we partner FFO the would of quarter interest equity at this our selling borrowings immediate The we assets debt. As

ended than ago. with times times, lower the of debt-to-EBITDA range. a the interest, should just the mid-quarter quarter which sales JV is debt-to-EBITDA X the X year As X.X mid times we a for reported result, we normalize in Adjusting

to well are in we improvements revolving availability the million. and price. to share, of which unchanged Approximately December fourth we spent two-thirds represents our million improvements had of level strategy. portfolio. was quarterly of ample shareholders capital $XX spent X% during about investment of the $X.X yield capacity, while $X.XX at quarter In including the total XXst, regular we our $XXX remainder million and per related We on leasing an throughout of costs, hand this approximately $XXX of of approximately million facility January, to expenditures on our prior on annualized distribution on our positioned liquidity, XXXX. and As share our tenant building is cash credit from declared dividend pursue acquisition disciplined With current capital

please our remains of well the concludes payout XX% the sales XX% prepared mid up ratio quarter remarks. or normalized below FFO of approximately interest. for after dividend JV normalizing Operator, at the That lines questions. Our a open covered just

Operator

come And Bryan Instructions] first [Operator go Maher with will B.Riley. ahead. question Please from today Certainly. our

Bryan Maher

a Two Thanks. everyone. also with the of on We’re morning, are your tenant, questions that bit property? upon little of your Good One, there this not thoughts expand up. Corporation? expansion I Excelligence And you have then Learning morning. can And acquisition for the familiar me property? Kansas City a what follow

John Murray

future consolidated several of school they’re Sure, strongest have many that tenant bright across near-term credit, education-related cap operations. providing as think recently rate were business too. good is -- had they educational new where to model. to in materials students grow United them consolidated Bryan. on learning States and the of equipment, a preschool distributing locations different their long-term transaction And with we They they’ve the have we their and from building. environment a that this primarily much on focused and products they reflects current They that age That elementary believe, they they’ve remote this for business continue respectable particularly future they they the not the students -- but the higher their are is and

expansion acquisition. capabilities. in have we It do It’s does new good -- think see don’t a have near-term. happening happen We a expansion that’s building. So we reasonably the But that this to road, add building. -- the separate either subdivide a ability to could land this we if building the industrial we down existing where from potentially the develop parcel, or on

Bryan Maher

as Great. kind do relates how substantially an times grade investment of leverage you do Thank now it or in getting And below anticipate think liquidity your being rating you. heated X industrial your you net assets? then this about for deploying and for in XXXX to lobbying market excess debt-to-EBITDA,

Yael Duffy

about sure financing. capital. demonstrate Yeah. a out our we CMBS one have the Bryan, We investment when we to of with. We’ve great investment of And the then we rating to through had with got bit. would other debt that value relationships look number the cost was that an for we that CMBS us and at could quite And that much. the portfolio work think IPO, the seek we opportunity at encumbered it’s leverage a partners all do grade we with rating. we It’s Hawaii capital question. Initially internally have with We’ve plan offline good when discussed portfolio assets really came XXXX. really not some try a low banks. the did I’m to with significant now, help got grade

fairly capital perspective know well long-term maintain that conservative a to it years obviously liquidity then couple a to or a capital, from might I a priority of how a as sheet ago. as much deploy I… from remain perspective, and So, been positioned. And it’s that want have we But don’t balance

Rick Seidel

Yeah.

Yael Duffy

things on turn �� Rick. to

John Murray

Yeah.

we’re acquire high actively terms at capital, industrial deploying quality looking transactions In of potential to properties.

I have, several offers a five current know, that at of are time, moving don’t round. We six or are into outstanding which second the

So them. of only but plentiful, chasing the opportunities investors who amount by are to the invest exceeded are

happy do that that’s rates, have is with what also making investors that So we but to who acquisitions knows or at but to we’ll successful and we sell to we forward. now into joint venture and joint the of so venture so current of our continue the cap -- owner continue the have the partners may properties of we’re joint be those acquired we time growth whether we’re venture manner, both own of time long-term, that joint offer just ILPT to plan be and sole the And part setup some the assets from to that would ability going what to venture in grow. our -- for XX% properties

but liquidity should joint our good revolver, our through have we on have believe with have we attractively today that So equity -- we priced mostly capital through depressed venture to level, price access even our we capital the need is share -- we it. what for

Bryan Maher

John. Thanks, Yeah.

John Murray

Thank you.

Operator

with will ahead. [Operator Instructions] come Idoine RBC. And question from Please next Jason our go

Jason Idoine

then, guys well. In Thanks. obviously, remarks, opportunities as some and mentioned land development the on I the you prepared potential think, City some acquisition has Kansas it for

to the forward? weigh going guess, how further, I about, acquisitions stabilized what’s then thinking a development investment you do versus little going just So those today? opportunities opportunities And pipelines allocation

John Murray

between We we through today, or net they don’t have a growth a specific through land, that have own development. of where we expand number excess there’s allocation properties. triple leased The could that existing them facilities, are but acquisition properties

their on to the or to want just in -- tenant go and buildings it’s expand build So desire. their expand, we needs can’t without

on have. other depends locations their it that the and So of may growth business they

we be properties vacant not other a other RMR about the future material ground We and within just some hard But acquire up. that’s of land it’s where growth land Group in predict. component going from have the So going entities develop forward. opportunities some to do companies -- to may where there’s opportunities

to in competitive rates portion today. be to are Over I growth development, peripheral So more are to make the growth, us of near-term to of is they it’s going the just development think for as going cap if sort through -- going we’d like towards time, remain be a it when as acquisitions. primarily

Jason Idoine

XXXX sure renewals your on early then, an any those Hawaii mainland the obviously, than that’s could I I pandemic. the impacted for are if where lease know But you’ve I’m what any had or And don’t expect guess, ongoing. if by are guess, the and rolls Okay. discussions expectations those XXXX? in, rates color area you more provide to rental been been, that’s you’d portfolio just I come in

So about how that? thinking guys are you

Yael Duffy

Sure.

up opportunity So so rents. we a have continue in expiring roll real have to we there think see XX leases Hawaii, XXXX in I in to

As I prepared we us quarter of market. indication we’re XX% is mentioned the up the good saw think over in little of half a And engaging with roll a with leases. help to I those this remarks, brokers

think definitely I XX% think be expectation, parcels gauge. to good to we’ll there’s but able where XX% a that some is exceed I

Jason Idoine

Got it. Thanks.

Operator

from question come Aaron And Please go Hecht Securities. will ahead. our with next JMP

Aaron Hecht

for Yeah. Thanks taking my question.

you maybe XX hit on those mainland, if you I give combined separate XX% they the talked but for Hawaii, over could and you that more. if bit insights? am those rents. and of any sit wondering little can to market, XXXX, Just talk expirations, you between want all those if the your of relative I about to XXXX, just about overall lease could where for total think, a XXXX, rolls Hawaii

Yael Duffy

Yeah.

mainland, XXXX, So, leases have on XXX,XXX feet. about two expiring we the only in square

with discussions tenants. of both We’re in active those

complete Again, big I think think it’s be we’re to Hawaii. ‘XX them reached I be market. will little year terms will yet, but say, too haven’t is a if early the renewals at to a in we able

proposals as for out some million. square think number, we -- or X.X started And over ‘XX we about well, and us and believe in about to light X.X the so lot million then feet only that we’re of have XX% XXX,XXX a expiring at tenants of have talk or to and ‘XX those We’re Hawaii feet ‘XX it mainland in between properties, square have in discussions And year about with a discussions renewals. ‘XX least already other of X million. it’s is a to have little not I

is I the on market that’s think, everybody vacancy think now So, up gobble any again, -- Board. it’s to right we’re coming where I and trying -- is

our to don’t disrupted. they the want want buildings in to their I think be remain businesses tenants and

we have So active I audience. think an

Aaron Hecht

thoughts just And maybe future? in What context mainland ago and portfolio? where versus happen market what a where’s your your on for the any year that thoughts could -- to of sort today give on

Yael Duffy

rent? of terms In

Aaron Hecht

Yeah.

Yael Duffy

competitive. it’s generation. mean, say, be leases second I because I lot think to hard it’s a these of will

So we’re rents, the where competing So, some original might be. is the but X% rents leases I TI X% think, think, -- roll in probably ups against X%, of that as we’ll in newer product, there as expect I don’t know well seeing X% them? to be we I have in amortized to

Aaron Hecht

some Got ILPT I multi-tenanted could investing if a on you. thought maybe to wants then just a that And not bit higher and little give go you the approach? more drive one or that yield guys in could, model facilities, is

John Murray

properties, currently actually out we We’ve primarily on two have both do offers single-tenant properties. at we and invested in but look different multi-tenant

properties So what tenants perceive laid available. we’re the as depends is and of just those if out, not risks we and the how who the them. are against really It space becomes re-tenanting on space

may some we see So added multi-tenant go forward. properties you as

Aaron Hecht

and that that that two you you’re you traditionally single looking thoughts in of on between assets, work -- multi at? Any tenants spread types yield the

John Murray

it’s tenants it that now I’d much there but who of some recognition the say, XX XX so It that transactions Honestly, basis right be really bid to basis doesn’t aggressively markets the markets points. the like are that maybe where in are -- difference. seem depends are, points feels and to on

Aaron Hecht

guys. it Nice Appreciate you. quarter. Got

John Murray

you. Thank

Operator

Bank America. come And our with Feldman Jamie ahead. from of will Please next go question

Jamie Feldman

morning. Thanks Great. good and

going are you’d said, are I of adjusted your get that number I I know And the on these XX year flattish. same-store pieces renewals to portfolio, as basis think just to you an the had that moving are for kind rate you’re want lower? some that is higher in run said understand, this look growth or was a at what like, of points And doing basis ahead, good quarter. the we

to just on these look I’m what I’d So love for get assets? I trying under just to core of growth -- view outlook your kind does -- the

Rick Seidel

it’s I a think mainland Hawaii. is in it than in little different the

that bit we noise, to little example, there Hawaii in This sewer mentioned quarter had the had a really line repairs, expenses, that issue non-escalatable some the -- a then tenant was damage and that was I able slightly on higher, of we and mainland. some what hail pass-through wasn’t for

probably when some to little is the we growth do of together, building And have great it you that. we then, bit have the struggling P&L a three bit. drive ready that a of speak that little the and So the the bit better to pretty certainly is a can. is down But in go. multi-tenant than a tenants a in Yael, to news does today one and portfolio of I there noise backfill it related But, can much put

disruption So, essentially high any portfolio kind But down. you a it’s again, time little your drags I prospects. good full, with future time, quality think from of portfolio when to is

than bumps So expect the that be to will the with road are, in occasional I where come the aside from business. we would higher

Jamie Feldman

are What building think do and cash would look spreads you basis? your think Like do the like? bumps? a I how would what like, on what mean, rent So, can leasing you do average blocks, layout you occupancy

Rick Seidel

that I Hawaii little had decline around mean, history, look that, of grown there. said historically, you we’ve has bit if a occupancy is at we’ve There X%.

to We’re hopeful that get back.

to short-term credit I on cash. getting in X.X% X% bumped mainland, the tenants pandemic, in high short-term the before some if I to impact those leases quality And then that’s in of So, at X%, again, long-term we’re mean, until think, of the the the lease with roll. growing pleased

that’s are think for pretty where we solid I today.

Jamie Feldman

X.X%-ish is of like Okay. this X% year. more It for to reasonable a range kind sounds

Rick Seidel

Yeah.

a reasonable I that’s expectation. think conservative

Jamie Feldman

that I number Okay. think, then debt-to-EBITDA, as Do through on net you number? like look you a gave And it’s have leverage consolidated a basis.

Rick Seidel

mean number? you do through leverage by What look

Jamie Feldman

JVs? of share your Well,

Rick Seidel

kind from -- you following NAREIT, the share our now portion the i.e. The of JV. EBITDA our see can definition clearly in calculation Yeah. of EBITDA

This me, quarter but a settle think, have $XXX,XXX I our kind I it front I said, X.X in levels on times range. was supplemental of of I basis, don’t in the believe. if that go-forward will

Jamie Feldman

not And that’s that’s consolidated? just a look through,

Rick Seidel

correct. That’s

Jamie Feldman

Okay.

JV is or $XXX,XXX your saying income at so? you’re So currently

Rick Seidel

That half impact. was the quarter

on share of So from million numbers of the our round $X probably, I EBITDA JV. a expect, would go-forward basis,

Jamie Feldman

Okay. All right. Thank Great. you.

Operator

And over this session. our turn will for closing conclude Murray question-and-answer remarks. to conference the I’d to John back like any

John Murray

Thanks, seeing least everyone, for us today. to joining conferences. you some soon investor forward at at virtually Look hopefully Thanks.

Operator

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

now time. disconnect at your may You lines this

Industrial Logistics Properties Trust (ILPT) 18 Feb 212020 Q4 Earnings call transcript