ILPT - Earnings call transcript Q3 2021 | Industrial Logistics Properties Trust

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Operator

Good morning, and welcome to the Industrial Logistics Properties Trust Third Quarter 2021 Earnings Conference Call. [Operator Instructions]. I would now like to turn the conference over to Kevin Barry, Director 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 Siedel; 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

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

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

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

John Murray

industrial NOI in stable new leases year. last increased We year-over-year for weighted quarter portfolio for performance Cash were strength earnings I as quarter third and for rental space Industrial Thank the highlight over of market ILPT's than properties and and for renewal Trust. to growth call quarter approximately deconsolidation prior third that rent moment, space. statistics, expansion in Strong a basis Good the strong joint came and same-property activity within over same quarter the third demand XX% will third was ILPT's which rental This Then the share, and entered average rates ongoing a to ILPT's the of portfolio on I'll results Normalized continued logistics quarter you, and morning, turn everyone, and high-quality ILPT's In by per the reflects results. welcome NOI. industrial rates completed X.X% financial reported growth call square portfolio. details continued leasing despite at accelerating and industrial in Properties higher at sector. broader Rick leasing as same-property well that trends, occupancy recent our acquisitions. estate for solid of highlighted venture. Kevin. third rate on over Logistics were rental the feet XX% growth cash We $X.XX XXX,XXX real Yael resets FFO

return acquiring properties with profile. cash acquisitions. and on high-quality remain favorable a Turning stable We flows to focused risk-adjusted

acquisitions. access. rail sector to to leased located real competition XXX% million, the benefit The intense interstate leading cap rate to strong The excellent X.X%. During for approximately X.X continues estate the are industrial with highway quarter, a square $XXX buildings A million we well from market X and representing totaling Memphis and closed buildings industrial GAAP industrial a portfolio in of fundamental on tenants for X airport, Class feet of tailwinds,

active. opportunities Our remains of pipeline

on cash leverage sheet and continue growth. rates approach to portfolio opportunities drive investments a With additional our However, well to complement pursue maintain to potential cap modest liquidity, as we and to flow balance continue trend our to positioned healthy remain disciplined we lower.

Now the over I'll review turn the call for quarter. leasing to and Yael ILPT's to portfolio activity

Yael Duffy

and with Like then diverse begin an for prior good ILPT's ILPT I'll on has portfolio third leasing and everyone. land with of or morning, goods. revenues John, rental rated overview leases. update exposure our highly XX% the subsidiaries quarter. calls, sought provide Thanks, base tenant secure activity after including consumer a or investment-grade than ILPT's e-commerce, and from to from tenants annualized industry distribution verticals, come our More of Hawaii an

ILPT's more investment-grade On for Mainland, or parent half tenants of revenues. rated of than subsidiaries entities account the investment-grade rated

XX rental XX% nearly X% top followed is our approximately Restoration by at and Hardware revenues, X% XX% annualized largest tenants annualized of total total and of annualized revenue, representing Amazon rental of revenues. respectively. Our represent tenant, FedEx

acquisition, remaining growth remaining strength this according this increase on Wakefield. XX%, rents markets of and up within continue industrial those of short approximately X% approximately term & As evidenced Today, acquisition since XX expects nearly and given lease totaling rent years occupancy in of basis has industrial With the the roll is the Memphis and of seen within ILPT's properties top of Class market of consisted to earlier. discussed portfolio. X.X portfolio XX the of X and growth as XX, XXXX, recent the XX is to XXXX states square goal properties feet. ILPT to relatively XX% Memphis ILPT's lease a XXX distribution points capitalize markets Mainland XX XX% term our of million markets and expand an XX ranked our XXXX, September overall warehouse average John of approximately portfolio weighted for X to year-over-year. in and within is in over A by portfolio top Cushman located years that has our

properties was XX quarter states The which Hawaii. improvement of basis that portfolio and feet at portfolio leased. of land in was feet approximately the Mainland in XXX% in square of compared a XX year. industrial prior Our Hawaii XX.X point totaling the to million is XX.X end, includes XX are properties balance Occupancy square comprised million XX.X%

industrial per year, in feet by continued higher renewal XX.X% of capital third were driven approximately rents highest demand rental XX level space. quarter, and feet We'd at the that square XXX,XXX a with new than year. leases same at and leasing per square an During that years than We of the rates, leases achieved square rates for real for XXX,XXX ILPT higher term prior executed executed prior rental of for XX.X% estate. for its commitments average rates for lease over were $X.XX activity foot lease leasing X.X

rent XX in rent. roll-up reflect a a leases, performance Our XX.X% Hawaii reset in strong at we results where signed including

steady to With X% income able Mainland to these we the increases contractual which were of and Hawaii, X.X% leases, annual will on provide negotiate to in growth. rental X% X.X%

Our and are a revenue that mainly of potential mark-to-market where focused driven costs. by XXXX rent rent for rolling, growth minimizing expirations while expirations Hawaii We In resets scheduled complete. XXXX, X.X% annualized is essentially is will lease maximize revenue of XX.X% annualized remain capital in renewal. way for downtime up adjusting total on and

the to annualized that Hawaii. of has Over in the during signed leases scheduled expire XX% representing approximately XX quarters, XXXX was rental revenue ILPT past X

our leasing Beyond the drive most activity. on XXXX, expirations will of Mainland

discussions. and acting several the rents, engaged vacancy Given supply from constraints, new absorption, conditions early aggressive net have us increased market low tenants renewal resulting record-breaking in

within favorable over terms lease is details portfolio. retention and turn that we portfolio results. growth I'll achieving focused the quarter's Rick to on are on tenant our drive provide important, this to will While now call financial

Richard Siedel

by XX debt-to-EBITDA million, is spent than approximately which prior as capital the and the partially X.X%, we call Memphis contributed X.Xx this for reported we came million increase ended result Yael, quarter prior was of third half a driven increase occupancy quarter November in increase morning's well what acquisition. during an was third X% share activity quarter basis October on onetime cash this in the combined expense shareholders morning, and than driven of of a result quarterly share yield the more administrative recurring X.X% while interest X.Xx, remainder throughout quarter. with XX. maintenance month, rent XX% a to everyone. new compared tenant and by year normalized expense to The point our this Hawaii lower annualized as distribution as general leases, but Mainland. $XX.X that to we of NOI along approximately of per for We costs, calls, Total improvements portfolio. capital in dividend this performance and our and Adjusted third to Mainland X.X% the equates up shareholders leasing modestly quarter $X.X building the to Hawaii the quarter XX improvements CapEx Thanks, EBITDA Slightly expenses. FFO with per with for record of on year-over-year at a $X.XX contractual $X.XX a good on on on $XX.X year-over-year. higher share. of expenditures based paid the of and increased This portfolio related decreases and declared price. ago million same-property steps was be or The our primarily portfolio on of offset regular and increase in in Earlier in This discussed repair to by on same-property spent leasing Yael to basis

XX%. well FFO of a at just Our dividend normalized remains covered ratio payout

and liquidity, availability please including million cash XX, our line revolving our on September of Operator, $XXX million. questions. credit of million open the on hand $XXX As we up That had $XX remarks. prepared total facility for concludes of approximately in

Operator

Instructions]. [Operator

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

Bryan Maher

for questions me. couple A start of with Rick. Maybe

What place, Is little that? Can plan us due give later I the a comes you existing one? this to put are think year. in there? one new facility on your color the credit a thoughts extend the

Richard Siedel

Sure. we some I still options. two out have point that We main Bryan, X-month thing, have the do is flexibility. guess extension to

banks the can decision have we those to over on a not. talking started we'll our we as next decide weeks. and have facility, to few whether - or But likely month you options a about So the in make to imagine, enough exercise

Bryan Maher

that that there below saying your there's rating. for much two on going by didn't a have recently. then any go comment originally you of But market thoughts seek or such I about made in and next so guys this Are rating demand out credit is bond metrics was years just that given a seeking what's year important an recall rating and I there think, And a investment-grade that as I might profoundly year? ILPT seem thought Adam maybe as couple marketplace, I when on ago. The at process, it and Great. the investment-grade believe maybe think have to the I important, recently investment-grade spun

Richard Siedel

Yes.

valuation that NAV. leverage the we that joint and a Last EBITDA, the there headed, to are that loan-to-value substantial had the kind pressure think of the rating. we've we after direction between investment-grade But with shares a we and venture, And of over the I public properties to what thought private the capital was certain thoughts at that's and private meanwhile, year, is conservative. likely issuing was fairly in is it something and those JV partners, IPO, deconsolidated to in to discount XX% been priced on But we've markets get on shortly raise that able similar. were think think I we to reduce the were was leverage. under our using markets attractively disconnect continue markets equity when seen public I XXx through we'd leverage seeking - versus debt

interesting is using different how So markets it differently. the leverage are

think our are to with of again, utilize debt. is, I capital, we equity So where it more looking cost

wholeheartedly But so you that's ever why deploy our slightly debt I little to more leverage capital saw up quarter. the accretively. look we're with bit agree So of using going continue to a and this strategy tick to

Bryan Maher

about new for in touched made then might the those I upon leases. left When Memphis has think the I mean, on acquisition And X.X believe just and property, it? acquired respect years process? current last Yael renew us I what Is were you me, good, - in you're thought this. location they not you planning thoughts have tenants there to the Can are that place? on you to the renewing give the Do little color worried a just those? with so

Yael Duffy

things. those below-market I a larger lease of of both in tenants think have a little short all the term. remaining it's bit of of combination rents relatively Two

larger tenants, one are XX% of market. think rents the their I below about

X% below largest about second is market. The

We strong industrial are A also The construction. buildings market. a feel is Memphis Class

we vacate, be to opportunity So even our relatively would they re-lease if to were spaces feel short. like these

factors. So of of think a I it's combination all those

Operator

[Operator Instructions].

Our Jason Markets. next Idoine RBC question comes with Capital from

Jason Idoine

Yes.

color valuations around be selling I opportunities. prepared looking of interested of potential what some type for disposition and I what maybe would think remarks you that, John you would mentioned in guys was some out the expect. in additional just markets

John Murray

in of over I not made think We're my of did Memphis prepared have currently me. at the misheard words couple - a we you dispositions. portfolio But stumble acquisition. I We've remarks. the middle may looking

continue to a good at look We pretty pipeline.

So really meet earlier and we're property sold with the on generally current we're the our But market. yields replace better with otherwise, very investment we that currently yields in to difficult criteria. the have, We the properties on growth. the focused get didn't investment portfolio year that the happy we in it's

of So we're to not anything currently. dispose actually looking

Jason Idoine

Got it.

And types get sources more leverage term? the think be about guys you end funding? tick But think leverage you of how capital? about we we up additional end here should that of What towards target. do you the before of are of you the would comfortable know Okay. buffer some are should investments, I if the active making have that range? guys to higher how how And longer low

John Murray

little fill to. We more I'll ticking we brought But Rick using earlier, up, Rick have behind an as with down a venture. leverage joint and bit indicated me off-balance let where do comfortable on than think in it leverage we're had sheet this I one.

Our joint little move less traded quickly REITs bit publicly move. sovereign wealth fund-type venture being investors, than partners, a

they're possibility recently some so on the And acquired. evaluating of taking properties of we've that the

back I joint your think disposition we we time retain disposed would going the out. to maybe To may to XX% plan properties, So But we where take same back, our goes and a we sell the would, I question. extent some roll that there into them of have the guess, venture interest.

down from and that And acquisitions. proceeds provide so to our process the pay we would bandwidth use more on for line executing

Operator

for gentlemen, conference Murray, conclude closing to session. remarks. turn our President any I'd John the this Ladies CEO, over will question-and-answer to like back and and

John Murray

NAREIT us soon. you of up at Thanks we the again for that's joining today, look forward with virtual and many to speaking coming

So thank you.

Operator

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

You may disconnect. now

Industrial Logistics Properties Trust (ILPT) 28 Oct 212021 Q3 Earnings call transcript