Earnings call transcript Q1 2023

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Operator

Hello and welcome to the Industrial Logistics Properties Trust First Quarter 2023 Financial Results Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note today's event is being recorded. I would now like to turn the conference over to Stephen Colbert, Director of Investor Relations. Please go ahead, sir.

Stephen Colbert

morning. Good

today's Brian Duffy, Financial Donley, on Operating and Officer. are and Officer, Treasurer call me President Yael Chief Joining and Chief

Securities other securities question-and-answer the of consent of release ILPT's company call statements today's Reform actual Today's followed call The today's is those Litigation and note presentation results the conference statements XX, the of the conference laws. XXXX from are the company. These the revision project. publicly today's session in prior within Also made without a and based that beliefs today, undertakes written that re-transmission call looking Please of the of with any forward-looking no on conference the contains results XXXX, and by forward-looking as materially call. recording Private we forward prohibited meaning analysts. of statements may obligation includes differ Act by management and to to expectations that or April revise note

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

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

Yael. turn over to will the I now that With call

Yael Duffy

like helpful about night. efficiently morning. believe the this results. of presentation Thank I and company by last format be release combined investors for our to Stephen digest highlighting you, information We information that we analysts issued to good begin and and earnings will enhanced would

the our operating ILPT's consistent year then continued and over started to review Same the executed for compared call and property grew period will XXXX. Brian and the X.X% I last call, results. NOI new square by portfolio to to XX.X%. saw We demand healthy turn high feet on and $X.X the remained same leasing today's renewal trends with cash quality On year. financial performance We update total our an million we for throughout with basis at leases provide occupancy

Hawaii that XXXX executed that was the June of a lease to its agreed that of was parcel scheduled on our the Before you year. in we X.X wanted on from aware last March lease Depot, due a quarter, to diligence in for they expire details square termination Home right foot lab million get exercised tenant largest XX. period into make land the us we to The third in

March to We our tenants remain that reengaged in This we but gives ample time which an lease as Home us the to efforts. continue active results on the impact financial through from with we lease the also have the leases broader XXXX, property had discussions no Depot termination maturity. recognize prior tenant site, site existing to regarding rents release leasing believe

term properties and in and years. a includes results. warehouse consolidated of operating weighted square approximately XXX eight leasing with XX our ILPT's average feet approximately to Turning states portfolio distribution million XX lease totaling remaining

in portfolio activity leases cash we respectively. stability. XX% rental leasing continue and will and These XX quarter, approximately of renewal X.X effect to year. The spreads our feet organic to of gap of lease and what for million, million This new entered $X.X resulted annualized During square growth revenue weighted increase XX.X% cash this ability results in showcase while in term generate impact of the of X.X% activity average into first is a maintaining go an an XXXX. flow X.X

the respectively. with drive renewals and organization, and Earlier FedEx leasing Express will rents it the this ups companies other operating Express, our of most consolidate FedEx average its quarter including XX.X% of its in operating several XXX,XXX three square emerge feet investor weighted month Renewals and XX.X% with cash drove tenants to events, into Federal and into announced that roll of its FedEx mainland GAAP on for one plans that which Corporation. Ground our total largest companies

asset its have us their FedEx long leasing with revenue is as XX% makers through the with given have beyond. FedEx term $XX.X who teams plans. secure our a and decision and expirations work Furthermore, in XXXX strong over in relationship million associated lease in they an to management dialogue of Our committed open with having portfolio annualized

Looking scheduled ahead, mainland our properties. XX% primarily ILPT's approximately portfolio roll of to the end of is by driven by XXXX

a in the pipeline tracking our advanced roll-ups of square in will currently conversion documentation. are feet. X.X and executed, is near We in stages anticipate pipeline more XX% XX mainland average these we leases expect XX% than our given rent further illustrating Hawaii, lease our current of square of deals We for strength negotiation X.X of Once of the feet yield million of term or portfolio. XX% on million activity in that

The long data to call the make to group's the recent publication goals. you to RMR commitment insights, Brian, our highlights of term regarding the report. sustainability ESG annual wanted accomplishments managements’ Before aware report turning over I of and

made and of the disclosure. practices ILPT transparency ESG progress strengthen We and are proud sustainability our enhance to

ILPTreit.com. our cash You links can ILPT's as well website sheet to find report on complete the specific at Brian? an as

Brian Donley

Thank results a XXXX. impacted $X.X year FFO quarter our $X.XX or funds from million of morning. $XX.X million, The for in expense consolidated million Normalized with decline per you increase NOI. by quarter. offset operations was compared partially a prior quarter year the to prior major drivers higher the over good interest normalized financial share first were Starting the of Yael and $XX.X

and our increased portfolio Adjusted for NOI were increased quarter activities basis Total These XXXX. property XX.X% related million. cash in changes of Monmouth $XX.X to EBITDAre same X.X% result first year-over-year year-over-year. financing a the acquisition of

by for quarter was $XXX,XXX the properties. million change acquisition Monmouth percentage favorable XXXX. and of uncollectible increased quarter driven The increase as activities increase earned Interest of an Hawaii the prior in our result a reserve year expense to to of related rents rents our $XX.X approximately one at this of financing in

fixing interest continue initial through a we rate rates for floating maturities interest strike of the rate in our and XXXX. have As exceed reminder, $X.X billion cap to rates the loans

costs run rate caps. million $XX of and Our current the expense $XX rate estimated is cash quarterly million including interest interest $XX of expense non-cash consisting amortization financing of interest million approximately of

extension our in debt until to XXXX. Including ILPT's average options, maturities with sheet. Turning no weighted maturity balance six years

fixed As of average to carried rate a March a total weighted rate interest fixed either XX, rate our or caps interest of X.X%. with total debt

for] We $X.X by currently amounts quarter million improvements held our leasing venture have [us the of million $XX cash and joint cost, of million of on improvements. $X agreements. $XXX,XXX expenditures costs hand consolidated million, fourth for and cash of the Capital development tenant debt excluding including building $X.X were and

closing, opportunities. dispositions conditions focused monitor market continue de-leveraging to In operations and on and for potential we're our

our roster portfolio rents occupancy Our portfolio. tenant rising full strong exceptional near with across remains an and

questions. real We That quality expect demand for please our ILPT industrial prepared from high concludes continue will estate. benefit industry line open Operator, remarks. to for the

Operator

question answer FBR. [Operator session. time, from you. At with Instructions] will this first Bryan and the B. begin question thank comes the we And Yes, Maher Riley

Bryan Maher

Thank Maybe for to question you. Brian and morning Yael Good Brian. start. a

rate, through component the interest and component. topic the you cash On kind it's a the days, non-cash these and big of walk

to for and at XXXX about say rates. assume to make let's pay expense should your today's out the new think the and non-cash that you we interest we and of we about and that As should of have you year do you that caps. let's next think cost extension that amortization component new How options think just have under How to scenario? caps the assume exercise

Brian Donley

morning. is Good good a question. This Brian. Thanks,

rates, As curve we rate cap million, the we essentially the that of on period. on the strike down will will on today a interest look volatile in cap know was to current how way were But interest loan amortization year the And accounting million. next for anywhere rate it's from cap today's will I that one expensive; cap interest especially to maintain you're know, a same the If show estimate the for is the a $XX to did caps the buy buying works, you work can based we would very that and a whim. very at one change million market year I $XX and $XX CMBS as expire. September,

interest one could recognizing that of amortization change year if we're the what So cheaper. cap, expense be in a for the cap for favorable is there

curve continues those because decline. cheap guidance best that give today. hopefully rates the the continue, forward not the price that's caps today I So the And can declined, they're of to

Bryan Maher

caps Is tenure extension on lock All XXX or that right. another some up you're we given company were that and That's or that at for bought it year? And expire would helpful. extend. for something going Knowing year in at caps today some could go next to last year here on look you to there anything hedges they that an that did have would it loans the year. looking this cover today, do that something last

Brian Donley

not Yes. something That's It's we're question. a considering. good

to quarters. the to clients and for in say year. curve the hopefully all let we're point different think us are what would going drives look few people cap. I to settle forward time. future we something the like some And And pricing on It's give a talked backdrop on the in next rates in, what pundits is expected that that interest at the some a over more could it

Bryan Maher

seems you of with they on Okay, them? Depot the that deep tenants elaborate them? simply is take lower bench come agreement Yael and can the space maybe looking maybe like if just shifting for with Home maybe bit to you're Can Are a little still price? termination? to you a an more And It how gears. potential engaged

Yael Duffy

rights Bryan. with We Home Depot leases. this generally and and was diligence. Thanks, allow a a our million large square X.X This feet, had done periods unique diligence termination in parcel, for don't a they very is And circumstance.

As distribution think we mentioned putting and facility they site. a I on warehouse planning this earlier, on were

they So time on a needed planning. more just their little

mainland they I this vacancy. attractive. didn't Home site like really And Park their think retailer market. why they our think than this reason remain started as terminated the in I as as of us of and engaging why has that other find it But in Industrial grow have would network good I are they mentioned, parcels site we realized a Depot that be I essential the also Campbell mentioned, James chances less it would and the I QX percent and reasons half And so, they think interested. give they as And broader but

that advantage I competitive us So provides with release think a them. to

Bryan Maher

just I about you X.X renew prospects the conversion looking for those the you XX last years properties? engaged and the me, XX% tenants you're said that deals next XX% what to to that feet or anticipated. couple something Am mentioned for And you've in square releasing are tracking from properties are that for and assume that at million the of

Yael Duffy

not No. That's meant. actually not I what

So next we the in We years. 'XX, pipeline, explorations. expirations have our 'XX in in actually couple have of very minimal

are And we so LIBOR to them ones negotiating XX% we've we lease. and we're that just with mostly signed that's the a have 'XX. and ones just and that execute early, 'XX And are engaged a have likely the

Bryan Maher

give from had kind those to put What renewals take of you five anticipate or on of percentage that you the expiring being? some if Okay, that points. are probability do level

Yael Duffy

Yes.

feet. we ILPT's know of percent to only properties vacate tenants annualized less revenue it where the of square half than likely about three today, represents currently XXX,XXX a So and

Bryan Maher

Perfect. Thank you.

Yael Duffy

Yes.

Operator

comes the JMP Mitch question And from Germain you. Thank next Securities. with

Mitch Germain

wanted the morning. Good talked revenues. know percentage to new I and disclosures. a a from about rent reserve about Brian, Appreciate Hawaii. I you talk

timer. reserves percentage a the about that one be the the assuming a quarter? Is to rent? So just What benefit kind going in a onetime of

Brian Donley

but lot it's their pays and that tenant well. repeat percentage rent had that in could And annually. rent were there in increase a significant disappear as a percentage next Yes, revenues could rent that it the a percentage year, the tenant

project we'll we've form something that But necessarily ramp percentage for. some not of in time, it's annually. So received

Mitch Germain

the What's there? dollar

Brian Donley

quarter. had increase We a an $XXX,XXX year-over-year of and for change

Mitch Germain

about it? so of million are non-recurring. this about Is revenues way the think Okay, that quarter to X.X that

Brian Donley

Yes.

Mitch Germain

top Anything, Pacific there? Okay. I you provide tenant par your some can list. perspective entered saw

Yael Duffy

just just moved it's think leaves million the I No, ranks. with they square X.X that Home was that in Depot feet, terminating with up

Mitch Germain

Got you.

Okay. leasing Yael, your And X%. then But a bit you FedEx spreads reference, talked about higher. was the

I think it was XX.

quarter. and I FedEx what, in it So of half the leasing think like your was looks about

that specific we should lower we So on any be noting what worried kind end, that or about? of trends the was anything be there should

Yael Duffy

leases those roll just we are aren't in sometimes, especially instances, leasing, and Hawaii the couple as Hawaii, we do on in certain rents smaller big No. so, renewal. had in renewal, and When up a the

Mitch Germain

Okay.

Given least kind is any there to about where rates your of at someone a market debt the seems is off thought is be higher stabilizing today, that and now sales maybe of cost pursuing bit? the digesting

Yael Duffy

evaluating constantly case inquiries we're from looking all of inbound We've buyers by on a of We're and lot a case Yes. evaluating basis. opportunities. had those opportunistic

I think there I price of still a think discovery considerably XX%. is year-over-year, volume upwards period is of transaction down

think itself have holding it still we're until little tight. And data. think we're and we to makes we a I the will, presents if but patient opportunity So more be going sense, I

Mitch Germain

Thank you.

Yael Duffy

Thank you.

Operator

with DG from Thank you. And RBC Instructions] Capital [Operator comes Markets. question next the Balachandran

DG Balachandran

little the what talk you market change right about to bit and what happen good something more transaction needs or Can Hi, to to for now the a market? exactly seeing you you're bring morning. what

Yael Duffy

really Yes. market network brokers, we brokers. mean, I have of big a capital

acquisitions We they're dispositions a to market. the lot have just and hasn't a closing. And been team deals very of there close where

there's think just until price I we're waiting. so, discovery, more again And I think

I a process. might things what of of again little interest to a banking open start put kind hear of think and we I mean, bit QX up the in I the crisis, So slowdown settle from rates in think QX, kind

quarter in data. we'll hopefully, more have So next the two, or

DG Balachandran

What of are about, fair pool on got the that that? Okay, you? what it like assume thoughts or And were is you're it. your asset outright to some thinking

Yael Duffy

I think can any maximize way value. we

think open come pool. by, I but think financing limited being a with I to we're I a hard again, portfolio to that's think buyer

on fine to have value. individual we we execute again, and route So sales a that we're if can team go can robust that maximize

DG Balachandran

Okay, great. Thank you.

Yael Duffy

Yes.

Operator

question next Securities. a Mitch And is with from follow-up JMP you. Thank Germain

Mitch Germain

talked Yael, Hawaii. myself. Depot help with Illinois? about I couldn't in you I happened Sorry, Home what know

Yael Duffy

Yes.

portfolio lease unknown this to they expiration. knew tenant in we to lease came to able with So discussions their it this we that to hoping bought actually we're be When We're another natural active and them on vacate. be quarter.

Mitch Germain

Great. Appreciate it.

Yael Duffy

Yes.

Operator

Thank follow-up Bryan Riley you. we Maher FBR. have with And from B.

Bryan Maher

Yes.

one. Just a quick

that still thinking As that And JV JV worked within in assets with into their it or the the comes potential you've or putting partners, interest currently? or you wealth established. engaged funds you've partner, about those past? level what's to actively already dialogue sovereign dispositions JV Are had of

Yael Duffy

them, in As them. you discussions. know, JVs we active in no JV, especially we're with place that partner, have there [Monmouth] for a additional couple because and managing the But been we're of with discussions the has JVs for for bringing on

As you see not flowing. currently that financial is our can cash from disclosures JV supplemental

So attractive would to hard partner. be a it for it make new

Bryan Maher

billion] a appetite RMR the north Crown assets? and on XX-ish be what Hawaii you the can ever that, for would on kind would JV to But maybe bringing tell Jewels in I [$X.XX new there entertain there's evaluation rate know me, the debt a And of the ILPT? related of complex you been given for years. fixed the

Yael Duffy

our we're I anything help that really I think with can deleveraging. evaluating we're, Yes, mean,

not that's but not table, we're active the conversations now. So right any off in

Bryan Maher

worth you property with that can Hawaii And take maybe in us think share million? that currently give you what or and XXX is

Yael Duffy

think your if correct, was low. a I assumption not little

Bryan Maher

Perfect, thank you.

Operator

remarks. And any Operating the to I Duffy, would question-and-answer you. Officer President turn call Yael closing session. Chief this Thank like concludes for our and to

Yael Duffy

many joining us in look you for today. speaking everyone [indiscernible] you, call Thank forward of on We to with the June. at

Operator

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

now lines. You disconnect your phone may

Industrial Logistics Properties Trust (ILPT) 26 Apr 232023 Q1 Earnings call transcript