ILPT - Earnings call 2 2023 | Industrial Logistics Properties Trust

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Operator

Good day, and welcome to the Industrial Logistics Properties Trust Second Quarter 2023 Financial Results Conference Call. [Operator Instructions] Please note, this event is being recorded. I would like now to turn the conference over to Stephen Colbert, Director of Investor Relations. Please go ahead, sir.

Stephen Colbert

Good morning.

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

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

In funds from discussing addition, normalized and normalized NOI. adjusted FFO, income cash call, or cash basis non-GAAP during EBITDA this or we financial net operations including operating numbers will basis be

This calculation available distribution these financial website. over with data of call to CAD. be on introducing also can for found available of quarter, that, net our the non-GAAP And A supplemental cash reconciliation income Yael. to operating turn and are or figures I is we our our in package, will which

Yael Duffy

turning over I Brian performance review then on financial and our our activity Thank update you, good today's the to operating ILPT's provide Stephen, and call leasing and discuss On before will to results. morning. an call, disposition

average square high-quality the for million real of estate more of of strength this rates signed than stability. the take we XXXX, months the rental flow enter X.X XX% industrial of XXXX leases rental weighted remain we with fundamentals. revenue, real rates ILPT's encouraged showcase second in higher our continued that than by and cash results, rental a second retention million $X.X year, rate were the feet than In half X for -- at in These tenant the in more which the increase prior As XXXX. first XX the in in an the estate to half is of demand portfolio totaling space. half effect activity impact ability or along portfolio generate growth The of annualized XX%, while maintaining will same of organic we

XXX increase XX, XX.X% warehouse June XX occupancy, achieved basis of a As XXXX, and portfolio, consists of distribution which representing properties, point our sequentially.

average lease of feet XXX,XXX and with square was in of increases at XX%, During the square for feet XX.X% cash average prior our X within XX.X%, X.X results years. quarter, been X%, in and respectively. Highlighted demand, square and at X wholly-owned leasing rates under XX.X% XX we million resets new roll-ups This Mainland X XXX,XXX were activity of XXX,XXX have robust and to in is we and Hawaii feet strong XX.X%. Leasing rental leasing rent rent and new in square strong that leases of GAAP respectively. of tenant average portfolio. new including the executed We totaling renewals XX% than market leases opportunities. portfolio our in at lease mark-to-market rents, nearly X also term including construction total leasing rent With a of feet, new weighted in the spreads these Hawaii advantage weighted pipeline, take weighted resulted executed a and rate in higher approximately able of at minimal renewal activity X vacancy

increase cash believe months. over ahead, revenue total the is in through We to with opportunity set XX achieved XX% consistent annualized there XXXX. ILPT's XX% of flows expire to the past XX we square million Looking GAAP is feet roll-up or rents ample

discussions questions when the is what frequently firsthand reduce and Turning believe to Among to we most transactions. to for We for begun the thaw offers asked Based we are we slowly receive portfolio. the properties through our expect opportunities we to has seeing leverage. as on with brokers, look receive high-quality disposition to program our market in unsolicited consistently capital. investors resume deploy

finding not are simple we buyer. it as given However, seller, a as distressed isn't a

pricing to on As we our to position. our is evaluate opportunity, impact financial transact each ability and dependent the

offer we transaction can ratios. agreements price debt confirm the we debt compare amount coverage maintain to our that the allocated each required may potential For and under service receive, the we loan

Additionally, overall potential our be needs to tax gains to and liquidity the considered. impact

such, in market. limited this been As disposition opportunities sales challenging have

disposition to happy that X are opportunities. million. we for obstacles, to with We these square properties, that agreement report have position additional to sales we under XXX,XXX are improve our sell aggregate feet currently encumbered, financial to Given hope totaling price $XX.X an of continue X

term. However, in now turn to short Brian. be limited over I'll we call to activity the expect the

Brian Donley

debt was the Thank available funds was share, in quarter. XXXX, higher Starting of and operations for QX you, million, prior quarter $X.XX $XX.X $X.X a a year EBITDAre our million compared decline result adjusted flat the consolidated to morning, quarter, financial normalized floating from the as of for a with on and interest for expense primarily Yael, second under rate was per incurred our good everyone. instruments. Cash basis our results of distribution sequential

million rents X% our portfolio Our or of in cash for leasing generated year, comparable activity year-over-year. per increases $X.X

lease year liability the of to expense prior quarter to year. the basis partially in bridge in same-property prior of $X.X by year same-property costs was resulted increases, NOI growth total were by a in related which for expense rent a recognized operating NOI negatively point Comparisons amortization the but market termination. Interest impacted write-off, basis GAAP the our $XX.X net the million quarter. compared a quarter, increased impact XX portfolio However, million in the second offset cash below lease excluding loan of increase prior

the venture. cash loan consolidated part million $XX total amortizing interest-only This proceeds within rate X.XX% million. new balance repay X a of with on We at quarter, a we to bears that of properties executed by out principal X entered a and joint secured $XX.X fixed our refinancing loans used interest

As and a interest approximately interest cash estimated result, million $XX rate is of noncash existing of $XX caps. expense expense run million of rate costs, of million, $XX quarterly interest current our including consisting amortization financing

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

carry of weighted rate average our rate either a was or of for rate interest fixed total total June caps X.XX%. As fixed through XX, debt interest

properties of sale we mentioned, wholly-owned agreement $XX.X for have under Yael X As million.

collateral be or X under of portion properties floating property debt amount the repay will of loan. net under $X.X a XXX% of this The the pool agreement Assuming to sales the the used those greater is our the to transactions close, from from of allocated value $XX million the billion loan a of CMBS proceeds proceeds. loan release the rate

We also underwritten. coverage overall need to the in loan debt maintain was ratio was service that the place when

transact dispositions, to these to cash covenants. ILPT For additional loan maintain needing contribute can the without

million have as our of venture. So joint currently we restricted $XXX.X $XX.X hand consolidated million of cash well in cash on as

closing, That will an portfolio for And the expect cash please demand industry near be sale We opportunities from liquidity. In questions. tenant to our with our to estate. reserves. asset the continue we remains that enhance benefit proceeds the our look unencumbered X held of for ILPT roster, from our industrial will strong occupancy Accordingly, to prepared the line full exceptional our further across real remarks. build and to high-quality for open portfolio. concludes rising rents Operator, continue

Operator

Maher with B. comes Instructions] with The Bryan first question [Operator Securities. Riley

Bryan Maher

building Just reserves quarters? a the that, to we some cash for and think few debt, and When sales do paying down couple how of this opportunity big you the think next me asset an is over couple morning. that about

Yael Duffy

think as on they leasing list the of Bryan, came reviewing we're through opportunities I Two efforts. come. disposition our the properties

to the be disposition properties a is haven't so of vacant, launched and campaign. One formal vacant we the soon other

so evaluate we continuing pricing And and other have. portfolio see our and opportunities we're what to

you have I to So number don't for project. a

Bryan Maher

to sales before away extensions lower and to year. due the some that can the talk of were that's redo of extensions, Brian, this about next, some going the future that, be suspect debt, first debt chip what to the to get to cost today let's would I might you you variable get when to And at extensions for if XX rate cost second, have with months you your we sit Maybe relative XX here say, asset pay be on caps a over needed last what done. potentially the to those those caps to had

Just some broad ideas. stroke

Brian Donley

have and million. deal quoted our day. and Sure, could on about cap, The week, talked And million that million from around day this I with instrument. on if we be to Bryan. this last consult -- And cap. a debt buy an volatile $XX it's think think And that very pricing to to caps last rate might same rate we current interest I to today experts I quarter, changes estimate $X.X $XX week the the $XX it's quarter anywhere something were various we buying billion floating in

wind, on principal very we your reserves. yes, continue But to of cash it amount other would and that again, based So for to repay point, debt the amounts, because build cap debt also so changes meaningful of notional were with cost capping. you're at chip if it's it's away decline that to the the important to us the

Bryan Maher

for ones quick me. more X maybe just And

roll-ups, have When of think be is what for all think the would when rent in back pretty roll-ups Yael, do those we it for something I the mean, your what full the for we you look second think mind On do juicy for XQ, at were XXXX? you XQ, you it about quarter. year?

Yael Duffy

that a XX% for hoping it's between GAAP basis. XX% the year we're think to on somewhere I

Bryan Maher

there Blackstone BREIT, of look $X.X it some capital called of away one-off Blackstone and of assets raise something them that's on been demand The relates to seem that's capital in for question. like relative that to last it assets? a the when And et to at on in sell else to to all more Or cetera? my warehouses going is Prologis, industrial there part me. you the just as for And Okay. transaction, deal from billion does

Yael Duffy

I class. in the multifamily, probably most along general, with is asset think industrial, in-favor

So if one to those think categories. I investors in capital, looking of are it's deploy

the it's for landscape. think I promising So industrial

are haven't coming I a but that the they're deal. And huge think the into market, one-off brokers, they more deals in bigger seen seeing was portfolio. with that speaking deal

will and September everybody looking that is what slow. think and is kind So generally, summer the here because to see brings I get I think of for time tell,

Operator

Next question comes Securities. with Mitch Germain with JMP

Mitch Germain

significantly I'm puts growth. but from more. up only your on prior understand And up these healthy some despite same-property these X%, than are trying rent revenues about you and year spreads in some are operating pretty takes getting that of of your to the expense leases, your is less

trying just understand I'm does on rents and have income? to begin upside of when meaningful So in materialize rental to a kind impact this your

Yael Duffy

Yes.

doing because some I cash we've the seeing not of right these deals expiration. doing So think we're ahead historically. roll-ups, of -- this We're lease impact we're away had

will done the of So half latter we've for this the year and think so year, be activities in the I XXXX. almost far X/X into

some I and not it So the seeing we're growth impacting think that's quarter. of this

expenses when I that tenants think their as I maintenance the put for sophisticated they have as think go, back get and also we much passed in repairs. expenses leases, they for far can how negotiate caps some very

is side. the a on expense there of little think I so leakage bit And

Mitch Germain

aware had your of? rate Okay. you've of half back year, And far. to anything then is in note be there with XX% of the retention so the a we that I almost mean, expirations should regard

move-outs So is we aware should that of planned kind be any of? there

Yael Duffy

One So with have of tenants. a and actually we've the properties I assigned good of the think in has traded prospective Both vacates other, activity pretty of the LOI, year. of half known we X them. proposals those know on couple second

So needle be mover 'XX. that in isn't anything should there a

Mitch Germain

of in kind Mainland like color Hawaii? that, Okay, should going. How bifurcate mark-to-market is though, where I think extra the if we versus we cool. appreciate about terms of

Yael Duffy

Yes.

So as know, you Hawaii us. for really has strong been always

XX% would conservative surprising, XX% not think, roll-ups going the think XX% Hawaii forward on be side. so I And to in I

leasing good the on perspective, even on this from perspective. really quarter, And the almost the XX% a GAAP results was XX%. On had Mainland, we Mainland it cash

I market depends think to it market. really

seeing been have I some rent that roll-ups others single and think that we areas Memphis, in we've have like South Carolina been digit. huge

estimate Mainland. probably So XX% a is the good for think I

Operator

The with with of Camille next comes question Bonnel America. Bank

Jing Xian Tan

XX some far start think of of willing you to currently? leases strategies think your their tenants response half months impact, on, how from been advance? some the the question earlier see the in like this the like Can market Just I speak that leasing signing Yael, renew up through about year. in leases plus, to peers' which in are why, cases, differs spread to so following follow like, an you you'll you've in to just back really

Yael Duffy

Yes.

think in kind and they whole the they on of generally of smaller just their business they efforts. minute, generally, the kind focused of I more So -- their because tenants tenants, leasing don't until team are they're Hawaii running a have are and wait last

I are have and come if out hard can't they're you're square important build they these very business. think to tenants' move and large that going to to with we to for the operations. And make again. a Mainland, to wait you to And properties to to do X able renewal if be need the not that are sure the X feet, us months all infrastructure terms, it's to they're their going have relocate if million really

the negotiations our is, hire downtime. potentially, it, tenant broker, I going is want to indication time want we're that if by start have also Plus because takes marketing limit We the to downtime generally trying and that you early. starting multi-tenant to do you work need not if property to we're a to any we time limit to our So a why an renew. think,

Jing Xian Tan

market That's rent you helpful. what of seeing And are U.S.? mainland particularly the terms in in growth,

Yael Duffy

to About XX%. market market. depends Again, it

we're are push we've higher, rents. been have a lower, continue are -- bit able continuing little Some but some to to to

Jing Xian Tan

changed? And basis. on that Because an has think that annual is XX% I

you have any change So seen sequentially?

Yael Duffy

tenants I seeing seen haven't know make longer time of this on a vacation. tenants for if generally, are the back. summer. just more What don't little to that's and No. we people we've is it, decision, impact that a -- People because pushing the a been is slow taking But are no, leasing

Jing Xian Tan

Depot All interest do that in right. have in And take to 'XX? update was around on the Home going lastly, you space the Hawaii any

Yael Duffy

Yes.

to we've the a of at Hawaii. have tenants the So from in presence we've it month, kind officially mostly a Mainland beginning of looking launched calls, lot and gotten inbound of

March feel we the able get So of optimistic XXXX that we'll that lease to expiration. be re-leased ahead

Operator

next question with The Capital comes RBC Michael Markets. with Carroll

Michael Carroll

the -- the or quickly in that you going looked I $XX strategies? and time financing outstanding reasoning that expire guess touch million for was Can that it on repaying in smaller secured I million debt frame. like debt? the $XX of what's was like XXXX to your you balances $XX issuing million think It are repaid. XXXX in

interest get it just willing the more the way a that to give whole was was you that cash or goal that to So for debt? and lower of you're reason rate why up

Brian Donley

cash that's differential. the the so over thanks cash a But interest-only will on The again, rate improve income versus new payments way capture a question. amortizing mortgages, some go well ongoing loan as principal company. to other it It right. to those flow flow. the and improve coupon because our actually interest is was available as of was Michael, cash statement to our expense for Yes, exactly an the opportunity up

was process there. thought So that the

Michael Carroll

But you I said when I properties NOI vacant. estimate guess our trailing at was I flows we're rate looking of cap assume run what on the mean, kind can those going and soon those vacant how on guess XQ? in X know were generated to out asset from I assets was Okay. that you models, much of that was And rate forward? then we sales be announced, the the X

Yael Duffy

It Mesquite, formerly FedEx the small no Texas, associated that cash So so development that I was it. that And the is property one as of was mentioned, one, leased with project flow had properties to our other was in also vacant square June was in bigger a scheduled for million NOI the property, we XXX,XXX of in that and other $X also feet, had about is be in not a And X to 'XX, was property. that Indiana. cash flowing.

Michael Carroll

an number or that annualized quarterly? Is

Yael Duffy

yes. annualized, Yes,

Michael Carroll

to you about sales, rate And when the about a start properties. earlier bringing think asset to started you to you even kick I for you then market continue you Yael, before to sell? do process said the are start willing road, down like Or to potential a need looking haven't market I thinking that kind to of that the interest know waiting something you better before mean, properties expire? can yet pursuing at sell caps

Yael Duffy

no today. we have buy the reserves caps to cash hand we with Yes, cash We that the have urgency. what today, have on feel we the

think be sense So I a we'll we has patient better market sales until really capital get opened. that the

Brian Donley

as remarks, in We are we actually sort our and actually any want we but with willing Yes. outlined a evaluation transaction, to and prepared make there is considerations multiple to pursue before transaction, we're everything. sure of delever,

Michael Carroll

to for need market? need what the you willing you to see or see stabilize be do tick from assets to to And lower you point? to start this interest do have actually see them to rates mean, to bring I do you

Yael Duffy

it's just the market think I what to more understand is.

still think big Blackstone but one, price there's was a it one-off. deal I the also discovery. know I was a

And think so we're more just get to of I data. waiting kind

Operator

over would remarks. the This for Please concludes to Yael I closing session. like to turn conference ahead. question-and-answer Duffy back any our go

Yael Duffy

you the speak to many of you hope Thank on joining soon. call us and today for with

Operator

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

You now may disconnect.

Industrial Logistics Properties Trust (ILPT) 26 Jul 232023 Q2 Earnings call transcript