ILPT - Earnings call transcript Q3 2024 | Industrial Logistics Properties Trust

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Operator

Good morning, and welcome to the Industrial Logistics Properties Trust Third Quarter 2024 Financial Results Conference Call. [Operator Instructions] Please note, this event is being recorded.

I would now like to turn the call over to Ms. Melissa McCarthy, Manager of Investor Relations. Please go ahead.

Melissa McCarthy

Darin. you, Thank Good morning.

are Chief Yael Tiffany Financial Vice Marc call President Chief Sy, today's President, and ILPT's Officer Krohn. Officer, on Duffy; Operating me and Joining and Treasurer,

of question-and-answer by laws. reporting please the retransmission note Private company. call XXXX prior of the is conference followed presentation written note call and a contains conference that within without other includes analysts. Please and today's Reform call by Today's the Litigation forward-looking Also, a Act prohibited session today's consent with that the meaning management, Securities statements the of of securities

These obligation on and in as actual statements revise the release to The those any beliefs XXXX, of differ may and project. materially from or to made publicly forward-looking expectations statements are of the based forward-looking results that today's results XX, no today, revision call. undertakes October conference we ILPT's company

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

our basis or addition, adjusted this call, results which measures to operations measures available our will EBITDAre is be in during website. NOI. on In funds can or financial from package, and of discussing financial including cash income these non-GAAP we non-GAAP net be cash basis reconciliation operating FFO, A net found income

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

Yael Duffy

there, Marc results. handing will morning. and to financial to quarter a update portfolio high-level Thank over On third achievements. our our call, leasing review with start before performance on you, today's From discuss Melissa, and I Tiffany good will operating our it

ILPT's metrics, results NOI. continued the strength third year-over-year with encouraged demand and and strong estate key real quarter cash including high-quality remain the We growth in fundamentals. We FFO delivered basis the portfolio by industrial in in for

of record a organic flow through leasing and cash contractual is capturing efforts, we growth. our have there Given we drive track our escalations have leases to of believe rent many illustrated growth opportunity embedded

As of approximately feet. XX XX, distribution XXX and XX portfolio square ILPT's of XXXX, September logistics states, in properties totaling million consisted

Our diversified more million square XXX XX.X consisting by of portfolio our strategically is totaling unique than footprint feet. properties, Hawaii highlighted

from term carries come a land tenants and and our X weighted leases. years and portfolio top Our XX% cash Hawaii our average XX with or of lease tenants tenants nearly anchored for flows. of business secure from by account is total annualized ILPT's our investment-grade stable profiles half revenues rental annualized of revenues strong rated

tenant, a nationwide Tire week, Distributors, ILPT's agreement indicated fourth it proceedings its Last lenders. as XX revenues our voluntary restructuring it largest its operate to distribution continue will American annualized across has hoc ad contemplates network. group that of an representing filed American Tire with X.X% publicly of Chapter

foot that all X they property square our from decrease been fully to the of occupancy due located quarter Within lease disclosed was consolidated portfolio, end, the in became quarter XXX,XXX second the obligations from rent us a primarily submarket slight properties have July. XX.X%, paid vacant East our previously utilized. and in being Indianapolis the At are

that top vacancy increased, and parcel became XXXX. leased has X are in sites foot both and square that vacant this the be the priorities. Leasing for on among Hawaii X.X will activity with in are along April proposal our we million optimistic Tour

our parcels resulting the negotiating one the other in is XX%. lease GAAP the quarter, termination quarter rent early impacting average for results a parcel at and able a we both of leaves end NOI of the with Hawaii one tenant X charge replacement million lease for within which were this parcel new roll-up a to are execute tenant a After portfolio. Also noncash our of $X.X from

drove executed to which average continue quarter, term the tenants our our strong were will that feet land, as results relationships with leases over Hawaii the more FedEx momentum demand weighted In key higher of of of than highlight such third value and real persistent a average much prior X.X scarcity estate. of lease leasing leasing of These rates X.X with on Marc X% we at million weighted detail momentarily. square years, as provide

deliver attractive continue operating intend capitalizing We leasing outcomes. to on favorable the environment to

address revenue expirations While to near-term approximately with we plan annualized expirations while XXXX, way rent of in total will potential minimizing through maximize growth that scheduled mark-to-market in are X.X% minimal a downtime capital. expire to

at when it we been We management regularly dividend $X.XX earlier quarterly is increase maintain expect topic per investors, our would it that at that recent its and discuss month, of level. Lastly, we the recognize In our value dividend to the ILPT the share. cash we and months, have to board this announced asked a frequently both dividend.

not flexibility to does have ample and that capital level. expenditures leasing ILPT credit dividend it and our agreement a liquidity financial debt as obligations future address before However, feel the we have under is facility, increasing costs, we important

With to Marc. that, the over I'll call turn

Marc Krohn

good Thank everyone. morning, you, and

average our of totaled no mentioned, renewals XX This was ILPT feet more square in X.X the As over lease leasing than X.X%. third years with with roll-up term across by in rent and million leasing tenant with cash X.X largest of our flow beneficial X activity highlighted security rent of mutually improvements. million free Yael form concessions or which X states provided tenant, FedEx, a quarter renewal square feet, GAAP at encompassing

Since with April Real FedEx Estate was executed nearly totaling we announced FedEx network leases XX square as of within in plan have able secure feet. its million XXXX. locations it X.X strategic on Corporation February execute XXXX, Monmouth Investment return, In acquired to if continues optimization we to in its

addressing a the choice. relationships, our tenant beyond. expirations over this of and of Furthermore, is and XX% RMR's FedEx it XXXX secure, long-term lease needs ILPT in believe tenants' and is being fostering given with annualized million and portfolio our in associated to We reinforces $XXX commitment revenue strong landlord

aggregate, including an renewals with of markets, increase X.X XXX,XXX renewals a Ohio. these renewal X foot GAAP key executed of a rent South average renewal a and We early average years. term XXX,XXX in square in weighted with lease represent In tenants Charleston, XX% foot in Carolina, Columbus, square also

Nearly square only expire. our feet set expirations remaining of with all addressed XX,XXX to been XXXX have

As we look XXXX, square to XXXX revenue and of ahead X.X X.X% set annualized million expire. total ILPT's or to feet is

advanced XX square lease negotiation tracking currently million over feet, are documentation. of is square or stages of X.X We deals or X.X million or feet in XX% which

turn over Now call Tiffany. I'll the to

Tiffany Sy

Marc, X.X% of Thank morning, good share the or quarter FFO $X.XX reported quarter million third in XXXX. to and $X.X you, same representing per Yesterday, everyone. increase of compared we an

adjusted increased decreased million increased cash by compared $XX.X to to NOI to $XX.X quarter X.X% XXXX, basis EBITDAre million to quarter Third $XX.X by in same NOI and by while million. X.X% X.X% the

In XXXX, the rate first $X.X floating we of billion for a loan. October our exercised X-year X extension options

extension, As with rate cap with of a interest X-year our $XX part rate previous SOFR we the a of cap rate strike of for purchased a X.XX%. million X.XX%, replacing

cap this than rate cut of less a was of previously result as expected in the cost The September. Fed's interest

strong lender loan. based allowed property on the securing performance for the Additionally, of the strike the higher rate the

more may lower expect that of evaluate We purchase us opportunities flexibility will caps reduce cost and as further cuts provide the interest in we to we leverage. that the future rate any

of During net interest rate interest expense, received amortization million we third of from caps, the of our recognized cash we of cap costs. the quarter, interest $XX.X financing paid and rate million noncash cash $XX.X and

We $XX.X interest the of quarter rate interest from $XX fourth new approximately expense expect decline reflecting cap. our million to to million the impact

sheet. to balance Turning our

a of debt net total our compared to XX.Xx to quarter the XX.X%, XX, in September declined XX net XX.Xx of coverage of ratio As our ratio assets ago, debt third an to year while improvement XXXX. basis points from was

million $XXX million. was approximately cash, cash, Total of $XXX restricted excluding

interest future. use which We when rate our obligations leasing expect future greater this cash to provide include with us may caps in the and options, fund evaluating financing to flexibility purchasing

As ILPT extension has no maturities options, debt until XXXX. a including reminder,

Looking our flows operations retention generate to continue leasing support stable we and deleveraging will expect that in efforts. ahead, cash tenant that and strategic our strong result approach

remarks. the concludes our open for questions. please prepared That lines Operator,

Operator

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

Bryan Maher

Great.

a Just costs. just the rate drill today. bit more wanted a on I few to little me for interest down cap

like million, higher maybe but $X interest you're had million a to for calculations, rough whatever I that on to and with pay just rate be think going we conservative, So been billion. modeling $XX X.XX%, $X.X

million plus of $XX $X $XX is million kind million. So

still below the you about So thinking. we But in trade-off rate? talk can were interest were you what about thinking versus pricing how

Tiffany Sy

Sure.

our that and interest increase is X.XX% for be ILPT's around overall particular going weighted X.X%. to rate So average our for loan to will

our debt on determines based ratio. lender coverage cap strike the rate service Our on required

loan, a properties they based the And I the higher remarks, rate of strike so X.XX%. secure said on in that as for allow the performance of the prepared

are tag. payments. able be to $XX pleased pretty interest able to upfront actually rate defer for price save were we that million costs we So to some Effectively,

due, about how that's And so we we cost. pleased were will pay interest it comes but that. thought say to upfront We as

Bryan Maher

Okay. what Kind I thought. of

Is to you more conservative, on Is bit wide purposes. think granular a second Indianapolis. there? you Marc, it's I leasing quarter? but and pretty Moving third gap for said or know a be little be you modeling Yael, I it Hawaii XXXX, can it want maybe quarter? to

Yael Duffy

that execute going land them will what Brian, parcel. to Yes. business that for reality on lot have is, the plan parcel. do of I just to There's it's the Hawaii tenant for any think especially their cost prospective a diligence to evaluate to

we're discussions, lot the a having line for time while So tenants. on depends the it of

could a probably half half for think I 'XX we probably year in for of be And position be So for in most the say would would to the 'XX. able be Indianapolis, first the then of I Hawaii. second realistic

Bryan Maher

Okay.

assuming I'm so vacates you any commentary there And are vacates we that what Correct are should that about And that know over American there. made, me expected no known I'm Tire there the if XX months? upon you next said the wrong. based

Yael Duffy

adjust the just And know we today it's nothing perspective. American mean, Tire, material So them properties, we the on we announcement the week. there's and from that last known expect they're a won't there to then I But again, what vacate -- from very utilizing to made are else they early leases. expect --

Bryan Maher

did, in they and to to probably I'm lower go degree, the if pound them some to tell a sand they Do they process the rate. ability you could to rent do bankruptcy have vacate? -- And sure request

Yael Duffy

try it bankruptcy to Yes. landlord with in bankruptcy all this I of if American to since been they I them. that time. note can actually properties and us that. and have leased and negotiate renewed I And at be the come didn't same They from they and I do if of has would would leases filed our for we part reject just -- the position Tire they before. XXXX their want mean guess these decision want as think proceedings, in

well. as So there's that we some -- take comfort in

Bryan Maher

Okay.

for ones quick more me. X Just

I guys if As JV, relates XX% Tiffany, you JV can to get the deconsolidate And have you're could so were EBITDA to numbers of as you it be stands to Maybe what would another it run on partner to for the have onboard Mountain you and there's I'm know that. them to you probably XX%, back that roughly, north debt we into JV? to a the deconsolidate but move should numbers do able net partner you now. sure

Tiffany Sy

that There a factors of consider. we would are have to lot

So that have share at this exact don't we point. would we numbers

Bryan Maher

bit just then for about know I little you a And last the me. dividend. talked Okay. Yael,

I've on of that quarter spoken your basis. of buy CAD on side at X dividend, on We looking any lot it I the and running with be from on, sitting a cash $X.XX for also questions you're is up trailing to don't CAD $X.XX that a maybe $X.XX year whopper know go-forward a million around get anybody is something million or payments basis. to there roughly dividend take to simply of whatever, a $X.XX a to on $XXX expected when but $X dividend

me. get I of be So pre-Monmouth, the a would welcomed don't on improving something some ILPT, a community. there, throw all out dividend could That's by questions think overall of big just that. asking anybody think that whopper to positioning I of but is investment I for do for we if really the lot reflect

Operator

Germain The Instructions] with from JMP. Citizens is question next [Operator Mitch

Mitch Germain

expense quarter-over-quarter, change entirely The Tiffany, understand want Is that I the that to way interest think noncash. it? the about forecast. just to is

Tiffany Sy

Not entirely noncash.

perspective more I bit bit transparency. more a So guess, a little to give little or

then $XX we're to cash So noncash our and be expense expecting million $XX be to million. interest the

amortized are noncash as to but happen some will cash between of rate. expense decrease. we fully cover X.XX%, They're And is strike That's what on our amortization, -- So twofold. have is difference the X.XX% that then off. based increase the that our September deferred the costs will also running will interest some the But financing amortization cap that XX.

Hopefully, get a benefit helpful. we that's from So that.

Mitch Germain

is higher said And to do the swap that a And rate, -- You lender. and that's by nothing swap has rate with correct? cap helpful. lower the determined

amount. about a So traded that cap it's Is like it? way not you higher the a lower for to think

Tiffany Sy

That's question. It's to sure want I'm understanding note... correct. the I make your same

Mitch Germain

was Cap reflection higher million, you're that -- a of was something it the which paid amount that there side, at but you it a replacing being amount cap X.XX%, -- $XX at was X.XX%, at lower was rise, for okay. was rate

Tiffany Sy

There's You're piece well. a right. that of as

Mitch Germain

Yes.

And a up? Okay. Great. And right are about I'm then how about Or Hawaii talked I once. includes full kind breaking think now, what it wagon. around many feet there of only And square consideration it is if million-or-so the is assuming discussion Marc then that just X all sight? so, under circling curious users

Yael Duffy

right. you're Mitch,

-- X.X include within only million, X.X include the we one. only the we So

the entire parcel. for with we've so far, have having the And tenants been conversations been

Mitch Germain

Okay. environment that sales a like asset for on potentially forward time more me. Great. accommodating it And looks but to is which the where for again? balance start of the become considering kind I basis, sit? a helps it does a to your sheet, one firm then mean, last And bit rate obviously

Yael Duffy

So of and them -- evaluating a we as come we are lot have in. been unsolicited of do get all inbound they we offers,

there's are evaluating. something a that willing somebody and it have still the constantly bit pay little We to of think what found is we what disconnect are a but been is for, we between worth properties

debt, and covenants we I'm broken like to a remind, I our look that to have release but make this, I feel I But to about from record will we just several properties it at guess accretive. different need

something against. also we're is up that So

Mitch Germain

that some Understood. covenants? Does that unwind to you sales sales those are difficult does as more are one-off portfolio difficult? suggest suggest more that Or look of that

Yael Duffy

is one more difficult think other. the don't I than

sit. on they really assets it in and loan they think . depends the which where I -- pool

Operator

like to conference question-and-answer back to any our over President concludes would and Yael session. for Operating This Duffy, Chief I turn remarks. the Officer closing

Yael Duffy

Have day. us for today. . you a joining Thank good

Operator

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

You may disconnect. now

Industrial Logistics Properties Trust (ILPT) 30 Oct 242024 Q3 Earnings call transcript