Industrial Logistics Properties Trust(ILPT) - 2020 Q3 - Quarterly Report

Property Management and Occupancy - As of September 30, 2020, the company owned 301 properties with approximately 43.8 million rentable square feet, achieving an occupancy rate of 98.8%[82] - For the three months ended September 30, 2020, the company collected approximately 98.4% of contractual rents due after accounting for rent deferrals[73] - The average effective rental rate per square foot for all properties increased to $6.03 for the three months ended September 30, 2020, compared to $5.76 for the same period in 2019[86] - New and renewal leases for approximately 486,000 square feet were signed at weighted average rental rates approximately 7.9% higher than prior rates for the same space[88] - Rent resets for approximately 290,000 square feet of land at Hawaii properties resulted in rates approximately 15.6% higher than previous rates[88] - As of September 30, 2020, 75.7% of annualized rental revenues derived from investment-grade rated tenants[76] - Tenants representing 1% or more of total annualized rental revenues account for 57.2% of rented square feet, with Amazon.com Services, Inc. contributing 16.1%[93] - Mainland Properties represent approximately 59.3% of annualized rental revenues, while Hawaii Properties account for 40.7%[94][95] - As of September 30, 2020, 0.2% of total rented square feet and annualized rental revenues are scheduled to expire by December 31, 2020, amounting to $474,000[90] - Annualized rental revenues scheduled to reset in 2021 total $2,844,000, with a cumulative total of $31,447,000 for all future resets[92] Financial Performance - Rental income for Q3 2020 was $62,932, a 4.3% increase from $60,354 in Q3 2019, contributing to a consolidated rental income of $65,106, up 6.8% from $60,958[1] - Net operating income for Q3 2020 was $50,559, reflecting a 6.3% increase from $47,551 in Q3 2019[1] - Net income attributable to common shareholders increased by 29.0% to $14,089 in Q3 2020 from $10,922 in Q3 2019[1] - Total operating expenses rose to $14,547 in Q3 2020, an 8.5% increase from $13,407 in Q3 2019[1] - Interest expense decreased by 12.3% to $12,886 in Q3 2020 from $14,687 in Q3 2019, primarily due to a lower weighted average interest rate[1] - General and administrative expenses increased by 15.8% to $5,180 in Q3 2020 from $4,475 in Q3 2019, driven by higher professional fees[1] - The increase in rental income was attributed to acquisition activity and leasing activity, including rent resets and tax expense reimbursements[1] - Net operating income (NOI) for the nine months ended September 30, 2020, was $151,982, reflecting a 14.3% increase from $132,984 in 2019[135] - Total operating expenses rose to $42,512, a 24.8% increase from $34,051, driven by higher real estate taxes and other operating expenses[120] - Net income attributable to common shareholders was $41,756, a 2.3% increase from $40,824 in the prior year[130] Debt and Liquidity - The company had $457,000 of availability under its revolving credit facility as of October 26, 2020[72] - No outstanding debt is scheduled to mature during the remainder of 2020, with the next maturity in December 2021[72] - As of September 30, 2020, the company had unrestricted cash and cash equivalents of $39,105,000[146] - Cash and cash equivalents at the end of the nine months ended September 30, 2020, were $51,911,000, compared to $23,336,000 at the end of the same period in 2019[143] - The company expects to fund future property acquisitions and developments through borrowings under its revolving credit facility and net proceeds from equity or debt securities offerings[150] - The company recorded a gain on early extinguishment of debt amounting to $120 during the period[128] Tenant and Market Risks - The company is closely monitoring the impact of COVID-19 on its operations and tenant performance, conducting financial modeling and sensitivity analyses[72] - The company faces limited lease expirations over the next 12 months, which may help mitigate risks associated with tenant defaults[191] - The demand for e-commerce and logistics may decline if current economic conditions do not improve, potentially impacting tenants' ability to pay rent[194] - The company faces increased risk of tenants being unable to sustain operations due to extended economic activity cessation[196] - There is a heightened risk of default or bankruptcy among tenants, impacting overall financial stability[196] - Economic demand has decreased due to mass layoffs and furloughs, affecting the viability of tenants and demand for industrial properties[196] - The company may incur higher costs for capital expenditures than previously expected[191] - The extent and strength of economic recovery post-COVID-19 remain uncertain, with potential long-term impacts on business operations[198] Acquisitions and Investments - During the nine months ended September 30, 2020, the company acquired a property with 820,384 rentable square feet for $71,481,000[100] - A property located in Virginia is under agreement for sale at a gross price of $11,000,000, expected to close in Q4 2020[101] - In February and March 2020, the company received $108,676,000 from a joint venture for a 39% equity interest in 12 Mainland Properties[103] - The company prepaid a mortgage note with an outstanding balance of approximately $48,750,000, resulting in a gain of $120,000 for the nine months ended September 30, 2020[104] Capital Expenditures and Leasing Costs - Tenant improvements and leasing costs for the three months ended September 30, 2020, were $242 million, a decrease of 51% from $495 million in the same period of 2019[154] - Building improvements for the nine months ended September 30, 2020, totaled $2,978 million, slightly down from $2,986 million in 2019[154] - Total leasing costs and concession commitments for the nine months ended September 30, 2020, amounted to $1,613 million, with new leases contributing $695 million and renewals $918 million[156] - The average lease term for new leases was 16.9 years, while for renewals it was 10.3 years, resulting in a weighted average lease term of 10.9 years[156] Interest Rate Exposure - The company is exposed to market risks associated with interest rate changes, with strategies in place to manage this exposure[165] - A one percentage point increase in interest rates would raise the annual floating rate interest expense from $4.99 million to $8.19 million, impacting earnings per share by $(0.13)[172] - As of September 30, 2020, the company had outstanding fixed-rate debt of $1,056.98 million, with an annual interest expense of $41.72 million[166] - The company’s floating rate debt consisted of $320 million under its revolving credit facility, which matures on December 29, 2021[171]