Industrial Logistics Properties Trust(ILPT) - 2022 Q3 - Quarterly Report

Property Management and Leasing - As of September 30, 2022, the company owned 413 consolidated properties with approximately 59,962,000 rentable square feet, achieving a leasing rate of 99.2%[112] - The average effective rental rate per square foot for all properties increased to $6.96 for the three months ended September 30, 2022, compared to $6.22 for the same period in 2021[122] - During the three months ended September 30, 2022, the company signed new leases for 543,000 square feet with a weighted average rental rate change of 280.7%[124] - The company completed rent resets for approximately 194,000 square feet of land in Hawaii at rates approximately 36.8% higher than prior rates[126] - The company has a weighted average remaining lease term of approximately 8.9 years across its consolidated properties[112] - As of September 30, 2022, the total annualized rental revenues amount to $419,981,000, with a weighted average remaining lease term of 8.6 years[127] - Federal Express Corporation accounts for 22.0% of total rentable square feet and 29.6% of annualized rental revenues, with a remaining lease term of 7.3 years[129] - Hawaii Properties contribute approximately 28.5% of annualized rental revenues, with scheduled rent resets totaling $23,121,000 as of September 30, 2022[130] - The company expects to renew or extend leases at Mainland Properties, which represent approximately 71.5% of annualized rental revenues, due to tenants' capital investments[129] - The company employs a tenant review process to assess creditworthiness, which includes evaluating information provided by tenants and third-party sources[133] Financial Performance - Rental income for Q3 2022 was $53,357, an increase of $767 or 1.5% compared to $52,590 in Q3 2021[135] - Net operating income for Q3 2022 was $41,014, a decrease of $109 or 0.3% compared to $41,123 in Q3 2021[135] - Total operating expenses for Q3 2022 were $12,343, an increase of $876 or 7.6% compared to $11,467 in Q3 2021[135] - General and administrative expenses increased by 92.7% to $9,110 in Q3 2022 from $4,728 in Q3 2021, primarily due to higher business management fees[141] - Interest expense rose significantly to $(89,739) in Q3 2022 from $(9,084) in Q3 2021, reflecting higher average interest rates and outstanding debt[142] - Net loss attributable to common shareholders for Q3 2022 was $(45,627), compared to net income of $18,307 in Q3 2021[145] - The company recorded a significant loss on impairment of real estate amounting to $100,747 in 2022, impacting overall financial performance[1] - Net loss attributable to common shareholders was $(195,680) for the nine months ended September 30, 2022, compared to a net income of $56,475 in 2021, reflecting a change of $(252,155)[1] - The company recorded a loss on equity securities of $5,758, reflecting realized losses from certain equity securities acquired during the MNR acquisition[1] Debt and Financing - The company entered into a $1,235,000 Floating Rate Loan secured by 104 properties, maturing in October 2024, with an interest rate capped at 2.25%[117] - The weighted average annual interest rate payable under the Floating Rate Loan was 5.62% as of September 30, 2022[174] - The company has aggregate floating rate debt of $2,635,000, with an annual interest expense of $155,003 as of September 30, 2022[215] - A one percentage point increase in floating interest rates would raise the annual floating rate interest expense to $181,288, impacting earnings per share by $0.40[216] - The company plans to prepay up to $280,000 of the Floating Rate Loan after March 2023, and the Fixed Rate Loan can be prepaid in full or part at any time, subject to a premium[177] - The company intends to explore refinancing alternatives, property sales, or sales of equity interests in joint ventures to manage its debt as maturities approach[191] - As of September 30, 2022, the company had an aggregate principal amount of $4,295,842 of debt, scheduled to mature between 2022 and 2038[181] Cash Flow and Distributions - Cash and cash equivalents at the end of the nine months ended September 30, 2022, were $126,669,000, up from $44,093,000 at the end of the same period in 2021[171] - The company reduced its quarterly cash distribution rate to $0.01 per share as of July 14, 2022[173] - The company reduced its quarterly dividend to $0.01 per common share to enhance liquidity until the long-term financing plan for the MNR acquisition is completed[194] - During the nine months ended September 30, 2022, the company paid quarterly cash distributions to shareholders totaling $43,821[193] Market and Economic Conditions - The company anticipates that market conditions will influence future rental rates and lease negotiations, particularly for Hawaii Properties[130] - Economic conditions in areas where properties are located may decline, reducing demand for leasing industrial space and impacting financial results[230] - Delays in the anticipated sales of former MNR properties are due to current market conditions, which may result in lower sale prices than carrying values[228] Risks and Challenges - The ability to grow the business and increase distributions largely depends on acquiring properties that generate rents exceeding capital costs, which may not be achievable[228] - Existing and future derivative contracts may expose the company to additional risks, including counterparty credit risk, which could lead to unforeseen losses[228] - The competitive advantages the company believes it has may not materialize, and competition may increase, affecting market position[234] - The company may face challenges in maintaining good relations with significant tenants, which could affect occupancy rates and rental income[228]