Core Insights - The report by JLL highlights the resilience and steady growth of Beijing's real estate market in 2025, driven by the core AI industry and a shift from a "downturn cycle" to "re-pricing" in the office market [1] - The demand for office space is increasingly rational, with a significant rise in lease renewals as tenants gain bargaining power [2] - The investment market saw a notable decline in large transactions, with a total of approximately 18 billion yuan in 2025, down 58% year-on-year [3] Office Market - The overall demand for Grade A office space remains weak, leading tenants to prefer lease renewals over relocations due to high costs [2] - By the end of 2025, the vacancy rate for Grade A office buildings in Beijing slightly decreased to 15.2%, with net absorption at 21,790 square meters [2] - Average monthly rent for Grade A office space fell to 210 yuan per square meter, a decrease of 5.6% quarter-on-quarter and 16.3% year-on-year [3] Investment Market - The large transaction market in Beijing slowed down significantly, with total transaction volume for the year at approximately 18 billion yuan, marking a 58% decline from the previous year [3] - Retail assets are gaining more attention from investors, as evidenced by a strategic partnership between Ingka and Gaohe Capital to manage shopping center assets [3] - The expansion of public REITs to include commercial office and hotel projects is expected to enhance market liquidity and asset management [4] Retail Market - Consumer retail sales in 2025 experienced a negative growth of 3.1%, leading brands to adopt a cautious approach to expansion [5] - New supply in the retail sector was concentrated in the first half of the year, with over 800,000 square meters added, while the second half saw a significant slowdown [5] - The demand for retail space is increasingly driven by emotional value and cultural identity, with consumers willing to pay for experiences [5] Industrial and Logistics Market - The demand in the industrial logistics sector was primarily driven by cost-cutting relocations, with low new expansion activity [6] - The average effective rent in the market decreased by 4.3% in the fourth quarter, leading to a narrowing of regional price differences [7] - The market is expected to stabilize as demand from industries requiring high-quality warehousing, such as automotive and pharmaceuticals, begins to recover [7] Hotel Market - The high-end hotel market in Beijing faced challenges in the second half of 2025, with average occupancy rates and revenue per available room declining by over 4% year-on-year [8] - The addition of 1,505 new hotel rooms in the second half of 2025 indicates a maturing market, with expectations for steady growth in new supply over the next two years [8] - The clarity in the path for hotel REITs is anticipated to enhance asset performance and attract new investment opportunities [9]

Financial Data and Key Metrics Changes - ILPT reported third-quarter normalized FFO of $17.4 million or $0.26 per share, representing a 26% increase sequentially and a 116% increase year-over-year [11] - Same property cash basis NOI increased by 3% compared to the same period last year, supported by strong renewal activity and rent growth [5] - Interest expense decreased by $4.4 million compared to the second quarter of 2025, totaling $63.5 million, due to a $1.16 billion fixed-rate debt refinancing completed in June [11] Business Line Data and Key Metrics Changes - The company completed 836,000 square feet of leasing during the third quarter, with renewals accounting for 70% of the activity [7] - The weighted average rental rates for the new leases were 22% higher than prior rates for the same space [7] - The leasing pipeline now exceeds 8 million square feet, with anticipated average roll-ups in rent of 20% on the mainland and 30% in Hawaii [10] Market Data and Key Metrics Changes - ILPT's consolidated occupancy rate was 94.1%, outperforming the U.S. industrial average by 150 basis points [7] - Over 76% of annualized revenues come from investment-grade rated tenants or secure Hawaii land leases [6] Company Strategy and Development Direction - The company is focused on addressing lease expirations in 2026 and 2027 while evaluating opportunities to improve its balance sheet and reduce leverage [7] - ILPT has identified three properties for sale totaling 867,000 square feet, with anticipated sales proceeds of approximately $55 million [8] Management's Comments on Operating Environment and Future Outlook - Management noted that despite macroeconomic and tariff uncertainties, the industrial real estate sector remains resilient, driven by long-term demand from e-commerce growth and reshoring initiatives [4] - For the fourth quarter of 2025, normalized FFO is expected to be between $0.27 and $0.29 per share, excluding incentive fees [14] Other Important Information - The company recognized a $6.1 million impairment charge on one of the properties held for sale [12] - ILPT ended the quarter with cash on hand of $83 million and restricted cash of $95 million, with a net debt-to-total assets ratio of 69.3% [12] Q&A Session Summary Question: Guidance on incentive fees - Management indicated that a full-year incentive fee of $6.3 million would be recorded, with less than $2 million expected in Q4 [16][18] Question: GAAP rent increase on mainland assets - A specific deal with the United States Postal Service drove down the GAAP rent increase to 1.8% [24][25] Question: Disposition opportunities in 2026 - Management is evaluating the portfolio and may sell more properties in 2026, particularly within the Mountain joint venture [28] Question: Update on leasing in Indianapolis - There are three proposals out for leasing in Indianapolis, with optimism for leasing in the first half of next year [30] Question: Leasing progress in Hawaii - A prospect for a full-site user is currently in diligence, with hopes for a lease [34] Question: Impact of future incentive fees on normalized FFO - Management clarified that normalized FFO is intended to exclude one-time non-recurring activities, including incentive fees [23]

Financial Data and Key Metrics Changes - ILPT reported third-quarter normalized FFO of $17.4 million or $0.26 per share, representing a 26% increase sequentially and a 116% increase year-over-year [11] - Same property cash basis NOI increased by 3% compared to the same period last year, supported by strong renewal activity and rent growth [5] - Interest expense decreased by $4.4 million compared to the second quarter of 2025, totaling $63.5 million, due to a $1.16 billion fixed-rate debt refinancing completed in June [11] Business Line Data and Key Metrics Changes - The company completed 836,000 sq ft of leasing during the third quarter, with renewals accounting for 70% of the activity [7] - The weighted average rental rates for the new leases were 22% higher than prior rates for the same space [7] - The leasing pipeline now exceeds 8 million sq ft, with anticipated average roll-ups in rent of 20% on the mainland and 30% in Hawaii [10] Market Data and Key Metrics Changes - ILPT's consolidated occupancy rate was 94.1%, outperforming the U.S. industrial average by 150 basis points [7] - Over 76% of annualized revenues come from investment-grade rated tenants or secure Hawaii land leases [6] Company Strategy and Development Direction - The company is focused on addressing lease expirations in 2026 and 2027 while evaluating opportunities to improve its balance sheet and reduce leverage [7][10] - ILPT has identified three properties for sale totaling 867,000 sq ft, anticipating a combined sales price of approximately $55 million [8] Management's Comments on Operating Environment and Future Outlook - Management noted that despite macroeconomic and tariff uncertainties, the industrial real estate sector remains resilient, driven by e-commerce growth and reshoring initiatives [4] - For the fourth quarter of 2025, normalized FFO is expected to be between $0.27-$0.29 per share, excluding incentive fees [14] Other Important Information - The company recognized a $6.1 million impairment charge on one of the properties held for sale [12] - ILPT ended the quarter with cash on hand of $83 million and restricted cash of $95 million, with a net debt-to-total assets ratio of 69.3% [12] Q&A Session Summary Question: Guidance on incentive fees - Management indicated that a full-year incentive fee of $6.3 million would be recorded, with less than $2 million expected in Q4 [16][18] Question: GAAP rent increase on mainland assets - Management explained that a specific deal with the United States Postal Service drove down the GAAP rent increase to 1.8% [23][24] Question: Disposition opportunities in 2026 - Management stated that they are constantly evaluating the portfolio and may sell more properties in 2026, particularly within the Mountain joint venture [27] Question: Update on leasing in Indianapolis - Management reported optimism with three proposals out in Indianapolis, expecting potential leasing in the first half of next year [30] Question: Leasing progress in Hawaii - Management mentioned ongoing diligence with a full-site user prospect in Hawaii, hopeful for a lease [34] Question: Overall leasing and renewal outlook for 2026 - Management confirmed good progress on 2026 and 2027 expirations, with many signed LOIs or active lease negotiations [35]

Core Insights - The office market in Beijing is experiencing a buffering period with overall rental performance facing significant challenges, although liquidity improvements are expected to boost market confidence and solidify recovery foundations [1] Office Market - Technology companies are leading in leasing activity, particularly through consolidation and expansion, which enhances market liquidity [1] - In Q2, the overall viewing volume of Grade A office buildings in Beijing decreased compared to the beginning of the year, prompting landlords to actively retain high-quality tenants by offering flexible rent discounts and rent-free periods [2] - The vacancy rate for Grade A office buildings remains stable, with demand from internet giants contributing 70% to the net absorption in Q2, while other market demand is limited [2] Retail Market - The retail real estate market is experiencing a quarterly supply peak, with niche brands focusing on emotional value creating new consumer hotspots [1] Industrial and Logistics Market - The industrial logistics market is entering a high supply cycle, with significant new projects in the Pingguzi market leading to an increase in warehouse space by 531,000 square meters [4] - The overall vacancy rate in the logistics sector rose by 4.4 percentage points to 29.6%, driven by high supply and low absorption rates, with average effective rents declining by 5.9% [4] - Despite current challenges, warehouse demand in Beijing is expected to recover moderately over the next two years, with improved cost-effectiveness of logistics properties potentially stimulating demand [5]