Summary of Industrial Logistics Properties Trust (ILPT) Conference Call Company Overview - **Company**: Industrial Logistics Properties Trust (ILPT) - **Portfolio**: Owns and leases industrial and logistics properties across the United States, totaling approximately 60 million square feet across 411 properties in 39 states, with a 95% lease rate and a weighted average lease term of 7.8 years [1][2] Key Insights Unique Market Position - **Hawaii Portfolio**: ILPT has a significant presence in Hawaii, owning 226 properties totaling about 16.7 million square feet, primarily ground leased. This region contributes 28% to annualized revenues, with rent increases of 20% to 30% expected as leases expire [2][4] - **Tenant Quality**: 76% of revenues come from investment-grade rated tenants or secure land leases in Hawaii, indicating a strong tenant base [4] Financial Performance - **Debt Management**: Current leverage is at 11.9 times, with all debt at fixed rates or hedged through interest rate caps, averaging 5.5% as of March 31 [4][5] - **No Debt Maturities**: ILPT has no debt maturities until February 2027, providing stability [5] Market Dynamics - **Tariff Impact**: The company believes its portfolio is less sensitive to global tariff changes due to its unique tenant mix and geographic focus, primarily east of the Mississippi [3][13] - **Tenant Retention**: Increased tenant retention has been observed, with tenants opting to renew leases amid rising construction costs and tariff uncertainties [15] Growth Opportunities - **Rent Growth**: Historical rent resets every ten years have led to significant roll-ups in rents, with increases of 60% to 80% noted in recent years [12] - **Vacancy Management**: ILPT is actively working to fill vacancies, including a significant 2.2 million square feet property in Hawaii, which has impacted occupancy rates but not annualized revenue significantly [21][30] Strategic Focus Business Plan Adjustments - **Acquisition of Monmouth**: The acquisition in February 2022 has led to a reevaluation of the business plan due to rising interest rates and market volatility. The company is focusing on tenant retention and exploring asset sales to reduce leverage [18][19] - **Asset Sales**: While there is interest in asset sales, the current debt structure complicates this process. The company is evaluating inbound offers and considering sales that align with their debt yield requirements [38][42] Future Considerations - **Dividend Strategy**: The company is assessing the potential for reinstating dividends as market conditions improve and cash retention needs decrease [42][46] - **Long-term Outlook**: ILPT aims for a higher stock price and reduced vacancies in the coming year, focusing on operational control and leasing strategies [48] Additional Insights - **Market Conditions**: The company is experiencing a competitive leasing environment in Indianapolis, with new products entering the market, but remains optimistic about its positioning as a low-cost alternative [28] - **Infrastructure Challenges**: The Hawaii parcel's lack of utilities and infrastructure presents challenges for development, but the company prefers to hold the land for future appreciation [25][24] This summary encapsulates the key points discussed during the conference call, highlighting ILPT's strategic positioning, financial health, and market dynamics.

Financial Data and Key Metrics Changes - Cash basis NOI grew by nearly 2% year over year, while normalized FFO increased 43% year over year and 52% sequentially [7][15] - NOI for the quarter was reported at $87,500,000, with cash basis NOI at $83,800,000 and adjusted EBITDAre at $85,300,000, all showing increases year over year and sequentially [16] - Interest expense decreased to $69,800,000, reflecting a reduction in interest rate cap costs [16] Business Line Data and Key Metrics Changes - The company executed over 2,300,000 square feet of total leasing activity with an occupancy rate of 94.6%, reflecting a sequential increase of 20 basis points [7] - The Mainland properties accounted for nearly 80% of renewal activity, with significant leases signed with major tenants [11] - In Hawaii, 492,000 square feet of renewals were signed at rental rates 18.2% higher than prior rents [9] Market Data and Key Metrics Changes - The company is monitoring the evolving landscape surrounding global tariffs, which may impact tenant demand and the overall leasing environment [10] - The leasing pipeline includes 32 deals for more than 7,400,000 square feet, with anticipated roll-ups in rent of 20% on the Mainland and 30% in Hawaii [13] Company Strategy and Development Direction - The company aims to maximize mark-to-market growth opportunities, maintain strong tenant retention, and lease vacancies, particularly in undeveloped land parcels [10] - There is a focus on evaluating opportunities to improve the balance sheet and reduce leverage, potentially through refinancing existing debt and strategic property dispositions [10][30] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the portfolio's ability to withstand short-term volatility due to its high-quality assets and diversified tenant roster [10] - The company anticipates that tariffs may positively impact tenant demand, leading to higher tenant retention in the short term [38] Other Important Information - The company reported a strong start to the year with solid financial performance and steady demand for industrial real estate [17] - The company has no debt maturities until 2027, with all debt currently carried at fixed rates [17] Q&A Session Summary Question: Details on bad debt recovery impact - The financial impact from bad debt recovery in the first quarter was around $750,000, which is reflected in revenues [20][21] Question: Insights on leasing timelines - Leasing timelines have elongated, with tenants looking to start renewal processes earlier due to more stakeholders involved in lease decisions [22][23] Question: Status of notable vacancies in Hawaii and Indianapolis - Activity has been seen for the Hawaii property, with proposals out, while the Indianapolis property is actively being marketed with proposals but no finalized leases yet [24][26] Question: Motivation for leverage reduction and property sales - The company is evaluating unsolicited offers for properties, particularly from owner-users, which may lead to higher valuations [28][30] Question: Impact of tariffs on tenant decisions - Tariffs are anticipated to be beneficial for tenant demand, with some tenants opting to stay in place rather than relocate due to concerns about construction costs [37][38] Question: Exposure of Hawaii portfolio to inbound travel - The portfolio's exposure to inbound travel is minimal, as tenants generally serve the local economy rather than relying on tourism [39]

Financial Performance - Net loss attributable to common shareholders was $21532000, or $033 per diluted share[17] - Normalized FFO attributable to common shareholders was $13490000, or $020 per diluted share[17] - NOI increased by 17% to $87502000 and Cash Basis NOI increased by 19% to $83780000, compared to the first quarter of 2024[17] - Adjusted EBITDAre increased by 11% to $85324000 compared to the first quarter of 2024[17] Portfolio and Leasing Activity - Executed 2319000 square feet of total leasing activity at weighted average rental rates that were 189% higher than prior rental rates for the same space and with a weighted average lease term of 60 years[17] - Lease renewals accounted for approximately 75% of leased square footage, highlighting strong tenant retention[17] - Approximately 76% of annualized rental revenues are generated from investment grade tenants (or their subsidiaries) and Hawaii land leases[17] - Portfolio occupancy stood at 946% with a weighted average lease term of 78 years[17] Debt and Financing - Mountain JV exercised the second of its three, one-year extension options for the maturity date of its $14 billion floating rate loan and purchased a one-year interest rate cap for $15000000 with a SOFR strike rate equal to 310%[17] - ILPT had $108000000 of cash, excluding restricted cash[17]