Industrial Logistics Properties Trust(US:ILPT)2023-02-15 18:09Financial Data and Key Metrics Changes - For Q4 2022, normalized funds from operations (FFO) were $5.4 million or $0.08 per share, a decline of $26.3 million compared to the prior year quarter, primarily due to higher interest expenses, partially offset by a $40 million increase in net operating income (NOI) [18] - Consolidated same-property cash-based NOI increased by 1.3% year-over-year, driven by leasing activity and contractual rent steps [19] - Adjusted EBITDAre increased by 88% year-over-year to $79.2 million, attributed to the acquisition of Monmouth and related financing activities earlier in 2022 [24] Business Line Data and Key Metrics Changes - The company achieved record annual leasing activity of 7.8 million square feet in 2022, with weighted average rental rates 47.3% higher than prior rates, resulting in an increase of $17.1 million in annualized rental revenue [13] - In Q4, the company entered 17 new and renewal leases totaling 1.4 million square feet, with GAAP and cash leasing spreads of 18.7% and 6.7% respectively [14] - Approximately 12 million square feet or 18% of the portfolio is scheduled to roll by the end of 2025, with expected average roll-ups in rent of 20% on the Mainland and 30% in Hawaii [15] Market Data and Key Metrics Changes - Occupancy at year-end was 99.1%, with major tenants including FedEx, Amazon, and Home Depot representing approximately 40% of annualized rental revenues [7][8] - The company noted that leasing activity in Hawaii was strong, but future leasing will likely focus more on the Mainland [23] Company Strategy and Development Direction - The company is focused on improving leverage but is patient due to ongoing uncertainty in capital markets, with no near-term debt maturities [16] - The company is evaluating opportunities for potential asset sales and joint ventures, remaining open to all options that could yield the highest proceeds [42][57] Management's Comments on Operating Environment and Future Outlook - Management expressed that the leasing market has been quiet due to rising interest rates, and they are looking for more data to assess cap rates before engaging in property sales [30] - The company expects to see growth in cash NOI as leasing activity from 2022 begins to take effect in 2023 and 2024 [46] Other Important Information - Capital expenditures for Q4 were $7.9 million, including tenant improvements, building improvements, and development costs [20] - The company has $48 million in cash on hand, excluding cash held by its consolidated joint venture [26] Q&A Session Summary Question: When will discussions with potential joint venture partners heat up? - Management indicated that the transaction market has been quiet due to rising interest rates, and they are waiting for more data on cap rates before proceeding [30] Question: What is the outlook for occupancy and known vacancies? - Management expects occupancy to remain around 99% to 98% and noted that they have a couple of known vacancies in Hawaii that they can typically release within a quarter or two [32] Question: What is the expected leverage range for 2023? - Management expects leverage to remain in the high 12 to low 13 range throughout 2023, influenced by the effects of rent roll-ups [38] Question: Are all properties on the table for potential sales? - Management stated they are evaluating all properties in their portfolio for potential disposition, not limited to the original pool of Monmouth assets [42] Question: When will the same-store pool change to include the Monmouth acquisition? - The same-store pool will include the Monmouth acquisition starting in Q2 [36]