Industrial Logistics Properties Trust(ILPT) - 2022 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Total portfolio same property cash basis NOI for Q1 2022 increased by 3.1% year-over-year, with a negative impact of approximately 200 basis points due to a pending lease termination in Hawaii [31] - Adjusted EBITDA for Q1 2022 was $52.5 million, reflecting a 30% year-over-year increase [32] - First quarter normalized FFO was$ 27.6 million, or $0.42 per share, affected by$ 0.03 due to the sale of six properties and $0.03 from lease termination charges [33] Business Line Data and Key Metrics Changes - Same property cash basis NOI in Hawaii increased by 8.5%, while on the Mainland it grew by 1.9% [32] - First quarter leasing activity totaled 885,000 square feet with a 27.9% roll-up over prior rents, marking the 10th consecutive quarter of double-digit growth [23] - New leases in Hawaii averaged a 61% roll-up in rent, while a renewal in Northern New Jersey achieved a 29% roll-up [24] Market Data and Key Metrics Changes - New US industrial leasing activity surpassed 200 million square feet for the sixth consecutive quarter, with national average asking rents reaching$ 7.89 per square foot, a 15.2% increase year-over-year [12] - The national vacancy rate dropped to a record low of 3.3%, with Hawaii's industrial market vacancy rate at 1.4% [12][13] Company Strategy and Development Direction - The acquisition of Monmouth Real Estate Investment Corporation added 126 e-commerce-focused properties, enhancing tenant and geographic diversity [10] - The company plans to reduce leverage through selling additional equity interests in the joint venture and marketing 30 legacy Monmouth properties for sale [37] - The focus is on capitalizing on the strong demand environment and robust industry fundamentals to drive long-term growth [38] Management's Comments on Operating Environment and Future Outlook - Management believes the acquisition will enhance growth prospects despite macroeconomic challenges [11] - The company is optimistic about exiting the bridge loan by the end of Q3 2022 through various financing strategies [45] - Management expressed confidence in the portfolio's performance and the successful integration of Monmouth properties [63] Other Important Information - The company has a weighted average remaining lease term of approximately nine years, with over 75% of revenues coming from investment-grade rated tenants [20][19] - The integration of Monmouth properties is complete, with significant contributions from the RMR Group [15] Q&A Session Summary Question: Clarification on higher expenses in Q1 - Management noted seasonal one-time expenses but confirmed no specific impact from the Hawaii tenant lease [41][42] Question: Impact of interest rates on Monmouth transaction outlook - Management remains confident in exiting the bridge loan by Q3 through various strategies [45] Question: Details on lease termination charge in Hawaii - The lease termination was necessary to secure a new investment-grade tenant, increasing the profile of the Hawaii portfolio [55] Question: Differences between properties being sold and those retained - The properties for sale are representative of the larger portfolio, with a mix of non-FedEx and FedEx properties in strong markets [47] Question: Expectations for new joint venture partner valuation - Current discussions indicate no re-trading on valuation, with expectations to maintain similar valuation as the first partner [61]