Industrial Logistics Properties Trust(ILPT) - 2021 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In Q1 2021, normalized FFO per share increased to $0.47 from $0.46 in the prior year quarter, reflecting a growth of 2.2% [9] - Total portfolio same property cash basis NOI for Q1 decreased less than 1% year-over-year, excluding lease termination income [26] - Adjusted EBITDA for the quarter was reported at $40.5 million, with debt to EBITDA at 5.2 times, more than two turns lower than the previous year [28][30] Business Line Data and Key Metrics Changes - The company executed new and renewal leases for 620,000 square feet, achieving a rental rate increase of 16% [9][19] - Portfolio occupancy remained healthy at 98.6%, with mainland occupancy improving to 100% [15][19] - The top 20 tenants represent 46% of total annualized rental revenue, with significant contributions from Amazon, FedEx, and Restoration Hardware [16] Market Data and Key Metrics Changes - The competition for e-commerce industrial properties remains aggressive, particularly for newer buildings leased to credit tenants, with cap rates currently averaging below 5% [13] - The company has an active pipeline of attractive acquisition targets, with letters of intent submitted for nine properties valued at over $540 million [12][13] Company Strategy and Development Direction - The company focuses on acquiring high-quality distribution properties with stable cash flows and strong rental growth margins, primarily in the top 30 industrial markets [10] - While development is not a primary growth driver in the near term, the company is evaluating potential expansions on vacant land in its portfolio [11] - The company is willing to consider properties outside of top markets if they offer strong rent growth potential [48] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the leasing environment, noting minimal pushback on rent increases due to scarcity of available land [36] - The company is proactively engaging with tenants to maximize rent growth and minimize downtime, with a focus on lease expirations in the coming years [23] - Management indicated that while they are exploring development opportunities, the focus will remain on quality real estate [50] Other Important Information - The company declared a regular quarterly distribution to shareholders of $0.33 per share, unchanged from the prior level, representing an annualized dividend yield of approximately 5.4% [29] - As of March 31, the company had $559 million of total liquidity, including cash on hand and availability on its revolving credit facility [30] Q&A Session Summary Question: Outlook for EBITDA and FFO from the joint venture - Management indicated that the current run rate for FFO and EBITDA from the joint venture is fair for modeling going forward [34] Question: CapEx outlook for 2021 - Management expects Q2 CapEx to be higher than Q1, estimating it to be in the range of $2 million to $3 million [35] Question: Tenant discussions and rent increases in Hawaii - Management reported no significant pushback on rent increases, with tenants recognizing the scarcity of available land [36] Question: Acquisitions and market conditions - Management noted that while there is ongoing development, they are cautious about aggressive pricing in the current market [39] Question: Joint venture as a source of capital - Management sees the joint venture as a potential source of equity capital for growth and is evaluating properties for potential contributions to the joint venture [58] Question: Leasing negotiations for expiring leases - Management confirmed that negotiations for expiring leases are in Letter of Intent status [62]