Industrial Logistics Properties Trust Q3 FY2024 earnings call

• Portfolio update: Continued demand for high-quality portfolio, strong industrial real estate fundamentals. Occupancy at quarter-end was 94.4% with a slight decrease from the second quarter. American Tire Distributors filed Chapter 11 but properties are fully utilized.
• Leasing: Third quarter leasing activity totaled over 2.7 million square feet, including 13 renewals with FedEx. Renewals in key markets like Charleston and Columbus. 2024 expirations mostly addressed, with 2025/2026 expirations tracked.
• Financials: FFO, NOI, cash basis NOI, and adjusted EBITDAre figures provided. Balance sheet: Net debt to total assets ratio 68.1%, net debt coverage ratio 12.1x, cash ~$154 million (excluding restricted). Dividend maintained at $0.01 per share.

In the third quarter, FFO was $8.1 million or $0.12 per share, a 1.5% year-over-year increase. NOI decreased 0.7% to $84.7 million, cash basis NOI increased 1.1% to $82.5 million, and adjusted EBITDAre increased 0.9% to $83.9 million. As of September 30, 2024, ILPT's portfolio consisted of 411 distribution and logistics properties in 39 states totaling approximately 60 million square feet. The Hawaii footprint had 226 properties totaling over 16.7 million square feet. Top 10 tenants accounted for nearly half of total annualized rental revenues, and 77% of annualized revenues came from investment-grade rated tenants and secure Hawaii land leases.

• Maintained quarterly cash dividend at $0.01 per share. Expect strategic leasing to continue driving strong tenant retention and stable cash flows. Interest expense expected to decline in Q4 due to new interest rate cap. No debt maturities until 2027.

• American Tire Distributors Chapter 11 proceedings with uncertainty but properties are utilized.
• Uncertainty in leasing Hawaii land parcel and Indianapolis vacancy due to tenant diligence timelines.
• Interest rate cap costs and potential impact on debt service.
• Disconnect between property valuation and buyer offers for asset sales.

Q: Drill down on interest rate cap costs trade-off.

A: Lender determined strike rate on cap based on property performance, saved upfront costs with $17 million cap.

Q: Leasing timeline for Hawaii and Indianapolis.

A: Hawaii likely second half of 2025, Indianapolis first half of 2025.

Q: American Tire bankruptcy impact.

A: Properties are being utilized, previous bankruptcy experience gives comfort.

Q: Dividend expectations.

A: Need ample liquidity for leasing and financing before increasing dividend.

Q: Interest expense forecast.

A: Cash interest up, noncash amortization down due to cap and deferred costs.

Q: Asset sales consideration.

A: Evaluating inbound offers, but covenants need to be accretive.