Industrial Logistics Properties Trust Q1 FY2025 earnings call

• Portfolio overview: Started the year with continued demand for high-quality industrial and logistics properties. Portfolio has a weighted average lease term of seven years, anchored by strong tenants. Top 10 tenants account for 47% of annualized rental revenues, with over 76% from investment grade rated tenants or Hawaii land leases.
• Leasing activity: First quarter saw 2.3 million sq ft of total leasing activity, with 13 new/renewal leases plus 1 rent reset. Mainland properties had nearly 80% of renewal activity; Hawaii portfolio had 492,000 sq ft renewals with higher rents and weighted average lease term of 4.9 years.
• Goals for the year: Monitor evolving landscape around global tariffs. Focus on maximizing mark-to-market growth opportunities, maintaining strong tenant retention, leasing vacancies (including 2.2M sq ft in Hawaii and 535,000 sq ft in Indianapolis). Evaluate opportunities to improve balance sheet and reduce leverage, possibly refinancing debt and disposing properties.

Cash basis NOI grew by nearly 2% compared to the same period last year. Normalized FFO increased 43% year-over-year and 52% on a sequential quarter basis. ILPT's portfolio consists of 411 distribution and logistics properties in 39 states totaling 60 million square feet, with a unique Hawaii footprint of 226 properties totaling 16.7 million square feet. Mainland properties accounted for nearly 80% of renewal activity this quarter. Within the Hawaii portfolio, 492,000 square feet of renewals were signed with rent resets at 18.2% higher than prior rents. Cash leasing spreads were 9.8%, and GAAP leasing spreads were 18.9%. Annualized rental revenue increased by $2.9 million from leasing activity, with 57% yet to be realized.

Normalized FFO for the second quarter is expected to be between $0.19 and $0.21 per share. This guidance includes a one-time benefit of $0.01 per share related to a required remediation payment for a scheduled lease termination. Interest expense for Q2 2025 is expected to decline to approximately $68.5 million, with $60 million of cash interest expense net of cash received from interest rate caps and $8.5 million of non-cash amortization.

Uncertainty surrounding global tariffs and how it may impact tenant demand and the leasing environment. Potential short-term volatility in the leasing market due to tariff developments.

Q: Can you provide details around the bad debt recovery in the first quarter and its financial impact?

A: It was around $750,000 in revenues.

Q: What's the perspective on the leasing environment with lengthened timelines?

A: Tenants with renewals into 2026 and 2027 are starting the process earlier with more people involved, so we start dual paths to mitigate risk if there's potential vacancy.

Q: How exposed is the Hawaii portfolio to inbound travel pullback?

A: Very minimal, as tenant base in Hawaii serves the local economy and is not reliant on tourism.

Q: Details on Q2 guidance and moving pieces affecting the low end?

A: Low end allows for unforeseen leasing activity and potential increases in operating expenses; normalized FFO for Q2 is between $0.19 and $0.21 per share with a one-time $0.01 benefit.