Industrial Logistics Properties Trust Q2 FY2025 earnings call

• Acknowledged Tsunami warning for Hawaii was lifted with little to no impact on tenants or properties. - Key strategic priorities achieved: American Tire emerged from bankruptcy with 5 leases securing $7.5 million annualized revenue through 2029; refinanced $1.235 billion of floating rate debt to fixed rate, saving ~$8.5 million annually; increased quarterly dividend from $0.01 to $0.05. - Portfolio details: 411 properties in 39 states, 60M sq ft, Hawaii has 226 properties (16.7M sq ft). - Leasing activity: Q2 leasing 171,000 sq ft, year-to-date leasing to boost annualized rental revenue by ~$3.2M. - Balance sheet: Refinancing improved debt terms, ended Q2 with $60M cash on hand and $100M restricted cash; 1 property held for sale at $50M, JV debt under evaluation.

ILPT reported strong second quarter results. Cash basis NOI grew by 2.1% compared to the same period last year, and normalized FFO increased 54% year-over-year. The portfolio consists of 411 distribution and logistics properties across 39 states totaling 60 million square feet with a weighted average lease term of 7.6 years. More than 76% of annualized revenues come from investment-grade rated tenants or secure Hawaii leases. Second quarter leasing activity totaled 171,000 square feet at a weighted average lease term of 4.8 years and a weighted average rental rates 21.1% higher than prior rental rates for the same space. Year-to-date leasing is expected to increase ILPT's annualized rental revenue by approximately $3.2 million, of which 1/3 has yet to be realized.

• Anticipates normalized FFO for Q3 2025 to be between $0.25 and $0.27 per share. - Expect third quarter interest expense to decline to approximately $63.5 million. - Leasing pipeline could result in positive net absorption of 3 million square feet, with average rent rollup of 20% mainland and 30% in Hawaii.

• Macro-economic uncertainty may ultimately delay tenant decision-making or hinder leasing velocity.

Q: Are there any one-timers in the earnings this quarter?

A: We had 1 $750,000 remediation payment related to a scheduled termination of a lease.

Q: Are you in discussions to refinance the $1.4 billion JV debt?

A: We are actively evaluating options that are available to us.

Q: Should we expect more properties to be held for sale in the coming quarters?

A: We don't have anything else in the works right now, but we are evaluating opportunities. And so I would -- I could foreshadow that in the second half of the year or early 2026, there might be some additional properties that we bring to market or consider for disposition.

Q: Why were GAAP leasing spreads on Hawaiian new leases below the target?

A: If we were to break it out between new leasing and renewals, new leasing had almost over 83% roll-up in rent across 2 leases and renewals hovered around 11%. This was driven by most renewals being on our space leases versus our ground leases, which is nuanced as they are generally smaller tenants.

Q: Any updates on the lease-up of vacant assets in Hawaii and Indiana?

A: Nothing material. There's been a little more activity on the Indiana property in the last several weeks, and there are 3 active prospects in Hawaii, but it's slow due to the complexity of underwriting.