Industrial Logistics Properties Trust Q1 2025 Earnings Report

Industrial Logistics Properties Trust EPS Results

• Actual EPS: $0.20
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

Industrial Logistics Properties Trust Revenue Results

• Actual Revenue: $111.91 million
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Industrial Logistics Properties Trust Announcement Details

• Quarter: Q1 2025
• Date: 4/29/2025
• Time: After Market Closes
• Conference Call Date: Wednesday, April 30, 2025
• Conference Call Time: 10:00AM ET

Industrial Logistics Properties Trust (NASDAQ:ILPT) (NASDAQ:ILPT) is a real estate investment trust that owns and manages industrial and logistics properties in the United States. Its portfolio is designed to support essential supply-chain activities and includes distribution centers, warehouses, manufacturing facilities, and other industrial properties.

The trust generally leases its properties to business and government tenants, with locations serving a range of industries and transportation markets. Its holdings are geographically diversified across the United States, including strategically located properties near major population centers, transportation infrastructure, and logistics hubs.

Industrial Logistics Properties Trust was established in 2017 and became a publicly traded company in 2018. The trust is externally managed by The RMR Group, an alternative asset-management company that provides management and operational services to several real estate companies. John Murray has served as ILPT’s president and chief executive officer.

Industrial Logistics Properties Trust Q1 2025 Earnings Call Transcript

Key Takeaways

• Cash basis NOI grew by nearly 2% year over year and normalized FFO increased 43% compared to Q1 2024 while occupancy rose to 94.6%, reflecting a strong start to 2025.
• The company executed over 2.3 million square feet of new and renewal leases with GAAP and cash leasing spreads of 18.9% and 9.8%, respectively, including Hawaii rent resets that lifted rates 18.2%.
• With only 5.6% of annualized revenue set to roll by year-end 2026 and a leasing pipeline exceeding 7.4 million square feet targeting average roll-ups of 20% on the Mainland and 30% in Hawaii, ILPT is well-positioned for sustained growth.
• ILPT’s balance sheet remains strong with a 68.7% net debt to assets ratio, 11.9x net debt coverage, $108 million of cash on hand, no debt maturities until 2027, and all debt fixed or hedged at a 5.53% weighted average rate.
• Looking ahead, management is prioritizing tenant retention amid tariff volatility, leasing the 2.2 million square foot undeveloped land in Hawaii and a 535,000 square foot Indianapolis property, exploring refinancing and strategic dispositions, and forecasting Q2 normalized FFO of $0.19–$0.21 per share.

Presentation

[Operator]

Good morning and welcome to Industrial Logistics Properties Trust First Quarter 2025 Financial Results Conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on the touch-tone phone. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the call over to Matt Murphy, Manager of Investor Relations. Please go ahead.

[Matt Murphy, Manager and IR at Industrial Logistics Properties Trust]

Good morning. Joining me on today's call are ILPT's President and Chief Operating Officer Yael Duffy, Chief Financial Officer and Treasurer Tiffany Sy, and Vice President Marc Krohn. In just a moment they will provide details about our business and our performance for the first quarter of 2025, followed by a question and answer session with sell-side analysts. Please note that the recording and retransmission of today's conference call is prohibited without the prior written consent of the company. Also note that today's conference call contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other securities laws. These forward-looking statements are based on ILPT's beliefs and expectations as of today, April 30, 2025, and actual results may differ materially from those that we project.

[Matt Murphy, Manager and IR at Industrial Logistics Properties Trust]

The Company undertakes no obligation to revise or publicly release the results of any revision to the forward-looking statements made in today's conference call. Additional information concerning factors that could cause those differences is contained in our filings with the Securities and Exchange Commission which can be accessed from our website. ilptreit.com investors are cautioned not to place undue reliance upon any forward-looking statements. In addition, we will be discussing non-GAAP financial measures during this call including normalized funds from operations or normalized FFO, adjusted EBITDAre, Net Operating Income or NOI, and cash basis NOI. A reconciliation of these non-GAAP measures to net income is available in our Financial Results package which can be found on our website. I will now turn the call over to Yael.

[Yael Duffy, President and COO at Industrial Logistics Properties Trust]

Thank you Matt and good morning. On today's call, I will provide a brief overview of our portfolio, summarize our first quarter leasing activity and outline our key areas of focus for the year ahead. Marc will discuss the specifics of our mainland portfolio and leasing pipeline. From there, Tiffany will review our financial results and outlook. We started the year with continued demand for our high quality portfolio of industrial and logistics properties consistent with the trends we saw throughout 2024. Cash basis NOI grew by nearly 2% compared to the same period last year and Normalized FFO increased 43% year-over-year and 52% on a sequential quarter basis. We executed over 2.3 million square feet of total leasing activity with occupancy of 94.6% reflecting a sequential quarter increase of 20 basis points.

[Yael Duffy, President and COO at Industrial Logistics Properties Trust]

As of March 31, 2025, ILPT's portfolio consisted of 411 distribution and logistics properties in 39 states totaling 60 million square feet. Our well diversified portfolio is further highlighted by our unique Hawaii footprint consisting of 226 properties totaling 16.7 million square feet. Our portfolio has a weighted average lease term of 7 years and is anchored by tenants with strong business profiles and stable cash flows. ILPT's top 10 tenants account for 47% of our annualized rental revenues and more than 76% of our annualized revenues come from investment grade rated tenants or from our secure Hawaii land leases. Turning to leasing activity, during the first quarter we signed 13 new and renewal leases plus one rent reset for over 2.3 million square feet at a weighted average lease term of six years. This resulted in GAAP and cash leasing spreads of 18.9% and 9.8%.

[Yael Duffy, President and COO at Industrial Logistics Properties Trust]

This activity will increase ILPT's annualized rental revenue by $2.9 million, of which 57% had yet to be realized. Our mainland properties accounted for nearly 80% of our renewal activity this quarter, which Mark will provide detail on shortly. Within our Hawaii portfolio, we signed 492,000 square feet of renewals including rent resets at rental rates that were 18.2% higher than prior rents with a weighted average lease term of 4.9 years. These results underscore the value of our properties, showcasing our ability to generate organic cash flow growth while also maintaining portfolio stability. Turning to our goals for the year ahead, like most industry participants, we are monitoring the evolving landscape surrounding global tariffs.

[Yael Duffy, President and COO at Industrial Logistics Properties Trust]

While it remains uncertain how these developments may impact tenant demand and the overall leasing environment, we believe ILPT's portfolio of high quality assets with its diversified tenant roster is well positioned to withstand some short-term volatility. As such, our focus remains on maximizing mark-to-market growth opportunities, maintaining strong tenant retention and leasing the vacancies within our portfolio, specifically the 2.2 million square feet undeveloped land parcel in Hawaii and a 535,000 square feet property in Indianapolis. Another long-term area of focus is evaluating opportunities to improve our balance sheet and reduce leverage. Accordingly, in 2025 we may pursue options to refinance our existing debt and evaluate strategic property dispositions to accomplish these goals.

[Yael Duffy, President and COO at Industrial Logistics Properties Trust]

I will now turn the call over to Marc.

[Marc Krohn, VP at Industrial Logistics Properties Trust]

Thank you and good morning. As Yael mentioned, we executed over 2.3 million square feet of total leasing during the first quarter. The mainland accounted for over 1.8 million square feet or 79% of the total. Leasing renewals made up the majority of this activity and included leases with Packaging Corporation of America in Colorado, Refresco Beverages in South Carolina, Sherwin-Williams in Illinois and Ulta Beauty in Indiana. New leasing totaled 437,000 square feet across three properties. These results include a 250,000 square feet lease for a property in Indiana that expired on March 31, 2025. We subsequently entered into a new lease with a replacement tenant at a 45% roll-up in rent and with no downtime. Additionally, this quarter we leased two properties that had been vacant since the first quarter of 2023.

[Marc Krohn, VP at Industrial Logistics Properties Trust]

Looking ahead, only 4.3 million square feet, or 5.6% of ILPT's total annualized revenue, is scheduled to roll by the end of 2026. As we have previously mentioned, we initiate renewal discussions at least 18 months in advance as decision timelines have lengthened for many tenants. We believe this early engagement provides ample opportunity to maximize tenant retention and also mitigates risk by running dual paths in preparing properties for re-leasing should a tenant decide to vacate. We are currently tracking 32 deals in our pipeline for more than 7.4 million square feet. We anticipate a near term conversion of 500,000 square feet which is in advanced stages of negotiation or lease documentation. Once executed, we expect these leases will yield average roll-ups in rent of 20% on the mainland and 30% in Hawaii, further illustrating the strength of our portfolio.

[Marc Krohn, VP at Industrial Logistics Properties Trust]

Before I turn the call over to Tiffany, I want to highlight the recent publication of the RMR Group Sustainability Report. The report provides comprehensive insights into accomplishments and data regarding our manager's commitment to long term sustainability goals. We are proud of the progress made to strengthen ILPT's sustainability practices and enhance our transparency and disclosure of initiatives. You can find links to the complete report as well as a supplement specific to ILPT on our website at ilptreit.com. I will now turn the call over to Tiffany.

[Tiffany Sy, CFO and Treasurer at Industrial Logistics Properties Trust]

Thank you, Marc.

[Tiffany Sy, CFO and Treasurer at Industrial Logistics Properties Trust]

Good morning everyone. Last night we reported ILPT's financial results for the first quarter of 2025. Normalized FFO of $13.5 million or $0.20 per share, increased nearly 43% compared to the same quarter a year ago and 52% on a sequential quarter basis. This exceeded the high end of our guidance by $0.02, driven by percentage rent revenues and recovery of bad debts in Hawaii. We ended the quarter with NOI of $87.5 million, cash basis NOI of $83.8 million and adjusted EBITDAre of $85.3 million, each representing increases on both a year-over-year and sequential quarter basis. Interest expense decreased to $69.8 million or by $3.4 million compared to the same quarter a year ago, reflecting the decrease in interest rate cap costs over the past year.

[Tiffany Sy, CFO and Treasurer at Industrial Logistics Properties Trust]

As we discussed during our last earnings call, our consolidated joint venture purchased an interest rate cap in February in connection with the extension of its $1.4 billion floating rate loan for $15 million or $11 million less than the cap purchased in 2024. We expect our interest expense for the second quarter of 2025 to decline to approximately $68.5 million with $60 million of cash interest expense net of the cash we received from our interest rate caps and $8.5 million of non-cash amortization of financing and interest rate cap costs. Turning to our balance sheet, as of March 31, cash on hand was $108 million and restricted cash was $129 million.

[Tiffany Sy, CFO and Treasurer at Industrial Logistics Properties Trust]

Our net debt to total assets ratio was 68.7% and our net debt coverage ratio was 11.9 times, representing a 50 basis point improvement on a sequential quarter basis and driven by the increase in adjusted EBITDAre for the quarter. As a reminder, all of our debt is currently carried at a fixed rate or as fixed through interest rate caps. With a weighted average interest rate of 5.53% as of March 31 including extension options, ILPT has no debt maturities until 2027. In closing, we are off to a strong start to the year with solid financial performance and steady demand for our high quality industrial real estate. Based on the leasing activity both Yael and Marc mentioned earlier and our expectations for interest expense, we expect normalized FFO for the second quarter to be between $0.19 and $0.21 per share.

[Tiffany Sy, CFO and Treasurer at Industrial Logistics Properties Trust]

This guidance includes a one-time benefit of $0.01 per share related to a required remediation payment for a scheduled lease termination. That concludes our prepared remarks. Operator, please open the line for questions.

[Operator]

Thank you.

[Operator]

We will now begin the question and answer session. To ask a question, you may press star then one on your touch-tone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. Our first question will come from Mitchell Germain with Citizens Bank. Please go ahead.

[Mitchell Germain, MD Real Estate Research at Citizens Bank]

Good morning and thanks for the increased transparency on interest and earnings run rate. To that end, I think, Tiffany, you mentioned a bad debt recovery in the first quarter. Can you provide some details around what the financial impact on the model was?

[Tiffany Sy, CFO and Treasurer at Industrial Logistics Properties Trust]

Sure.

[Tiffany Sy, CFO and Treasurer at Industrial Logistics Properties Trust]

It was around $750,000.

[Mitchell Germain, MD Real Estate Research at Citizens Bank]

That is in revenues right now.

[Tiffany Sy, CFO and Treasurer at Industrial Logistics Properties Trust]

Yes, it is.

[Mitchell Germain, MD Real Estate Research at Citizens Bank]

Great.

[Mitchell Germain, MD Real Estate Research at Citizens Bank]

Marc, I think you mentioned some lengthened timelines, and I'm curious if you.

[Mitchell Germain, MD Real Estate Research at Citizens Bank]

Or maybe it was Yael

[Mitchell Germain, MD Real Estate Research at Citizens Bank]

I apologize. I'm curious if you can provide some perspective around, you know, what you're seeing real time in the leasing environment.

[Marc Krohn, VP at Industrial Logistics Properties Trust]

Yes, Mitch, we are still seeing elongated leasing timelines. Tenants with renewals into 2026 and 2027 in many cases are looking to start that process earlier. There are more people involved in that lease decision process. As we work through that process, we want to make sure that we're providing us enough time to mitigate risk. If we get a sense that there might be a potential vacancy, then we start running dual paths and start marketing the property for prospective new tenants at the same time.

[Mitchell Germain, MD Real Estate Research at Citizens Bank]

That's helpful. Maybe provide, can you provide some perspective on, I think there are two real notable.

[Marc Krohn, VP at Industrial Logistics Properties Trust]

Vacancies.

[Mitchell Germain, MD Real Estate Research at Citizens Bank]

Obviously, there's Indianapolis in the mainland, and then there was that large 2 million square feet space in Hawaii. Obviously, I'm assuming they're both in the leasing pipeline today. I'm curious how the traffic levels are for both of those sites right now.

[Yael Duffy, President and COO at Industrial Logistics Properties Trust]

Hi, Mitch.

[Yael Duffy, President and COO at Industrial Logistics Properties Trust]

I'll start and then Marc can add any color.

[Yael Duffy, President and COO at Industrial Logistics Properties Trust]

For Hawaii, we have seen activity.

[Yael Duffy, President and COO at Industrial Logistics Properties Trust]

We have a couple proposals out. We have had a couple prospects not materialize. One due to we had some credit concerns about the tenant, and another one was having some trouble getting the funding it needed to develop the parcel. I know there's a lot of attention on this site, given that it's such a huge impact to our occupancy. It's about 3.6%. I just would like to caveat that, you know, the annualized rental increases that we got this quarter from our leasing was $2.9 million, which is actually more than the revenue we got from.

[Yael Duffy, President and COO at Industrial Logistics Properties Trust]

That parcel when it was leased.

[Yael Duffy, President and COO at Industrial Logistics Properties Trust]

Just to put it in perspective, I mean, I know there's a lot of attention on it, but it really is immaterial from an annualized revenue perspective. Then for the Indianapolis property, we were pretty far along in lease negotiations with a tenant for half the building. It ended up not materializing. We are, you know, actively marketing it and we have some proposals out, but nothing that's far enough along.

[Mitchell Germain, MD Real Estate Research at Citizens Bank]

That's helpful. While I have you, Yael, I think this is the first time you seem to have a bit more conviction about leverage reduction. Obviously it seems like the economics around refis are a bit more favorable today than they've been over the last 24 months. That makes sense to me. Tell me what's driving your motivation to now beginning the effort to sell properties and are these going to be within a joint venture? You know, are they assets that are on your balance sheet? Could it include Hawaii? Is there anything, I'm sure you're going to tell me all options are on the table, but is there anything you can provide as to A, why now?

[Mitchell Germain, MD Real Estate Research at Citizens Bank]

B, you know, what could this.

[Mitchell Germain, MD Real Estate Research at Citizens Bank]

Look like as the process begins to materialize?

[Yael Duffy, President and COO at Industrial Logistics Properties Trust]

You know, all along the way we have been, you know, we do get a lot of unsolicited offers for properties within our portfolio and you know, we evaluate those on a case by case basis. You know, I think we, we've mentioned this before that you know, it's.

[Yael Duffy, President and COO at Industrial Logistics Properties Trust]

Tricky for us just the way our.

[Yael Duffy, President and COO at Industrial Logistics Properties Trust]

Debt is structured that we need to be able to, for it to make sense to release it from the, from the debt pools.

[Yael Duffy, President and COO at Industrial Logistics Properties Trust]

We have been seeing some of.

[Yael Duffy, President and COO at Industrial Logistics Properties Trust]

The unsolicited offers we've been getting have.

[Yael Duffy, President and COO at Industrial Logistics Properties Trust]

Now been from owner-users and so.

[Yael Duffy, President and COO at Industrial Logistics Properties Trust]

Those are usually at a higher valuation. You know, I think that's kind of where some of our optimism around.

[Yael Duffy, President and COO at Industrial Logistics Properties Trust]

Selling assets is coming from.

[Yael Duffy, President and COO at Industrial Logistics Properties Trust]

Just I think as you know, tenants evaluate their long term business plans, they.

[Yael Duffy, President and COO at Industrial Logistics Properties Trust]

Would rather own their real estate versus lease it.

[Yael Duffy, President and COO at Industrial Logistics Properties Trust]

I think there might be opportunity there. I think for Hawaii, you know, that land is precious. They are not making any more land in Hawaii. I think even though it is taking us some time to lease it, I think we feel good on the long term plan for that parcel. I do not know necessarily that we are looking to sell that at least today.

[Yael Duffy, President and COO at Industrial Logistics Properties Trust]

I think the third question.

[Yael Duffy, President and COO at Industrial Logistics Properties Trust]

Was around joint ventures and right now there isn't anything active on a joint venture perspective.

[Mitchell Germain, MD Real Estate Research at Citizens Bank]

Thank you.

[Yael Duffy, President and COO at Industrial Logistics Properties Trust]

Thanks, Mitch.

[Operator]

Again, if you have a question, please press star and then one. Our next question will come from John Massocca with B. Riley Securities. Please go ahead.

[John Massocca, Senior Research Analayst at B. Riley Securities]

Good morning.

[Tiffany Sy, CFO and Treasurer at Industrial Logistics Properties Trust]

Just as it kind of pertains so.

[John Massocca, Senior Research Analayst at B. Riley Securities]

Just kind of as it pertains to, like, you know, first quarter versus kind of what you're expecting in second quarter. Was I right in hearing they're basically both quarters have, you know, roughly a penny, maybe I'm just kind of back of the envelope math of kind of one time positive impact.

[Tiffany Sy, CFO and Treasurer at Industrial Logistics Properties Trust]

This quarter had two pennies and next quarter we're forecasting one.

[John Massocca, Senior Research Analayst at B. Riley Securities]

Okay, I guess maybe what's kind of the moving pieces that gets to the low end of the 2Q guidance just given, you're going to lose one penny potentially in one time impact. Anything else kind of that could act as a headwind?

[Tiffany Sy, CFO and Treasurer at Industrial Logistics Properties Trust]

Unforeseen. You know, it depends on leasing activity. We have a pretty good handle on what our leasing activity will be, but the low end just allows for some activity there that maybe we were not expecting. You never know. You could have increases in operating expenses or things like that one time things that we may have. Hopefully that's helpful.

[John Massocca, Senior Research Analayst at B. Riley Securities]

Bigger picture, same thing you're hearing from tenants in terms of the impact of tariffs, whether that be on utilization. I know you talked a little bit. It's not a new trend that's taking longer to make decisions on renewals. Anything else on that kind of front, whether it be renewals or selling of assets, just that's being impacted potentially by some of the tariff noise.

[Yael Duffy, President and COO at Industrial Logistics Properties Trust]

I think it's interesting. I think generally we anticipate that the.

[Yael Duffy, President and COO at Industrial Logistics Properties Trust]

Tariffs will probably be good for tenant demand for us. Where we really have seen a positive momentum is as tenants. Look, we've had a couple of tenants that were out in the market exploring either relocating or build-to-suit opportunities. I think there's some hesitation around the impact tariffs might have on construction costs. I think as they've evaluated those decisions, they've decided that it makes sense to just stay in place. If anything, we're getting higher tenant retention because of it, at least in the short-term. That's really the most meaningful impact we've seen.

[John Massocca, Senior Research Analayst at B. Riley Securities]

In kind of a similar vein, as I think about the Hawaii portfolio, obviously the Hawaiian economy is very reliant on inbound travel. Just how exposed big picture do you think your portfolio is to kind of inbound travel? If we see a pullback, particularly international travel, how would you kind of anticipate that flowing through the economics of your Hawaii assets?

[Yael Duffy, President and COO at Industrial Logistics Properties Trust]

I would say very minimal.

[Yael Duffy, President and COO at Industrial Logistics Properties Trust]

Our tenant base in Hawaii are generally serving the, like, the economy, are not really related to tourism or more, you know, these are industrial zone lands. So they're really servicing the, the people in Hawaii versus, you know, relying on tourism. We saw this a lot during COVID where, you know, travel, there were so many travel restrictions and I think there was a lot of concern how that would impact our tenants and it really did not have an impact.

[Yael Duffy, President and COO at Industrial Logistics Properties Trust]

So.

[John Massocca, Senior Research Analayst at B. Riley Securities]

I appreciate that. Color. That's it for me. Thank you.

[Yael Duffy, President and COO at Industrial Logistics Properties Trust]

Thank you, John.

[Operator]

With no further questions, this will conclude our question and answer session. I would like to turn the conference back over to Yael Duffy, President and Chief Operating Officer, for any closing remarks.

[Yael Duffy, President and COO at Industrial Logistics Properties Trust]

Thank you for joining our call. We look forward to seeing many of you.

[Yael Duffy, President and COO at Industrial Logistics Properties Trust]

You at the upcoming Nareit conference in June. Please reach out to Investor Relations if you're interested in scheduling a meeting with ILPT.

[Yael Duffy, President and COO at Industrial Logistics Properties Trust]

Thank you.

[Operator]

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

Participants

Executives

• Marc Krohn, VP
• Tiffany Sy, CFO and Treasurer
• Yael Duffy, President and COO
• Matt Murphy, Manager and IR

Analysts

• John Massocca, Senior Research Analayst at B. Riley Securities
• Mitchell Germain, MD Real Estate Research at Citizens Bank