Industrial Logistics Properties Trust Announces Second Quarter 2022 Results
Executed 3.9 Million Square Feet of Leasing at 61% Higher Rental Rates
Net Loss Attributable to Common Shareholders of ($2.20) Per Share
Normalized FFO Attributable to Common Shareholders of $0.43 Per Share
Same Property Cash Basis NOI Increased 2.6% Compared to the Same Period Last Year
Newton, MA (July 26, 2022): Industrial Logistics Properties Trust (Nasdaq: ILPT) today announced its financial results for the quarter ended June 30, 2022.
Yael Duffy, President and Chief Operating Officer of ILPT, made the following statement:
“During the second quarter, ILPT experienced continued favorable operating trends, which included record leasing activity and same property occupancy of 99.3%. We executed 3.9 million square feet of leasing, including rent resets, at weighted average rental rates that were 61.3% higher than prior rental rates for the same space. This quarter’s leasing activity illustrates how ILPT is well positioned to take advantage of robust operating dynamics through tenant retention, mark-to-market opportunities and leveraging expanded tenant relationships to grow cash flows.
Since committing to acquire Monmouth Real Estate Investment Corporation in November 2021, there have been unanticipated increases in interest rates and a deterioration in real estate market conditions. As a result, the implementation of our long-term financing plan for the Monmouth acquisition is taking longer than originally expected. Regardless, ILPT continues to benefit from strong secular tailwinds, a portfolio leased primarily to investment grade tenants and nearly $300 million of cash on hand.”
A Maryland Real Estate Investment Trust with transferable shares of beneficial interest listed on the Nasdaq.
No shareholder, Trustee or officer is personally liable for any act or obligation of the Trust.
Quarterly Results:
•Net loss attributable to common shareholders was ($143.5) million, or ($2.20) per share, inclusive of a $100.7 million, or $1.54 per diluted share, loss on impairment of real estate on properties reclassified from held for sale to held and used.
•Normalized funds from operations, or Normalized FFO, attributable to common shareholders of approximately $28.3 million, or $0.43 per share.
(dollars in thousands, except per share data)
Three Months Ended
Financial
June 30, 2022
June 30, 2021
Change
Net (loss) income attributable to common shareholders per share
($2.20)
$0.29
N/M
Normalized FFO attributable to common shareholders per share
$0.43
$0.47
(8.5)%
Net (loss) income
($151,321)
$18,831
N/M
Net (loss) income attributable to common shareholders
($143,539)
$18,831
N/M
Adjusted EBITDAre
$80,811
$40,862
97.8%
Net operating income (NOI)
$86,894
$42,350
105.2%
Same property Cash Basis NOI
$39,852
$38,854
2.6%
N/M - Not Meaningful
Reconciliations of net income (loss) attributable to common shareholders determined in accordance with U.S. generally accepted accounting principles, or GAAP, to funds from operations, or FFO, attributable to common shareholders and Normalized FFO attributable to common shareholders for the quarters ended June 30, 2022 and 2021 appear later in this press release. Further, reconciliations of net income (loss) determined in accordance with GAAP to earnings before interest, taxes, depreciation and amortization, or EBITDA, EBITDA for real estate, or EBITDAre, and Adjusted EBITDAre for the quarters ended June 30, 2022 and 2021 appear later in this press release. Reconciliations of net income (loss) determined in accordance with GAAP to net operating income, or NOI, and Cash Basis NOI, and a reconciliation of NOI to same property NOI and calculation of same property Cash Basis NOI for the quarters ended June 30, 2022 and 2021, also appear later in this press release.
Three Months Ended
Leasing Activity
June 30, 2022
Leasing activity for new and renewal leases and rent resets (square feet)
3,872,000
Weighted average lease term for new and renewal leases (by square feet)
22.7 years
Weighted average rental rate change versus prior rental rate for same space (by square feet)
61.3%
Commitments for leasing costs and concessions for new and renewal leases (per square foot per year)
$0.07
Three Months Ended
Occupancy
June 30, 2022
March 31, 2022
June 30, 2021
Occupancy
98.9%
98.9%
99.0%
Same property occupancy
99.3%
99.3%
98.9%
Conference Call:
On Wednesday, July 27, 2022 at 10:00 a.m. Eastern Time, Yael Duffy, President and Chief Operating Officer, and Richard Siedel, Chief Financial Officer and Treasurer, will host a conference call to discuss ILPT’s second quarter 2022 financial results.
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The conference call telephone number is (877) 418-4826. Participants calling from outside the United States and Canada should dial (412) 902-6758. No pass code is necessary to access the call from either number. Participants should dial in about 15 minutes prior to the scheduled start of the call. A replay of the conference call will be available through 11:59 p.m. on Wednesday, August 3, 2022. To access the replay, dial (412) 317-0088. The replay pass code is 6649973.
A live audio webcast of the conference call will also be available in a listen-only mode on ILPT’s website, at www.ilptreit.com. Participants wanting to access the webcast should visit ILPT’s website about five minutes before the call. The archived webcast will be available for replay on ILPT’s website following the call for about one week. The transcription, recording and retransmission in any way of ILPT’s second quarter conference call are strictly prohibited without the prior written consent of ILPT.
Supplemental Data:
A copy of ILPT’s Second Quarter 2022 Supplemental Operating and Financial Data is available for download at ILPT’s website, which is located at www.ilptreit.com. ILPT’s website is not incorporated as part of this press release.
Industrial Logistics Properties Trust (Nasdaq: ILPT) is a real estate investment trust, or REIT, focused on owning and leasing high quality distribution and logistics properties that serve the growing needs of e-commerce. As of June 30, 2022, ILPT’s portfolio consisted of 412 properties containing approximately 59.7 million rentable square feet located in 39 states. More than 78.0% of ILPT’s annual rental revenues are derived from investment grade tenants, tenants that are subsidiaries of investment grade rated entities or Hawaii land leases. ILPT is managed by The RMR Group (Nasdaq: RMR), a leading U.S. alternative asset management company with more than $37 billion in assets under management as of June 30, 2022 and more than 35 years of institutional experience in buying, selling, financing and operating commercial real estate. ILPT is headquartered in Newton, MA. For more information, visit www.ilptreit.com.
Non-GAAP Financial Measures:
ILPT presents certain “non-GAAP financial measures” within the meaning of the applicable rules of the Securities and Exchange Commission, or SEC, including FFO attributable to common shareholders, Normalized FFO attributable to common shareholders, EBITDA, EBITDAre, Adjusted EBITDAre, NOI, Cash Basis NOI, same property NOI and same property Cash Basis NOI for the three and six months ended June 30, 2022 and 2021. These measures do not represent cash generated by operating activities in accordance with GAAP and should not be considered alternatives to net income (loss) or net income (loss) attributable to common shareholders as indicators of ILPT’s operating performance or as measures of ILPT’s liquidity. These measures should be considered in conjunction with net income (loss) and net income (loss) attributable to common shareholders as presented in ILPT’s condensed consolidated statements of income (loss). ILPT considers these non-GAAP measures to be appropriate supplemental measures of operating performance for a REIT, along with net income (loss) and net income (loss) attributable to common shareholders. ILPT believes these measures provide useful information to investors because by excluding the effects of certain historical amounts, such as depreciation and amortization expense, they may facilitate a comparison of ILPT’s operating performance between periods and with other REITs and, in the case of NOI and Cash Basis NOI, reflecting only those income and expense items that are generated and incurred at the property level may help both investors and management to understand the operations of ILPT’s properties.
Please see the pages attached hereto for a more detailed statement of ILPT’s operating results and financial condition and for an explanation of ILPT’s calculation of FFO attributable to common shareholders and Normalized FFO attributable to common shareholders, EBITDA, EBITDAre, Adjusted EBITDAre, NOI, Cash Basis NOI, same
3
property NOI and same property Cash Basis NOI and reconciliations of those amounts to amounts determined in accordance with GAAP.
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Industrial Logistics Properties Trust
Condensed Consolidated Statements of Income (Loss)
(amounts in thousands, except per share data)
(unaudited)
Three Months Ended June 30,
Six Months Ended June 30,
2022
2021
2022
2021
Rental income
$
107,222
$
54,180
$
178,597
$
108,397
Expenses:
Real estate taxes
13,275
7,489
22,711
14,736
Other operating expenses
7,053
4,341
13,825
9,317
Depreciation and amortization
42,699
11,830
65,577
24,508
Acquisition and certain other transaction costs
—
646
—
646
General and administrative
9,709
4,234
15,786
7,990
Loss on impairment of real estate
100,747
—
100,747
—
Total expenses
173,483
28,540
218,646
57,197
Interest and other income
354
—
832
—
Interest expense (including net amortization of debt issuance costs, premiums and discounts of $34,448, $506, $54,769 and $1,011, respectively)
(77,548)
(8,643)
(118,547)
(17,384)
Loss on sale of real estate
(10)
—
(10)
—
Loss on equity securities
(9,450)
—
(5,758)
—
Loss on early extinguishment of debt
—
—
(828)
—
(Loss) income before income tax expense and equity in earnings of investees
(152,915)
16,997
(164,360)
33,816
Income tax expense
(16)
(42)
(85)
(105)
Equity in earnings of investees
1,610
1,876
3,337
4,457
Net (loss) income
(151,321)
18,831
(161,108)
38,168
Net loss attributable to noncontrolling interest
7,782
—
11,055
—
Net (loss) income attributable to common shareholders
$
(143,539)
$
18,831
$
(150,053)
$
38,168
Weighted average common shares outstanding - basic
65,221
65,146
65,217
65,142
Weighted average common shares outstanding - diluted
65,221
65,207
65,217
65,192
Per common share data (basic and diluted):
Net (loss) income attributable to common shareholders
$
(2.20)
$
0.29
$
(2.30)
$
0.58
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Industrial Logistics Properties Trust
Calculation and Reconciliation of Funds from Operations Attributable to Common Shareholders and Normalized Funds from Operations Attributable to Common Shareholders (1)
(amounts in thousands, except per share data)
(unaudited)
Three Months Ended June 30,
Six Months Ended June 30,
2022
2021
2022
2021
Net (loss) income attributable to common shareholders
$
(143,539)
$
18,831
$
(150,053)
$
38,168
Depreciation and amortization
42,699
11,830
65,577
24,508
Equity in earnings of unconsolidated joint venture
(1,610)
(1,876)
(3,337)
(4,457)
Loss on equity securities
9,450
—
5,758
—
Share of FFO from unconsolidated joint venture
1,676
1,170
3,437
2,406
Loss on impairment of real estate
100,747
—
100,747
—
Loss on sale of real estate
10
—
10
—
FFO adjustments attributable to noncontrolling interest
(11,434)
—
(16,038)
—
FFO attributable to common shareholders
(2,001)
29,955
6,101
60,625
Loss on early extinguishment of debt
—
—
828
—
Acquisition and certain other transaction costs (2)
30,303
646
48,976
646
Normalized FFO attributable to common shareholders
$
28,302
$
30,601
$
55,905
$
61,271
Weighted average common shares outstanding - basic
65,221
65,146
65,217
65,142
Weighted average common shares outstanding - diluted
65,221
65,207
65,217
65,192
Per common share data (basic and diluted):
FFO attributable to common shareholders
$
(0.03)
$
0.46
$
0.09
$
0.93
Normalized FFO attributable to common shareholders
$
0.43
$
0.47
$
0.86
$
0.94
Distributions declared
$
0.33
$
0.33
$
0.66
$
0.66
(1) ILPT calculates FFO attributable to common shareholders and Normalized FFO attributable to common shareholders as shown above. FFO attributable to common shareholders is calculated on the basis defined by The National Association of Real Estate Investment Trusts, or Nareit, which is net income (loss) attributable to common shareholders, calculated in accordance with GAAP, excluding loss on impairment of real estate, any gain or loss on sale of real estate, equity in earnings of an unconsolidated joint venture and any realized and unrealized gains or losses on equity securities, plus real estate depreciation and amortization of consolidated properties and its proportionate share of FFO of unconsolidated joint venture properties and minus FFO adjustments attributable to noncontrolling interest, as well as certain other adjustments currently not applicable to ILPT. In calculating Normalized FFO attributable to common shareholders, ILPT adjusts for the items shown above including similar adjustments for ILPT’s unconsolidated joint venture, if any, and excludes acquisition and transaction costs expensed under GAAP. FFO attributable to common shareholders and Normalized FFO attributable to common shareholders are among the factors considered by ILPT’s Board of Trustees when determining the amount of distributions to ILPT’s shareholders. Other factors include, but are not limited to, requirements to maintain ILPT’s qualification for taxation as a REIT, limitations in the agreements governing ILPT’s debt, the availability to ILPT of debt and equity capital, ILPT’s distribution rate as a percentage of the trading price of its common shares, or dividend yield, and ILPT’s dividend yield compared to the dividend yields of other industrial REITs, ILPT’s expectation of its future capital requirements and operating performance and ILPT’s expected needs for and availability of cash to pay its obligations. Other real estate companies and REITs may calculate FFO attributable to common shareholders and Normalized FFO attributable to common shareholders differently than ILPT does.
(2)Amounts for the three and six months ended June 30, 2022 include certain finance fees related to ILPT’s bridge loan facility and/or other transaction related expenses that are expensed under GAAP.
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Industrial Logistics Properties Trust
Calculation and Reconciliation of EBITDA, EBITDAre and Adjusted EBITDAre (1)
(amounts in thousands)
(unaudited)
Three Months Ended June 30,
Six Months Ended June 30,
2022
2021
2022
2021
Net (loss) income
$
(151,321)
$
18,831
$
(161,108)
$
38,168
Plus: interest expense
77,548
8,643
118,547
17,384
Plus: income tax expense
16
42
85
105
Plus: depreciation and amortization
42,699
11,830
65,577
24,508
EBITDA
(31,058)
39,346
23,101
80,165
Loss on impairment of real estate
100,747
—
100,747
—
Loss on sale of real estate
10
—
10
—
Equity in earnings of unconsolidated joint venture
(1,610)
(1,876)
(3,337)
(4,457)
Share of EBITDAre from unconsolidated joint venture
2,476
1,966
5,034
3,991
Loss on equity securities
9,450
—
5,758
—
EBITDAre
80,015
39,436
131,313
76,699
Plus: acquisition and certain other transaction costs
—
646
—
646
Plus: general and administrative expense paid in common shares (2)
796
780
1,202
1,019
Less: loss on early extinguishment of debt
—
—
828
—
Adjusted EBITDAre
$
80,811
$
40,862
$
133,343
$
81,364
(1) ILPT calculates EBITDA, EBITDAre and Adjusted EBITDAre as shown above. EBITDAre is calculated on the basis defined by Nareit, which is EBITDA, including ILPT’s proportionate share of EBITDAre from unconsolidated joint venture properties, and excluding gains and losses on the sale of real estate, equity in earnings of an unconsolidated joint venture, loss on impairment of real estate, any realized and unrealized gains or losses on equity securities, as well as certain other adjustments currently not applicable to ILPT. In calculating Adjusted EBITDAre, ILPT adjusts for the items shown above. Other real estate companies and REITs may calculate EBITDA, EBITDAre and Adjusted EBITDAre differently than ILPT does.
(2)Amounts represent equity based compensation to ILPT’s trustees, ILPT’s officers and certain other employees of RMR.
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Industrial Logistics Properties Trust
Calculation and Reconciliation of Property Net Operating Income and Cash Basis Net Operating Income (1)
(dollars in thousands)
(unaudited)
Three Months Ended June 30,
Six Months Ended June 30,
2022
2021
2022
2021
Calculation of NOI and Cash Basis NOI:
Rental income
$
107,222
$
54,180
$
178,597
$
108,397
Real estate taxes
(13,275)
(7,489)
(22,711)
(14,736)
Other operating expenses
(7,053)
(4,341)
(13,825)
(9,317)
NOI
86,894
42,350
142,061
84,344
Non-cash straight line rent adjustments included in rental income
(3,220)
(1,951)
(4,376)
(3,995)
Lease value amortization included in rental income
(3,695)
(171)
(4,015)
(351)
Lease termination fees included in rental income
(30)
(5)
(30)
(512)
Cash Basis NOI
$
79,949
$
40,223
$
133,640
$
79,486
Reconciliation of Net (Loss) Income to NOI and Cash Basis NOI:
Net (loss) income
$
(151,321)
$
18,831
$
(161,108)
$
38,168
Equity in earnings of investees
(1,610)
(1,876)
(3,337)
(4,457)
Income tax expense
16
42
85
105
(Loss) income before income tax expense and equity in earnings of investees
(152,915)
16,997
(164,360)
33,816
Loss on early extinguishment of debt
—
—
828
—
Interest and other income
(354)
—
(832)
—
Interest expense
77,548
8,643
118,547
17,384
Loss on sale of real estate
10
—
10
—
Loss on equity securities
9,450
—
5,758
—
General and administrative
9,709
4,234
15,786
7,990
Acquisition and certain other transaction costs
—
646
—
646
Loss on impairment of real estate
100,747
—
100,747
—
Depreciation and amortization
42,699
11,830
65,577
24,508
NOI
86,894
42,350
142,061
84,344
Non-cash straight line rent adjustments included in rental income
(3,220)
(1,951)
(4,376)
(3,995)
Lease value amortization included in rental income
(3,695)
(171)
(4,015)
(351)
Lease termination fees included in rental income
(30)
(5)
(30)
(512)
Cash Basis NOI
$
79,949
$
40,223
$
133,640
$
79,486
(1) The calculations of NOI and Cash Basis NOI exclude certain components of net income (loss) in order to provide results that are more closely related to ILPT’s property level results of operations. ILPT calculates NOI and Cash Basis NOI as shown above. ILPT defines NOI as income from its rental of real estate less its property operating expenses. NOI excludes amortization of capitalized tenant improvement costs and leasing commissions that ILPT records as depreciation and amortization expense. ILPT defines Cash Basis NOI as NOI excluding non-cash straight line rent adjustments, lease value amortization and lease termination fees, if any. ILPT uses NOI and Cash Basis NOI to evaluate individual and company-wide property level performance. Other real estate companies and REITs may calculate NOI and Cash Basis NOI differently than ILPT does.
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Industrial Logistics Properties Trust
Reconciliation of Net Operating Income to Same Property Net Operating Income and Calculation of Same
1
Property Cash Basis Net Operating Income (1)
(dollars in thousands)
(unaudited)
Three Months Ended June 30,
Six Months Ended June 30,
2022
2021
2022
2021
Reconciliation of NOI to Same Property NOI (2) (3):
Rental income
$
107,222
$
54,180
$
178,597
$
108,397
Real estate taxes
(13,275)
(7,489)
(22,711)
(14,736)
Other operating expenses
(7,053)
(4,341)
(13,825)
(9,317)
NOI
86,894
42,350
142,061
84,344
Less:
NOI of properties not included in same property results
(41,499)
(1,390)
(56,710)
(2,790)
Same property NOI
$
45,395
$
40,960
$
85,351
$
81,554
Calculation of Same Property Cash Basis NOI (2) (3):
Same property NOI
$
45,395
$
40,960
$
85,351
$
81,554
Less:
Non-cash straight line rent adjustments included in rental income
(1,938)
(1,930)
(2,596)
(3,953)
Lease value amortization included in rental income
(3,575)
(171)
(3,813)
(351)
Lease termination fees included in rental income
(30)
(5)
(30)
(512)
Same property Cash Basis NOI
$
39,852
$
38,854
$
78,912
$
76,738
(1)See footnote (1) on page 8 of this press release for the definitions of NOI and Cash Basis NOI and page 4 for a description of why ILPT believes they are appropriate supplemental measures and a description of how ILPT uses these measures. ILPT calculates same property NOI and same property Cash Basis NOI in the same manner that it calculates the corresponding NOI and Cash Basis NOI, except that it only includes same properties in calculating same property NOI and same property Cash Basis NOI.
(2)For the three months ended June 30, 2022 and 2021, same property NOI and same property Cash Basis NOI are based on properties that ILPT owned as of June 30, 2022 and that it owned continuously since April 1, 2021 and exclude properties owned by an unconsolidated joint venture.
(3)For the six months ended June 30, 2022 and 2021, same property NOI and same property Cash Basis NOI are based on properties that ILPT owned as of June 30, 2022 and that it owned continuously since January 1, 2021 and exclude properties owned by an unconsolidated joint venture.
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Industrial Logistics Properties Trust
Condensed Consolidated Balance Sheets
(dollars in thousands, except per share data)
(unaudited)
June 30,
December 31,
2022
2021
ASSETS
Real estate properties:
Land
$
1,113,997
$
699,037
Buildings and improvements
4,012,041
1,049,796
Total real estate properties, gross
5,126,038
1,748,833
Accumulated depreciation
(210,866)
(167,490)
Total real estate properties, net
4,915,172
1,581,343
Investment in unconsolidated joint venture
143,716
143,021
Acquired real estate leases, net
327,319
63,441
Cash and cash equivalents
291,866
29,397
Restricted cash
145,078
—
Rents receivable, including straight line rents of $73,549 and $69,173, respectively
90,187
75,877
Other assets, net
42,500
15,479
Total assets
$
5,955,838
$
1,908,558
LIABILITIES AND EQUITY
Revolving credit facility
$
—
$
182,000
Bridge loan facility
1,379,983
—
Mortgage notes payable, net
3,030,585
646,124
Assumed real estate lease obligations, net
24,759
12,435
Accounts payable and other liabilities
78,175
27,772
Due to related persons
7,402
2,185
Total liabilities
4,520,904
870,516
Commitments and contingencies
Equity:
Equity attributable to common shareholders:
Common shares of beneficial interest, $.01 par value: 100,000,000 shares authorized; 65,427,459 and 65,404,592 shares issued and outstanding, respectively
654
654
Additional paid in capital
1,013,418
1,012,224
Cumulative net income
193,855
343,908
Cumulative other comprehensive income
7,572
—
Cumulative common distributions
(361,911)
(318,744)
Total equity attributable to common shareholders
853,588
1,038,042
Noncontrolling interest
581,346
—
Total equity
1,434,934
1,038,042
Total liabilities and equity
$
5,955,838
$
1,908,558
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Warning Concerning Forward-Looking Statements
This press release contains statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other securities laws. Whenever ILPT uses words such as “believe”, “expect”, “anticipate”, “intend”, “plan”, “estimate”, “will”, “may” and negatives or derivatives of these or similar expressions, ILPT is making forward-looking statements. These forward-looking statements are based upon ILPT’s present intent, beliefs or expectations, but forward-looking statements are not guaranteed to occur and may not occur. Actual results may differ materially from those contained in or implied by ILPT’s forward-looking statements. Forward-looking statements involve known and unknown risks, uncertainties and other factors, some of which are beyond ILPT’s control. For example:
•Ms. Duffy states that ILPT experienced continued favorable operating trends, which included record leasing activity and same property occupancy of 99.3%, which may imply that ILPT will achieve similar or better results in the future. However, ILPT’s business is subject to various risks, and leasing activity and occupancy depend on various factors, including the timing of lease expirations, leasing demand at ILPT’s properties, ILPT’s ability to successfully compete for tenants and other economic and market conditions. As a result, ILPT may not achieve similar or better results in the future, and these results may worsen;
•Ms. Duffy states that ILPT believes that it is well positioned to take advantage of robust operating dynamics through various strategies. However, these current market conditions may not continue and the opportunities we believe may exist may not actually exist or continue or we may fail to take advantage of any opportunities that may exist. Further, market conditions could decline due to many factors beyond ILPT’s control, including inflation, economic slowdown and a possible recession. As a result, ILPT may not be able to take advantage of the market conditions to grow cash flows; and
•Ms. Duffy states that ILPT continues to benefit from strong secular tailwinds, a portfolio leased primarily to investment grade tenants and nearly $300 million of cash on hand. However, economic and market conditions often change and are beyond ILPT’s and its tenants’ control. ILPT’s tenants’ operations and liquidity could be adversely impacted by an economic downturn or otherwise, which may impact their ability to pay rent due to ILPT. Further, unanticipated events may require ILPT to expend amounts not currently planned. As a result, ILPT’s anticipated benefits may not be realized as currently expected or at all.
The information contained in ILPT’s filings with the SEC, including under “Risk Factors” in ILPT’s periodic reports, or incorporated therein, identifies important factors that could cause ILPT’s actual results to differ materially from those stated in or implied by ILPT’s forward-looking statements. ILPT’s filings with the SEC are available on the SEC’s website at www.sec.gov.
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You should not place undue reliance upon forward-looking statements.
Except as required by law, ILPT does not intend to update or change any forward-looking statements as a result of new information, future events or otherwise.
