• Cash Basis NOI: Increased 2.6% year-over-year.
• Normalized FFO: Increased 18.1% to $9 million or $0.14 per share.
• Adjusted EBITDAre: Increased 4.6% to $85.1 million.
• Annualized Rental Revenue Increase: $4.2 million, with $3.4 million yet to be realized.
• Interest Expense: $73.6 million, increased by $1.8 million year-over-year.
• Net Debt to Total Assets Ratio: 68.2%, improved by 60 basis points year-over-year.
• Net Debt Coverage Ratio: Improved by 80 basis points to 11.9 times.
• Total Cash: Approximately $250 million, including $112 million of restricted cash.
• Leasing Activity: 26 leases totaling 2.6 million square feet signed in the first half of 2024.
• Weighted Average Rental Rate Increase: 30.5% higher than prior rates for the same space.
• Portfolio Occupancy: Declined to 95.4% due to a 2.2 million square foot land parcel vacancy.
• Upcoming Lease Expirations: 1.3 million square feet or 3.1% of annualized revenue set to expire in 2024.

• Warning! GuruFocus has detected 6 Warning Signs with ILPT.

Release Date: July 31, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Cash basis NOI increased by 2.6% and normalized FFO increased by 18.1% compared to the same period last year.
• ILPT signed 26 leases totaling 2.6 million square feet at rental rates 30.5% higher than previous rates.
• The portfolio has a weighted average remaining lease term of 7.9 years, with strong tenant profiles and stable cash flows.
• Leasing activity resulted in GAAP and cash leasing spreads of 15.8% and 7.8%, respectively.
• Net debt to total assets ratio improved by 60 basis points to 68.2%, and net debt coverage ratio improved by 80 basis points to 11.9 times.

Negative Points

• Occupancy declined to 95.4% due to a 2.2 million square foot land parcel in Hawaii becoming vacant.
• 1.3 million square feet or 3.1% of ILPT's annualized revenue is set to expire in the remainder of 2024.
• Interest expense increased by $1.8 million compared to the same period a year ago.
• The Indianapolis property vacancy will impact results in the second half of the year.
• The leasing pipeline decreased slightly from 7.5 million square feet to 7 million square feet.

Q & A Highlights

Q: On the Home Depot and Indianapolis properties, when should we expect these to be leased? Could it be as early as the fourth quarter, or is it more like the first half of 2025? A: I would conservatively model the second half of 2025. We have proposals out for both sites, but we aren't in advanced negotiations with any one tenant yet. It will take time to negotiate and document a lease.

Q: With the upcoming extension in October, have there been any changes in your thoughts on the cap cost given the decline in interest rates? A: We expect the cost to be between $25 million and $30 million, and it will likely be executed very close to September 30.

Q: Regarding your current progression on leverage, should we expect the pace of deleveraging over the next 12 months to be similar to the past 12 months? A: Yes, that's a fair estimate.

Q: Has the Board considered increasing the dividend given the conservative payout ratio? A: We discuss it at each Board meeting, but currently, the plan is to continue preserving cash to run the business.

Q: On the leasing pipeline, it was 7.5 million square feet last quarter. Is it now 7 million square feet, or did I misunderstand? A: It was 7.5 million square feet last quarter, but we executed 620,000 square feet of leasing this quarter, resulting in a net positive of 150,000 square feet of new pipeline from one quarter to the next.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.