Second Quarter Net Income of $0.29 Per
Share
Second Quarter Normalized FFO of $0.39 Per
Share
Second Quarter Same Property Cash Basis NOI
Increased by 3.3%
Industrial Logistics Properties Trust (Nasdaq: ILPT) today
announced financial results for the quarter and six months ended
June 30, 2018. ILPT was formed in 2017 as a wholly owned
subsidiary of Select Income REIT (Nasdaq: SIR). On January 17,
2018, ILPT sold approximately 30.8% of its common shares in an
initial public offering, or the IPO, and became a separate public
company. For periods prior to January 17, 2018, ILPT's historical
results of operations and financial position have been derived from
the financial statements of SIR and may not be comparable to future
results. SIR currently owns 69.2% of ILPT's outstanding common
shares.
John Popeo, President and Chief Executive
Officer of ILPT, made the following statement:
"During the second quarter, we continued our
positive leasing activity, entering leases for approximately
218,000 square feet that resulted in weighted average rental rates
that were approximately 34.5% higher than prior rental rates for
the same space, and a weighted average lease term of more than 11
years. In addition, we executed one rent reset in Hawaii for
approximately 34,000 square feet of land at a rental rate that was
approximately 18.0% higher than the prior rate. Even though
occupancy declined slightly to 99.1% as of the end of the quarter,
same property cash basis net operating income increased by 3.3%
during the quarter because of rent increases. We are also pleased
to announce our first acquisition since our IPO; in June 2018, we
acquired a 240,000 square foot property located in Doral, Florida
for $43.1 million."
Results for the Quarter Ended June 30, 2018:
Net income for the quarter ended June 30, 2018 was $18.7
million, or $0.29 per diluted share, compared to $21.6 million for
the same quarter last year. Normalized funds from operations, or
Normalized FFO, for the quarter ended June 30, 2018 were $25.6
million, or $0.39 per diluted share, compared to $28.7 million for
the same quarter last year.
Reconciliations of net income determined in accordance with U.S.
generally accepted accounting principles, or GAAP, to funds from
operations, or FFO, and to Normalized FFO for the quarters ended
June 30, 2018 and 2017 appear later in this press release.
Results for the Six Months Ended June 30,
2018:
Net income for the six months ended June 30, 2018 was $38.0
million, or $0.60 per diluted share, compared to $41.9 million for
the same period last year. Normalized FFO for the six months ended
June 30, 2018 were $51.7 million, or $0.82 per diluted share,
compared to $58.3 million for the same period last year.
Reconciliations of net income determined in accordance with GAAP
to FFO and to Normalized FFO for the six months ended June 30,
2018 and 2017 appear later in this press release.
Leasing, Occupancy and Same Property Results:
During the quarter ended June 30, 2018, ILPT entered lease
renewals and new leases for approximately 218,000 square feet,
which resulted in weighted average (by square feet) rental rates
that were approximately 34.5% higher than prior rental rates for
the same space and a weighted average (by square feet) lease term
of 11.1 years. Commitments for leasing capital and concessions for
these leases totaled approximately $540,000, or approximately $0.22
per square foot per lease year. All of ILPT's leasing activity
during the quarter ended June 30, 2018 occurred in Hawaii. During
the quarter ended June 30, 2018, ILPT also executed one rent
reset at one of its properties in Hawaii for approximately 34,000
square feet of land at a rental rate that was approximately 18.0%
higher than the prior rental rate.
As of June 30, 2018, 99.1% of ILPT’s total rentable square
feet was leased, compared to 99.9% as of March 31, 2018 and 99.6%
as of June 30, 2017. Occupancy for properties owned
continuously since April 1, 2017, or on a same property basis,
decreased to 99.1% at June 30, 2018 from 99.6% at
June 30, 2017. Same property cash basis net operating income,
or Cash Basis NOI, increased 3.3% for the quarter ended
June 30, 2018 compared to the quarter ended June 30,
2017, primarily as a result of contractual rent increases and
leasing activity at certain properties since April 1, 2017.
Reconciliations of net income determined in accordance with GAAP
to net operating income, or NOI, and Cash Basis NOI, on both a
consolidated and same property basis, for the quarters and six
months ended June 30, 2018 and 2017 appear later in this press
release.
Recent Investing Activities:
In June 2018, ILPT acquired a single tenant, net leased property
located in Doral, FL with 240,283 rentable square feet for a
purchase price of $43.1 million, excluding acquisition related
costs. This property is 100% leased and has a lease term of
approximately 10 years.
In July 2018, ILPT entered an agreement to acquire a single
tenant, net leased property located in Upper Marlboro, MD with
approximately 221,000 rentable square feet for a purchase price of
$29.3 million, excluding acquisition related costs. This property
is 100% leased and has a remaining lease term of approximately 12
years. This acquisition is expected to occur before the end of the
third quarter of 2018.
Conference Call:
At 10:00 a.m. Eastern Time this morning, President and Chief
Executive Officer, John Popeo, and Chief Financial Officer and
Treasurer, Richard Siedel, will host a conference call to discuss
ILPT’s second quarter 2018 financial results.
The conference call telephone number is (877) 270-2148.
Participants calling from outside the United States and Canada
should dial (412) 902-6510. 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 Friday,
August 3, 2018. To access the replay, dial (412) 317-0088. The
replay pass code is 10121840.
A live audio webcast of the conference call will also be
available in a listen-only mode on ILPT's website, which is located
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 2018 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 is a real estate
investment trust, or REIT, that owns and leases industrial and
logistics properties throughout the United States. ILPT is managed
by the operating subsidiary of The RMR Group Inc. (Nasdaq: RMR), an
alternative asset management company that is headquartered in
Newton, MA.
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 NOI, Cash Basis NOI,
same property NOI, same property Cash Basis NOI, FFO and Normalized
FFO and a reconciliation of those amounts to amounts determined
according to GAAP.
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. ALSO,
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 AS A RESULT OF
VARIOUS FACTORS. FOR EXAMPLE:
- MR. POPEO'S STATEMENT IN THIS PRESS
RELEASE THAT ILPT CONTINUED ITS POSITIVE LEASING ACTIVITY DURING
THE SECOND QUARTER OF 2018 MAY IMPLY THAT ILPT WILL CONTINUE TO
EXPERIENCE POSITIVE LEASING ACTIVITY IN THE FUTURE AND THAT ILPT'S
OPERATING RESULTS WILL IMPROVE AS A RESULT. HOWEVER, ILPT'S ABILITY
TO LEASE ITS PROPERTIES DEPENDS IN LARGE PART ON MARKET CONDITIONS
IN AREAS WHERE ILPT'S PROPERTIES ARE LOCATED WHEN SUCH PROPERTIES
BECOME AVAILABLE FOR LEASE OR WHEN LEASES ARE NEGOTIATED OR RENTS
ARE RESET. LEASING MARKET CONDITIONS OFTEN CHANGE AND ARE GENERALLY
BEYOND ILPT'S CONTROL. IN THE FUTURE, ILPT MAY EXPERIENCE
INCREASING VACANCIES OR LOWER RENTS AT ILPT'S OWNED PROPERTIES AND
ITS OPERATING RESULTS MAY DECLINE, AND
- THIS PRESS RELEASE STATES THAT ILPT HAS
ENTERED AN AGREEMENT TO ACQUIRE A PROPERTY FOR $29.3 MILLION,
EXCLUDING ACQUISITION RELATED COSTS. THIS TRANSACTION IS SUBJECT TO
CONDITIONS. THESE CONDITIONS MAY NOT BE MET AND THIS ACQUISITION
MAY NOT OCCUR, MAY BE DELAYED OR THE TERMS MAY CHANGE.
THE INFORMATION CONTAINED IN ILPT’S FILINGS WITH THE SECURITIES
AND EXCHANGE COMMISSION, OR SEC, INCLUDING UNDER “RISK FACTORS” IN
ILPT’S PERIODIC REPORTS, OR INCORPORATED THEREIN, IDENTIFIES OTHER
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.
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.
Industrial Logistics Properties
Trust
Condensed Consolidated Statements of
Income
(amounts in thousands, except per share
data)
(unaudited)
Three Months Ended June 30, Six Months Ended June 30, 2018
2017 2018 2017 Revenues: Rental income $ 33,880 $ 33,427 $ 68,689 $
67,297 Tenant reimbursements and other income 5,540 5,178
11,336 10,748 Total revenues 39,420
38,605 80,025 78,045 Expenses: Real
estate taxes 4,582 4,339 9,167 8,678 Other operating expenses 2,824
2,701 6,369 5,433 Depreciation and amortization 6,890 6,855 13,763
13,666 General and administrative 2,888 2,564 5,462
7,200 Total expenses 17,184 16,459
34,761 34,977 Operating income 22,236 22,146
45,264 43,068 Interest income 50 — 63 —
Interest expense (including net
amortization of debt issuance costs
and premiums of $311, ($75), $622 and
($148), respectively)
(3,552 ) (560 ) (7,354 ) (1,115 ) Income before income tax expense
18,734 21,586 37,973 41,953 Income tax expense (8 ) (11 ) (15 ) (22
) Net income $ 18,726 $ 21,575 $ 37,958 $
41,931 Weighted average common shares outstanding -
basic and diluted 65,011 45,000 63,238 45,000
Net income per common share - basic and diluted $
0.29 $ 0.48 $ 0.60 $ 0.93
Industrial Logistics Properties
Trust
Funds from Operations and Normalized
Funds from Operations (1)
(amounts in thousands, except per share
data)
(unaudited)
Three Months Ended June 30, Six Months Ended June 30, 2018
2017 2018 2017 Net income $ 18,726 $ 21,575 $
37,958 $ 41,931
Plus: depreciation and amortization
6,890 6,855 13,763 13,666 FFO 25,616 28,430
51,721 55,597
Plus: estimated business management
incentive fees (2)
— 281 — 2,690 Normalized FFO $ 25,616 $
28,711 $ 51,721 $ 58,287 Weighted average
common shares outstanding - basic and diluted 65,011 45,000
63,238 45,000 FFO per common share - basic and
diluted $ 0.39 $ 0.63 $ 0.82 $ 1.24 Normalized
FFO per common share - basic and diluted $ 0.39 $ 0.64
$ 0.82 $ 1.30 Distributions declared per common share
$ 0.27 $ — $ 0.27 $ — (1) ILPT
calculates FFO and Normalized FFO as shown above. FFO is calculated
on the basis defined by The National Association of Real Estate
Investment Trusts, or Nareit, which is net income, calculated in
accordance with GAAP, plus real estate depreciation and
amortization, as well as certain other adjustments currently not
applicable to ILPT. ILPT’s calculation of Normalized FFO differs
from Nareit’s definition of FFO because ILPT includes business
management incentive fees, if any, only in the fourth quarter
versus the quarter when they are recognized as expense in
accordance with GAAP due to their quarterly volatility not
necessarily being indicative of ILPT’s core operating performance
and the uncertainty as to whether any such business management
incentive fees will be payable when all contingencies for
determining such fees are known at the end of the calendar year.
ILPT considers FFO and Normalized FFO to be appropriate
supplemental measures of operating performance for a REIT, along
with net income and operating income. ILPT believes that FFO and
Normalized FFO provide useful information to investors because by
excluding the effects of certain historical amounts, such as
depreciation expense, FFO and Normalized FFO may facilitate a
comparison of its operating performance between periods and with
other REITs. FFO and Normalized FFO 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 qualify for taxation as a REIT,
limitations in ILPT’s credit agreement, the availability to ILPT of
debt and equity capital, 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. FFO and
Normalized FFO do not represent cash generated by operating
activities in accordance with GAAP and should not be considered
alternatives to net income or operating income as indicators of
ILPT’s operating performance or as measures of ILPT’s liquidity.
These measures should be considered in conjunction with net income
and operating income as presented in ILPT’s condensed consolidated
statements of income. Other real estate companies and REITs may
calculate FFO and Normalized FFO differently than ILPT does.
(2) Incentive fees under ILPT's and SIR’s business management
agreements with The RMR Group LLC are payable after the end of each
calendar year, are calculated based on common share total return,
as defined in the respective agreements, and are included in
general and administrative expense in ILPT's condensed consolidated
statements of income. In calculating net income in accordance with
GAAP, ILPT recognizes estimated business management incentive fee
expense, if any, in the first, second and third quarters. Although
ILPT recognizes this expense, if any, in the first, second and
third quarters for purposes of calculating net income, ILPT does
not include such expense in the calculation of Normalized FFO until
the fourth quarter, when the amount of the business management
incentive fee expense for the calendar year, if any, is determined.
Normalized FFO for the three and six months ended June 30, 2017
excludes $281 and $2,690, respectively, which represents the
portion of SIR's estimated business management incentive fee
allocated to ILPT for the period during which ILPT was SIR's wholly
owned subsidiary.
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, 2018
2017 2018 2017
Calculation of NOI
and Cash Basis NOI: Rental income $ 33,880 $ 33,427 $ 68,689 $
67,297 Tenant reimbursements and other income 5,540 5,178 11,336
10,748 Real estate taxes (4,582 ) (4,339 ) (9,167 ) (8,678 ) Other
operating expenses (2,824 ) (2,701 ) (6,369 ) (5,433 ) NOI 32,014
31,565 64,489 63,934 Non-cash straight line rent adjustments
included in rental income (2) (1,038 ) (1,475 ) (2,232 ) (2,945 )
Lease value amortization included in rental income (2) (101 ) (96 )
(203 ) (192 ) Non-cash amortization included in other operating
expenses (3) — (138 ) — (276 ) Cash Basis NOI $
30,875 $ 29,856 $ 62,054 $ 60,521
Reconciliation of Net Income to NOI and Cash Basis
NOI: Net income $ 18,726 $ 21,575 $ 37,958 $ 41,931 Income tax
expense 8 11 15 22 Income before income
tax expense 18,734 21,586 37,973 41,953 Interest expense 3,552 560
7,354 1,115 Interest income (50 ) — (63 ) — Operating
income 22,236 22,146 45,264 43,068 General and
administrative 2,888 2,564 5,462 7,200 Depreciation and
amortization 6,890 6,855 13,763 13,666
NOI 32,014 31,565 64,489 63,934 Non-cash straight line rent
adjustments included in rental income (2) (1,038 ) (1,475 ) (2,232
) (2,945 ) Lease value amortization included in rental income (2)
(101 ) (96 ) (203 ) (192 ) Non-cash amortization included in other
operating expenses (3) — (138 ) — (276 ) Cash Basis
NOI $ 30,875 $ 29,856 $ 62,054 $ 60,521
(1) The calculations of NOI and Cash Basis NOI
exclude certain components of net income 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.
ILPT defines Cash Basis NOI as NOI excluding non-cash straight line
rent adjustments, lease value amortization, lease termination fees,
if any, and non-cash amortization included in other operating
expenses. ILPT considers NOI and Cash Basis NOI to be appropriate
supplemental measures to net income because they may help both
investors and management to understand the operations of ILPT’s
properties. ILPT uses NOI and Cash Basis NOI to evaluate individual
and company wide property level performance, and ILPT believes that
NOI and Cash Basis NOI provide useful information to investors
regarding its results of operations because they reflect only those
income and expense items that are generated and incurred at the
property level and may facilitate comparisons of ILPT’s operating
performance between periods and with other REITs. NOI and Cash
Basis NOI do not represent cash generated by operating activities
in accordance with GAAP and should not be considered alternatives
to net income or operating income as indicators of ILPT’s operating
performance or as measures of ILPT’s liquidity. These measures
should be considered in conjunction with net income and operating
income as presented in ILPT’s condensed consolidated statements of
income. Other real estate companies and REITs may calculate NOI and
Cash Basis NOI differently than ILPT does. (2) ILPT reports
rental income on a straight line basis over the terms of the
respective leases; accordingly, rental income includes non-cash
straight line rent adjustments. Rental income also includes
non-cash amortization of intangible lease assets and liabilities
and lease termination fees, if any. (3) The amounts for the
three and six months ended June 30, 2017, respectively, represent
the portion of SIR's non-cash amortization included in other
operating expenses allocated to ILPT for the period during which
ILPT was SIR's wholly owned subsidiary.
Industrial Logistics Properties
Trust
Reconciliation of Net Operating Income
to Same Property Net Operating Income and Calculation of
SameProperty Cash Basis Net Operating Income
(1)
(dollars in thousands)
(unaudited)
Three Months Ended June 30, Six Months Ended June 30, 2018
2017 2018 2017
Reconciliation of NOI
to Same Property NOI (2)(3): Rental income $
33,880
$
33,427 $ 68,689 $ 67,297 Tenant reimbursements and other income
5,540 5,178 11,336 10,748 Real estate taxes (4,582 ) (4,339 )
(9,167 ) (8,678 ) Other operating expenses (2,824 ) (2,701 ) (6,369
) (5,433 ) NOI 32,014 31,565 64,489 63,934 Less: NOI of properties
not included in same property results (23 ) — (23 ) —
Same property NOI $ 31,991 $ 31,565 $ 64,466 $
63,934
Calculation of Same Property Cash
Basis NOI (2)(3): Same property NOI $ 31,991 $
31,565 $ 64,466 $ 63,934 Less: Non-cash straight line rent
adjustments included in rental income (4) (1,035 ) (1,475 ) (2,229
) (2,945 ) Lease value amortization included in rental income (4)
(101 ) (96 ) (203 ) (192 ) Non-cash amortization included in other
operating expenses (5) — (138 ) — (276 ) Same
property Cash Basis NOI $ 30,855 $ 29,856 $ 62,034
$ 60,521 (1) See footnote (1) on page 7
of this press release for the definitions of NOI and Cash Basis
NOI, a description of why ILPT believes they are appropriate
supplemental measures and a description of how ILPT uses these
measures. (2) For the three months ended June 30, 2018, same
property NOI and same property Cash Basis NOI are based on
properties that ILPT owned (including for the period SIR owned
ILPT's properties prior to the IPO) as of June 30, 2018, and which
it owned continuously since April 1, 2017. (3) For the six
months ended June 30, 2018, same property NOI and same property
Cash Basis NOI are based on properties ILPT owned (including for
the period SIR owned ILPT's properties prior to the IPO) as of June
30, 2018, and which it owned continuously since January 1, 2017.
(4) ILPT reports rental income on a straight line basis over
the terms of the respective leases; accordingly, rental income
includes non-cash straight line rent adjustments. Rental income
also includes non-cash amortization of intangible lease assets and
liabilities and lease termination fees, if any. (5) The
amounts for the three and six months ended June 30, 2017,
respectively, represent the portion of SIR's non-cash amortization
included in other operating expenses allocated to ILPT for the
period during which ILPT was SIR's wholly owned subsidiary.
Industrial Logistics Properties
Trust
Condensed Consolidated Balance
Sheets
(dollars in thousands, except per share
data)
(unaudited)
June 30, December 31, 2018 2017
ASSETS
Real estate properties: Land $ 657,931 $ 642,706 Buildings and
improvements 729,823 700,896 1,387,754 1,343,602
Accumulated depreciation (83,581 ) (74,614 ) 1,304,173 1,268,988
Acquired real estate leases, net 73,848 79,103 Cash and cash
equivalents 15,565 —
Rents receivable, including straight line
rents of $52,409 and $50,177, respectively, net
of allowance for doubtful accounts of $766
and $1,241, respectively
54,069 51,672 Debt issuance costs, net 5,169 1,724 Deferred leasing
costs, net 5,190 5,254 Due from related persons 2,955 — Other
assets, net 381 4,942 Total assets $ 1,461,350
$ 1,411,683
LIABILITIES AND
SHAREHOLDERS' EQUITY
Revolving credit facility $ 335,000 $ 750,000 Mortgage note
payable, net 49,311 49,427 Assumed real estate lease obligations,
net 19,339 20,384 Accounts payable and other liabilities 10,250
11,082 Rents collected in advance 5,852 5,794 Security deposits
5,802 5,674 Due to related persons 1,479 7,114 Total
liabilities 427,033 849,475 Commitments and
contingencies Shareholders' equity:
Common shares of beneficial interest, $.01
par value: 100,000,000 shares authorized;
65,020,000 and 45,000,000 shares issued
and outstanding, respectively
650 450 Additional paid in capital 997,991 546,489 Cumulative net
income 53,227 15,269 Cumulative common distributions (17,551 ) —
Total shareholders' equity 1,034,317 562,208
Total liabilities and shareholders' equity $ 1,461,350 $
1,411,683
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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20180727005094/en/
Industrial Logistics Properties TrustOlivia Snyder,
617-219-1489Manager, Investor Relations
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