• Cash Basis NOI Growth: Nearly 2% year-over-year increase.
• Normalized FFO: $13.5 million or $0.20 per share, up 43% year-over-year and 52% sequentially.
• Leasing Activity: 2.3 million square feet with occupancy at 94.6%.
• Portfolio Size: 411 properties totaling 60 million square feet.
• Top 10 Tenants: Account for 47% of annualized rental revenues.
• GAAP and Cash Leasing Spreads: 18.9% and 9.8%, respectively.
• Interest Expense: Decreased to $69.8 million, down $3.4 million year-over-year.
• Net Debt-to-Total Assets Ratio: 68.7%.
• Net Debt Coverage Ratio: 11.9 times, a 50-basis point improvement sequentially.
• Weighted Average Interest Rate: 5.53% as of March 31.
• Cash on Hand: $108 million.
• Restricted Cash: $129 million.

• Warning! GuruFocus has detected 7 Warning Signs with ILPT.

Release Date: April 30, 2025

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

Positive Points

• Cash basis NOI grew by nearly 2% compared to the same period last year, indicating steady financial performance.
• Normalized FFO increased 43% year over year and 52% on a sequential quarter basis, showcasing strong financial growth.
• ILPT executed over 2.3 million square feet of total leasing activity with a high occupancy rate of 94.6%.
• The portfolio is well-diversified with a unique Hawaii footprint, consisting of 226 properties totaling 16.7 million square feet.
• ILPT's Top 10 tenants account for 47% of annualized rental revenues, with more than 76% coming from investment grade-rated tenants or secure Hawaii land leases.

Negative Points

• The company is facing elongated leasing timelines, which could impact future leasing activities.
• There are notable vacancies, including a 2.2 million square foot undeveloped land parcel in Hawaii and a 535,000 square foot property in Indianapolis.
• The impact of global tariffs remains uncertain, potentially affecting tenant demand and the overall leasing environment.
• The net-debt-to-total-assets ratio is relatively high at 68.7%, indicating significant leverage.
• Interest expense remains substantial, although it has decreased compared to the previous year.

Q & A Highlights

Q: Can you provide details on the financial impact of the bad debt recovery in the first quarter? A: It was around $750,000, and it is included in revenues. - Tiffany Sy, CFO

Q: What are you seeing in the current leasing environment, particularly regarding leasing timelines? A: We are experiencing elongated leasing timelines. Tenants are starting renewal processes earlier, often involving more decision-makers. We mitigate risks by preparing properties for potential new tenants if necessary. - Marc Krohn, Vice President

Q: Can you provide an update on the notable vacancies in Indianapolis and Hawaii? A: In Hawaii, we have proposals out but faced challenges with tenant credit and funding. The Indianapolis property had a potential lease that didn't materialize, but we are actively marketing it. The Hawaii vacancy is not significantly impacting annualized revenue. - Yael Duffy, President, COO

Q: Why is there now a focus on reducing leverage and potentially selling properties? A: We receive unsolicited offers, particularly from owner-users, which are often at higher valuations. This interest, along with favorable refinancing conditions, drives our optimism. We are not currently looking to sell the Hawaii land. - Yael Duffy, President, COO

Q: How do tariffs impact tenant demand and leasing decisions? A: Tariffs may increase tenant retention as tenants reconsider relocation due to potential construction cost impacts. This has led to higher retention rates as tenants opt to stay in place. - Yael Duffy, President, COO

Q: How exposed is the Hawaii portfolio to changes in inbound travel, particularly international travel? A: Our Hawaii portfolio is minimally exposed to tourism. The tenant base primarily serves the local economy, not tourism, as evidenced during COVID when travel restrictions had little impact. - Yael Duffy, President, COO

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