First Quarter Net Income of $0.31 Per Share
First Quarter Cash Basis NOI Increased by 1.7%
Completed IPO for Net Proceeds of Approximately $444 Million
NEWTON, Mass.--(BUSINESS WIRE)--
Industrial Logistics Properties Trust (Nasdaq: ILPT) today announced
financial results for the quarter ended March 31, 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 Operating Officer of ILPT, made the
following statement:
"We are pleased to report our operating results for the first quarter of
2018. During the quarter, we entered new and renewal leases for
approximately 296,000 square feet at our properties in Hawaii, resulting
in weighted average rental rates that were approximately 46% higher than
prior rental rates for the same space. Also, we are optimistic that
current industrial market dynamics, primarily driven by growth in
e-commerce, will translate into more demand for our existing U.S.
mainland industrial portfolio when leases expire, which could result in
additional internal growth. We continue to operate with low debt
leverage and have significant capacity under our revolving credit
facility. We believe this will allow us to fund potential acquisitions
with low cost debt for the next several quarters."
Results for the Quarter Ended March 31, 2018:
Net income for the quarter ended March 31, 2018 was $19.2 million, or
$0.31 per diluted share, compared to $20.4 million for the same quarter
last year. Normalized funds from operations, or Normalized FFO, for the
quarter ended March 31, 2018 were $26.1 million, or $0.42 per diluted
share, compared to $29.6 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
March 31, 2018 and 2017 appear later in this press release.
Leasing, Occupancy and Same Property Results:
During the quarter ended March 31, 2018, ILPT entered lease renewals and
new leases for approximately 296,000 square feet, which resulted in
weighted average (by square feet) rental rates that were approximately
45.9% higher than prior rental rates for the same space and a weighted
average (by square feet) lease term of 30.3 years. Commitments for
leasing capital and concessions for these leases totaled approximately
$68,000, or approximately $0.01 per square foot per lease year.
As of March 31, 2018, 99.9% of ILPT’s total rentable square feet was
leased, compared to 99.9% as of December 31, 2017 and 99.6% as of
March 31, 2017. Cash basis net operating income, or Cash Basis NOI,
increased 1.7% for the quarter ended March 31, 2018 compared to the
quarter ended March 31, 2017, primarily as a result of contractual rent
increases and leasing activity at ILPT's properties in Hawaii since
January 1, 2017, partially offset by rent reserves, and insurance
proceeds received in the prior year.
Reconciliations of net income determined in accordance with GAAP to net
operating income, or NOI, and Cash Basis NOI for the quarters ended
March 31, 2018 and 2017 appear later in this press release.
Recent Financing Activities:
On January 17, 2018, ILPT completed the IPO, in which it issued
20,000,000 of its common shares for net proceeds of approximately $444.3
million, after deducting the underwriting discounts and commissions and
expenses. Upon the closing of the IPO, ILPT used substantially all of
the net proceeds from the IPO to reduce amounts outstanding under its
revolving credit facility.
Conference Call:
At 10:00 a.m. Eastern Time this morning, President and Chief Operating
Officer, John Popeo, and Chief Financial Officer and Treasurer, Richard
Siedel, will host a conference call to discuss ILPT’s first 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, May 4, 2018. To access the
replay, dial (412) 317-0088. The replay pass code is 10118565.
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 first quarter conference call are strictly prohibited without the
prior written consent of ILPT.
Supplemental Data:
A copy of ILPT’s First 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, 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 STATEMENTS IN THIS PRESS RELEASE REGARDING OPTIMISM ABOUT
MARKET DYNAMICS AND GROWTH IN E-COMMERCE AND RESULTING DEMAND FOR
ILPT’S MAINLAND INDUSTRIAL PORTFOLIO AND INTERNAL GROWTH ARE SUBJECT
TO VARIOUS RISKS, INCLUDING INDUSTRIAL MARKET CONDITIONS OVER WHICH
ILPT HAS NO CONTROL. ACCORDINGLY, ILPT MAY NOT BE ABLE TO ACHIEVE ITS
INTERNAL GROWTH AND EXPANSION GOALS; AND
-
MR. POPEO’S STATEMENT REGARDING THE USE OF LOW COST DEBT TO FUND
POTENTIAL ACQUISITIONS MAY IMPLY THAT SUCH ACQUISITIONS WILL OCCUR. IN
FACT, ANY POTENTIAL ACQUISITION WOULD BE SUBJECT TO CONDITIONS. THESE
CONDITIONS MAY NOT BE SATISFIED. AS A RESULT, ANY POTENTIAL
ACQUISITION MAY NOT OCCUR, MAY BE DELAYED OR THEIR TERMS MAY CHANGE.
FURTHER, ILPT MAY CHOOSE NOT TO FUND ANY POTENTIAL ACQUISITION WITH
DEBT.
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 March 31,
|
|
|
|
|
2018
|
|
2017
|
|
Revenues:
|
|
|
|
|
|
|
|
Rental income
|
|
|
|
$
|
34,809
|
|
|
$
|
33,870
|
|
|
Tenant reimbursements and other income
|
|
|
|
5,796
|
|
|
5,570
|
|
|
Total revenues
|
|
|
|
40,605
|
|
|
39,440
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
Real estate taxes
|
|
|
|
4,585
|
|
|
4,339
|
|
|
Other operating expenses
|
|
|
|
3,545
|
|
|
2,732
|
|
|
Depreciation and amortization
|
|
|
|
6,873
|
|
|
6,811
|
|
|
General and administrative
|
|
|
|
2,574
|
|
|
4,636
|
|
|
Total expenses
|
|
|
|
17,577
|
|
|
18,518
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
|
23,028
|
|
|
20,922
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
|
13
|
|
|
—
|
|
|
Interest expense (including net amortization of debt issuance
costs and premiums of $311 and ($73), respectively)
|
|
|
|
(3,802
|
)
|
|
(555
|
)
|
|
Income before income tax expense
|
|
|
|
19,239
|
|
|
20,367
|
|
|
Income tax expense
|
|
|
|
(7
|
)
|
|
(11
|
)
|
|
Net income
|
|
|
|
$
|
19,232
|
|
|
$
|
20,356
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding - basic and diluted
|
|
|
|
61,445
|
|
|
45,000
|
|
|
|
|
|
|
|
|
|
Net income per common share - basic and diluted
|
|
|
|
$
|
0.31
|
|
|
$
|
0.45
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Industrial Logistics Properties Trust
Funds from
Operations and Normalized Funds from Operations
(1)
(amounts
in thousands, except per share data)
(unaudited)
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
|
2018
|
|
2017
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
$
|
19,232
|
|
|
$
|
20,356
|
|
Plus: depreciation and amortization
|
|
|
|
6,873
|
|
|
6,811
|
|
FFO
|
|
|
|
26,105
|
|
|
27,167
|
|
Plus: estimated business management incentive fees (2)
|
|
|
|
—
|
|
|
2,409
|
|
Normalized FFO
|
|
|
|
$
|
26,105
|
|
|
$
|
29,576
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding - basic and diluted
|
|
|
|
61,445
|
|
|
45,000
|
|
|
|
|
|
|
|
|
FFO per common share - basic and diluted
|
|
|
|
$
|
0.42
|
|
|
$
|
0.60
|
|
Normalized FFO per common share - basic and diluted
|
|
|
|
$
|
0.42
|
|
|
$
|
0.66
|
|
|
|
|
|
|
|
|
|
|
|
(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 months ended March 31, 2017 excludes $2,409, 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) (2)
(dollars
in thousands)
(unaudited)
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
|
2018
|
|
2017
|
|
Calculation of NOI and Cash Basis NOI:
|
|
|
|
|
|
|
|
Rental income
|
|
|
|
$
|
34,809
|
|
|
$
|
33,870
|
|
|
Tenant reimbursements and other income
|
|
|
|
5,796
|
|
|
5,570
|
|
|
Real estate taxes
|
|
|
|
(4,585
|
)
|
|
(4,339
|
)
|
|
Other operating expenses
|
|
|
|
(3,545
|
)
|
|
(2,732
|
)
|
|
NOI
|
|
|
|
32,475
|
|
|
32,369
|
|
|
Non-cash straight line rent adjustments included in rental income (3) |
|
|
|
(1,194
|
)
|
|
(1,470
|
)
|
|
Lease value amortization included in rental income (3) |
|
|
|
(102
|
)
|
|
(96
|
)
|
|
Non-cash amortization included in other operating expenses (4) |
|
|
|
—
|
|
|
(138
|
)
|
|
Cash Basis NOI
|
|
|
|
$
|
31,179
|
|
|
$
|
30,665
|
|
|
|
|
|
|
|
|
|
Reconciliation of Net Income to NOI and Cash Basis NOI:
|
|
|
|
|
|
|
|
Net income
|
|
|
|
$
|
19,232
|
|
|
$
|
20,356
|
|
|
Income tax expense
|
|
|
|
7
|
|
|
11
|
|
|
Income before income tax expense
|
|
|
|
19,239
|
|
|
20,367
|
|
|
Interest expense
|
|
|
|
3,802
|
|
|
555
|
|
|
Interest income
|
|
|
|
(13
|
)
|
|
—
|
|
|
Operating income
|
|
|
|
23,028
|
|
|
20,922
|
|
|
|
|
|
|
|
|
|
General and administrative
|
|
|
|
2,574
|
|
|
4,636
|
|
|
Depreciation and amortization
|
|
|
|
6,873
|
|
|
6,811
|
|
|
NOI
|
|
|
|
32,475
|
|
|
32,369
|
|
|
|
|
|
|
|
|
|
Non-cash straight line rent adjustments included in rental income (3) |
|
|
|
(1,194
|
)
|
|
(1,470
|
)
|
|
Lease value amortization included in rental income (3) |
|
|
|
(102
|
)
|
|
(96
|
)
|
|
Non-cash amortization included in other operating expenses (4) |
|
|
|
—
|
|
|
(138
|
)
|
|
Cash Basis NOI
|
|
|
|
$
|
31,179
|
|
|
$
|
30,665
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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)
|
|
|
For the three months ended March 31, 2018 and 2017, ILPT's
consolidated results are equal to its same property results.
|
|
|
|
|
|
(3)
|
|
|
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.
|
|
|
|
|
|
(4)
|
|
|
The amount for the three months ended March 31, 2017 represents 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)
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
December 31,
|
|
|
|
|
2018
|
|
2017
|
|
ASSETS
|
|
|
|
|
|
|
|
Real estate properties:
|
|
|
|
|
|
|
|
Land
|
|
|
|
$
|
642,706
|
|
|
$
|
642,706
|
|
|
Buildings and improvements
|
|
|
|
701,433
|
|
|
700,896
|
|
|
|
|
|
1,344,139
|
|
|
1,343,602
|
|
|
Accumulated depreciation
|
|
|
|
(79,092
|
)
|
|
(74,614
|
)
|
|
|
|
|
1,265,047
|
|
|
1,268,988
|
|
|
Acquired real estate leases, net
|
|
|
|
76,475
|
|
|
79,103
|
|
|
Cash and cash equivalents
|
|
|
|
19,847
|
|
|
—
|
|
|
Rents receivable, including straight line rents of $51,371 and
$50,177, respectively, net of allowance for doubtful accounts of
$659 and $1,241, respectively
|
|
|
|
52,787
|
|
|
51,672
|
|
|
Debt issuance costs, net
|
|
|
|
5,538
|
|
|
1,724
|
|
|
Deferred leasing costs, net
|
|
|
|
5,065
|
|
|
5,254
|
|
|
Due from related persons
|
|
|
|
4,133
|
|
|
—
|
|
|
Other assets, net
|
|
|
|
4,343
|
|
|
4,942
|
|
|
Total assets
|
|
|
|
$
|
1,433,235
|
|
|
$
|
1,411,683
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS' EQUITY
|
|
|
|
|
|
|
|
Revolving credit facility
|
|
|
|
$
|
302,000
|
|
|
$
|
750,000
|
|
|
Mortgage note payable, net
|
|
|
|
49,369
|
|
|
49,427
|
|
|
Assumed real estate lease obligations, net
|
|
|
|
19,861
|
|
|
20,384
|
|
|
Accounts payable and other liabilities
|
|
|
|
11,056
|
|
|
11,082
|
|
|
Rents collected in advance
|
|
|
|
8,426
|
|
|
5,794
|
|
|
Security deposits
|
|
|
|
5,730
|
|
|
5,674
|
|
|
Due to related persons
|
|
|
|
3,965
|
|
|
7,114
|
|
|
Total liabilities
|
|
|
|
400,407
|
|
|
849,475
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders' equity:
|
|
|
|
|
|
|
|
Common shares of beneficial interest, $.01 par value: 100,000,000
shares authorized; 65,005,000 and 45,000,000 shares issued and
outstanding, respectively
|
|
|
|
650
|
|
|
450
|
|
|
Additional paid in capital
|
|
|
|
997,677
|
|
|
546,489
|
|
|
Cumulative net income
|
|
|
|
34,501
|
|
|
15,269
|
|
|
Total shareholders' equity
|
|
|
|
1,032,828
|
|
|
562,208
|
|
|
Total liabilities and shareholders' equity
|
|
|
|
$
|
1,433,235
|
|
|
$
|
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/20180427005169/en/
Industrial Logistics Properties Trust
Olivia Snyder, 617-219-1489
Manager,
Investor Relations
Source: Industrial Logistics Properties Trust