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DATE
Thursday, April 30, 2026 at 10 a.m. ET
CALL PARTICIPANTS
- President and Chief Executive Officer — Yael Duffy
- Chief Financial Officer and Treasurer — Tiffany R. Sy
- Senior Director of Investor Relations — Kevin Barry
- Vice President — Marc Krohn
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TAKEAWAYS
- Debt Refinancing -- Announced $1.6 billion fixed rate, interest-only debt for the consolidated joint venture at a 5.71% rate to replace existing floating rate and amortizing debt, leaving all consolidated company debt as fixed rate and non-amortizing with a weighted average interest rate below 5.5%.
- Normalized FFO -- Reported $22 million, or $0.33 per share, above the high end of guidance by $0.20 per share due to $1.1 million in one-time revenues and fees.
- Normalized FFO Growth -- Increased 16% sequentially and 63% year over year.
- Same Property Cash NOI -- Increased over 4% year over year, totaling $87.4 million.
- Leasing Activity -- Leased 862,000 square feet at a weighted average rent roll up of 26.3%, with 70% activity from renewals, and consolidated occupancy at 94.6%.
- Future Lease Expirations -- 8.1 million square feet, or 11.5% of total annualized revenue, is set to expire by 2027, presenting embedded rent growth potential.
- Leasing Pipeline -- 6 million square feet in total, with more than 2 million square feet at advanced negotiation or documentation stages.
- Indianapolis Vacancy -- Expecting to fully lease the 535,000 square foot vacancy in June, with a minimal four-month free rent period and secured rent roll up.
- Cash and Liquidity -- Ended quarter with $100 million cash on hand and $86 million restricted cash.
- Net Debt Metrics -- Net debt to total assets ratio decreased to 68.8%, and net debt leverage ratio improved to 11.6x from 11.8x.
- Debt Maturities -- No consolidated company debt matures until 2029.
- Interest Expense Guidance -- Forecasting $61.5 million for the upcoming quarter, with $59 million cash interest and $2.5 million non-cash deferred fee amortization.
- Adjusted EBITDAre Guidance -- Projecting $85.5 million to $86.5 million for the next quarter, and $344 million to $349 million for the full year 2026.
- Normalized FFO Guidance -- Expecting $0.31 to $0.33 per share for the next quarter and $1.27 to $1.34 per share for the full year 2026.
- Capital Expenditures -- Q1 CapEx was labeled an anomaly and not expected to represent a new run rate for future periods.
- Disposition Flexibility -- New debt has a 24-month lockout period; leasing of the Indianapolis property will allow greater flexibility to dispose of assets within the $1.16 billion debt pool post-lockout.
- Acquisition Outlook -- Management stated they do not anticipate property acquisitions in the near term unless presented with specific or opportunistic situations.
- Cash Utilization -- Cash balance is currently preserved to support potential tenant building expansions and to address evolving tenant needs under early-stage discussions.
SUMMARY
The refinancing of $1.6 billion in joint venture debt transitions all of Industrial Logistics Properties Trust's consolidated obligations to fixed rate, non-amortizing status, removing variable-rate exposure and materially improving liquidity. Management signaled ongoing momentum in rental roll ups and portfolio stability through double-digit leasing spreads and six consecutive quarters of growth. Guidance for 2026 incorporates the Indianapolis leasing, positions interest costs and EBITDAre ranges, and explicitly excludes Hawaii lease-up effects. Operational leverage improved, with substantially enhanced flexibility for future property dispositions after the debt lockout ends.
- One-time items boosting Q1 normalized FFO included $150,000 in percentage rent true up and a $450,000 remediation fee already released, both affecting sequential and year-over-year comparability.
- Tiffany R. Sy confirmed, "There is a 24 month lockout period in the new debt," clarifying timeline limitations for near-term asset sales in the heavily encumbered debt pool.
- President Duffy said, "Given where our leverage is today, I do not see us looking to acquire any properties at least in the short term, unless it is a very specific or opportunistic situation," setting current acquisition priorities.
- The contribution from the upcoming Indianapolis lease is expected to begin after a four-month free rent period, with initial cash flow outlined for the back half of the year and a documented rent roll up.
INDUSTRY GLOSSARY
- NOI (Net Operating Income): Rental and property income less operating expenses, excluding interest and taxes, representing core real estate profitability.
- FFO (Funds from Operations): Standard REIT performance metric, net income plus real estate depreciation/amortization and excluding gains or losses on asset sales.
- EBITDAre: Adjusted earnings before interest, taxes, depreciation, amortization, and restructuring costs, standardized for real estate investment trusts.
Full Conference Call Transcript
Operator: Good morning, and welcome to Industrial Logistics Properties Trust's first quarter 2026 financial results conference call. I would now like to turn the call over to Kevin Barry, Senior Director of Investor Relations. Please go ahead.
Kevin Barry: Good morning, and thank you for joining Industrial Logistics Properties Trust's first quarter 2026 earnings call. With me on today's call are President and Chief Executive Officer, Yael Duffy, Chief Financial Officer and Treasurer, Tiffany R. Sy, and Vice President, Marc Krohn. In just a moment, they will provide details about our business and quarterly results, followed by the question and answer session with sell side analysts. Please note that the recording and retransmission of today's conference call is prohibited without the prior written consent of the company.
Also note that today's conference call contains forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other securities laws, including guidance with respect to certain second quarter and full year 2026 financial measures. These forward looking statements are based on Industrial Logistics Properties Trust's beliefs and expectations as of today, 04/30/2026, and actual results may differ materially from those that we project. The company undertakes no obligation to revise or publicly release the results of any revision to the forward looking statements made in today's conference call.
Additional information concerning factors that could cause those differences is contained in our filings with the Securities and Exchange Commission which can be accessed from our website ilptreit.com. Investors are cautioned not to place undue reliance upon any forward looking statements. In addition, we will be discussing non GAAP financial measures during this call including normalized funds from operations or normalized FFO, adjusted EBITDAre, net operating income or NOI, and cash basis NOI. A reconciliation of these non GAAP measures to net income is available in our financial results package, which can be found on our website. Lastly, we will be providing guidance on this call including estimated normalized FFO and adjusted EBITDAre.
We are not providing a reconciliation of these non GAAP measures as part of our guidance because certain information required for such reconciliation is not available without unreasonable efforts or at all. I will now turn the call over to Yael.
Yael Duffy: Thank you, Kevin, and good morning. To begin, I would like to highlight the announcement we made last week that our consolidated joint venture successfully priced $1.6 billion of fixed rate interest only debt at an attractive interest rate of 5.71%. This outcome was achieved despite geopolitical headwinds and capital markets volatility. It also speaks to the strength of our high quality portfolio, the creditworthiness of our tenants, and the depth of the banking relationships our manager, The RMR Group, has built. As Tiffany will cover shortly, this financing takes out the JV's floating rate and amortizing debt, substantially strengthening its capital structure, insulating it from interest rate swings, and driving stronger cash flow.
As a result, all of Industrial Logistics Properties Trust's consolidated debt will now be fixed rate and non amortizing, at a weighted average interest rate of less than 5.5%. Turning to our results, I am pleased to report another quarter of strong earnings growth that outpaced our expectations, which was supported by continued leasing momentum across our portfolio. Same property cash basis NOI increased more than 4% year over year and normalized FFO grew more than 60%, demonstrating the meaningful progress we have made reducing financing costs and driving rent growth. We leased 862,000 square feet at a weighted average rent roll up of 26.3%, marking our sixth consecutive quarter of double digit rent growth.
Renewals accounted for approximately 70% of the activity, reflecting continued strong tenant retention and portfolio stability, with consolidated occupancy of 94.6%. Today, 8.1 million square feet, or 11.5% of Industrial Logistics Properties Trust's total annualized revenue, is scheduled to expire by 2027, which provides us a substantial runway to capture embedded rent growth and drive organic cash flow. Currently, our leasing pipeline stands at 6 million square feet with more than 2 million square feet already in advanced stages of negotiation or lease documentation. We are especially pleased to share that we anticipate fully leasing the 535,000 square foot vacancy in Indianapolis in June, accomplishing a key 2026 initiative for the company.
Before I turn the call over to Tiffany, I want to underscore the momentum we have built across fronts: a meaningfully strengthened capital structure, continued double digit leasing spreads, and a healthy pipeline of embedded mark to market opportunities still available to us. Looking ahead, we believe we have a clear path to continued cash flow growth and delivering value to our shareholders. I will now turn the call over to Tiffany R. Sy for the financial results.
Tiffany R. Sy: Thank you, Yael, and good morning, everyone. Yesterday, we reported first quarter normalized FFO of $22 million, or $0.33 per share. These results exceeded the high end of our guidance by $0.20 per share, driven by one time revenues and fees totaling $1.1 million. Normalized FFO grew 16% on a sequential quarter basis and 63% compared to the same quarter a year ago. Same property NOI was $90.3 million, same property cash basis NOI was $87.4 million, and adjusted EBITDAre totaled $87 million, each increasing on a year over year and sequential quarter basis. Turning to our balance sheet, we ended the quarter with cash on hand of $100 million and restricted cash of $86 million.
Our net debt to total assets ratio declined modestly to 68.8% and our net debt leverage ratio improved to 11.6 times from 11.8 times. Last week, we priced $1.6 billion of five year fixed rate, interest only mortgage financing for our consolidated joint venture at 5.71%. We expect to close the loan on or about May 8, and plan to use the proceeds to refinance the joint venture's existing $1.4 billion floating rate loan and $[inaudible] of fixed rate amortizing debt. The new debt is secured by the same 90 mainland properties as the existing borrower.
With this refinancing, our consolidated joint venture will unlock nearly $20 million in annual cash flow by eliminating its amortizing debt and the need to purchase interest rate caps. Additionally, all of Industrial Logistics Properties Trust's consolidated debt will be fixed rate, limiting our exposure to market interest rate volatility, with a weighted average interest rate of 5.48% and no debt maturities until 2029. Turning to our outlook, we introduced full year guidance in our earnings presentation issued last night, in addition to the quarterly guidance we have been providing.
For the second quarter of 2026, we expect interest expense of $61.5 million, including $59 million of cash interest expense and $2.5 million of non cash amortization of deferred financing fees, adjusted EBITDAre between $85.5 million and $86.5 million, and normalized FFO between $0.31 to $0.33 per share. For the full year 2026, we are guiding to interest expense of approximately $245 million with cash interest of $234.5 million and non cash interest of $10.5 million, adjusted EBITDAre between $344 million and $349 million, and normalized FFO of between $1.27 to $1.34 per share. This guidance reflects the impact of our consolidated joint venture's refinance.
It also assumes our vacant property in Indianapolis is leased in June 2026 and does not include the lease up of our Hawaii land parcel. In closing, we are pleased with the meaningful progress that Industrial Logistics Properties Trust has made over the past year, refinancing our floating rate debt and enhancing cash flow. As we look ahead to the remainder of 2026, we are focused on building on this momentum, advancing our growth initiatives, and creating long term value for our shareholders. That concludes our prepared remarks. We will now open the call for questions.
Operator: Thank you very much. We will now begin the question and answer session. If you are using a speakerphone, please pick up your handset before pressing the keys. Our first question comes from Mitchell Germain with Citizens Bank. Please go ahead.
Mitchell Germain: Thank you very much. Can you provide some sensitivity from the top to the bottom end of the guidance range, please? Meaning, what will impact the bottom, and what factors take you to the high end of the range?
Tiffany R. Sy: Sure. Sometimes we have one time reimbursements or one time fees. They are usually not very large, so that accounts for the $1 million range in the guidance.
Mitchell Germain: Got it. Okay. That is helpful. Obviously, interest rate is pretty much fixed at this point. So maybe provide some perspective on the Indianapolis lease. I know this has been a big priority strategically. Do you believe it becomes income paying in June? How should we think about that, and maybe provide some perspective on the economics? Are we looking at rents going higher?
Yael Duffy: Sure. We anticipate the lease to be signed in June. There will be a minimal free rent period of four months, so we will start seeing the cash in the back half of the year, and it will be at a roll up in rent.
Mitchell Germain: Great. And then last question from me: with regards to the recent debt, does it offer more flexibility from a covenant perspective with regard to your ability to potentially look to sell some assets? And then more broadly, do you think that asset sales might become more of a strategic priority?
Tiffany R. Sy: There is a 24 month lockout period in the new debt.
Yael Duffy: I will add that with the leasing of this property in Indianapolis, it will allow us flexibility on the $1.16 billion debt to be able to look to sell properties in that pool. So while we might not be able to, in the short term, have dispositions within that mountain of debt, we will have greater flexibility now that we have gotten this Indianapolis lease completed.
Mitchell Germain: Thanks, and I appreciate the guidance.
Kevin Barry: Thanks, Mitch.
Operator: Thank you. Our next question comes from John Massocca with B. Riley. Please go ahead.
John Massocca: Good morning. Maybe can you walk us through what the $1.1 million of one time items were in the quarter? And is that why guidance is calling for a step down in 2Q versus 1Q at the midpoint?
Tiffany R. Sy: Yes, that is exactly why. There was $150,000 of percentage rent that gets trued up. That happened this quarter. And then we also had $450,000 of a one time remediation fee related to a move out that has already been released.
John Massocca: Okay. And the percentage rent true up, is that something that could hit in any given quarter, or is that usually a 1Q item?
Tiffany R. Sy: It is always a 1Q item. We just do not know what the amount will be, or even if it will be incremental to us.
John Massocca: And post the debt transaction, now that your balance sheet is pretty set, how are you thinking about utilizing the cash balance today? You talked a little bit about dispositions, maybe using that cash to pay down debt potentially. Or would you even potentially look into the acquisition market? Just curious how you are thinking of managing the cash outstanding, given there is a little more certainty from a debt side of your balance sheet.
Yael Duffy: We are evaluating all of our options right now. We want to make sure that we have cash on the balance sheet to address our tenants' needs. We have a couple of tenants we are in early discussions with who are looking at potential building expansions that they want us to partner with them on, so we want to make sure that we have that cash available to us. It is early stages. We will see where we shake out and then go from there.
John Massocca: I know those are potentially unique situations, but how do you think about a return threshold if you get back into the market of deploying capital?
Tiffany R. Sy: We are certainly in a better position today than we were even a year ago, so that is something we are always considering with the Board.
John Massocca: Was I asking about property acquisitions or even other investments? If you were to get back into the market, how would you view the current cap rate environment versus where you would want to deploy capital? Are there things out there today, especially given it would probably be coming from cash on hand rather than newly raised capital?
Yael Duffy: Given where our leverage is today, I do not see us looking to acquire any properties at least in the short term, unless it is a very specific or opportunistic situation.
John Massocca: And lastly, the CapEx spending was down a little bit. I know 1Q can be a relatively weak period seasonally for CapEx spend, but is that a more typical run rate, or was the current quarter a bit of an anomaly?
Tiffany R. Sy: The current quarter was an anomaly. Q1 can be down sometimes. That is not what we are forecasting going forward.
John Massocca: That is it for me. Thank you very much.
Kevin Barry: Operator, I believe that concludes our Q&A.
Yael Duffy: Thank you for joining today's call, and we look forward to meeting with many of you at the NAREIT conference in June. Please reach out to Investor Relations if you are interested in scheduling a meeting with Industrial Logistics Properties Trust. Operator, that concludes our call.
Operator: Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
