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IL

Industrial Logistics Properties Trust (ILPT)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 delivered incremental operational improvement: rental income rose to $112.10M (+1.3% YoY; +0.2% QoQ), Cash Basis NOI grew 2.1% YoY, and normalized FFO/share reached $0.21, at the high end of Q1 guidance .
  • Balance sheet de-risking was a focal point: ILPT refinanced $1.235B of floating-rate debt with a $1.16B fixed-rate, interest-only loan at 6.399%, trimming variable-rate exposure to 34.4% of net debt and driving approximately $8.5M annual cash savings; quarterly dividend was raised from $0.01 to $0.05 per share .
  • Versus Street: revenue modestly beat ($112.10M vs $111.62M*); EPS was roughly in line/marginal miss (-$0.32 vs -$0.31*); EBITDA (S&P-defined) missed consensus (company-reported “EBITDAre” was stable), highlighting definitional differences between company and S&P metrics .
  • Management guided Q3 normalized FFO/share to $0.25–$0.27 and Q3 interest expense to ~$63.5M as refinancing savings flow through; only 3.6% of leased square feet expires over the next 12 months, supporting cash flow stability .
  • Near-term stock catalysts: dividend hike and refinancing savings realization; watch for Mountain JV debt strategy into 2026 and progress on asset sales held-for-sale at ~$50M valuation .

What Went Well and What Went Wrong

What Went Well

  • Executed refinancing and reduced variable-rate exposure; interest coverage improved to 1.3x and variable debt / net debt fell to 34.4% from 64.8% QoQ .
  • Leasing economics remained healthy: Q2 weighted-average GAAP rent change +21.1%; YTD leasing expected to add ~$3.2M annualized rent, with pipeline indicating ~20% Mainland and ~30% Hawaii roll-ups .
  • Dividend reset to $0.05/share and Q3 normalized FFO/share guided up to $0.25–$0.27, reflecting confidence in savings from refinancing and stable demand .
  • “We believe there is continued opportunity to generate organic cash flow growth while simultaneously evaluating opportunities to strengthen our balance sheet and reduce leverage.” — Yael Duffy, President & COO .

What Went Wrong

  • EBITDA (S&P-defined) missed consensus despite company’s Adjusted EBITDAre stability, underscoring metric definition divergence; EPS was a slight miss vs consensus .
  • Hawaii vacancy and certain renewals on “space leases” moderated Hawaiian spreads (renewals ~11% vs >83% for new leases); management noted continued but slow activity on large Hawaii parcel and Indiana vacancy .
  • Net debt remains elevated (Net debt/total market cap ~89.8%) and leverage high (Net debt/annualized Adjusted EBITDAre ~12.0x), indicating balance sheet remains a work-in-progress despite refinancing .

Financial Results

MetricQ2 2024Q1 2025Q2 2025
Rental income ($USD Thousands)$110,621$111,905 $112,097
Net loss per share ($USD)$(0.35) $(0.33) $(0.32)
Normalized FFO per share ($USD)$0.14$0.20 $0.21
NOI ($USD Thousands)$86,265$87,502$87,557
Cash Basis NOI ($USD Thousands)$82,935$83,780$84,672
Adjusted EBITDAre ($USD Thousands)$85,057$85,324$84,968
Interest expense ($USD Thousands)$73,631$69,813$67,914
Percentage leased (%)95.4% 94.6% 94.3%

Estimates vs Actuals (Q2 2025):

MetricConsensus EstimateActual (Company)Result vs Est.
Revenue ($USD)$111,618,500*$112,097,000 Beat
Primary EPS ($USD)$(0.31)*$(0.32) Slight Miss
EBITDA ($USD)$84,315,000*$78,993,000 (EBITDA)Miss

Values with asterisks (*) were retrieved from S&P Global.

Segment breakdown (Q2 2025):

Segment (Q2 2025)Rental income ($USD Thousands)NOI ($USD Thousands)Cash Basis NOI ($USD Thousands)Occupancy (%)
Mainland (Wholly Owned)$38,248 $30,599 $29,930 95.6%
Hawaii (Wholly Owned)$30,993 $23,117 $21,722 85.8%
Mountain JV (100% consolidated)$42,643 $33,752 $32,944 99.8%
Other$213 $89 $76 98.1%

KPIs and leasing:

KPIQ2 2024Q1 2025Q2 2025
Total leasing activity (sq ft, thousands)628 2,319 171
Weighted avg GAAP rent change (%)15.8% 18.9% 21.1%
Weighted avg lease term (years)6.8 6.1 5.4
Renewals (sq ft, thousands)555 1,738 127
New leases (sq ft, thousands)73 437 44

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Normalized FFO per shareQ2 2025$0.19–$0.21 Actual: $0.21Achieved (High end)
Normalized FFO per shareQ3 2025N/A$0.25–$0.27 New (Raised outlook)
Interest expense ($USD)Q2 2025~$68.5M Actual: $67.9MBetter than guided
Interest expense ($USD)Q3 2025N/A~$63.5M (incl. ~$58.5M cash; ~$5.0M non-cash) New
Quarterly dividendQ3 2025 onward$0.01/share $0.05/share Raised
Variable debt / net debtAs of Q1/Q2 202564.8% (Q1) 34.4% (Q2) Lowered materially

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4’24, Q1’25)Current Period (Q2’25)Trend
Balance sheet deleveraging/refiExercised extensions; considering leverage reduction $1.235B floating refi to $1.16B fixed; extension option remains on Mountain JV Improving
Dividend policyMaintained $0.01/share Increased to $0.05/share Positive
Leasing pipeline and spreadsPipeline ~7.4M sq ft; expected roll-ups Mainland ~20%, Hawaii ~30% Pipeline ~7.8M sq ft; similar roll-ups; 171k sq ft executed at +21.1% GAAP Stable/Building
Hawaii/Indiana vacanciesHawaii parcel revenue immaterial; Indiana half-building fell through 3 active Hawaii prospects; Indiana activity picked up; leasing remains slow Gradual
Tariffs/macroMay aid retention; elongate decision timelines No demand weakening seen; monitoring uncertainty Neutral to supportive
Mountain JV $1.4B debtExtension/cap purchase in Mar-25 Evaluating refi; one-year extension option in place Pending decision

Management Commentary

  • “ILPT delivered strong second quarter results, highlighted by an increase in its quarterly dividend and the successful refinancing of its $1.235 billion of floating rate debt… which provides us both stability and annual cash savings.” — Yael Duffy, President & COO .
  • “By reducing the outstanding principal balance… and reducing our interest rate from 6.7% – 6.4%, we expect our annual cash savings to be approximately $8.5 million, or $0.13 per share.” — Tiffany Sy, CFO & Treasurer .
  • “We have not seen any weakening demand within our portfolio.” — Yael Duffy .
  • “Our leasing pipeline could result in positive net absorption of 3 million sq ft… average roll-ups of 20% on the mainland and 30% in Hawaii.” — Marc Krohn, VP .

Q&A Highlights

  • One-timers: ~$750k remediation payment for a scheduled lease termination in Q2 .
  • Asset dispositions: One property classified as held for sale at ~$50M; potential additional dispositions in late 2025/early 2026 .
  • Mountain JV refinancing: Timing driven by rate/maturity attractiveness; portfolio near 100% occupied; one-year extension option available .
  • Hawaii leasing spreads: New leases >83% roll-up across two leases; renewals ~11% driven by smaller “space leases,” not ground leases .
  • Leasing pipeline: 7.8M sq ft with potential ~3M sq ft net absorption; tenant retention aided by move/disruption costs and uncertainty .

Estimates Context

  • Coverage is thin: Q2 EPS had 1 estimate; revenue had 2; future quarters also show limited estimate counts, implying potential volatility in consensus [GetEstimates Q2 2025; Q3 2025].
  • Q2 2025 comparisons: Revenue beat modestly; EPS slightly missed; S&P’s EBITDA estimate missed due to different definitions vs company-reported EBITDAre/Adjusted EBITDAre .
  • Future quarters: Q3 2025 consensus EPS -$0.26*, revenue ~$111.93M*; management’s Q3 normalized FFO/share guidance of $0.25–$0.27 suggests improving run-rate despite GAAP EPS loss expectations .
    Values marked with asterisks (*) were retrieved from S&P Global.

Key Takeaways for Investors

  • Refinancing materially reduces variable-rate risk and interest expense; expect realized cash savings to lift normalized FFO/share beginning Q3 2025 .
  • Elevated leverage persists (Net debt/Adj. EBITDAre ~12x), but pathway to de-risk includes refinancing Mountain JV debt and selective asset sales; watch 2026 maturities .
  • Dividend reset to $0.05/share signals improving cash coverage; payout ratios remain conservative vs normalized FFO/CAD metrics .
  • Organic rent growth intact: Q2 GAAP spreads +21.1%; pipeline supports ~20–30% roll-ups, with only 3.6% of leased square feet expiring over the next 12 months, underpinning near-term stability .
  • Hawaii/Indiana vacancies remain a drag on occupancy optics but are modest to annualized revenue; monitor leasing updates on large Hawaii parcel .
  • Expectation management: GAAP EPS likely remains negative near term (non-cash items and JV accounting), while FFO-based metrics and Cash Basis NOI trend better; align evaluation with REIT-relevant measures .
  • Trading lens: Dividend increase and visible interest savings are near-term catalysts; a clear Mountain JV refinancing plan and execution on dispositions would be further rerating events .