Industrial Logistics Properties Trust

Good morning and welcome to the Industrial Logistics Properties Trust's fourth quarter 2022 financial results conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on a touch-tone phone. To withdraw your question, please press star, then two. Please note this event is being recorded. I would now like to turn the conference over to Kevin Barry, Director of Investor Relations. Please go ahead, sir.

Good morning, everyone, and thank you for joining us today. With me on the call are ILPT's President and Chief Operating Officer, Yael Duffy, and Chief Financial Officer and Treasurer, Brian Donley. In just a moment, they will provide details about our business and our performance for the fourth quarter of 2022. followed by a question and answer session with sell-side analysts. First, I would like to 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. These forward-looking statements are based on ILPT's beliefs and expectations as of today, Wednesday, February 15th, 2023, 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, or SEC, which can be accessed from our website, ILPTREIT.com or the SEC's website. Investors are cautioned not to place undue reliance upon any forward-looking statements. In addition, we will be discussing non-GAAP numbers during this call, including normalized funds from operations, or normalized FFO, adjusted EBITDA, and cash-based net operating income, or cash basis NOI. A reconciliation of these non-GAAP figures to net income and components to calculate cash available for distribution are available in our supplemental operating and financial data package which also can be found on our website. I will now turn the call over to Yael.

Thank you, Kevin, and good morning. I will begin with a review of ILPT's portfolio and operating performance and then turn the call over to Brian to provide an update on our financial results. ILPT's consolidated portfolio includes 413 warehouse and distribution properties in 39 states totaling 60 million square feet with a weighted average remaining lease term of approximately nine years. Occupancy at year end was 99.1%. FedEx, Amazon, and Home Depot represent approximately 40% of our annualized rental revenues and 78% of our revenues come from investment grade rated tenants or their subsidiaries or from our secure Hawaii land leases. We finished the year with strong demand for our high-quality portfolio, consistent with the trends we saw throughout 2022. For the full year, we achieved record annual leasing activity of 7.8 million square feet at weighted average rental rates that were 47.3% higher than prior rental rates for the same space. The impact of this activity is an increase of $17.1 million in annualized rental revenue of which more than two-thirds will take effect in 2023 or 2024. These results showcase our ability to generate organic cash flow while maintaining portfolio stability. During the fourth quarter, we entered 17 new and renewal leases and one rent reset for a total of 1.4 million square feet at a weighted average lease term of eight years. This activity resulted in gap in cash leasing spreads of 18.7% and 6.7% respectively. Renewals on the mainland drove most of our leasing activity. Our leasing spreads include a 338,000 square foot renewal in a tertiary market in Iowa, where we were only able to achieve a 4.5% roll-up in rent. Excluding this renewal, GAAP and cash leasing spreads were 25.7% and 14.1% respectively. Looking ahead, approximately 12 million square feet, or 18% of ILPT's portfolio, is scheduled to roll by the end of 2025, primarily driven by our mainland properties. We are currently tracking 28 deals in our pipeline for 2.8 million square feet. Once executed, we expect these leases will yield average roll-ups in rent of 20% on the mainland and 30% in Hawaii, further illustrating the strength of our portfolio. Lastly, as we have communicated in the past, we are focused on improving ILPT's leverage. However, given the ongoing uncertainty in the capital markets, our timeline for addressing these priorities is unknown. With no near-term debt maturities and a cash-flowing portfolio, ILPT will continue to be patient as we evaluate opportunities. I will now turn the call over to Brian.