Industrial Logistics Properties Trust Q4 2025 Earnings Call - Record Leasing, 25.7% Rent Roll-up Drives 113% YoY Normalized FFO

Conference Operator: Good day, and welcome to the Industrial Logistics Properties Trust fourth quarter 2025 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, Senior Director of Investor Relations. Please go ahead.

Kevin Barry, Senior Director of Investor Relations, ILPT: Good afternoon, and thank you for joining ILPT’s fourth quarter 2025 earnings call. With me on today’s call are President and Chief Executive Officer, Yael Duffy, Chief Financial Officer and Treasurer, Tiffany Sy, and Vice President, Marc Krohn. In just a moment, they will provide details about our business and quarterly results, followed by a 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 first quarter 2026 financial measures.

These forward-looking statements are based on ILPT’s beliefs and expectations as of today, February 19, 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, President and Chief Executive Officer, ILPT: Thank you, Kevin, and good afternoon. We ended the year with robust demand for our high-quality portfolio of industrial and logistics properties, consistent with the trends we saw throughout 2025, delivering one of the strongest quarters in ILPT’s history. We achieved record quarterly leasing volume, executing nearly 4 million sq ft at a weighted average rent roll-up of 25.7%, marking our fifth consecutive quarter of double-digit rent growth. Normalized FFO grew 113% year-over-year, and same property cash basis NOI increased 5.2%. Our improved performance resulted in ILPT generating a total shareholder return of more than 55% in 2025, ranking us third in the U.S. across all REITs. Additionally, we made notable progress on our strategic priorities, including improving our balance sheet and position, positioning ILPT for future growth.

In June, we successfully refinanced $1.2 billion of floating rate debt into fixed rate debt, resulting in annual cash savings of more than $8 million. Shortly thereafter, we announced a material increase in our annualized dividend from $0.04 to $0.20 per share. Turning to our portfolio. As of December 31, 2025, ILPT owned 409 properties across 39 states, totaling approximately 60 million sq ft, with a weighted average lease term of seven years. Our well-diversified portfolio is further highlighted by our unique Hawaii footprint, consisting of 226 properties totaling 16.7 million sq ft. More than 76% of our annualized revenues come from investment grade rated tenants or from our secure Hawaii land leases.

Consolidated occupancy at year-end was 94.5%, representing a 40 basis point increase over from the third quarter. During 2025, we completed 42 new and renewal leases and two rent resets, totaling 7.3 million sq ft. This activity is expected to generate an increase of approximately $10.6 million in annualized rental revenue, of which approximately $5.8 million or 55%, has not yet commenced and will contribute to cash flow in 2026 and beyond. Additionally, we continue to expand our relationships with FedEx and Amazon, our two largest tenants, which accounted for 2.8 million sq ft or 38% of our annual leasing volume. These results showcase our ability to realize mark-to-market rent growth through leasing and continued strong tenant retention.

Looking ahead to 2026, we remain focused on our leasing priorities, specifically the 2.2 million sq ft land parcel in Hawaii and a 535,000 sq ft property in Indianapolis.... We believe there is continued opportunity to generate organic cash flow growth and reduce leverage, which has declined from 12.4x to 11.8x over the last year. We are pleased with the strong performance and momentum we are building at ILPT, and we look forward to delivering long-term value for our shareholders. I will now turn the call over to Marc, who will provide further details into our fourth quarter leasing results within our mainland portfolio, as well as our pipeline.

Marc Krohn, Vice President, ILPT: Thank you, Yael, and good afternoon, everyone. During the fourth quarter, we executed nearly 4 million sq ft of leasing at a weighted average lease term of 9.5 years and a roll-up in rent of 25.7%. Given the limited available space within our portfolio, renewals represented the majority of the activity this quarter, reflecting a tenant retention rate of 96%. Notable leases include three lease renewals totaling 2.3 million sq ft with Amazon, our second-largest tenant, for a weighted average lease term of 11.5 years and a roll-up in rent of 26.8%. A 1.2 million sq ft renewal with Restoration Hardware, our fourth-largest tenant, for a weighted average lease term of 7.4 years, and a roll-up in rent of 29%.

And three lease renewals totaling 152,000 sq ft with FedEx, our largest tenant, for a weighted average lease term of 4.6 years and a roll-up in rent of 11.7%. These results are a testament to the quality of our portfolio, showcase our commitment to fostering strong tenant relationships, and underscore our collaborative and strategic approach to leasing. As we look ahead, 8.8 million sq ft, or 11.8% of ILPT’s total annualized revenue, is scheduled to expire by the end of 2027, which provides meaningful embedded rent growth opportunities. Today, our leasing pipeline consists of 6.4 million sq ft, of which 3.8 million sq ft is in advanced stages of negotiation or lease documentation.

Based on current discussions, we expect this activity to generate average rent roll-ups of approximately 20% on the mainland and 30% in Hawaii. I will now turn the call over to Tiffany to review our financial results.

Tiffany Sy, Chief Financial Officer and Treasurer, ILPT: Thank you, Marc. Yesterday, we reported fourth quarter normalized FFO of $18.9 million, or $0.29 per share, which was at the high end of our guidance. This represents an increase of 9% on a sequential quarter basis and 113% compared to the same quarter a year ago. Same property NOI was $88.2 million, and same property cash basis NOI was $85.7 million, both increasing on a year-over-year and sequential quarter basis, driven by strong tenant retention and rent roll-ups. Adjusted EBITDAre totaled $85.1 million. During the quarter, we recognized $14.6 million of earnings from our unconsolidated joint venture, which was primarily driven by an increase in the fair value of the underlying real estate owned by this joint venture.

Additionally, we sold two vacant, unencumbered properties totaling 286,000 sq ft for total proceeds of $3.9 million, resulting in a $1.4 million net loss. In January 2026, we paid our manager an incentive fee of $5.7 million, incurred for the year ended December 31, 2025. This payment resulted from ILPT outperforming the total return of the industry benchmark over the trailing three-year measurement period by more than 60%. Turning to our balance sheet. We ended the quarter with cash on hand of $95 million and restricted cash of $88 million. Our total net debt to total assets ratio declined modestly to 69%, and our net debt leverage ratio improved to 11.8 times.

As of December 31, all of ILPT’s debt is either fixed rate or fixed through an interest rate cap, with a weighted average interest rate of 5.43%. We continue to monitor capital market conditions as we evaluate opportunities to refinance our consolidated joint venture’s $1.4 billion floating rate loan, including its remaining extension option. This loan does not mature until March 2027. We currently expect to exercise this extension option and purchase a related interest rate cap for approximately $4 million. Looking ahead to the first quarter, we expect interest expense to be $61.5 million, including $57 million of cash interest expense and $4.5 million of non-cash amortization of deferred financing fees and interest rate cap costs.

We expect Normalized FFO to be between $0.29-$0.31 per share and Adjusted EBITDAre between $84 million-$85 million. In summary, ILPT ended 2025 with strong operating momentum, improving financial performance, and less exposure to market and interest rate volatility. Our leasing results, stable tenant base, and focus on strengthening ILPT’s balance sheet has us well positioned for 2026. That concludes our prepared remarks. Operator, please open the line for questions.

Yael Duffy, President and Chief Executive Officer, ILPT: We will now begin the question and answer session. To ask a question, you may press star, then one on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys.

Conference Operator: ... If at any time your question has been addressed and you would like to withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. The first question today comes from Mitchell Germain with Citizens Bank. Please go ahead.

Mitchell Germain, Analyst, Citizens Bank: Thank you. Tiffany, you were speaking a little too fast for me. What’s the non-cash interest amount for the year? For the quarter, I mean.

Tiffany Sy, Chief Financial Officer and Treasurer, ILPT: For the quarter... Well, for the forecasted quarter, it’s $4.5 million for-

Mitchell Germain, Analyst, Citizens Bank: 61.5 starting out next year, is that the way to think about it?

Tiffany Sy, Chief Financial Officer and Treasurer, ILPT: That’s correct.

Mitchell Germain, Analyst, Citizens Bank: Okay, great. I believe there was another asset that was under contract or maybe in discussion for sale. Can you provide an update there?

Yael Duffy, President and Chief Executive Officer, ILPT: Sure. Hi, Mitch. Yep, we had another property under LOI for about $50 million, and the tenant was actually gonna be the buyer of that property, and they decided that they preferred to engage in a renewal discussion versus buy the property. So we have a signed LOI for them for a seven-year renewal now that we’re negotiating.

Mitchell Germain, Analyst, Citizens Bank: Okay. That’s helpful. Marc talked about expirations for next two years. Are there any known move-outs we need to be aware of?

Marc Krohn, Vice President, ILPT: Hey, Mitch. Nothing material in nature at this point. We’re making really good progress on our 26 expirations and 27 as we kind of move into, you know, beyond 2026. So we feel good about kind of where we’re landing right now.

Mitchell Germain, Analyst, Citizens Bank: Marc, while I have you, is there any changes that you’re making in the marketing process for the Indy and Hawaii vacancies? I know it’s been north of a year that you’ve been sitting on them now. You know, have you kind of looked at possibly, you know, changing the concession package or some sort of adjustments there?

Marc Krohn, Vice President, ILPT: Well, I’ll touch on Indy, and then I’ll let Yael touch on Hawaii. But Indy, we made some really good progress, and we’re actually exchanging lease comments right now. So that could be as early as next quarter that we would be in a position to maybe provide some positive news about the lease-up of that space.

Yael Duffy, President and Chief Executive Officer, ILPT: Then, as it relates to Hawaii, we’re continuing. We’re in discussions with the same tenant that we’ve talked about the last couple quarters. As I think, you know, it’s just the size of that parcel and the complexity of it just provides some timing delays. But we’re hopeful we’ll be able to lease that one. But in terms of concessions, there really, for that site specifically, there really isn’t anything we can do just given it’s a ground lease, so it’s just finding kind of that unicorn that wants to take such a big parcel.

Mitchell Germain, Analyst, Citizens Bank: Got you. I guess last one from me, and maybe just Tiffany, like, bridge me from, I think it was around $64 million or $63 million in interest expense in Q4 to the forecast that you just laid out in, for Q1. How did we get there?

Tiffany Sy, Chief Financial Officer and Treasurer, ILPT: It’s really number of days. There were 92 days in this quarter, and there’s only 90 in the next quarter.

Mitchell Germain, Analyst, Citizens Bank: Does that suggest that it goes up again in 2Q?

Tiffany Sy, Chief Financial Officer and Treasurer, ILPT: Well, if you... No, it doesn’t, because if you consider what we think we would pay for a cap, $4 million, we’ll have the impact of that in Q2, which should lower interest expense-

Mitchell Germain, Analyst, Citizens Bank: Okay.

Tiffany Sy, Chief Financial Officer and Treasurer, ILPT: Q2.

Mitchell Germain, Analyst, Citizens Bank: Great. Thank you, guys. Appreciate it.

Tiffany Sy, Chief Financial Officer and Treasurer, ILPT: Welcome.

Yael Duffy, President and Chief Executive Officer, ILPT: Thanks, Mitch.

Marc Krohn, Vice President, ILPT: Thank you.

Conference Operator: As a reminder, if you would like to ask a question, please press star then one to enter the question queue. Your next question comes from John Moscata with B. Riley. Please go ahead.

John Moscata, Analyst, B. Riley: Good afternoon.

Yael Duffy, President and Chief Executive Officer, ILPT: Hi, John.

John Moscata, Analyst, B. Riley: So looking at the same store NOI growth in the quarter, a little higher versus kind of your past three quarters, was there anything specific that drove that beyond kind of leasing and addressing some of the vacancy in the mainland portfolio? Just curious if there’s any kind of cash rent coming online or anything like that, that may have caused that to be elevated relative to the last three quarters of the year?

Yael Duffy, President and Chief Executive Officer, ILPT: So, I mean, Tiffany might want to expand, but I think really the reasoning is we do a lot of our leases ahead of time, so, you know, it could be 12-18 months ahead of a natural lease expiration. So it does take a little while for the cash impact of the new leases to kind of hit. And so I think that’s the majority of the increase.

Tiffany Sy, Chief Financial Officer and Treasurer, ILPT: That’s right, the leasing.

John Moscata, Analyst, B. Riley: Okay. And, I mean, would that be something then that as some of those new leases keep hitting, that this level of same store NOI growth is sustainable long term, or is it really going to be a product of just... You know, addressing some of the maybe maturing leases that are still left in 2026 and 2027?

Yael Duffy, President and Chief Executive Officer, ILPT: So I’ll give you as an example. For this quarter, we did. I think the impact of that, of our leasing was about $10 million of cash growth, and most of that hasn’t been. We haven’t seen that yet this quarter. A lot of that, I mean, you know, at least 50% is gonna hit probably in the back half of 2026 and into 2027, because that’s when the leases we renewed this quarter are gonna actually go into effect, so later. So I will say, I would say that it’s sustainable to continue to see that growth.

John Moscata, Analyst, B. Riley: Okay. And then outside of the transactions closed in Q4 and the transaction that was potentially going to be disposition-

Yael Duffy, President and Chief Executive Officer, ILPT: Part of our business plan, at least in the near term. But, you know, we, we do get a lot of inbounds and sometimes, they’re, they appear really good, and we kind of, you know, investigate them further. So I think it’ll be any sales will really be opportunistic, but not a material part of our business plan.

John Moscata, Analyst, B. Riley: Okay. And then with regards to the Monmouth JV loan, you know, it sounds like you’re gonna utilize the extension. But what’s kind of the thought process around refinancing? How are you thinking about timing there? You know, is there something you want to see in the markets or, you know, something else kind of structurally with the JV you want to see before looking to address that refi? Just kind of curious how we should think about that.

Tiffany Sy, Chief Financial Officer and Treasurer, ILPT: We’re actively evaluating refinance opportunities. The good thing is, you know, with the extension option that we have, it gives us flexibility to really, not have to rush into anything because it’s no extra fees. The only thing we have to do is purchase the Interest Rate Cap, which we can later sell when we refinance, if we refinance before the maturity date.

John Moscata, Analyst, B. Riley: So I guess, I mean, is it just do you want to see what kind of macro environment shapes out in terms of, of where we are with kind of base interest rates? Or is there something within the portfolio or within the JV you’re kind of looking to see before you go out there to kind of maximize the best pricing?

Tiffany Sy, Chief Financial Officer and Treasurer, ILPT: No, I wouldn’t say that. I would think we’re currently looking at macroeconomic factors and what’s available to us. And, you know, these types of things do take some time, and we are aware of that. So,

Yael Duffy, President and Chief Executive Officer, ILPT: Yeah, I would just add, John, I think the portfolio is 100% leased. We’ve been seeing really good tenant retention. Even if we get a vacancy, we’re able to lease it up. From an operating perspective, there’s nothing to do to put in a position to refinance.

John Moscata, Analyst, B. Riley: Okay. Lastly, I mean, how do some of your kind of core markets look, particularly on the mainland, in terms of kind of competing supply? You know, is that at all kind of a near-term concern, or is that something that, you know, given where interest rates moved in the last couple of years and, you know, et cetera, that that’s not, not really a big issue going forward?

Yael Duffy, President and Chief Executive Officer, ILPT: We haven’t seen it be a big issue. You know, I think the construction has slowed, and I think the vacancy increase, you know, from a macro perspective, has just been new supply coming to the market. But I think tenants are realizing that it costs money to relocate and is also disruptive to their operations. So, I think we’ve had some tenants that have looked into potential relocations and then have come back and wanted to do a lease renewal.

John Moscata, Analyst, B. Riley: Okay. That’s it for me. I appreciate all the color.

Yael Duffy, President and Chief Executive Officer, ILPT: Thanks, John.

Conference Operator: This concludes our question and answer session. I would like to turn the conference back over to Yael Duffy, President and Chief Executive Officer, for any closing remarks.

Yael Duffy, President and Chief Executive Officer, ILPT: Thank you for joining today’s call, and we look forward to meeting with many of you at industry conferences this spring. Please reach out to Investor Relations if you’re interested in scheduling a meeting with ILPT. Operator, that concludes our call.

Conference Operator: The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect.