Q2 2024 Industrial Logistics Properties Trust Earnings Call

Operator: Good morning, and welcome to the Industrial Logistics Properties Trust's second quarter 2024 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 touchtone 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 Brady, Director of Investor Relations. Please go ahead.

Operator: Good morning, and welcome to the Industrial Logistics Properties Trust's 2nd Quarter 2024 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.

Good morning, and welcome to the industrial Logistics properties Trust second quarter 2024 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 Starkey followed by zero.

Operator: 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.

After todays presentation, there will be an opportunity to ask questions to ask a question you May Press Star then one on a touchtone phone to withdraw your question. Please press Star then two.

Please note this event is being recorded.

Kevin Brady: I would now like to turn the conference over to Kevin Brady, Director of Investor Relations.

I would now like to turn the conference over to Kevin Brady Director of Investor Relations. Please go ahead.

Kevin Brady: Thanks, Nick.

Kevin Brady: Thanks, Nick. Good morning. Joining me on today's call are ILPT's President and Chief Operating Officer, Yael Duffy, Chief Financial Officer and Treasurer, Tiffany Sy, and Vice President, Mark Crone. The call will include a presentation by management, followed by a question and answer session with analysts. Please note that the recording and retransmission of today's conference call is prohibited without the prior written consent of the company. Also, please 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.

Kevin Brady: Thanks, Nick Good morning, joining me on today's call are <unk>, President and Chief operating Officer, <unk>, Chief Financial Officer, and Treasurer Tiffany Si.

Kevin Brady: Good morning. Joining me on today's call are ILPT's president and chief operating officer, Yael Duffy. Chief Financial Officer and Treasurer, Tiffany Sy, and Vice President, Mark Cron.

Speaker Change: And Vice President Mark.

Kevin Brady: Today's call includes a presentation by management, followed by a question-and-answer session with analysts.

Speaker Change: Today's call includes a presentation by management followed by.

Speaker Change: A question answer session with analysts.

Kevin Brady: Please note that the recording and retransmission of today's conference call is prohibited without the prior written consent of the company. Also, please note that today's conference call contains forward-looking statements within the meeting 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, July 31, 2024, 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 my website, ILPTREAPES.com.

Speaker Change: Please note that the recording and retransmission of today's conference call is prohibited without the <unk>.

Speaker Change: Prior written consent of the company.

Kevin Brady: These four living statements are based on ILPT's beliefs and expectations as of today, July 31st, 2024, 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, ILPTREITS.com.

Speaker Change: Also please 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.

Speaker Change: These forward looking statements are based on <unk> beliefs and expectations as of today July 31, 2024, and actual results may differ materially from those that we project.

Speaker Change: 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.

Speaker Change: He asked this for my website <unk> 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 that football adjusted EBITDA.

Kevin Brady: Investors, our caution is not to place under-reliance upon any forward-looking statements.

Kevin Brady: 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 EBITDA IRAE, and cash basis net operating income or cash basis NOI. A reconciliation of these non-GAAP measures to net income is available in our earnings presentation, which can be found on our website. With that, I will turn the call over to Yael.

Kevin Brady: In addition, we will be discussing non-GAAP financial measures during this call, including normalized funds from operations or normalized effort follow, adjusted EBITDA R8, and cash-basis net operating income or cash-basis NOI. A reconciliation of these presentations, which can be found on our website.

Mark: <unk> and cash basis, net operating income or cash basis NOI. A reconciliation of these non-GAAP measures to net income is available in our earnings presentation, which can be found on our website with that I will turn the call over to yeah. Thank you Kevin and good morning, before we start I would like to welcome Mark.

Kevin Brady: With that, I will turn the call over to YILLE.

Yael Duffy: Thank you, Kevin, and good morning. Before we start, I would like to welcome Mark Krohn, who joined ILPT as our Vice President on June 1st. On today's call, I will start with an overview of our portfolio, review second quarter leasing results and upcoming lease expirations before turning the call over to Tiffany to review our financial results. As we enter the second half of the year, we remain encouraged by the continued demand for ILPT's high-quality portfolio, which has benefited from solid leasing activity and organic cash flow growth. Compared to the same period last year, cash basis NOI increased 2.6 percent, and normalized FFO increased 18.1 percent.

Yael Duffy: Thank you, Kevin, and good morning.

Yael Duffy: Before we start, I would like to welcome Mark Crone, who joined ILPT as our Vice President on June 1. On today's call, I will start with an overview of our portfolio. Reviews second-quarter leasing results and upcoming lease expiration before turning the call over to Tiffany to review our financial results. As we enter the second half of the year, we remain encouraged by the continued demand for ILPTREAPES high-quality portfolio, which has benefited from solid leasing activity and organic cash flow growth. Compared to the same period last year, cash-basis NOI increased 2.6 percent and normalized FFO increased 18.1 percent.

Mark: One who joined IMTT as our vice President.

Speaker Change: On today's call I will start with an overview of our portfolio reviews second quarter leasing results and upcoming lease exploration before turning the call over to Stephanie to review our financial results.

Speaker Change: As we enter the second half of the year. We remain encouraged by the continued demand for I O P. T high quality portfolio, which has benefited from solid leasing activity and organic cash flow growth.

Stephanie: Compared to the same period last year cash basis, NOI increased two 6% and normalized <unk> increased 18, 1%.

Yael Duffy: In the first half of 2024, we signed 26 leases totaling 2.6 million square feet at weighted average rental rates that were 30.5 percent higher than prior rental rates for the same space. The impact of this activity is an increase of $4.2 million in annualized rental revenue, of which more than $3.4 million has yet to be realized, given the effective dates are in the second half of 2024 or in 2025. As of June 30, 2024, ILPT's portfolio consisted of 411 warehouse and distribution properties in 39 states totaling approximately 60 million square feet, which includes 16.7 million square feet of industrial land and properties in Hawaii.

Yael Duffy: In the first half of 2024, we signed 26 leases totaling 2.6 million square feet at weighted average rental rates that were 30.5% higher than prior rental rates for the same space. The impact of this activity is an increase of $4.2 million in annualized rental revenue, of which more than $3.4 million has yet to be realized, given the effective dates are in the second half of 2024 or in 2025. As of June 30th, 2024, ILPT's portfolio consisted of 411 warehouse and distribution properties in 39 states, totaling approximately 60 million square feet, which included 16.7 million square feet of industrial land and properties in Hawaii.

Speaker Change: In the first half of 2024, we signed 26 leases totaling two 6 million square feet at weighted average rental rate that was 31, 5% higher than prior rental rates for the same space.

Speaker Change: The impact of this activity is an increase of $4 $2 million in annualized rental revenue of which more than $3.4 million has yet to be realized.

Speaker Change: The effective date or in the second half of 2024 or in 2025.

Speaker Change: As of June 30th 2020 for I O P. Ts portfolio consisted of 411 warehouse and distribution properties in 39 states totaling approximately 60 million square feet, which includes $16 7 million square feet of industrial land.

Speaker Change: And properties in Hawaii.

Yael Duffy: ILPT's portfolio has a weighted average remaining lease term of 7.9 years, anchored by tenants with strong business profiles and stable cash flows. ILPT's top tenants account for nearly half of our total annualized rental revenues, and 77 percent of our revenues come from investment grade rated tenants or from our secure Hawaii land leases. During the quarter, we entered 15 new and renewal leases for approximately 628,000 square feet at a weighted average lease term of 6.8 years. The activity resulted in gap and cash leasing spreads of 15.8 percent and 7.8 percent, respectively. Leasing in our wholly owned mainland portfolio was strong, with total renewal leasing of approximately 432,000 square feet at weighted average roll-ups and rent of 9.6 percent.

Yael Duffy: ILPT's portfolio has a weighted average remaining lease term of 7.9 years, anchored by tenants with strong business profiles and stable cash flows. ILPT's top tenants account for nearly half of our total annualized rental revenues, and 77% of our revenues come from investment-grade rated tenants or from our secure Hawaii land lease. During the quarter, we entered 15 new and renewal leases for approximately 628,000 square feet at a weighted average lease term of 6.8 years. This activity resulted in a gap in cash leasing spreads of 15.8% and 7.8%, respectively.

Speaker Change: I L. P. CS portfolio has a weighted average remaining lease term of 7.9 year anchored by tenants with strong business profile and stable cash flow.

Speaker Change: I L. P. Te's top tenants account for nearly half of our total annualized rental revenues and 77% of our revenues come from investment grade rated tenants or from our secure Hawaii land leases.

Yael Duffy: During the quarter, we entered 15, new and renewal leases for approximately 628000 square feet at a weighted average lease term of six eight years.

Speaker Change: This activity resulted in GAAP and cash leasing spreads.

Speaker Change: <unk>, 8% and seven 8% respectively.

Yael Duffy: Leasing in our wholly owned mainland portfolio was strong, with total renewal leasing of approximately 432,000 square feet at weighted average roll-ups in rent of 9.6%. We continue to benefit from mark-to-market opportunities within our Hawaii portfolio, where market vacancy is 1% and there has been minimal new construction. We executed 11 leases at weighted average rental rates that were 23.8 percent higher than prior rents, including two new leases totaling 73,000 square feet, an increase in rent of 43.5 percent. As we have long telegraphed, this quarter, we saw the impact of the 2.2 million square foot land parcel in Hawaii that became vacant on April 1st, as occupancy declined to 95.4%.

Speaker Change: Leasing in our wholly owned mainland portfolio was strong with total renewal leasing of approximately 432000 square feet at weighted average roll up in rent of nine 6%.

Yael Duffy: We continued to benefit from mark-to-market opportunities within our Hawaii portfolio, where market vacancy is 1 percent and there has been minimal new construction. We executed 11 leases at weighted average rental rates that were 23.8 percent higher than prior rent, including 2 new leases totaling 73,000 square feet at increases in rent of 43.5 percent. As we have long telegraphed, this quarter we saw the impact of the 2.2 million square foot land parcel in Hawaii that became vacant on April 1st, as occupancy declined to 95.4 percent. While the property accounted for 3.7 percent of total occupancy, it represents less than 1 percent of IOPT's annualized rental revenues.

Speaker Change: We continue to benefit from mark to market opportunities within our Hawaii portfolio, where market vacancy is one with that and there has been minimal new construction.

Speaker Change: We executed 11 leases at weighted average rental rates that were 23, 8% higher than prior rents, including two new leases totaling 73000 square feet and increases in rent of 43, 5%.

Speaker Change: As we have long telegraphed this quarter, we saw the impact of the 2.2 million square foot land parcel in Hawaii that became vacant on April 1st as occupancy declined to 95, 4%.

Yael Duffy: While the property accounted for 3.7% of total occupancy, it represents less than 1% of ILPT's annualized rental revenue. We are actively marketing the site for lease. Looking ahead to IOPT's upcoming lease expiration, for the remainder of 2024, 1.3 million square feet, or 3.1% of ILPT's annualized revenue, is set to expire. In July, a 535,000-square-foot property in the East Submarket of Indianapolis previously leased to a beverage distributor became vacant. This tenant accounted for approximately 90 basis points of ILPT's occupancy and 1% of ILPT's annualized revenue, or $4 million.

Speaker Change: While the property accounted for three 7% of total occupancy it represents less than 1% of Iot Ts annualized rental revenues.

Yael Duffy: We are actively marketing the site for lease, looking ahead to IOPT's upcoming lease expiration. For the remainder of 2024, 1.3 million square feet or 3.1 percent of IOPT's annualized revenue is set to expire. In July of 535,000 square foot property in the east submarket of Indianapolis previously leased to a beverage distributor, became vacant. This tenant accounted for approximately 90 basis points of IOPT's occupancy and 1 percent of IOPT's annualized revenue for $4 million. Accordingly, this move out will impact our results in the second half of the year. As we look ahead to 2025 and 2026, 8.4 million square feet, or 12.8% of IOPT's total annualized revenue, is set to expire.

Speaker Change: We are actively marketing the site for lease.

Speaker Change: Looking ahead to I L. P Ts upcoming lease expirations for the remainder of 2024 1.3 million square feet or three 1% of I O P. Ts annualized revenue with that to expire in.

Speaker Change: In July a 535000 square foot property in the east sub market of Indianapolis previously leased to a beverage distributor became vacant.

Speaker Change: This tenant accounted for approximately 90 basis points of I O P. T. The occupancy and 1% of I O P Ts annualized revenue or $4 million.

Yael Duffy: Accordingly, this move out will impact our results in the second half of the year, as we look ahead to 2025 and 2026. 8.4 million square feet, or 12.8% of ILPT's total annualized revenue, is set to expire.

Speaker Change: Accordingly, this move out will impact our results in the second half of the year.

Speaker Change: As we look ahead to 2025 and 2026.

Speaker Change: $8 4 million square feet or 12, 8% of I O P. T. As total annualized revenue was set to expire.

Yael Duffy: Our leasing and asset management teams are proactively engaging in renewal discussions with these tenants. As conversations progress, we expect to benefit from our proven track record of strong tenant retention and reputation as a landlord of choice. Our leasing pipeline remains active. We are tracking 36 deals for over 7 million square feet, of which 2.5 million square feet, or 35%, is in an advanced stage of negotiation or lease documentation. Included in our pipeline are proposals for the Hawaii land parcel and the Indianapolis property that I mentioned earlier, and we will update you on our progress as the sessions evolve.

Yael Duffy: Our leasing and asset management teams are proactively engaging in renewal discussions with these tenants. As conversations progress, we expect to benefit from our proven track record of strong tenant retention and reputation as a landlord of choice. Our leasing pipeline remains active. We are tracking 36 deals for over 7 million square feet, of which 2.5 million square feet, or 35 percent, are in advanced stages of negotiation or lease documentation. Included in our pipeline are proposals for the Hawaii land parcel and the Indianapolis property that I mentioned earlier, and we will update you on our progress as discussions evolve.

Yael Duffy: Our leasing and asset management teams are proactively engaging in renewal discussions with these tenants.

Speaker Change: There's conversations progressed, we expect to benefit from our proven track record of strong tenant retention and reputation as a landlord of choice.

Yael Duffy: Our leasing pipeline remains active we are tracking 36 deal for over 7 million square feet of which $2 5 million square feet or 35% is in advanced stages of negotiation or at least documentation.

Speaker Change: Included in our pipeline or proposals for the Hawaii land parcel in the Indianapolis property that I mentioned earlier, and we will update you on our progress as discussions evolve.

Yael Duffy: Before I turn the call over to Tiffany, I would like to reiterate that we believe there is continued opportunity to generate organic cash flow growth and reduce leverage, which has declined from 12.7 times to 11.9 times over the last year. As such, we remain focused on tenant retention, maximizing mark-to-market rent growth, and continuing to evaluate opportunities to reduce operating expenses.

Yael Duffy: Before I turn the call over to Tiffany, I would like to reiterate that we believe there is continued opportunity to generate organic cash flow growth and reduce leverage, which has declined from 12.7 times to 11.9 times over the last year. As such, we remain focused on tenant retention, maximizing mark-to-market rent growth, and continuing to evaluate opportunities to reduce operating expenses. Thank you, Yael.

Speaker Change: Before I turn the call over to Tiffany I would like to reiterate that we believe there is continued opportunity to generate organic cash flow growth and reduce leverage which has declined from $12 seven times to 11 nine times over the last year.

Tiffany R. Sy: Such we remain focused on tenant retention maximizing mark to market rent growth and continuing to evaluate opportunities to reduce the operating expenses Tiffany.

Tiffany Sy: Tiffany? Thank you, Yael.

Tiffany R. Sy: Thank you, Yael. Good morning, everyone.

Tiffany R. Sy: Thank you Yale good morning, everyone.

Tiffany Sy: Good morning, everyone. Yesterday, we reported second quarter normalized FFO of $9 million, or 14 cents per share, representing an increase of 18.1% compared to the same quarter in 2023. Gap and cash basis NOI were $86.3 million and $82.9 million, increasing by 2.2% and 2.6% year over year, while adjusted even to RE of $85.1 million increased 4.6% compared to the same quarter a year ago.

Tiffany R. Sy: Yesterday, we reported second quarter normalized FFO of $9 million, or $0.14 per share, representing an increase of 18.1% compared to the same quarter last year. Gaps in cash basis NOI were $86.3 million and $82.9 million, increasing by 2.2% and 2.6% year-over-year, while adjusted EBITDA RE of $85.1 million increased 4.6% compared to the same quarter a year ago. As we look towards the third quarter, it's worth noting that approximately $1 million of nonrecurring GAAP and cash-basis revenues related to one-time fees and bad debt recoveries were included in our second quarter results.

Speaker Change: Yesterday, we reported second quarter normalized Roe of $9 million or 14 cents per share representing an increase of 18, 1% compared to the same quarter in 2023.

Speaker Change: GAAP and cash basis, NOI were $86 $3 million.

Speaker Change: $2 $9 million, increasing by two 2% and two 6% year over year.

Tiffany R. Sy: Adjusted EBITDA, sorry of $85 $1 million increased four 6% compared to the same quarter a year ago.

Tiffany Sy: As we look towards the third quarter, it's worth noting that approximately $1 million of non-recurring gap and cash basis revenues related to one-time fees and bad debt recoveries were included in our second quarter results. Interest expense of $73.6 million increased by $1.8 million compared to the same period a year ago, and approximately $400,000 on a sequential quarter basis. During the second quarter, we paid $58.3 million of cash into 6 cents, net of the cash we received from our interest rate cap, and recognized $15.3 million of non-cash amortization of financing and interest rate cap costs.

Speaker Change: As we look towards the third quarter, it's worth noting that approximately $1 million of nonrecurring GAAP and cash basis revenues related to one time fees and bad debt recovery.

Tiffany R. Sy: Were included in our second quarter results.

Tiffany R. Sy: Interest expense of $73.6 million increased by $1.8 million compared to the same period a year ago and approximately $400,000 on a sequential quarter basis. During the second quarter, we paid $58.3 million of cash interest expense, net of the cash we received from our interest rate cap, and recognized $15.3 million of non-cash amortization of financing and interest rate cap costs. We expect our third-quarter interest expense to remain in line with the second quarter.

Speaker Change: Interest expense of $73 $6 million increased by $1 $8 million compared to the same period a year ago.

Tiffany R. Sy: Absolutely $400000 on a sequential quarter basis.

Speaker Change: During the second quarter, we paid $53 million of cash interest expense.

Speaker Change: None of the cash we received from our interest rate caps and recognized $15 3 million of noncash amortization of financing and interest rate cap costs.

Tiffany Sy: We expect our third quarter interest expense to remain in line with the second quarter.

Speaker Change: We expect our third quarter interest expense to remain in line with the second quarter.

Tiffany Sy: Turning to our balance sheet, as of June 30th, our net debt to total assets ratio was 68.2%, an improvement of 60 basis points compared to a year ago, while our net debt coverage ratio improved by 80 basis points to 11.9 times, driven by an increase in adjusted EBITDA and the pay down of our amortizing debt. All of our debt is currently carried out a fixed rate or a fixed through interest rate cap with weighted average rate of 5.35%. As of today, we intend to exercise the first of our three one-year extension options on our $1.2 billion moment maturing in October 2024.

Tiffany R. Sy: Turning to our balance sheet, as of June 30th, our net debt-to-total-assets ratio was 68.2%, an improvement of 60 basis points compared to a year ago, while our net debt coverage ratio improved by 80 basis points to 11.9 times, driven by an increase in adjusted EBITDA RE and the paydown of our amortizing debt. All of our debt is currently carried at a fixed rate or a fixed interest rate cap, with a weighted average rate of 5.35%.

Tiffany R. Sy: Turning to our balance sheet.

Tiffany R. Sy: As of June 30, our net debt to total assets ratio was 68, 2% an improvement of 60 basis points compared to a year ago, while our net debt coverage ratio improved by 80 basis points to 11 nine times driven by an increase in adjusted EBITDA, Ari and the pay down of our amortizing debt.

Tiffany R. Sy: All of our debt is currently carried at a fixed rate.

Speaker Change: It is fixed through interest rate cap.

Tiffany R. Sy: With a weighted average rate of 5.35%.

Tiffany R. Sy: As of today, we intend to exercise the first of our three one-year extension options on our $1.2 billion loan maturing in October 2024. Including extension options, ILPP has no debt maturities until 2027. As of June 30th, total cash was approximately $260 million, including $112 million of restricted cash, representing total cash growth of approximately $50 million over the past year. We expect to use this cash to pay for a replacement interest rate cap on our $1.2 billion loan and to fund future leasing obligations.

Tiffany R. Sy: As of today, we intend to exercise the first of our three one year extension option on our $1 $2 billion loan maturing in October 2024.

Tiffany Sy: Including extension options, IELPT has no debt maturities until 2027. As of June 30, total cash was approximately $260 million, including $112 million of restricted cash, representing total cash growth of approximately $50 million over the past year. We expect to use this cash to pay for a replacement interest rate cap on our $1.2 billion loan and fund future leasing obligations.

Speaker Change: Including extension options I don't think he has no debt maturities until 2027.

Tiffany R. Sy: As of June 30th total cash was approximately $260 million, including $112 million of restricted cash representing total cost growth of approximately $50 million over the past year.

Tiffany R. Sy: We expect to use this cash to pay for a replacement interest rate caps on our $1 $2 billion loan, it's a fund future leasing obligations.

Tiffany R. Sy: In closing, ILPT's portfolio continues to benefit from rising rental rates, overall high tenant retention, and investment-grade rated tenant profile, and is well-positioned to support our strategic objectives. Operator, please open the line for questions.

Tiffany Sy: In closing, IELPT's portfolio continues to benefit from rising rental rates, overall high-tenant retention, and investment grade-rated tenant profile, and is well-positioned to support our strategic objectives.

Speaker Change: In closing I Hope you do as portfolio continues to benefit from rising rental rates overall high tenant retention and investment grade rated tenant profile and is well positioned to support our strategic objectives.

Tiffany Sy: That concludes our prepared remarks.

Speaker Change: Who's our prepared remarks, operator, please open the line for questions.

Operator: Operator, please open the line for questions. We'll now begin the question and answer session. To ask a question, you may press star then one on your touchtone phone. If you're using a speaker phone, please pick up your handset before pressing the keys. If at any time your question has been addressed, and you would like to withdraw to your question, please press star, then two.

Operator: We'll now begin the question and answer session. To ask a question, you may press star, then 1 on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been answered and you would like to withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. The first question comes from Bryan Maher, with B. Reilly, F.B.R. Please go ahead.

Speaker Change: Well begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone if youre using a speakerphone. Please pick up your handset before pressing the keys.

Operator: Any time your question has been addressed and you would like to withdraw your question. Please press Star then two.

Operator: At this time, we will pause momentarily to assemble our roster.

Speaker Change: At this time, we will pause momentarily to assemble our roster.

Brian Mahar: The first question comes from Brian Mahar with B. Riley FBR. Please go ahead.

Speaker Change: The first question comes from Bryan Maher with B Riley FBR. Please go ahead.

Brian Mahar: Thank you and good morning. Just a couple for me today. On the Home Depot and Indianapolis properties, that was some helpful information on your leasing pipeline, and I understand both are in the advanced stages. From a modeling standpoint, where would you advise that we possibly slot that in? Could it be as early as what quarter is it, you know, more like first half of 2025? I was conservatively modeled a second half of 2025. Why would it take so long?

Bryan Anthony Maher: Thank you and good morning. A couple of questions on the Home Depot and Indianapolis properties. That was some helpful information on your leasing pipeline, and I understand both are in the advanced stage. But from a modeling standpoint, where would you advise us to possibly slot that in? Could it be as early as the fourth quarter, or is it, you know, more like the first half of 2025?

Bryan Anthony Maher: Thank you and good morning, just a couple from me today.

Speaker Change: On the home depot, Oh, and Indianapolis properties that was some helpful information.

Speaker Change: Pipeline and I understand.

Bryan Anthony Maher: Stages.

Speaker Change: From a modeling standpoint, now where would you advise that possibly slots at Inc.

Bryan Anthony Maher: He is early as the fourth quarter or is it more like first half of 2025.

Speaker Change: I'm sorry.

Speaker Change: The model the second half of 2025.

Yael Duffy: [inaudible] in the second half of 2025.

Yael Duffy: And why would it take so long?

Speaker Change: And why would it take so long.

Yael Duffy: We are in, so while we have proposals out for both sites, we aren't in advanced negotiations with any one tenant quite yet, and by the time we negotiate a lease and document it, it'll probably take some time.

Yael Duffy: We aren't in. So, while we have proposals out for both sites, we aren't in advanced negotiations with any one tenant quite yet. And by the time we negotiate a lease and document it, it'll probably take a while.

Speaker Change: We arent in so we well we have proposals out for both sides. We are in advanced negotiations with any one tenant quite yet and by the time, we negotiate a lease and.

Yael Duffy: Document it it'll probably take some time.

Tiffany Sy: Okay, and then maybe for Tiffany, when you have this, you know, the upcoming extension in October, has there been any changes, you know, given the interest rates of the clients, since we last spoke on an earnings call to your thoughts on what the cap cost might be? Right now, we're expecting the cost to be between $25 and $30 million. And when might that actually be executed? I would say very close to September 30th. Okay.

Bryan Anthony Maher: Okay, and then maybe for Tiffany, when you have this, you know, the upcoming extension in October, has there been any changes, you know, given the interest rates have declined since we last spoke on an earnings call? Do you have thoughts on what the cap cost might be?

Yael Duffy: Okay, and then maybe for Tiffany when you have this.

Tiffany R. Sy: How many extension in October has there been any.

Tiffany: The changes you know given the interest rates have declined since we last spoke on our earnings call to your thoughts on what the cap cost might be.

Tiffany R. Sy: Right now, we're expecting the cost to be between $25 and $30 million.

Tiffany: Right now, we're expecting the cost to be between 25 and $30 million.

Tiffany R. Sy: Yeah.

Tiffany R. Sy: And when might that actually be executed?

Speaker Change: And when might that actually be executed.

Tiffany R. Sy: I would say, very close to September 30th.

Tiffany R. Sy: I would say very close to September 30th.

Tiffany R. Sy: Yeah.

Bryan Anthony Maher: Okay. And then given your current progression on leverage, assuming there's not some deleveraging transaction, you know, via adding a JV partner or some asset sales, you know, what should we think about the pace of deleveraging? Should it be similar over the upcoming 12 months to what we saw over the past 12 months?

Speaker Change: Okay, and then given your current progression on leverage net debt to EBITDA, assuming there's not some deleveraging transaction.

Tiffany Sy: And then, giving your current progression on leverage, and that's it, that assuming there's not some de-leveraging transaction, you know, you're adding a JD partner or some asset sales, you know, what should we think about the pace of de-leveraging? Should it be similar of the upcoming 12 months to what we saw in the past 12 months? I think that's a fair estimate.

Speaker Change: G partner or some asset sales you know what should we think about the pace of deleveraging should it be similar over the upcoming 12 months to what we saw over the past 12 months.

Speaker Change: I think that's a that's a fair.

Speaker Change: Fair estimate yeah.

Brian Mahar: And then just last for me, and I know you're going to be able to answer some, but I mean your cash position is decent, especially when you think about paying for the cap at 25 to 30 million.

Bryan Anthony Maher: Okay.

Yael Duffy: And then just last for me, and I know, Yael, you're going to be able to answer some of that, but I mean, your cash position is decent, especially when you think about, you know, paying for the cap at $25 to $30 million. I know you have some, you know, tenant stuff that you have to do, but has the board given any thought to ratcheting up the dividend even a little? I mean, the dividend payout ratio, when you look at it...

Speaker Change: And then just last for me.

Speaker Change: Yeah, I know you're going to be able to answer some of that but I mean, your cash position is decent, especially when you think about yeah paying for the cap at $25 million to $30 million.

Tiffany Sy: I know you have some tenant stuff that you have to do, but has the board given any thought to ratcheting up the dividend even a little? I mean the dividend payout ratio when you look at CAD, and CAD payout ratio is really conservative. You know, it's the board giving any considerations at all at this time. So we do discuss it at each of the board meetings, and currently the plan is just to continue to preserve cash to run the business.

Yael Duffy: Some tenants stuff that you have to do but has the board given any thought to ratcheting up the dividend even at all.

Yael Duffy: Dividend payout ratio.

Speaker Change: CAD payout ratio.

Yael Duffy: Yeah, it's really conservative yeah, we're giving any consideration to that at all at this time.

Yael Duffy: So we do discuss it at each of the board meetings, and currently, the plan is just to continue to preserve cash to run the business.

Speaker Change: But we do discuss that at each of our board meetings and currently the plan is just to continue to preserve cash to run the business.

Brian Mahar: Okay, thank you. That's all for me.

Bryan Anthony Maher: Okay, thank you, that's all for me.

Speaker Change: Okay. Thank you that's all for me.

Operator: Thanks, Brian. Again, if you have a question, please press star, then one.

Brian: Thanks, Brian.

Operator: Again, if you have a question, please press star then 1. The next question comes from Mitch Germain, a private investor. Please go ahead.

Speaker Change: Again, if you have a question. Please press Star then one.

Mitch Germain: The next question comes from Mitch Germain, private investor. Please go ahead.

Operator: The next question comes from Mitch Germain private Investor. Please go ahead.

Mitch Germain: Interesting. Another new job.

Mitchell Bradley Germain: Two interesting I got a new job.

Mitchell Bradley Germain: Interesting, I got a new job. Yael, I wanted to talk about the leasing pipeline and just some of the, you know, kind of ins and outs. You were at 7.5 million square feet last quarter. Seems like it's down a bit. Is that the way to think about it? It's at 7 million square feet? Or did I misunderstand what you said?

Operator: Hum.

Mitchell Bradley Germain: So.

Yael Duffy: So, Yael, I wanted to talk about the leasing pipeline and just some of the kind of ins and outs. You were at 7.5 million square feet last quarter. Seems like it's down a bit. Is that the way to think about it? Is it 7 million square feet? Did I mistake what you said? So it was 7.5 million square feet last quarter, but we also did execute 628,000 square feet of new leasing or leasing this quarter. So that gets back out. So there is some ins and outs as we execute leasing.

Yael Duffy: Yeah, Bill I wanted to talk about the leasing pipeline.

Speaker Change: And just some of the you know kind of ins and outs. You you were at seven 5 million square feet last quarter seems like it's down a bit is that the way to think about is it 7 million square feet, what did I mistaken what you said.

Yael Duffy: So, it was 7.5 million square feet last quarter, but we also did execute 628,000 square feet of new leasing this quarter, so that gets back. So there are some ins and outs as we execute leasing.

Yael Duffy: So it was seven and a half million square feet last quarter, but we also did execute 628000 square feet of new leasing.

Speaker Change: The thing that quarter, so that gets backed.

Yael Duffy: So there is some ins and outs as we execute we thing.

Mitchell Bradley Germain: Great, that's kind of what I was asking in terms of you know kind of what's the kind of execution rate on that on the pipe.

Speaker Change: Great that's kind of what I was asking in terms of you know kind of what's.

Yael Duffy: That's kind of what I was asking in terms of, you know, kind of what's the kind of execution rate on that on the pipeline historically? So we executed what was in the 7.5. So it's a net positive of about 150,000 square feet of new pipeline from one quarter to the next.

Speaker Change: The kind of execution rate on that on the pipelines historically.

Mitchell Bradley Germain: So.

Yael Duffy: We, we executed. What was in the seven and a half, so it's a net positive of 150,000 square feet of new pipeline from one quarter to the next.

Speaker Change: We we executed.

Yael Duffy: What was in the seven and a half so it's a net positive up 150000 square feet of new pipeline from one quarter to though.

Yael Duffy: Okay, great. And then I guess your commentary suggested you had a proposal out last quarter on the Hawaii space. Is it safe to say that that kind of fell through and now it's kind of back out there, or are you still under negotiations with, you know, that customer and maybe even others as well? Yeah, so we have; we only consider, we only account for the square footage one time. So we do have multiple proposals out for the Hawaii land parcels, one for the entire site and then a couple for half the site. And so we're kind of negotiating, but not far enough to say that we have an L.O.I.

Yael Duffy: Okay, Great and then.

Mitchell Bradley Germain: Okay, great. And then... I guess your commentary suggested you had a proposal out last quarter in the Hawaii space. Is it safe to say that that kind of fell through and now it's kind of back out there, or are you still under negotiations with, you know, that customer and maybe even others as well?

Yael Duffy: So we only consider, we only account for the square footage one time, so we do have multiple proposals out for the Hawaii land parcels, one for the entire site and then a couple for half the site. And so we're kind of negotiating, but not far enough to say that we're not or we haven't.

Mitchell Bradley Germain: I guess your commentary suggests that you had a proposal out last quarter.

Yael Duffy: On the Hawaii space.

Speaker Change: Is it safe to say that that kind of fell through and now it's kind of back out there or are you still under negotiations with you know that customer and maybe even others as well.

Yael Duffy: Yeah. So we have we only consider we only account for the square footage one times. So we do have we do have multiple proposals out for the Hawaii land parcel one for the entire site and then a couple for half the site.

Yael Duffy: And so we're we're kind of negotiating but not far enough to say that where we have an LOI yet.

Yael Duffy: yet. So Hawaii parcel, I'm sorry, no, I think we part of the reason it's going to take a little while. There's just a lot of diligence to do for any tenant who's going to take that Hawaii parcel. It's, you know, a big piece of land. And I think for tenants to undertake it, they have a lot of homework to do before they come in. Talking to Millions Square Feet is now the easy task.

Yael Duffy: I think part of the reason it's going to take a little while is that there's just a lot of diligence to do for any tenant who's going to take that Hawaii parcel. It's, you know, a big piece of land, and I think for a tenant to undertake it, they have a lot of homework to do before they come in.

Yael Duffy: Right so in Hawaii for so long.

Yael Duffy: I'm sorry.

Yael Duffy: I think we did.

Yael Duffy: Part of the reason, it's going to take a little while Theres just a lot of diligence to do for any tenant who's going to take that Hawaii parcel. Its you know a big piece of land and I think for a tenant to undertake it they have a lot of homework to do before they come in.

Mitchell Bradley Germain: Walking two million square feet is not an easy task. And then Indy went on July 1 or July 31? I just can't remember.

Yael Duffy: Walking 2 million square feet is not that easy task.

Mitchell Bradley Germain:

Yael Duffy: And then Indy went dark on July 1, or was it July 31st? I just can't remember. The Indian Atlas property, it was, they actually held over for a couple of days, so in early in July. Basically, July 1 is the safest way to think about it, right? Correct. Yep.

Mitchell Bradley Germain: And then India went dark.

Mitchell Bradley Germain: Hum.

Mitchell Bradley Germain: July one or as of July 31st I, just can't remember.

Yael Duffy: The Indianapolis property, it was, they actually held it for a couple of days, so in

Mitchell Bradley Germain: The Indianapolis property. It was they actually held over for a couple of days. So in early in July.

Speaker Change: She basically July one is the cheapest way to think about it right.

Mitchell Bradley Germain: Basically, July 1 is the safest way to think about it, right? Correct. Yep. Okay, great.

Mitchell Bradley Germain: Correct Yep, Okay great.

Yael Duffy: Okay, great. And then last one for me, you know, obviously we're in this period where, you know, the discussion around rates, costs has become, is gaining momentum, call it. How or is your team viewing the potential to possibly refinance some of the existing debt? Is it something where you're just going to kind of let the market settle and see kind of where things go? Or do you look to maybe take an advantageous view toward potentially locking in more favorable rates, you know, kind of nearer term? How do you kind of see the playbook there? So we are evaluating before we would ever exercise the cap or evaluating if it's beneficial to refinance instead.

Mitchell Bradley Germain:

Mitchell Bradley Germain: And then last one for me, you know, obviously we're in this period where the discussion around rates, cuts, has become, is gaining momentum, call it that. How is your team viewing the potential to possibly finance some of the existing debt, something where you're just going to kind of let the market settle and see kind of where things go, or do you look to maybe take an advantageous view? toward potentially locking in more favorable rates, you know, kind of nearer term. How do you kind of see the playbook there? So we are evaluating it before we would

Mitchell Bradley Germain: And then last one for me you know obviously, we're in this period where.

Mitchell Bradley Germain: You know the discussion around rates Koch has become is gaining momentum call. It.

Mitchell Bradley Germain: How or is your team.

Mitchell Bradley Germain: Assuming the potential to possibly.

Speaker Change: Finance some of the existing debt is it.

Mitchell Bradley Germain: Something where you're just going to kind of let the market settle in she kind of where things go.

Mitchell Bradley Germain: Or do you look to maybe taken advantageous you.

Mitchell Bradley Germain: Toward potentially locking in more favorable rates, you know kind of nearer term, how do you kind of see the playbook there.

Yael Duffy: So we are evaluating. Before we would ever exercise a cap, we're evaluating if it's beneficial to refinance instead. So that analysis is ongoing.

Mitchell Bradley Germain: So we are evaluating before we would ever exercise a cap or evaluating if it's beneficial to refinance instead, so that analysis is ongoing.

Yael Duffy: So this analysis is ongoing. Great.

Yael Duffy: Right.

Mitch Germain: Thank you. Thanks, Mitch.

Speaker Change: Thank you.

Mitch: Thanks Mitch.

Yael Duffy: This concludes our question and answer session.

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

Speaker Change: This concludes our question and answer session.

Yael Duffy: I would like to turn the conference back over to the aisle, Duffy, for any closing remarks. Thank you, everyone, for joining us on the call today.

Operator: I'd like to turn the conference back over to the aisle Duffy for any closing remarks.

Yael Duffy: Thank you everyone for joining us on the call today.

Yael Duffy: Thank you everyone for joining us on the call today.

Operator: The conference is now concluded. Thank you for attending today's presentation.

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

Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.

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Operator: You may now disconnect. .

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