Q1 2025 Industrial Logistics Properties Trust Earnings Call
Unknown Executive: Good morning and welcome to Industrial Logistics Properties Trust first quarter 2025 financial results conference call. All participants will be in 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 industrial Logistics properties Trust first quarter 2025 financial results Conference call all participants will be in listen only mode.
Should you need assistance. Please signal a conference specialist by pressing the star key followed by zero.
Unknown Executive: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on the touchtone phone. To withdraw your question, please press star, then two.
After today's presentation there'll be an opportunity to ask questions.
Ask the question you May Press Star then one on the touch sounds off.
So it's all your question. Please press Star then two.
Unknown Executive: Please note this event is being recorded.
Speaker Change: Please note. This event is being recorded I would now like to turn the call over to Matt Murphy manager of Investor Relations. Please go ahead.
Matt Murphy: I would now like to turn the call over to Matt Murphy, Manager of Investor Relations. Please go ahead. Good morning.
Matt Murphy: Good morning.
Matt Murphy: 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 Marc Krohn. In just a moment, they will provide details about our business and our performance for the first quarter of 2025, followed by a question and answer session with SellSide Analytics.
Speaker Change: Joining me on today's call are <unk>, President and Chief operating Officer, Yale Duffy, Chief Financial Officer, and Treasurer, Stephanie Si and Vice President Mark Chrome.
Speaker Change: And just a moment they will provide details about our business and our performance for the first quarter of 2025, followed by a question and answer session with sell side analysts.
Matt Murphy: 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. These four looking statements are based on ILPG's beliefs and expectations as of today, April 30th, 2025, 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.
Speaker Change: 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 todays 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 April 32025, 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.
Matt Murphy: 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 on any forward looking In addition, we will be discussing non-GAAP financial measures during this call, including normalized funds from operations or normalized FFO. Adjusted EBITDA RE, Net Operating Income or NOI, and Cash Basis NOI.
Speaker Change: 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 <unk> dot com <unk>.
Speaker Change: Investors are cautioned not to place undue reliance upon any forward looking statements.
Speaker Change: In addition, we will be discussing non-GAAP financial measures during this call, including normalized funds from operations or normalized <unk>.
Speaker Change: Adjusted EBITDA already.
Speaker Change: Net operating income or NOI and cash basis NOI.
Matt Murphy: A reconciliation of these non-GAAP measures to net income is available in our financial results package, which can be found on our website.
Speaker Change: Reconciliation of these non-GAAP measures to net income is available in our financial result package, which can be found on our website.
Yael Duffy: I will now turn the call over to Yael. Thank you, Matt. And good morning.
Speaker Change: I will now turn the call over to you I.
Speaker Change: Thank you, Matt and good morning on today's call I will provide a brief overview of our portfolio summarizes first quarter leasing activity and outline our key areas of focus for the year ahead.
Yael Duffy: On today's call, I will provide a brief overview of our portfolio, summarize our first quarter leasing activity, and outline our key areas of focus for the year ahead.
Marc Krohn: Then, Marc will discuss the specifics of our mainland portfolio and leasing pipeline.
Speaker Change: Then mark will discuss the specifics of our mainland portfolio and leasing pipeline.
Yael Duffy: From there, Tiffany will review our financial results and outlook. We started the year with continued demand for a high quality portfolio of industrial and logistics properties. consistent with the trends we saw throughout 2024. Cash basis NOI grew by nearly 2% compared to the same period last year and normalized FFO increased 43% year-over-year and 52% on a sequential quarter basis. We executed over 2.3 million square feet of total leasing activity with occupancy of 94.6%, reflecting a sequential quarter increase of 20 basis points. As of March 31, 2025, ILPT's portfolio consisted of 411 distribution and logistics properties in 39 states totaling 60 million square feet.
Speaker Change: There Kipp and he will review our financial results and outlook.
Speaker Change: We started the year with continued demand for our high quality portfolio of industrial and logistics properties.
Speaker Change: With the trends we saw throughout 2024.
Speaker Change: Cash basis, NOI grew by nearly 2% compared to the same period last year and normalized <unk> increased 43% year over year and 52% on a sequential quarter basis.
Speaker Change: We executed over two 3 million square feet of total leasing activity with occupancy of 94, 6%, reflecting a sequential quarter increase of 20 basis points.
Speaker Change: As of March 31, 2025.
Speaker Change: I L. P. Ts portfolio consisted of 411 distribution and logistics properties in 39 states totaling 60 million square feet.
Yael Duffy: Our well diversified portfolio is further highlighted by our unique Hawaii footprint consisting of 226 properties totaling 16.7 million square feet. Our portfolio has a weighted average lease term of seven years and is anchored by tenants with strong business profiles and stable cash flows. ILPT's top 10 tenants account for 47% of our annualized rental revenues and more than 76% of our annualized revenues come from investment grade rated tenants or from our secure Hawaii land lease.
Speaker Change: Our well diversified portfolio is further highlighted by our unique Hawaii footprint, consisting of 226 properties totaling $16 7 million square feet.
Speaker Change: Our portfolio has a weighted average lease term of seven years and is anchored by tenants with strong business profiles and stable cash flows.
Speaker Change: I L. P. T top 10 tenants account for 47% of our annualized rental revenues and more than 76% of our annualized revenues come from investment grade rated tenants or from our secure Hawaii land leases.
Yael Duffy: Turning to Leasing Activity. During the first quarter, we signed 13 new and renewal leases, plus one rent reset for over 2.3 million square feet at a weighted average lease term of six years. This resulted in gap in cash leasing spreads of 18.9% and 9.8%. This activity will increase ILPT's annualized rental revenue by $2.9 million, of which 57% has yet to be realized. Our mainland properties accounted for nearly 80% of our renewal activity this quarter, which Marc will provide detail on shortly. Within our Hawaii portfolio, we signed 492,000 square feet of renewals, including rent recess at rental rates that were 18.2% higher than prior rents, with a weighted average lease term of 4.9 years.
Speaker Change: Turning to leasing activity.
During the first quarter, we signed 13, new and renewal leases plus one rent reset for over two 3 million square feet.
Speaker Change: Our weighted average lease term of six years. This resulted in GAAP and cash leasing spreads of 18, 9% and nine 8%.
Speaker Change: This activity will increase I O P cheese annualized rental revenue by $2 $9 million of which 57% is yet to be realized.
Speaker Change: Our mainland properties accounted for nearly 80% of our renewal activity this quarter.
Mark: Mark will provide detail on shortly.
Mark: Within our Hawaii portfolio, we signed 492000 square feet of renewals, including rent resets at rental rates that were $18, 2% higher than prior rents with a weighted average lease term of four nine years.
Yael Duffy: These results underscore the value of our property. showcasing our ability to generate organic cash flow growth while also maintaining portfolio stability.
Mark: These results underscore the value of our properties.
Mark: Okay thing our ability to generate organic cash flow growth, while also maintaining portfolio stability.
Yael Duffy: Turning to our goals for the year ahead. Like most industry participants, we are monitoring the evolving landscape surrounding global tariffs. While it remains uncertain how these developments may impact tenant demand and the overall leasing environment, we believe ILPT's portfolio of high-quality assets with its diversified tenant roster is well positioned to withstand some short-term volatility. As such, our focus remains on maximizing mark to market growth opportunities, maintaining strong tenant retention and leasing the vacancies within our portfolio, specifically the 2.2 million square foot undeveloped land parcel in Hawaii and a 535,000 square foot property in Indianapolis. Another long-term area of focus is evaluating opportunities to improve our balance sheet and reduce leverage.
Mark: Turning to our goals for the year ahead like most industry participants we are monitoring the evolving landscape surrounding global Paris.
While it remains uncertain, how these developments may impact tenant demand and the overall leasing environment, we believe Iot cheese portfolio of high quality assets with its diversified tenant roster is well positioned to withstand some short term volatility.
Mark: As such our focus remains on maximizing mark to market growth opportunities, maintaining strong tenant retention and leasing the vacancies within our portfolio, specifically, the 2.2 million square foot undeveloped land parcel in Hawaii and a 535000.
Mark: Our property in Indianapolis.
Mark: Yeah.
Mark: Another long term area of focus is evaluating opportunities to improve our balance sheet and reduce leverage.
Yael Duffy: Accordingly, in 2025, we may pursue options to refinance our existing debt and evaluate strategic property dispositions to accomplish these goals.
Mark: Accordingly in 2025, we may pursue options to refinance our existing debt and evaluate strategic property dispositions to accomplish these calls I will now turn the call over to Mark.
Marc Krohn: I will now turn the call over to Marc. Thank you and good morning. As Yael mentioned, we executed over 2.3 million square feet of total leasing during the first quarter. The mainland accounted for over 1.8 million square feet, or 79% of the total beach. Renewals made up the majority of this activity and included leases with Packaging Corporation of America in Colorado, Refresco Beverages in South Carolina, Sherwin-Williams in Illinois, and Ulta Beauty in Indiana. New leasing total 437,000 square feet across three properties. These results include a 250,000 square foot lease for property in Indiana that expired on March 31, 2025.
Mark: Thank you and good morning.
Mark: I'll mention we executed over two 3 million square feet of total leasing during the first quarter.
Mark: The mainland accounted for over one 8 million square feet or 79% of the total leasing renewals made up the majority of this activity and included leases with packaging Corporation of America in Colorado.
Mark: <unk> beverages, and South Carolina, Sherwin, Williams, and Illinois, and Ulta beauty in Indiana.
Mark: New leasing totaled 437000 square feet across three properties. These results include a 250000 square foot lease for a property in Indiana that expired on March 31, 2025 weeks.
Marc Krohn: We subsequently entered into a new lease with a replacement tenant at a 45% roll up in rent and with no doubt. Additionally, this quarter, we leased two properties that had been vacant since the first quarter of 2023. Looking ahead, only 4.3 million square feet or 5.6% of IOPT's total annualized revenue is scheduled to roll by the end of 2026.
Mark: We subsequently entered into a new lease with a replacement tenant and a 45% roll up in Bryan and with no downtime.
Mark: Additionally, this quarter, we leased two properties that had been vacant since the first quarter of 2023.
Mark: Looking ahead, only $4 3 billion square feet or five 6% of <unk> total annualized revenue.
Mark: Careful to roll by the end of 2026 as we have previously mentioned, we initiated renewal discussion at least 18 months in advance as decision timeline at Lincoln for many times.
Marc Krohn: As we have previously mentioned, we initiate renewal discussions at least 18 months in advance, as decision timelines have lengthened for many 10 We believe this early engagement provides ample opportunity to maximize tenant retention and also mitigates risk by running dual paths in preparing properties for releasing should a tenant decide to vacate. We are currently tracking 32 deals in our pipeline for more than 7.4 million square feet. We anticipate a near-term conversion of 500,000 square feet, which is in advanced stages of negotiation or lease documentation. 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.
Mark: We believe this early engagement, providing ample opportunity to maximize tenant retention and also mitigates risks by running dual pass and preparing properties for re leasing tenant decided to vacate.
Mark: We are currently tracking 30 deals in our pipeline for more than seven 4 million square feet.
Mark: We anticipate a near term conversion of 500000 square feet, which is in advanced stages of negotiation or lease documentation.
Mark: 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.
Marc Krohn: Before I turn the call over to Tiffany, I want to highlight the recent publication of the RMR Group's Sustainability Report. The report provides comprehensive insights into accomplishments and data regarding our managers' commitment to long-term sustainability. We are proud of the progress made to strengthen ILPT's sustainability practices and enhance our transparency and disclosure of initiatives.
Speaker Change: Before I turn the call over to Tiffany I want to highlight the recent publication of the RMR group's sustainability report.
Speaker Change: The report provides a comprehensive insights to accomplish into accomplishment and data regarding our managers commitment to long term sustainability goals. We are proud of the progress <unk> made to strengthen Iot chief sustainability practices and enhanced our transparency and disclosure of initiative.
Marc Krohn: You can find links to the complete report as well as a supplement specific to ILPT on our website at ILPTREIT.com.
Susan: You can find links to the complete report as well as the supplement specific to <unk> on our website at <unk> Dot Com I will now turn the call over to Susan.
Tiffany Sy: I will now turn the call over to... Thank you, Marc. Good morning, everyone.
Susan: Thank you Mark and good morning, everyone.
Tiffany Sy: Last night, we reported ILPT's financial results for the first quarter of 2025. Normalized FFO of $13.5 million, or $0.20 per share, increased nearly 43% compared to the same quarter a year ago, and 52% on a sequential quarter basis. This exceeded the high end of our guidance by two cents, driven by percentage rent revenues and recovery of bad debts in Hawaii. We ended the quarter with NOI of $87.5 million, cash basis NOI of $83.8 million, and adjusted EBITDA RE of $85.3 million, each representing increases on both a year-over-year and sequential quarter basis. Interest expense decreased to $69.8 million or by $3.4 million compared to the same quarter a year ago, reflecting the decrease in interest rate cap costs over the past year.
Susan: Last night, we reported <unk> financial results for the first quarter 2025.
Susan: Normalized <unk> of $13 5 million or <unk> 20 per share increased nearly 43% compared to the same quarter, a year ago, and 52% on a sequential quarter basis.
Susan: This exceeded the high end of our guidance by <unk> <unk>, driven by percentage rent revenues and recovery of bad debts in Hawaii.
Susan: We ended the quarter with NOI of $87 $5 million cash basis, NOI of $83 $8 million and adjusted EBITDA, sorry of $85 $3 million, each representing increases on both a year over year and sequential quarter basis.
Susan: Interest expense decreased to $69 $8 million or by $3 $4 million compared to the same quarter a year ago, reflecting the decrease in interest rate cap cost over the past year.
Tiffany Sy: As we discussed during our last earnings call, our consolidated joint venture purchased an interest rate cap in February in connection with the extension of its $1.4 billion floating rate loan for $15 million or $11 million less than the cap purchased in 2024. We expect our interest expense for the second quarter of 2025 to decline to approximately $68.5 million, with $60 million of cash interest expense, net of the cash we received from our interest rate caps, and $8.5 million of non-cash amortization of financing and interest rate cap costs. Turning to our balance sheet, as of March 31st, cash on hand was $108 million and restricted cash was $129 million.
Susan: As we discussed during our last earnings call. Our consolidated joint venture purchased an interest rate cap in February in connection with the extension of its $1 4 billion dollar floating rate loan for $15 million.
Susan: Or $11 million less than the cat purchased in 2024.
Susan: We expect our interest expense for the second quarter of 2025 to decline to approximately $68 $5 million with $60 million of cash interest expense net of the cash we received from our interest rate caps and $8 5 million of noncash amortization of financing and interest rate cap costs.
Susan: Turning to our balance sheet as of March 31st cash on hand was $108 million in restricted cash was $129 million. Our net debt to total assets ratio was 68, 7% and our net debt coverage ratio was 11 nine times, representing a 50 basis point improvement on a sequential.
Tiffany Sy: Our net debt to total assets ratio was 68.7% and our net debt coverage ratio was 11.9 times, representing a 50 basis point improvement on a sequential quarter basis and driven by the increase in adjusted EBITDA RE for the quarter. As a reminder, all of our debt is currently carried at a fixed rate or a fixed interest rate cap, with a weighted average interest rate of 5.53% as of March 31st. including extension options.
Susan: So a quarter basis and driven by the increase in adjusted EBITDAR for the quarter.
Susan: As a reminder, all of our debt is currently carried at a fixed rate or fixed through interest rate caps with a weighted average interest rate of 553% as of March 31.
Susan: Including extension options <unk> has no debt maturities until 2027.
Tiffany Sy: ILPT has no debt maturities until 2027.
Tiffany Sy: In closing, we are off to a strong start to the year with solid financial performance and steady demand for our high-quality industrial real estate. Based on the leasing activity both Yael and Marc mentioned earlier and our expectations for interest expense, we expect normalized FFO for the second quarter to be between $0.19 and $0.21 per share. This guidance includes a one-time benefit of $0.01 per share related to a required remediation payment for a scheduled lease termination.
Susan: In closing we are off to a strong start to the year with solid financial performance and steady demand for our high quality industrial real estate based on the leasing activity, both Yahoo, and Mark mentioned earlier and our expectations for interest expense, we expect normalized <unk> for the second quarter to be between 19 and 21 per share.
Susan: Sure.
Susan: This guidance includes a onetime benefit of one seven per share related to a required remediation payments were scheduled lease termination.
Unknown Executive: That concludes our prepared remarks. Operator, please open the line for questions. Thank you.
Susan: That concludes our prepared remarks, operator, please open the lines for questions.
Unknown Executive: 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're using a speakerphone, please pick up your handset before pressing the keys. 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.
Speaker Change: Thank you we will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone.
Speaker Change: If youre using a speakerphone please pick up your handset before pressing the keys.
Speaker Change: If at any time. Your question has been addressed and you would like to withdraw your question. Please press Star then two.
Speaker Change: At this time, we will pause momentarily to assemble our roster.
Mitch Germain: And our first question will come from Mitch Germain with Citizens Bank. Please go ahead. Good morning, and thanks for the increased transparency on Interest and Earnings Run Rate. To that end, I think, Tiffany, you mentioned a bad debt recovery in the first quarter. Can you provide some details around what the financial impact on the model was? Sure. It was around $750,000. and that's in revenues right now. Yes, it is. Great.
Speaker Change: And our first question will come from Mitch Germain with citizens Bank. Please go ahead.
Mitch Germain: Good morning, and thanks for the increased transparency on.
Speaker Change: Interesting and earnings run rate.
Speaker Change: It's about and I think Tiffany you mentioned, a bad debt recovery and in.
Speaker Change: In the first quarter can you provide some details around what the financial impact on the model was.
Speaker Change: Sure.
Speaker Change: It was around $750000.
Speaker Change: And that's in revenues right now.
Speaker Change: Yes. It is.
Marc Krohn: Marc, I think you mentioned some lengthened timelines, and I'm curious. if you or maybe it was Yael, I apologize. But I'm curious if you can provide some perspective around, you know, what you're seeing real time in the leasing environment. Yes, Mitch, we are still seeing elongated leasing timelines. Tenants with renewals into 26 and 27 in many cases are looking to start that process earlier. There are more people involved in that lease decision process. And so as we work through that process, we want to make sure that we're providing us enough time to mitigate risk. And if we get a sense that there might be a potential lease.
Speaker Change: Great.
Speaker Change: <unk>.
Speaker Change: Mark I think you mentioned, some lengthened timelines and I'm curious if.
Speaker Change: If you or maybe it was you already I apologize, but I'm curious if you could provide some perspective around.
Speaker Change: You know what Youre seeing real time in the leasing environment.
Speaker Change: Yes, Mitch we are still seeing elongated leasing timelines tenants with renewals into 26 and 27 in many cases are looking to start that process earlier.
Speaker Change: There are more people involved in that lease decision process.
Speaker Change: And so as we worked through that process, we want to make sure that we're providing us enough time to mitigate risk and if we get a sense that there might be a potential agencies. Then we start running dual pass and start marketing the property for perspective, new tenants at the same time.
Marc Krohn: Then we start running dual paths and start marketing the property for prospective new tenants at the same time. That's helpful.
Speaker Change: That's helpful and then.
Yael Duffy: And then maybe provide can you provide some perspective on I think there are two real notable vacancies. Obviously, there's Indianapolis in the mainland. And then there was that large 2 million square foot space in Hawaii. Obviously, I'm assuming they're both in the leasing pipeline today. I'm curious, you know, how the traffic levels are for both of those sites.
Speaker Change: Maybe you provide can you provide some perspective on I think there are two real notable.
Speaker Change: Vacancies, obviously theres Indianapolis in the mainland and then there was that large 2 million square foot space and in.
Speaker Change: In Hawaii, obviously, I'm, assuming they're both in the leasing pipeline today.
Speaker Change: I'm curious you know how the traffic.
Speaker Change: <unk> levels are for both of those sites right now.
Yael Duffy: Hi Mitch, I'll start and then Marc can add any color. So for Hawaii, we have we have seen activity. We have a couple proposals out. We have had a couple prospects not materialized one due to we have some credit concerns about the tenant and then another one was having some trouble getting the funding it needed to develop the parcel. And I know I know there's a lot of attention on the site, given that it's such a huge impact to our occupancy. It's about 3.6%. But I just would like to caveat that, you know, the annualized rental increases that we got this quarter from our leasing was $2.9 million, which is actually more than the revenue we got from that parcel when it was leased.
Speaker Change: Hey, Mitch I'll start and then Mark can add any color. So for Hawaii. We have we have seen activity. We have a couple of proposals out we have had a couple of prospects not materialize one do we.
Speaker Change: We have some credit concerns about the tenant and then another one was having.
Speaker Change: Some trouble getting the funding it needed to develop the parcel.
Speaker Change: I know I know theres a lot of attention on the site given that it's such a huge impact to our occupancy it's about three 6%, but I just would like to caveat that.
Speaker Change: Now though.
Speaker Change: Annualized rental increases that we got this quarter from our leasing was $2 $9 million, which is actually more than the revenue we got from that parcel. When it was leased so Mike just to put it in perspective, I mean, I know, there's a lot of attention on it but it really is immaterial for.
Yael Duffy: So just to put it in perspective, I mean, I know there's a lot of attention on it, but it really is immaterial from an annualized revenue perspective.
Speaker Change: Annualized revenue perspective.
Yael Duffy: And then for the Indianapolis property, we were pretty far along in lease negotiations with a tenant for half the building. It ended up not materializing and we are, you know, actively marketing it. We have some proposals out, but nothing that's far enough along. That's helpful.
Speaker Change: And then.
For the Indianapolis property, we are pretty far along in lease negotiations with a tenant for half the building. It ended up not materializing and we are you know.
Speaker Change: Actively marketing it and we have some proposals out but nothing that's far enough along.
Speaker Change: That's helpful and then.
Mitch Germain: And then While I have you, Yael, I think this is the first time you seem to have a bit more conviction. about leverage reduction. Obviously, it seems like the economics around refis are a bit more favorable today than they've been over the last 24 months. That makes sense to me.
Speaker Change: While I have you Yale I think this is the first time you seem to have a bit more conviction.
Speaker Change: About leverage reduction.
Speaker Change: Obviously, it seems like the economics around it.
Speaker Change: Refis are a bit more favorable today than they've been over the last 24 months that makes sense to me.
Yael Duffy: But tell me what's driving your motivation to now beginning the effort to sell properties and are these going to be? within a joint venture? You know, are they assets that are on your balance sheet? Could it include Hawaii? Is there anything? I'm sure you're going to tell me all options are on the table, but is there anything you can provide as to A, why now? And B, you know, what could this look like as the process begins to materialize? So, you know, all along the way, we have been, you know, we do get a lot of unsolicited offers for properties within our portfolio.
Speaker Change: But.
Speaker Change: Tell me, what's driving your motivation to now beginning the after too.
Speaker Change: So properties and.
Speaker Change: Are these going to be.
Speaker Change: Within the joint venture you know are they assets that are on your balance sheet could it include Hawaii is there anything I'm sure you're going to tell me all options are on the table, but is there anything you can provide as to why now and B what could this look like as the process.
Speaker Change: <unk> begins to materialize.
So you know all along the way we have been.
Speaker Change: We do get a lot of unsolicited offers for properties within our portfolio and so we evaluate those on a case by case basis and you know I think we've mentioned this before that.
Yael Duffy: And so we evaluate those on a case by case basis. And, you know, I think we've, we've mentioned this before that, you know, it's tricky for us just the way our debt is structured that we need to be able to, for it to make sense to release it from the, from the debt pools. But we have been seeing some of the unsolicited offers we've been getting have now been from owner users. And so those are usually at a higher valuation. And, you know, I think that's kind of where some of our. optimism around selling assets is coming from just, I think, you know, tenants evaluate their long term business plans, they would rather own their real estate versus lease it.
Speaker Change: It's tricky for US just the way our debt structure that we need to be able to.
Speaker Change: For it to make sense to release that from the from the debt pools, but we have been seeing some of the unsolicited offers we've been getting have now been from older users and so those are usually at a higher valuation and you know I think that's kind of where some of our.
Speaker Change: Optimism around selling assets, that's coming from just I think as you know tenants evaluate their long term business plans, they would rather own their real estate versus leased it. So I think there might be opportunity there and then.
Yael Duffy: So I think there might be opportunity there. And then, again, I think for Hawaii, you know, that land is precious, they aren't making any more land in Hawaii. So I think even though it's taking us some time to lease it, I think we we feel good on the long term plan for that parcel. So I don't know necessarily that we're looking to sell that at least today.
Speaker Change: Again, I think for Hawaii.
Speaker Change: That land is precious they aren't making any more land in Hawaii. So I think even though it's taking us some time to Lee said I think we feel good on the long term plan for that parcel. So I don't know necessarily that we're looking to sell that at least today.
Unknown Executive: And then I think the third question was around joint ventures. And right now, there isn't anything active on a joint venture perspective. Thank you. Again, if you have a question, please press star and then 1.
Speaker Change: And then I think the third question was around joint ventures, and right now there isn't anything active on a joint venture perspective.
Speaker Change: Thank you.
Mitch Germain: Thanks Mitch.
Speaker Change: Yeah.
Mitch Germain: Again, if you have a question. Please press star and then one.
John Masicsa: Our next question will come from John Masicsa with B. Reilly Securities. Please go ahead. Good morning. Just as it kind of pertains to like, you know, first quarter versus kind of what you're expecting in second quarter. Was I right in hearing they're basically both quarters have, you know, roughly a penny maybe I'm going to back the envelope math of kind of one time positive impact? This quarter had two pennies and next quarter we're forecasting one.
Speaker Change: Our next question will come from John <unk> with B Riley Securities. Please go ahead.
John <unk>: Good morning.
Speaker Change: Just as a kind of pertains to just kind of as it pertains to like.
You know first quarter versus kind of what you're expecting in second quarter.
Speaker Change: It was I right in hearing they're basically both quarters have.
Speaker Change: Roughly a penny maybe I'm just kind of back of the envelope math it kind of a one time positive impact.
Speaker Change: This quarter had two pennies and next quarter, we're forecasting one.
Speaker Change: Okay.
Tiffany Sy: Okay, um, so I guess maybe what's kind of the moving pieces that gets to the low end of the 2Q guidance just given you're going to lose one penny potentially in your one-time impact, but is there anything else kind of that could act as a headwind? Unforeseen, you know, it depends on leasing activity. We have a pretty good handle on what our leasing activity will be, but. The low end allows for some activity there, but maybe we weren't expecting. And then also, you never know, you could have increases in operating expenses or things like that, one-time things that we may have.
Speaker Change: So I guess, maybe what's kind of the moving pieces that gets to the low end of the <unk> guidance, just given even though there's one penny potentially onetime impact, which anything else kind of that could act as a headwind.
Speaker Change: Unfortunately, <unk>, yes, it depends on leasing activity and we have a pretty good handle on what our leasing activity will be but.
Speaker Change: Hello and allows for.
Speaker Change: Some activity there, but maybe if we werent expecting and then also you never know you could have increases in operating expenses or things like that one time things that we that we may have so.
Tiffany Sy: So hopefully that's helpful.
Speaker Change: Hopefully that's helpful and then okay, and then bigger picture.
Yael Duffy: And then the bigger picture, same thing you're hearing from tenants in terms of the impact of tariffs, whether that be on utilization, you talked a little bit, it's not a new trend that's longer to make decisions on renewals, but anything else on that kind of front, whether it be renewals or selling of assets, just that's being impacted potentially by some of the tariff noise. I think, you know, it's interesting. I think generally, we anticipate that the tariffs will probably be good for tenant demand for us. But where we really have seen a positive momentum is as tenants look, you know, we've had a couple tenants that were out in the market exploring either relocating or built to suit opportunities.
Speaker Change: Anything you're hearing from tenants in terms of the impact of tariffs, whether that'd be on utilization I know you talked a little bit of it it's not a new trend that's taking longer to make decisions on renewals, but anything else on that front, whether it be renewals or or.
Speaker Change: Selling of assets, just that's being impacted potentially by some of the tariff noise.
Speaker Change: I think you know it's interesting I think generally we anticipate that the tariffs will probably be good for tenant demand for us, but where we really have seen him a positive momentum is as tenants look you know we've had a couple of tenants that were out in the mall.
Speaker Change: Exploring either relocating or a build to suit opportunities and I think there is some hesitation around the impact Paris might have on construction cost and so I think as they've evaluated those decisions. They decided that it makes sense to just stay in place and so.
Yael Duffy: And I think there's some hesitation around the impact tariffs might have on construction costs. And so I think as they've evaluated those decisions, they've decided that it makes sense to just stay in place. And so, if anything, we're getting higher tenant retention because of it, at least in the short term. That's really the most meaningful impact we've seen.
Speaker Change: If anything we're getting higher tenant retention.
Speaker Change: Cause of it at least in the short term that's really the most meaningful impact we have seen.
Yael Duffy: And then in kind of a similar vein, and I think about the Hawaii portfolio, obviously the Hawaiian economy is very reliant on inbound travel. How exposed, big picture, do you think your portfolio is to kind of inbound travel? If we see a pullback, particularly in international travel, how would you kind of anticipate that flowing through the economics of your Hawaii assets? I would say very minimal. You know, our tenant base in Hawaii are generally serving the, like the economy, are not really related to tourism or more, you know, these are industrial zone land. So they're really servicing the tent, the The people in Hawaii versus, you know, relying on tourism.
Speaker Change: Okay, and then kind of a similar vein as I think about the Hawaii portfolio, obviously, Hawaii Hawaiian economy is very rely on inbound travel but just.
Speaker Change: How exposed Big picture do you think your portfolio is to kind of be inbound travel if we see a pull back particularly in international travel.
Speaker Change: You know how.
Speaker Change: How would you kind of anticipate that flowing through the economics of your Hawaii assets.
Speaker Change: I would say very minimal I'm, you know our tenant base in Hawaii are generally serving the.
Speaker Change: Like the economy.
Speaker Change: Not really related to tourism or more you know these are industrial zone land, so there really <unk>.
Speaker Change: Servicing the 10th.
Speaker Change: The people in Hawaii versus.
Yael Duffy: We saw this a lot during COVID where, you know, travel, there were so many travel restrictions and I think there was a lot of concern how that would impact our tenants and it really did not have an impact.
Speaker Change: You know reliant on tourism, we thought there's a lot during COVID-19 where you.
Speaker Change: You know travel there were so many travel restrictions and I think there was a lot of concern how that would impact our tenants and it really did not have an impact so.
Yael Duffy: So.
John Masicsa: I appreciate that comment.
Speaker Change: Okay I appreciate that color that's it for me. Thank you.
John Masicsa: That's it for me.
Unknown Executive: Thank you. Thank you, John.
Mitch Germain: Thank you John.
Yael Duffy: With no further questions, this will conclude our question and answer session.
Speaker Change: With no further questions. This will conclude our question and answer session I would like to turn the conference back over to Yeah, Duffy, President and Chief operating officer for any closing remarks.
Yael Duffy: I would like to turn the conference back over to Yael Duffy, President and Chief Operating Officer for any closing remarks. Thank you for joining our call. We look forward to seeing many, many of you at the upcoming NAEWI conference in June. Please reach out to Investor Relations if you're interested in scheduling a meeting with IOPT. Thank you.
Speaker Change: Thank you for joining our call we look forward to seeing many many of you at the upcoming NAREIT Conference in June please reach out to Investor Relations, if you're interested in scheduling a meeting with I O P T.
Speaker Change: Thank you.
Unknown Executive: The conference is now concluded. Thank you for attending today's presentation.
Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Unknown Executive: You may now disconnect.
Speaker Change: [music].
Speaker Change: Yeah.
Speaker Change: [music].