Industrial Logistics Properties Trust 8-K, filed Nov 24, 2020
Industrial Logistics Properties Trust (ILPT)
About this 8-K
Industrial Logistics Properties Trust filed this 8-K on November 24, 2020, reporting on events of November 18, 2020.
Items reported
- Item 2.01: Completed an acquisition or sale of assets
- Item 9.01: Financial statements and exhibits
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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Securities Registered Pursuant to Section 12(b) of the Act:
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Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
In this Current Report on Form 8-K, the terms “the Company”, “we”, “us” or “our” refer to Industrial Logistics Properties Trust and its subsidiaries, unless otherwise noted.
Item 2.01. Completion of Acquisition or Disposition of Assets.
On November 18, 2020, we sold a 39% equity interest from our 61% equity interest in our existing joint venture for 12 of our properties located in the mainland United States, or our joint venture, to an unrelated third party institutional investor for approximately $108.8 million, which includes certain costs associated with the initial formation of our joint venture. After giving effect to the sale, our pre-existing joint venture partner will maintain its existing 39% equity interest in our joint venture and we will continue to own the remaining 22% equity interest in our joint venture.
Item 9.01. Financial Statements and Exhibits
(b) Pro Forma Financial Information
Following the sale described in Item 2.01 above, we will no longer consolidate the results of operations of our joint venture and instead will account for our remaining 22% equity interest using the equity method. This Current Report on Form 8-K includes unaudited pro forma condensed consolidated financial information of the Company as required by Item 9.01(b) of Current Report on Form 8-K as a result of this deemed disposition. The unaudited pro forma condensed consolidated financial statements are not necessarily indicative of our expected financial position or results of operations for any future period. Differences could result from numerous factors, including future changes in our portfolio of investments, capital structure, property level operating expenses and revenues, including rents expected to be received on our existing leases or leases we may enter into, changes in interest rates, the performance of our joint venture and other reasons. Actual future results are likely to be different from amounts presented in the unaudited pro forma condensed consolidated financial statements and such differences could be significant.
The following unaudited pro forma financial information of the Company is filed as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference:
| Introduction to Unaudited Pro Forma Condensed Consolidated Financial Statements | F-1 |
| Unaudited Pro Forma Condensed Consolidated Balance Sheet at September 30, 2020 | F-2 |
| Unaudited Pro Forma Condensed Consolidated Statements of Income for the Nine Months Ended September 30, 2020 | F-3 |
| Unaudited Pro Forma Condensed Consolidated Statements of Income for the Year Ended December 31, 2019 | F-4 |
| Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements | F-5 |
(d) Exhibits
| 99.1 | Unaudited Pro Forma Condensed Consolidated Financial Statements of the Company. (Filed herewith.) |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document). |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| INDUSTRIAL LOGISTICS PROPERTIES TRUST | ||
| By: | /s/ Richard W. Siedel, Jr. | |
| Name: | Richard W. Siedel, Jr. | |
| Title: | Chief Financial Officer and Treasurer | |
Dated: November 24, 2020
Exhibit 99.1
INDUSTRIAL LOGISTICS PROPERTIES TRUST
Introduction to Unaudited Pro Forma Condensed Consolidated Financial Statements
In February and March 2020, we entered into agreements related to a joint venture for 12 of our properties in the mainland United States, or our joint venture, with an Asian institutional investor. We contributed 11 of these properties to our joint venture in February 2020 and the remaining property in March 2020. We received an aggregate of $108.7 million from the investor for a 39% equity interest in our joint venture, and we retained the remaining 61% equity interest.
On November 18, 2020, we sold a 39% equity interest in our joint venture from our remaining 61% equity interest for $108.8 million to a second unrelated third party institutional investor. Following the sale, we continue to own a 22% equity interest in our joint venture. The net cash proceeds to us from this transaction will be used to repay amounts outstanding under our $750 million unsecured revolving credit facility. Effective as of the date of the sale, our joint venture will be deconsolidated and will be accounted for using the equity method.
The accompanying unaudited pro forma condensed consolidated balance sheet at September 30, 2020 reflects our financial position as if the transactions described in the notes to the unaudited condensed consolidated pro forma financial statements were completed on September 30, 2020. The unaudited pro forma condensed consolidated statements of income for the nine months ended September 30, 2020 and the year ended December 31, 2019 present our results of operations as if transactions described in the notes to the unaudited condensed consolidated pro forma financial statements were completed on January 1, 2019.
These unaudited pro forma condensed consolidated financial statements should be read in connection with our unaudited financial statements for the nine months ended September 30, 2020, included in our Quarterly Report on Form 10-Q filed on October 28, 2020 with the Securities and Exchange Commission, or SEC, and our audited financial statements for the year ended December 31, 2019, included in our Annual Report on Form 10-K filed on February 24, 2020 with the SEC.
These unaudited pro forma condensed consolidated financial statements are provided for informational purposes only. Our financial position and results of operations may be significantly different than what is presented in these unaudited pro forma condensed consolidated financial statements. In the opinion of management, all adjustments necessary to reflect the effects of the transactions described in the notes to the unaudited pro forma condensed consolidated financial statements have been included.
Adjustments have been made to the unaudited pro forma consolidated balance sheet and the unaudited pro forma condensed consolidated statements of income to reflect factually supportable items that are directly attributable to these transactions, and with respect to the unaudited pro forma condensed consolidated statements of income, are expected to have a continuing impact on our financial results.
F-1
Industrial Logistics Properties Trust
Unaudited Pro Forma Condensed Consolidated Balance Sheet
September 30, 2020
(dollars in thousands)
| Historical | Sale of Interest | Deconsolidation | Pro Forma | |||||||||||||
| ASSETS | (A) | (B) | ||||||||||||||
| Real estate properties: | ||||||||||||||||
| Land | $ | 757,522 | $ | — | $ | (54,164 | ) | $ | 703,358 | |||||||
| Buildings and improvements | 1,632,842 | — | (566,660 | ) | 1,066,182 | |||||||||||
| Total real estate properties, gross | 2,390,364 | — | (620,824 | ) | 1,769,540 | |||||||||||
| Accumulated depreciation | (160,570 | ) | — | 26,541 | (134,029 | ) | ||||||||||
| Total real estate properties, net | 2,229,794 | — | (594,283 | ) | 1,635,511 | |||||||||||
| Assets of property held for sale | 10,136 | — | — | 10,136 | ||||||||||||
| Acquired real estate leases, net | 123,146 | — | (40,976 | ) | 82,170 | |||||||||||
| Investment in joint venture | — | 61,176 | — | 61,176 | ||||||||||||
| Cash and cash equivalents | 39,105 | — | — | 39,105 | ||||||||||||
| Restricted cash | 12,806 | — | (12,806 | ) | — | |||||||||||
| Rents receivable | 70,597 | — | (4,489 | ) | 66,108 | |||||||||||
| Deferred leasing costs, net | 6,037 | — | (1,106 | ) | 4,931 | |||||||||||
| Debt issuance costs, net | 1,846 | — | — | 1,846 | ||||||||||||
| Other assets, net | 5,527 | — | (1,959 | ) | 3,568 | |||||||||||
| Total assets | $ | 2,498,994 | $ | 61,176 | $ | (655,619 | ) | $ | 1,904,551 | |||||||
| LIABILITIES AND EQUITY | ||||||||||||||||
| Revolving credit facility | $ | 320,000 | $ | (108,812 | ) | $ | — | $ | 211,188 | |||||||
| Mortgage notes payable, net | 1,048,521 | — | (403,078 | ) | 645,443 | |||||||||||
| Liabilities of property held for sale | 227 | — | — | 227 | ||||||||||||
| Assumed real estate lease obligations, net | 15,778 | — | (606 | ) | 15,172 | |||||||||||
| Accounts payable and other liabilities | 19,162 | — | (3,616 | ) | 15,546 | |||||||||||
| Rents collected in advance | 8,098 | — | (1,454 | ) | 6,644 | |||||||||||
| Security deposits | 6,698 | — | (152 | ) | 6,546 | |||||||||||
| Due to related persons | 3,087 | — | — | 3,087 | ||||||||||||
| Total liabilities | 1,421,571 | (108,812 | ) | (408,906 | ) | 903,853 | ||||||||||
| Commitments and contingencies | ||||||||||||||||
| Equity: | ||||||||||||||||
| Equity attributable to common shareholders: | ||||||||||||||||
| Common shares of beneficial interest, $.01 par value | 653 | — | — | 653 | ||||||||||||
| Additional paid in capital | 1,010,139 | 153,034 | (153,034 | ) | 1,010,139 | |||||||||||
| Cumulative net income | 183,911 | 16,954 | — | 200,865 | ||||||||||||
| Cumulative common distributions | (210,959 | ) | — | — | (210,959 | ) | ||||||||||
| Total equity attributable to common shareholders | 983,744 | 169,988 | (153,034 | ) | 1,000,698 | |||||||||||
| Noncontrolling interest: | ||||||||||||||||
| Total equity attributable to noncontrolling interest | 93,679 | — | (93,679 | ) | — | |||||||||||
| Total equity | 1,077,423 | 169,988 | (246,713 | ) | 1,000,698 | |||||||||||
| Total liabilities and equity | $ | 2,498,994 | $ | 61,176 | $ | (655,619 | ) | $ | 1,904,551 | |||||||
The accompanying notes are an integral part of these unaudited pro forma condensed consolidated financial statements.
F-2
Industrial Logistics Properties Trust
Unaudited Pro Forma Condensed Consolidated Statements of Income
For the Nine Months Ended September 30, 2020
(amounts in thousands, other than per share amounts)
| Historical | Sale of Interest | Deconsolidation | Pro Forma | |||||||||||||
| (C) | (D) | |||||||||||||||
| Rental income | $ | 194,494 | $ | — | $ | (38,857 | ) | $ | 155,637 | |||||||
| Expenses: | ||||||||||||||||
| Real estate taxes | 26,779 | — | (5,289 | ) | 21,490 | |||||||||||
| Other operating expenses | 15,733 | — | (3,546 | ) | 12,187 | |||||||||||
| Depreciation and amortization | 55,303 | — | (20,269 | ) | 35,034 | |||||||||||
| Acquisition and certain other transaction related costs | 178 | — | — | 178 | ||||||||||||
| General and administrative | 14,857 | (1,724 | ) | (823 | ) | 12,310 | ||||||||||
| Total expenses | 112,850 | (1,724 | ) | (29,927 | ) | 81,199 | ||||||||||
| Interest income | 113 | — | — | 113 | ||||||||||||
| Interest expense | (40,610 | ) | 2,079 | 10,868 | (27,663 | ) | ||||||||||
| Gain on early extinguishment of debt | 120 | — | — | 120 | ||||||||||||
| Income before income tax expense and equity in earnings of an investee | 41,267 | 3,803 | 1,938 | 47,008 | ||||||||||||
| Income tax expense | (202 | ) | — | — | (202 | ) | ||||||||||
| Equity in losses of an investee | — | (706 | ) | — | (706 | ) | ||||||||||
| Net income | 41,065 | 3,097 | 1,938 | 46,100 | ||||||||||||
| Net loss attributable to noncontrolling interest | 691 | — | (691 | ) | — | |||||||||||
| Net income attributable to common shareholders | $ | 41,756 | $ | 3,097 | $ | 1,247 | $ | 46,100 | ||||||||
| Weighted average common shares outstanding - basic | 65,092 | 65,092 | ||||||||||||||
| Weighted average common shares outstanding - diluted | 65,101 | 65,101 | ||||||||||||||
| Per common share data (basic and diluted): | ||||||||||||||||
| Net income attributable to common shareholders | $ | 0.64 | $ | 0.71 | ||||||||||||
The accompanying notes are an integral part of these unaudited pro forma condensed consolidated financial statements.
F-3
Industrial Logistics Properties Trust
Unaudited Condensed Consolidated Statements of Income
For the Year Ended December 31, 2019
(amounts in thousands, other than per share amounts)
| Historical | Sale of Interest | Deconsolidation | Pro Forma | |||||||||||||
| (E) | (F) | |||||||||||||||
| Rental income | $ | 229,234 | $ | — | $ | (39,706 | ) | $ | 189,528 | |||||||
| Expenses: | ||||||||||||||||
| Real estate taxes | 30,367 | — | (5,361 | ) | 25,006 | |||||||||||
| Other operating expenses | 17,643 | — | (3,360 | ) | 14,283 | |||||||||||
| Depreciation and amortization | 61,927 | — | (21,407 | ) | 40,520 | |||||||||||
| General and administrative | 17,189 | (2,757 | ) | — | 14,432 | |||||||||||
| Total expenses | 127,126 | (2,757 | ) | (30,128 | ) | 94,241 | ||||||||||
| Interest income | 743 | — | — | 743 | ||||||||||||
| Interest expense | (50,848 | ) | 3,602 | 4,105 | (43,141 | ) | ||||||||||
| Gain on early extinguishment of debt | — | — | — | — | ||||||||||||
| Income before income tax expense and equity in earnings of an investee | 52,003 | 6,359 | (5,473 | ) | 52,889 | |||||||||||
| Income tax expense | (171 | ) | — | — | (171 | ) | ||||||||||
| Equity in earnings of an investee | 666 | 702 | — | 1,368 | ||||||||||||
| Net income | 52,498 | 7,061 | (5,473 | ) | 54,086 | |||||||||||
| Net loss attributable to noncontrolling interest | — | — | — | — | ||||||||||||
| Net income attributable to common shareholders | $ | 52,498 | $ | 7,061 | $ | (5,473 | ) | $ | 54,086 | |||||||
| Weighted average common shares outstanding - basic | 65,049 | 65,049 | ||||||||||||||
| Weighted average common shares outstanding - diluted | 65,055 | 65,055 | ||||||||||||||
| Per common share data (basic and diluted): | ||||||||||||||||
| Net income attributable to common shareholders | $ | 0.81 | $ | 0.83 | ||||||||||||
The accompanying notes are an integral part of these unaudited pro forma condensed consolidated financial statements.
F-4
Industrial Logistics Properties Trust
Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
(dollars in thousands)
Unaudited Pro Forma Condensed Consolidated Balance Sheet at September 30, 2020 Adjustments
| (A) | As of September 30, 2020, we owned a 61% equity interest in our joint venture. The adjustments represent the effect of our sale on November 18, 2020 of a 39% equity interest in our joint venture from our 61% equity interest to an institutional investor for approximately $108,812 and the use of those proceeds to repay amounts outstanding under our $750,000 unsecured revolving credit facility as if the sale occurred on September 30, 2020. We adjusted retained earnings to recognize an estimated gain of $16,954. Following these transactions, we continue to own a 22% equity interest in our joint venture. |
| (B) | The adjustments represent the elimination of the assets, liabilities and noncontrolling interest related to the deconsolidation of our joint venture. |
Unaudited Pro Forma Condensed Consolidated Statement of Income for the nine months ended September 30, 2020 Adjustments
| (C) | The adjustments represent: |
| • | a decrease in general and administrative expenses based upon our contractual obligation under our business management agreement with The RMR Group LLC, or RMR LLC; |
| • | a decrease in interest expense due to the application of approximately $108,812 net proceeds against amounts outstanding under our unsecured revolving credit facility at the weighted average interest rate for the nine months ended September 30, 2020 of 2.51%; and |
| • | pro forma equity in losses of an investee representing our 22% equity interest in our joint venture for the nine months ended September 30, 2020. |
| (D) | The adjustments represent the historical income and expenses relating to our joint venture as of and for the nine months ended September 30, 2020. |
Unaudited Pro Forma Condensed Consolidated Statement of Income for the year ended December 31, 2019 Adjustments
| (E) | The adjustments represent: |
| • | a decrease in general and administrative expenses based upon our contractual obligation under our business management agreement with RMR LLC; |
| • | a decrease in interest expense due to the application of approximately $108,812 net proceeds against amounts outstanding under our unsecured revolving credit facility at the weighted average interest rate for the year ended December 31, 2019 of 3.68%; and |
| • | pro forma equity in earnings of an investee representing our 22% equity interest in our joint venture for the year ended December 31, 2019. |
| (F) | The adjustments represent the historical income and expenses relating to properties in our joint venture from January 1, 2019 to December 31, 2019 or for the period starting with the date of acquisition to December 31, 2019 for properties acquired after January 1, 2019. We owned three of the 12 properties on January 1, 2019, acquired three of the 12 properties in February 2019 and acquired six of the 12 properties in April 2019. |
F-5