NEWTON, Mass.--(BUSINESS WIRE)--Industrial Logistics Properties Trust (Nasdaq: ILPT) today announced that it has completed its acquisition of Monmouth Real Estate Investment Corporation (NYSE: MNR) for $21.00 per share in an all-cash transaction, valued at approximately $4.0 billion, including committed MNR acquisitions, transaction costs and the assumption of approximately $323 million of debt. This transaction was approved by MNR’s shareholders on February 17, 2022 and closed on February 25, 2022. The MNR portfolio includes 126 Class A, single tenant, net leased, e-commerce focused industrial properties containing over 26 million square feet of space with a weighted average lease term of approximately eight years that was 99.7% occupied and over 80.0% leased to investment grade rated tenants as of February 25, 2022. ILPT expects the MNR portfolio to generate annualized rental revenues of approximately $175 million in 2022 and expects the transaction to be accretive to normalized funds from operations, or Normalized FFO, per share.
Simultaneous with closing the MNR transaction, ILPT entered into a new joint venture with an institutional investor for 95 MNR properties that are expected to generate approximately $137 million in annualized net operating income, or NOI, in 2022. The investor contributed approximately $587 million for a 39% non-controlling equity interest and ILPT retained a 61% equity interest in the joint venture. The joint venture also entered into a $1.4 billion floating rate CMBS loan secured by 82 of the acquired properties and assumed $323 million of existing MNR mortgage debt. ILPT used the proceeds from the joint venture to partially fund the MNR purchase. ILPT funded its equity interest in the joint venture and the balance of the MNR purchase price with proceeds from a $1.385 billion draw on a bridge loan facility secured by 109 MNR and ILPT properties and proceeds from a $700 million fixed rate CMBS loan secured by 17 existing ILPT properties. In connection with the closing of the MNR transaction, ILPT also terminated its existing $750 million revolving credit facility.
John Murray, President and Chief Executive Officer of ILPT, made the following statement regarding today’s announcement:
“The successful completion of the MNR acquisition creates a stronger ILPT with enhanced scale, additional high quality e-commerce focused mainland properties and increased tenant and geographic diversity. This accretive transaction is complementary to our existing portfolio and increases ILPT’s exposure to key markets that offer attractive long-term investment prospects. It also further demonstrates our strong and growing relationships with private capital investors, providing ILPT with access to efficient capital to support future growth. We have already completed significant steps in our integration plan and are well positioned to continue capitalizing on the ongoing strong fundamental tailwinds in the industrial sector.”
ILPT expects to repay the $1.385 billion bridge loan facility with proceeds from the sale of approximately 30 MNR properties and from borrowings under a new credit facility it plans to enter by mid-2022. In addition, ILPT plans to sell additional equity interests in the joint venture, which would reduce its ownership percentage in the joint venture and raise additional proceeds to decrease ILPT’s leverage. As a result, ILPT expects that its consolidated net debt to Adjusted EBITDAre will be approximately 8.0x by year end 2022.
Certain Expected Strategic Transaction Benefits
- Accretive to Normalized FFO per share
- Improves existing portfolio by adding Class A, e-commerce focused assets
- Increases scale and provides better access to investment opportunities
- Adds geographic and tenant diversity
- Includes an active pipeline through acquisitions and property expansions
- Provides a platform for growth through relationships with merchant builders
On a pro forma basis as of today, ILPT will have a portfolio consisting of 383 properties containing approximately 55 million rentable square feet located in 39 states with a portfolio occupancy of over 99% and a weighted average remaining lease term of eight years.
Advisors
Citigroup Global Markets Inc. acted as exclusive financial advisor, Hunton Andrews Kurth LLP served as legal advisor on the transaction, Skadden, Arps, Slate, Meagher & Flom LLP served as legal advisor on the bridge and CMBS financings, and Sullivan & Worcester LLP served as legal advisor on the joint venture and corporate and tax structuring. Joint lead arrangers and bookrunners for the bridge loan were Citigroup Global Markets Inc. and UBS Investment Bank.
Non-GAAP Financial Measures
ILPT refers to Normalized FFO, NOI and Adjusted EBITDAre in this press release. Normalized FFO, NOI and Adjusted EBITDAre are “non-GAAP financial measures” within the meaning of the applicable rules of the Securities and Exchange Commission, or SEC. For a calculation and definition of these measures, and a reconciliation to ILPT’s net income, please see ILPT’s Fourth Quarter 2021 Supplemental Operating and Financial Data, or the Supplemental. The Supplemental was attached as Exhibit 99.2 to ILPT’s Current Report on Form 8-K furnished with the SEC on February 15, 2022. In addition, please see the Supplemental for statements as to why ILPT’s management believes that these measures provide useful information to investors and additional purposes for which ILPT management uses these measures.
About Industrial Logistics Properties Trust
Industrial Logistics Properties Trust (Nasdaq: ILPT) is a real estate investment trust, or REIT, focused on owning and leasing high quality distribution and logistics properties that serve the growing needs of e-commerce. As of December 31, 2021, ILPT’s portfolio consisted of 288 properties containing 34 million rentable square feet in 31 states. More than 70% of ILPT’s annual rental revenues are derived from investment grade tenants, tenants that are subsidiaries of investment grade rated entities or Hawaii land leases. ILPT is managed by The RMR Group (Nasdaq: RMR), a leading U.S. alternative asset management company with more than $33 billion in assets under management and more than 35 years of institutional experience in buying, selling, financing and operating commercial real estate. ILPT is headquartered in Newton, MA. For more information, visit ilptreit.com.
WARNING CONCERNING FORWARD-LOOKING STATEMENTS
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other securities laws. These forward-looking statements are based upon ILPT’s present beliefs and expectations, but these statements and the implications of these statements are not guaranteed to occur and may not occur for various reasons, some of which are beyond ILPT’s control. For example:
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This press release states that ILPT expects the MNR portfolio to generate annualized rental revenues of approximately $175 million in 2022 and expects its consolidated debt to Adjusted EBITDAre to be approximately 8.0x by year end 2022. However, these expectations are subject to a number of risks and uncertainties that could adversely affect ILPT’s business, results of operations and liquidity, including, but not limited to:
- the impact of economic conditions and the capital markets on ILPT and its tenants,
- competition within the real estate industry, particularly for industrial and logistics properties in those markets in which ILPT’s properties are located,
- ILPT’s tenants’ ability and willingness to pay their rent obligations to ILPT and the terms of future leases, which may not be as favorable as anticipated,
- ILPT’s ability to refinance debt, sell certain properties or sell a portion of its equity interest in the new joint venture on attractive terms or at all,
- compliance with, and changes to, federal, state and local laws and regulations, accounting rules, tax laws and similar matters,
- limitations imposed on ILPT’s business and its ability to satisfy complex rules in order for ILPT to maintain its qualification for taxation as a REIT for U.S. federal income tax purposes,
- actual and potential conflicts of interest with ILPT’s related parties, including its managing trustees, The RMR Group Inc. or others affiliated with them, and
- acts of terrorism, outbreaks of pandemics, or other manmade or natural disasters beyond ILPT’s control.
- This press release states that ILPT expects the MNR transaction to be accretive to Normalized FFO per share. However, the transaction may not be accretive to Normalized FFO per share at expected levels or at all for many reasons, including, but not limited to, the performance of its or MNR’s portfolio and changes in market interest rates. As a result, ILPT may be unable to achieve the strategic benefits from the MNR transaction at expected levels or at all.
- Mr. Murray states in this press release that ILPT is well positioned to continue capitalizing on the ongoing strong fundamental tailwinds in the industrial sector. However, these expectations may not be realized as currently expected or at all. Market conditions often change and are beyond ILPT’s control.
- This press release states that ILPT plans to sell a portion of its equity interest in the new joint venture to decrease ILPT’s leverage. However, ILPT may not be able to find additional joint venture investors or obtain such equity investments on favorable terms, and ILPT may not be able to find alternative financing in such amount and/or on as favorable terms, if at all.
- This press release states that ILPT expects to repay the bridge loan facility with proceeds from the sale of approximately 30 MNR properties and from borrowings under a new credit facility ILPT plans to enter by mid-2022. However, ILPT may not be able to find one or more buyers for this portfolio or any of the properties included in this portfolio, or such buyers may not be willing to pay prices or be subject to other terms acceptable to ILPT, and any such sales may not occur, may be delayed or the terms of such transactions may change. In addition, ILPT may be unable to enter a new credit facility by mid-2022 or at all, and any new credit facility ILPT may enter may not be on the terms ILPT expects or desires. As a result, ILPT may be unable to repay the bridge loan facility when or as expected.
The information contained in ILPT’s filings with the SEC, including under the caption “Risk Factors” in ILPT’s periodic reports or incorporated therein, identifies important factors that could cause ILPT’s actual results to differ materially from those stated or implied by ILPT’s forward-looking statements. ILPT’s filings with the SEC are available at the SEC’s website at www.sec.gov.
You should not place undue reliance upon forward-looking statements.
Except as required by law, ILPT does not intend to update or change any forward-looking statements as a result of new information, future events or otherwise.
A Maryland Real Estate Investment Trust with transferable shares of beneficial interest listed on the Nasdaq.
No shareholder, Trustee or officer is personally liable for any act or obligation of the Trust.
