Q4 2020 Industrial Logistics Properties Trust Earnings Call Feb 19, 2021 (Thomson StreetEvents) — Edited Transcript of Industrial Logistics Properties Trust earnings conference call or presentation Thursday, February 18, 2021 at 3:00:00pm GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * John G. Murray Industrial Logistics Properties Trust – President, CEO & Managing Trustee * Kevin Barry * Richard W. Siedel Industrial Logistics Properties Trust – CFO & Treasurer * Yael Duffy Industrial Logistics Properties Trust – VP & COO ================================================================================ Conference Call Participants ================================================================================ * Aaron Randall Hecht JMP Securities LLC, Research Division – MD & Equity Research Analyst * Bryan Anthony Maher B. Riley Securities, Inc., Research Division – Analyst * James Colin Feldman BofA Securities, Research Division – Director and Senior US Office & Industrial REIT Analyst * Jason R. Idoine RBC Capital Markets, Research Division – Associate ================================================================================ Presentation ——————————————————————————– Operator  ——————————————————————————– Good morning, and welcome to the Industrial Logistics Properties Trust Fourth Quarter 2020 Financial Results Conference Call. (Operator Instructions) Please note that this event is being recorded. I would now like to turn the conference over to Kevin Barry, Manager of Investor Relations. Please go ahead, sir. ——————————————————————————– Kevin Barry,  ——————————————————————————– Good morning, everyone, and thank you for joining us today. With me on the call are ILPT’s Chief Financial Officer John Murray; Chief Financial officer, Rick Siedel; and Chief Operating Officer, Yael Duffy. In just a moment, they will provide details about our business and our performance for the fourth quarter of 2020, followed by a question-and-answer session with sell-side analysts. First, I would like to note that 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 forward-looking statements are based on ILPT’s beliefs and expectations as of today, Thursday, February 18, 2021; 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, ilptreit.com; or the SEC’s website. Investors are cautioned not to place undue reliance upon any forward-looking statements. In addition, we will be discussing non-GAAP numbers during this call, including normalized funds from operations or normalized FFO, adjusted EBITDA and cash-based net operating income or cash basis NOI. A reconciliation of these non-GAAP figures to net income and the components to calculate cash available for distribution or CAD are available in our supplemental operating and financial data package, which also can be found on our website. With that, I will now turn the call over to John. ——————————————————————————– John G. Murray, Industrial Logistics Properties Trust – President, CEO & Managing Trustee  ——————————————————————————– Thank you, Kevin. Good morning, everyone, and thanks for joining us. On today’s call, I’ll begin with a brief update on our results and the progress we made on key priorities during the fourth quarter. Yael will review our latest property portfolio statistics and recent leasing activity; and Rick will discuss our financial results in more detail. We will then take questions. Turning to our quarterly results. We closed out the year with continued financial growth, solid leasing activity, execution on our joint venture strategy, reduced leverage and a high-quality industrial acquisition. During the fourth quarter, our portfolio achieved 1.6% normalized FFO growth year-over-year. We’ve collected over 98% of contractual rent after giving effect to modest rent deferrals granted to certain tenants earlier in the pandemic. We executed new and renewal leases for 253,000 square feet, while sustaining high occupancy at 98.5%. In November, we took another step forward with our joint venture initiative, adding a top-tier global sovereign wealth fund with a 39% equity investment in the existing 12-property JV for approximately $109 million of proceeds. The first partner maintained their 39% stake, and ILPT owns the remaining 22% interest. This vehicle provides ILPT with an additional source of attractively priced equity capital. We’re pleased to have this completed and look forward to continuing our growth. Our acquisition strategy is to invest in modern, high-quality, diversified assets that serve the growing needs of e-commerce and generate consistent cash flows. We are primarily focused on well-located properties in the top 30 industrial markets, occupied long term by high-quality credit tenants. At the same time, we may pursue expansion into smaller targeted infill locations that offer increased returns through rental rate roll-ups as well as properties that offer expansion opportunities with access to developer land. The intense competition for industrial real estate showed no signs of abating during the fourth quarter. We continue to face aggressive market conditions and a variety of investors are looking for similar opportunities. As we continue to evaluate a steady pipeline of investments, we are maintaining a disciplined approach. We submitted letters of intent for 8 properties with values exceeding $525 million during the fourth quarter and 28 properties with a combined value of more than $1.8 billion for the full year 2020. Our underwriting remains competitive. We are typically a finalist for the deals that we pursue. In late December, we closed on the acquisition of a 645,000 square foot industrial building in Kansas City for a purchase price of $44 million. This Class A single tenant property is 100% net leased and has a remaining lease term of approximately 12 years. This property is in the largest and fastest growing submarket of Kansas City and expands ILPT’s geographic diversification into another top U.S. industrial market. The purchase price reflects a 6.5% capitalization rate. I’ll now turn the call over to Yael to review ILPT’s operating results for the quarter. ——————————————————————————– Yael Duffy, Industrial Logistics Properties Trust – VP & COO  ——————————————————————————– Thanks, John, and good morning, everyone. I’ll start with a brief overview of industry and market trends, provide an update on ILPT’s portfolio after the deconsolidation of the joint venture assets and then summarize leasing activity for 2020, as well as the fourth quarter. As you know, the pandemic has been a catalyst for industrial real estate due to accelerated e-commerce demand for consumer products, groceries, home furnishings and improvements. Retailers are opting for multiple warehouses in the single area, evaluating supply chain optimization and stockpiling inventory to meet consumer needs. As a result, our facilities remain in strong demand. In Hawaii, the local economy has been under significant pressure due to its reliance on leisure and hospitality. However, we remain confident in our business there as well. Approximately 70% of ILPT’s tenants in Hawaii serve industries beyond tourism. Additionally, our land remains in high demand due to its prime location relative to the central business district, airport and seaport. Given these factors, we believe ILPT is well positioned to serve the growing needs of our existing tenants, while maintaining high occupancy and rent growth, both on the mainland and in Hawaii. As of December 31, 2020, ILPT’s portfolio consisted of 289 warehouse and distribution properties in 31 states, totaling approximately 35 million square feet that were 98.5% leased. As a reminder, these figures exclude the 12 properties totaling 9.2 million square feet that were contributed to the joint venture. Now, our mainland portfolio includes 63 properties in 30 states, totaling 18 million square feet that were 99.7% leased at year-end. The balance of the portfolio is comprised of 17 million square feet of valuable industrial land and properties in Hawaii, which were 97.2% leased. ILPT’s top 20 tenants represent 47% of total annualized rental revenues, with Amazon, FedEx and Restoration Hardware, representing approximately 10%, 5% and 3% of total annualized rental revenues, respectively. Investment-grade rated tenants or subsidiaries of investment-grade rated parent entities make up more than half of our mainland revenues. Looking at the total portfolio, more than 70% of revenue comes from those investment-grade rated tenants or subsidiaries or from our secure Hawaii land leases. The total portfolio has a weighted average remaining lease term of approximately 10 years. During 2020, we entered new and renewal leases for approximately 1.1 million square feet at rents that were 14.7% higher than prior rents with an average lease term of 11 years and commitments for leasing capital and concessions of only $0.17 per square foot per lease year. In 2020, we also completed rent resets for 1.9 million square feet of land in Hawaii at rental rates that were approximately 20% higher than prior rental rates. Our leasing activity in the fourth quarter comprised of 11 new and renewal leases for 253,000 square feet at rental rates that were 14.1% higher than prior rates, with an average lease term of 13 years and commitments for leasing capital of only $0.15 per square foot per lease year. These results exclude the 64-month renewal with Amazon that we discussed on our last earnings call for a 1 million square foot facility in Whitestown, Indiana, which is now part of the joint venture. We believe these results, combined with our success driving strong tenant retention and maintaining high occupancy levels, demonstrate the strength of ILPT’s portfolio and the rapid expansion of the industrial and logistics sector. Looking ahead to ILPT’s upcoming lease expirations, near-term expirations are relatively modest with 1.4% of total annualized revenue rolling in 2021. In 2022, a larger pool of leases will expire with 9.8% of total annualized revenue rolling, mainly driven by Hawaii were 14.6% of annualized revenue is scheduled to expire. Given the high-volume of expirations in Hawaii next year, we plan to engage brokers to assist with our re-leasing efforts. While this will drive incremental leasing costs in the back half of 2021 and into 2022, utilizing brokers will support ILPT’s efforts to maximize rent growth and minimize potential downtime. Our current leasing pipeline consists of 3.3 million square feet and includes 153,000 square feet of new prospects that could partially absorb the 532,000 square feet of vacant space across the portfolio. Our monthly rent collections continue to trend above 98% and granted rent deferrals totaled $3.2 million. Repayment activity has been strong as we have collected more than $1 million or over 30% of total granted rent deferrals to date. While the impact of COVID-19 continues to be felt throughout the country, we have received no new deferral requests, which we believe demonstrates the strong resiliency of our tenants and their businesses. As we previously disclosed, in December, we completed the sale of 308,000 square foot warehouse building in Winchester, Virginia for approximately $11 million. We believe that exiting this property reduce future risk for ILPT given the property’s age and potential leasing challenges. I’ll now turn the call over to Rick to provide details on this quarter’s results and financial position. ——————————————————————————– Richard W. Siedel, Industrial Logistics Properties Trust – CFO & Treasurer  ——————————————————————————– Thanks, Yael, and good morning, everyone. Total portfolio same property cash basis NOI for the fourth quarter decreased 1.8% year-over-year. This decline was primarily due to the change in timing for recognition of percentage rent that resulted from our execution of a lease amendment during the fourth quarter of 2019. As discussed on previous calls, we amended that lease and began recognizing approximately $1 million ratably throughout 2020. Excluding the impact of that change, same property cash basis NOI increased 20 basis points year-over-year. From a property type perspective, we reported a 2.9% decrease in same property cash NOI in Hawaii. Excluding the percentage rent timing change, same property cash basis NOI in Hawaii increased 1.2% year-over-year. Our Mainland Properties, same property cash NOI declined less than 1% due to slightly lower occupancy and slightly higher non escalatable expenses year-over-year. The same property NOI performance, along with our half quarter of FFO from a 61% ownership in the joint venture contributed to fourth quarter normalized FFO of $30.2 million or $0.46 per share. As John mentioned earlier, we added a second partner in our joint venture during the fourth quarter. And as a result of selling this additional 39% interest in our joint venture, we deconsolidated the assets and related liabilities, including $407 million of secured debt. If we had owned just our continuing 22% equity interest for the entire fourth quarter, normalized FFO would have been $0.44 per share. The immediate financial benefits of the JV transaction for ILPT are twofold. It enabled us to efficiently raise equity capital at net asset value and substantially reduce leverage. We recognized $24 million of gains on the sale, and we used $109 million of proceeds from this transaction to pay down outstanding borrowings on our revolver. As a result, we ended the quarter with debt-to-EBITDA of just 4.9x, which is 3x lower than we reported a year ago. Adjusting for the mid-quarter sale of the JV interest, debt-to-EBITDA should normalize in the mid-5x range. As of December 31, we had $552 million sic [$550 million] in total liquidity, including cash on hand of about $23 million and availability on our revolving credit facility of $529 million. With ample investment capacity, we are well positioned to pursue our disciplined acquisition strategy. We spent approximately $3.2 million on capital expenditures during the fourth quarter of 2020. Approximately 2/3 of this capital related to tenant improvements and leasing costs, while the remainder was spent on building improvements throughout our portfolio. In January, we declared our regular quarterly distribution to shareholders of $0.33 per share, which is unchanged from the prior level and represents an annualized dividend yield of approximately 6% at our current share price. Our dividend remains well covered at a normalized FFO payout ratio of just below 72% or approximately 75% after normalizing for the mid-quarter sales of the JV interest. That concludes our prepared remarks. Operator, please open up the line for questions. ================================================================================ Questions and Answers ——————————————————————————– Operator  ——————————————————————————– (Operator Instructions) And our first question today will come from Bryan Maher with B. Riley. ——————————————————————————– Bryan Anthony Maher, B. Riley Securities, Inc., Research Division – Analyst  ——————————————————————————– 2 questions from me this morning. One, can you expand a little bit upon your acquisition of the Kansas City property? We’re not familiar with the tenant, Excellence Learning Corporation. And also, what are your thoughts there on expansion of that property? And then I have a follow-up. ——————————————————————————– John G. Murray, Industrial Logistics Properties Trust – President, CEO & Managing Trustee  ——————————————————————————– Sure, Bryan. That tenant is in the business of providing educational materials and education related equipment, primarily focused on preschool and elementary school age students. And they’ve recently consolidated much of their operations. They had several different locations where they were distributing their products from. They’ve consolidated them to this new building. And we think that they have a good business model. The higher cap rate on this transaction reflects that they are not the strongest credit, but we believe, particularly with the current remote learning environment for many students across the United States, that they have a bright near term future. And as they continue to grow, the long term future is respectable too. So we think it’s a good acquisition. It’s a reasonably new building. It does have expansion capabilities. We don’t see that expansion happening in the near term, but we do have the ability to either add on to this building or potentially down the road if we subdivide this land from the existing parcel, we could develop a separate industrial building. ——————————————————————————– Bryan Anthony Maher, B. Riley Securities, Inc., Research Division – Analyst  ——————————————————————————– Great. And then as it relates to your leverage now being substantially below 6x net debt to EBITDA, do you anticipate getting or lobbying for an investment-grade rating in 2021? And how do you think about deploying your excess liquidity in this kind of heated market for industrial assets? ——————————————————————————– Richard W. Siedel, Industrial Logistics Properties Trust – CFO & Treasurer  ——————————————————————————– Bryan, it’s a good question. It’s one we’ve discussed internally quite a bit. Initially, when we did the IPO, we came out with really low leverage, and the plan was to seek an investment-grade rating. And then we had the opportunity to try to demonstrate the value of the Hawaii portfolio with some CMBS financing. And when we look at the portfolio now, when we think about our cost of capital, I’m not sure that the investment-grade rating would really help us all that much. We do have a significant number of offline assets encumbered with that CMBS debt for — through 2029. We’ve got great relationships with banks. We’ve got other capital partners that we could work with. So from a long term capital perspective, we obviously want to maintain a fairly conservative balance sheet and remain well positioned. But I don’t know that it’s as much of a priority as it might have been a couple of years ago. ——————————————————————————– Bryan Anthony Maher, B. Riley Securities, Inc., Research Division – Analyst  ——————————————————————————– And then from a liquidity perspective or how to deploy that capital like — ——————————————————————————– John G. Murray, Industrial Logistics Properties Trust – President, CEO & Managing Trustee  ——————————————————————————– Yes. In terms of deploying capital, we’re actively looking at potential transactions to acquire high-quality industrial properties. We have, I don’t know, 5 or 6 offers that are outstanding at the current time, several of which are moving into a second round. So the opportunities to invest are plentiful, but exceeded only by the amount of investors who are chasing them. So who knows whether we’ll be successful or at what cap rates. But — so that’s — our current plan is to continue to grow. And we’re making acquisitions that we’re happy for ILPT to be the sole owner of long term. But we also — we do have the joint venture set up with both investors part of the joint venture now. And so we have the ability to offer properties to the joint venture partners and may, from time to time, sell some of the acquired assets into that joint venture and continue our growth in that manner so that we would own just 22% of those properties going forward. So we have good liquidity today on our — mostly through our revolver, but we have — even with our share price at what we believe is depressed levels, we have access to attractively price capital through the joint venture for equity capital should we need it. Thank you. Operator: (Operator Instructions) And our next question will come from Jason Idoine with RBC. ——————————————————————————– Jason R. Idoine, RBC Capital Markets, Research Division – Associate  ——————————————————————————– In the prepared remarks, I think you guys mentioned some potential for development opportunities. And then, obviously, the Kansas City acquisition has some land on it as well. So just thinking about, I guess, what’s the investment pipeline allocation to development opportunities versus stabilized acquisitions today? And then going a little further, how do you weigh those opportunities going forward? ——————————————————————————– John G. Murray, Industrial Logistics Properties Trust – President, CEO & Managing Trustee  ——————————————————————————– We don’t have a specific allocation between growth through acquisition or through development. The properties that we own today, there’s a number of them that have excess land where we could expand existing facilities. But it’s — they’re triple-net leased properties. So it’s — the tenant needs to want to expand, we can’t just go and build or expand on their buildings without their desire. So it depends on the growth of their business and other locations that they may have. So it’s hard to predict. We do have some opportunities — other opportunities within the RMR Group of Companies where there’s some vacant land where we may, in the future, acquire land from other entities and just develop properties ground up. But that’s not going to be a material component of our growth going forward. So I think development growth for us in the near term is going to be sort of a peripheral portion of the growth, it’s primarily going to be through acquisitions. Over time, we’d like to make it more towards development when — if cap rates are going to remain as competitive as they are today. ——————————————————————————– Jason R. Idoine, RBC Capital Markets, Research Division – Associate  ——————————————————————————– And then, I guess, what are your expectations for the Hawaii lease rolls in 2021 and 2022? I don’t know if you’ve had any early renewals or I’m sure those discussions are ongoing, but if you could just provide any color on where you’d expect those rental rates to come in. Obviously, that’s been an area that’s been, I guess, more impacted than the mainland portfolio by the pandemic. So how are you guys thinking about that? ——————————————————————————– Yael Duffy, Industrial Logistics Properties Trust – VP & COO  ——————————————————————————– Sure. So we have 53 leases expiring in 2022 in Hawaii. So I think we have a real opportunity there to continue to see roll up in rents. As I mentioned in the prepared remarks, we’re engaging with brokers to help us with a little over half of those leases. And I think the 14% roll up we saw this quarter is a good indication of market. I think there’s definitely some parcels where we’ll be able to exceed that expectation. But 15% to 20%, I think, is a good gauge. ——————————————————————————– Operator  ——————————————————————————– And our next question will come from Aaron Hecht with JMP Securities. ——————————————————————————– Aaron Randall Hecht, JMP Securities LLC, Research Division – MD & Equity Research Analyst  ——————————————————————————– Just wanted to hit on those lease rolls a little bit more. 2022, 2023, 2024, I think that combines for over 30% of your total rents. Wondering if you could separate those between Hawaii and the mainland, and maybe if you could talk about where they sit relative to market. And you talked about 22% for Hawaii, but just overall for all of those expirations, if you can give any insights? ——————————————————————————– Yael Duffy, Industrial Logistics Properties Trust – VP & COO  ——————————————————————————– Sure. So on the mainland we only have 2 leases expiring in 2021, about 222,000 square feet. We’re in active discussions with both of those tenants. I think it’s a little too early to — we haven’t reached terms yet, but I think the renewals will be — if we’re able to complete them, will be at market. Again, ’22 is a big year in Hawaii. We’re in discussions with — I think, we have 3.3 million square feet expiring between ’21 and ’23 in Hawaii, and we’re in discussions or at least have proposals out to 53% of that number, so about 1.4 million. And then for some of the other Mainland Properties, ’22 is a light year as well. It’s only about 715,000 square feet. In ’23, we have a little over 2 million. And believe it or not, a lot of those tenants have already started to talk to us about renewals. So, again, I think we’re — I think where the market is right now, and it’s — everybody is trying to gobble up any vacancy that’s coming on board, I think the tenants want to remain in our buildings, and they don’t want their businesses to be disrupted. So I think we have an active audience. ——————————————————————————– Aaron Randall Hecht, JMP Securities LLC, Research Division – MD & Equity Research Analyst  ——————————————————————————– I mean, any thoughts on where your mainland portfolio — where is the market today versus maybe a year ago? Any sort of thoughts on that to give context for what could happen in the future? ——————————————————————————– Yael Duffy, Industrial Logistics Properties Trust – VP & COO  ——————————————————————————– In terms of rents? ——————————————————————————– Aaron Randall Hecht, JMP Securities LLC, Research Division – MD & Equity Research Analyst  ——————————————————————————– Yes. ——————————————————————————– Yael Duffy, Industrial Logistics Properties Trust – VP & COO  ——————————————————————————– I think it’s competitive. I mean, it’s hard to say, because a lot of these leases will be second generation. So we’re competing against newer product as well as some of the rents in the original leases have amortized TI in them. So, I think, there might — I don’t know that we’ll be seeing 5%, 6% roll-ups in rents, but I think 2% to 3% is probably where we expect to be. ——————————————————————————– Aaron Randall Hecht, JMP Securities LLC, Research Division – MD & Equity Research Analyst  ——————————————————————————– And then one more, if I could. Have you guys given thought into investing in multi-tenanted facilities, maybe drive a little bit higher yield? Or is that just not a model that ILPT wants to go and approach? ——————————————————————————– John G. Murray, Industrial Logistics Properties Trust – President, CEO & Managing Trustee  ——————————————————————————– We’ve primarily invested in single-tenant properties, but we do look at both. And we actually have offers out currently on 2 different multi-tenant properties. So we’re not against them. It just really depends on who the tenants are and how the space is laid out and what we perceive as the risks of re-tenanting those properties if space becomes available. So you may see some multi-tenant properties added as we go forward. ——————————————————————————– Aaron Randall Hecht, JMP Securities LLC, Research Division – MD & Equity Research Analyst  ——————————————————————————– Any thoughts on yield spread between the 2 types of assets, single tenants that you traditionally worked in and multi that you’re looking at? ——————————————————————————– John G. Murray, Industrial Logistics Properties Trust – President, CEO & Managing Trustee  ——————————————————————————– It really depends on where the markets are and who the tenants are. But I’d say maybe 25 to 50 basis points. Honestly, it feels like transactions are so aggressively bid right now that it’s — in some markets, there doesn’t seem to be that much recognition of the difference. Thank you. ——————————————————————————– Operator  ——————————————————————————– And our next question will come from Jamie Feldman with Bank of America. ——————————————————————————– James Colin Feldman, BofA Securities, Research Division – Director and Senior US Office & Industrial REIT Analyst  ——————————————————————————– I think you had said on an adjusted basis, your same-store growth was 20 basis points in the quarter. And I just want to understand, as we look at the year ahead, is that a good run rate for this portfolio? Like what are the moving pieces that are going to get that number higher or lower? And I know you’d said some of these renewals you’re doing are kind of flattish. So I’m just trying to — I just — I’d love to get your view on what does the kind of core growth outlook look for these assets? ——————————————————————————– Richard W. Siedel, Industrial Logistics Properties Trust – CFO & Treasurer  ——————————————————————————– I think it’s a little different in the mainland than it is in Hawaii. This quarter had a little bit of noise. I mentioned slightly higher non-escalatable expenses, for example, and really what that was, was some repairs. There was a sewer line issue in Hawaii. And then we had some hail damage that we — that wasn’t able to be passed through the tenant on the mainland. So when you put some of that together, it does certainly drag the growth down a little bit. And then, we do have a multi-tenant building in the portfolio today. And one of the 3 tenants is struggling a bit, and we have a little bit of noise in the P&L related to that. But, Yael, can probably speak to it better than I can. But the great news is that there is a backfill pretty much ready to go. So, again, I think from time-to-time, when your portfolio is essentially full, any little disruption kind of drags you down, but it’s a high-quality portfolio with good future prospects. So I would expect to be higher than where we are aside from the occasional bump in the road that will come with the business. ——————————————————————————– James Colin Feldman, BofA Securities, Research Division – Director and Senior US Office & Industrial REIT Analyst  ——————————————————————————– So I mean, how would you lay out the building blocks? Like on a cash basis, like what are your average rent bumps? What do you think occupancy can do? And what do you think leasing spreads would look like? ——————————————————————————– Richard W. Siedel, Industrial Logistics Properties Trust – CFO & Treasurer  ——————————————————————————– I mean, historically, we’ve said that — if you look at history Hawaii has grown around 3%. There is a little bit of occupancy decline that we’ve had there. We’re hopeful to get that back. So, I mean, in the short term, with the impact of the pandemic, if that’s growing at 2.5% to 3%, I think we’re pleased in the short term until some of those leases roll. And then on the mainland, again, long term leased to high credit quality tenants if we’re getting 1% bumps in cash, I think that’s pretty solid for where we are today. ——————————————————————————– James Colin Feldman, BofA Securities, Research Division – Director and Senior US Office & Industrial REIT Analyst  ——————————————————————————– So it sounds like kind of a 1% to 2.5-ish percent range is more reasonable for this year? ——————————————————————————– Richard W. Siedel, Industrial Logistics Properties Trust – CFO & Treasurer  ——————————————————————————– Yes. I think that’s a reasonable conservative expectation. ——————————————————————————– James Colin Feldman, BofA Securities, Research Division – Director and Senior US Office & Industrial REIT Analyst  ——————————————————————————– And then you gave net debt to EBITDA. I think it’s on a consolidated basis. Do you have that number as like a look through leverage number? ——————————————————————————– Richard W. Siedel, Industrial Logistics Properties Trust – CFO & Treasurer  ——————————————————————————– What do you mean by a look through leverage number? ——————————————————————————– James Colin Feldman, BofA Securities, Research Division – Director and Senior US Office & Industrial REIT Analyst  ——————————————————————————– Well, your share of JVs? ——————————————————————————– Richard W. Siedel, Industrial Logistics Properties Trust – CFO & Treasurer  ——————————————————————————– Yes. The share — in our EBITDA calculation now kind of following the EBITDAre definition from NAREIT, you can clearly see our portion of the JV. This quarter, it was $939,000, I believe. I don’t have the supplemental in front of me. But on a go-forward basis, I think I said, our leverage will settle in at that kind of 5.5x range. ——————————————————————————– James Colin Feldman, BofA Securities, Research Division – Director and Senior US Office & Industrial REIT Analyst  ——————————————————————————– And that’s a look through. That’s not just consolidated? ——————————————————————————– Richard W. Siedel, Industrial Logistics Properties Trust – CFO & Treasurer  ——————————————————————————– That’s correct. ——————————————————————————– James Colin Feldman, BofA Securities, Research Division – Director and Senior US Office & Industrial REIT Analyst  ——————————————————————————– So your JV income you’re saying is currently at $900,000 or so? ——————————————————————————– Richard W. Siedel, Industrial Logistics Properties Trust – CFO & Treasurer  ——————————————————————————– That was the half quarter impact. So on a go-forward basis, I would expect probably $2 million round numbers of our share of EBITDA from the JV. ——————————————————————————– Operator  ——————————————————————————– And this will conclude our question-and-answer session. I’d like to turn the conference back over to John Murray for any closing remarks. ——————————————————————————– John G. Murray, Industrial Logistics Properties Trust – President, CEO & Managing Trustee  ——————————————————————————– Thanks, everyone, for joining us today. We look forward to hopefully seeing you soon, at least virtually at some investor conferences. Thanks. ——————————————————————————– Operator  ——————————————————————————– The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect your lines at this time.