Industrial Logistics Properties Trust (ILPT) delivered a robust performance in the second quarter of 2026, marked by substantial growth in its financial metrics and strategic operational advancements. The company achieved a remarkable 51% year-over-year increase in normalized Funds From Operations (FFO) and a 2% rise in same-property cash basis Net Operating Income (NOI). This growth was underpinned by an exceptional quarter of leasing activity, totaling 5.4 million square feet, and the successful resolution of significant property vacancies. Furthermore, ILPT’s proactive debt refinancing initiative has transformed its entire consolidated debt portfolio to a fixed-rate structure, significantly reducing exposure to variable interest rate fluctuations and enhancing financial predictability. These positive developments have prompted the company to increase its full-year guidance and double its quarterly dividend, underscoring management's confidence in the firm's sustained earning potential and commitment to shareholder returns.
During the second quarter of 2026, which concluded on July 30th, ILPT's executive team, including President and CEO Yael Duffy, CFO and Treasurer Tiffany Sy, Vice President Marc Krohn, and Senior Director of Investor Relations Kevin Barry, unveiled the impressive results during their earnings call. The company's normalized FFO reached $20.8 million, translating to $0.31 per share, aligning with expectations and representing a significant 51% surge compared to the previous year. This substantial increase was primarily attributed to reduced interest expenses following recent debt refinancing efforts and the strong rental growth observed across its diverse portfolio. Same property cash basis NOI escalated to $85.7 million, marking a 2% year-over-year improvement, while Adjusted EBITDAre grew by 3% to $87.4 million.
A pivotal achievement for ILPT in this quarter was its record-breaking leasing performance. The company successfully executed 14 new and renewal leases, alongside one rent reset, encompassing an impressive 5.4 million square feet. This activity led to remarkable leasing spreads of 35% on a GAAP basis and 14% on a cash basis, extending the streak of double-digit rent growth to seven consecutive quarters and accelerating mark-to-market spreads for the fifth straight quarter. Notably, a 10-year lease for 532,000 square feet was secured with FedEx in Indianapolis, and a 53-year ground lease covering 2.2 million square feet in Hawaii was finalized with a construction firm. These agreements played a crucial role in boosting consolidated occupancy by 450 basis points to an impressive 99%, showcasing the strategic value and underlying quality of ILPT's properties.
Financially, ILPT reinforced its balance sheet through a strategic debt refinancing initiative in May. The company secured a $1.62 billion five-year fixed-rate interest-only mortgage loan at 5.71%. The proceeds from this loan were utilized to refinance $1.4 billion in floating-rate debt and $205 million in fixed-rate amortizing debt previously held by the consolidated joint venture. This move has successfully converted 100% of ILPT’s consolidated debt to fixed rates, eliminating variable rate exposure and extending debt maturities until 2029. This refinancing also facilitated a $38 million distribution from the joint venture, with ILPT receiving over $23 million. Supported by these robust financial and operational achievements, ILPT's board approved a doubling of the quarterly dividend to $0.10 per share, reflecting confidence in sustainable earnings and a commitment to delivering attractive returns to shareholders.
Looking forward, ILPT is well-positioned for sustained growth, with a strong leasing pipeline and clear objectives to optimize its portfolio and financial structure. The company anticipates continued organic cash flow growth from its robust leasing activity, with average roll-ups of 20% on the mainland and 30% in Hawaii for upcoming expirations. Management remains focused on leveraging embedded rent growth, maintaining high tenant retention rates, and further strengthening its financial position. The capital expenditure guidance for the full year 2026 is projected between $29 million and $34 million, reflecting ongoing investment in its properties. Overall, ILPT’s strategic focus on operational excellence, prudent financial management, and long-term value creation continues to drive its strong market performance and enhance shareholder confidence.