BofA Initiates Industrial Logistics Properties Trust With A Buy, Expects $200M In Acquisitions In 2018

Acquisition opportunities will fuel Industrial Logistics Properties Trust ILPT's future growth, according to Bank of America Merrill Lynch. 

The Analyst

James Feldman initiated coverage of Industrial Logistics Properties Trust with a Buy rating and $25 price target.

The Thesis

Industrial Logistics Property Trust has 40 mainland U.S. assets in 24 states, with four properties being the largest concentration in one state. Its largest tenant is Amazon.com, Inc. AMZN.

Hawaii, where ILPT owns 226 properties, remains a key catalyst for the newly public company. Hawaii — a state that's considered a difficult location to build in and where rent resets have averaged 22 percent since 2015 — acquisitions will likely be a key driver of future growth for the company, Feldman said in a Tuesday note. 

“ILPT plans to grow through acquisitions going forward. We view ILPT as well-positioned to grow using the remaining capacity on its credit line,” the analyst said. 

While the company does not develop properties, it has a robust credit line capacity of $434 million, and the trust is comfortable with leverage up to 6.5x, providing runway for nearly $600 million in acquisitions before ILPT has to raise more equity, Feldman said. 

Access to the equity markets thereafter to fund growth is a key future risk, the analyst said. 

BofA projects that ILPT will make $200 million in acquisitions in 2018 and $240 million in 2019.

Price Action

ILPT shares were up 0.55 percent at $21.81 in Tuesday afternoon trading. 

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Posted In: Bank of AmericaJames FeldmanAnalyst ColorREITPrice TargetInitiationAnalyst RatingsReal Estate