Industrial Logistics Properties Trust (ILPT) stock intrinsic value fair value estimate & owner earnings analysis

Industrial Logistics Properties Trust owns 409 industrial and logistics properties, about 59.6 million rentable square feet in 39 states, 94.5% occupied at the end of 2025. It earned $448.8 million of rent in 2025. Roughly 28% of rent comes from Hawaii, including land leases whose rents reset periodically to market (generally every 10 years), and the rest from mainland properties. FedEx accounts for 27.9% of annualized rent and Amazon for 7.3%. A joint venture holding 94 mainland properties is consolidated by the company, which owns 61% of it; an outside partner owns the other 39%. The company carries about $4.2 billion of debt against roughly 66 million shares, so what is left for shareholders after interest is a thin slice of a large rent roll. That leverage is the central fact of the valuation. How we measured earnings. We start from cash from operations, remove working-capital swings and share-based pay, and subtract the capital spending needed to keep buildings leased (real estate improvements, with a small growth portion carved out using the company's own spending-to-rent ratio). Two judgements matter. First, the company receives payments on its interest rate caps that its cash flow statement classifies as investing rather than operating, and it pays for the caps in investing too; since these payments directly offset interest, we counted the net amount as part of earnings ($18.9 million in 2025, $22.1 million in 2024, $56.9 million in 2023). Second, because the consolidated cash flow includes 100% of the joint venture, we subtracted the outside partner's share of joint-venture earnings, approximated by that partner's share of funds from operations ($3.6 million in 2025). On this basis owner earnings were $0.68 per share in 2025, $0.44 in 2024, $0.75 in 2023 and $0.93 in 2022, versus roughly $1.5 to $2.3 per share from 2016 to 2021 when the company was far less indebted. A cross-check of net loss plus non-cash charges less improvement spending reconciled to our cash-flow build within the value of share-based pay (about $2 million), as expected. Anchor. We use the median of 2023 to 2025, $0.68 per share. The company transformed in 2022 with $3.59 billion of property acquisitions funded largely with new debt, so earlier years describe a different business and 2022 is only a partial year of the larger portfolio. Cash from operations was only $6 million in 2023 and $2 million in 2024 because about $237 million of annual interest was paid while cap receipts were classified elsewhere. What changes going forward. Owner earnings rose 55% in 2025 (from $0.44 to $0.68), helped by lower cap purchases ($15.0 million versus $43.2 million) and higher operating cash flow ($60.7 million versus $2.0 million). We do not project that gain continuing. In June 2025 the company replaced a floating-rate loan of about $1.2 billion with a $1.16 billion fixed-rate mortgage at 6.40% due July 2030, and in April 2026 it priced a $1.62 billion five-year fixed-rate, interest-only mortgage at 5.71% for the joint venture to refinance $1.4 billion of floating debt and $0.2 billion of fixed debt. With floating rates gone, the cap receipts that subsidized 2025 disappear, and we estimate cash interest about $15 million higher than 2025 net of caps (first-half 2026 interest paid was $117.5 million). That lowers 2026 by about $0.19 per share to around $0.48 before growth, so year one of the base case is roughly $0.52, a decline of about 24% against the 55% gain of 2025. First-half 2026 filings support this level: cash from operations was $37.9 million versus $29.8 million a year earlier, while distributions to the joint-venture partner jumped to $15.0 million from $0.06 million in all of 2025, so the partner's claim is now being paid in cash. Base case. Rent net of property costs and general expenses grew about $2.6 million a year from 2023 to 2025 (from $307.9 million to $313.1 million, after a $5.7 million incentive management fee in 2025). Rent growth is supported by fixed escalators in most mainland leases, Hawaii rent resets (a 29.1% increase on about 204,000 square feet reset in 2025) and new and renewal leases signed in 2025 at rents 22.8% above prior rents. We credit that $2.6 million a year, about $0.034 per share, for ten years and then hold it flat. Two low-rate loans mature: $650 million at 4.31% in February 2029 and $700 million at 4.42% in March 2032. We assume they are refinanced at 6.40%, the rate on the company's own most recent fixed loan, which adds roughly $0.21 per share of interest each after their maturities. The other large loans (at 5.71% to 6.40%) are assumed to roll at their current rates. Result: about $0.52 in 2026, near $0.58 by 2028, around $0.43 in 2029 and $0.34 to $0.41 in 2032 to 2035. After 2035 we hold the level flat, because owned industrial buildings and Hawaii land keep collecting rent with maintenance spending already deducted; we credit no growth beyond 2035. Value: $7.13 per share, of which about $3.77 comes from years after 2035. Bear case. No rent growth (rent net of property costs grew only $2.1 million in 2024), and one in five of the leases expiring in 2027 to 2029, which represent 27.3% of rent ($16.8 million, or 3.8%, expires in 2026), leaves without being replaced, costing about $24 million of rent a year, or about $0.32 per share once phased in by 2029. The two low-rate loans refinance at 6.40%. Owner earnings fall to about zero in 2029 to 2031 and turn negative, about $0.21 to $0.25 per share, from 2032. On this case the company owes more than the properties earn over time, by roughly $1.95 per share in present value. We did not model a FedEx departure because we could not find FedEx lease expiry dates in the filing. Bull case. Net rent grows at the faster $5.4 million a year seen from 2023 to 2025 when the 2025 incentive fee is excluded (about $0.07 per share per year) for ten years, and the two low-rate loans refinance at 5.71%, the joint venture's new rate. Value: $13.70 per share. What would prove this wrong. Faster rent growth from Hawaii resets scheduled for 2029 ($8.4 million of annualized rent) and 2030 ($5.9 million) would help; a loss or downsizing by FedEx, or refinancing above 6.40%, would hurt. We estimated the joint-venture partner's cash claim from funds from operations and could not confirm it from the joint venture's own financials; the first-half 2026 distributions suggest it may be larger, which would lower these values. Because the equity is thin relative to debt and rent is concentrated, we require a wide margin of safety: $3.25 per share, under half of the base value, given the negative bear case.