Source: The Motley Fool —
Don’t fall for the company’s low share price.
Industrial Logistics Properties Trust (ILPT -4.38%) has gotten mauled over the past year. Shares of the industrial real estate investment trust (REIT) have plummeted a staggering 83%. They could have further to fall. Because of that, investors should avoid this REIT like the plague.
Instead, they should consider buying shares of fellow industrial REITs Prologis (PLD -3.01%) and EastGroup Properties (EGP -2.07%). Here’s why they’re much better buys than the beaten-up Industrial Logistics Properties.
An expensive mistake
The biggest factor weighing on Industrial Logistics Properties Trust over the past year is its debt-laden balance sheet. In late 2021, the company won the bidding to acquire fellow industrial REIT Monmouth Real Estate Investment Corp in an all-cash transaction valued at $4 billion plus the assumption of Monmouth’s $409 million of debt. The company swooped in after Monmouth shareholders rejected a $3.4 billion cash-and-stock merger agreement with Equity Commonwealth (NYSE: EQC).
While that deal significantly increased Industrial Logistics Properties’ scale, it strained its balance sheet. An unanticipated increase in interest rates and deteriorating conditions in the real estate market made it hard for the company to complete its long-term financing plan, which included selling joint venture interests, divesting properties, and other refinancing activities. That forced the REIT to slash its dividend and focus on reducing leverage.
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