UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September 30, 2021~~March 31, 2022

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 001-38342

INDUSTRIAL LOGISTICS PROPERTIES TRUST

(Exact Name of Registrant as Specified in Its Charter)


Maryland						82-2809631
(State or Other Jurisdiction of Incorporation or Organization)						(IRS Employer Identification No.)

Two Newton Place, 255 Washington Street, Suite 300, Newton, Massachusetts 02458-1634

~~(Address~~(Address of Principal Executive Offices) ~~(Zip~~

(Zip Code)

617-219-1460

(Registrant’s Telephone Number, Including Area Code)

Securities Registered Pursuant to Section 12(b) of the Act:

Title of Each Class

Trading Symbol(s)

Name Of Each Exchange On Which Registered

Common Shares of Beneficial Interest

ILPT

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided inpursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Number of registrant’s common shares of beneficial interest, $.01 par value per share, outstanding as of ~~October 25, 2021: 65,404,592~~

April 22, 2022: 65,403,859

Table of Contents

INDUSTRIAL LOGISTICS PROPERTIES TRUST

FORM 10-Q

~~September 30, 2021~~March 31, 2022

INDEX


		Page
PART I	Financial Information	3

Item 1.	Financial Statements (unaudited)	3

	Condensed Consolidated Balance Sheets —S e ~~ptember~~ ~~30, 2021~~ March 31, 2022 and December 31, ~~2020~~2021	3

	Condensed Consolidated Statements of Comprehensive Income (Loss) — Three ~~and~~ ~~Nine~~Months Ended ~~September~~ ~~30,~~March 31, 2022 and 2021 ~~and 2020~~	4

	Condensed Consolidated Statements of Shareholders’ Equity — Three ~~and~~ ~~Nine~~Months Ended ~~September~~ ~~30,~~March 31, 2022 and 2021 ~~and 2020~~	5

	Condensed Consolidated Statements of Cash Flows — ~~Nine~~Three Months Ended S e ~~ptember~~ ~~30,~~March 31, 2022 and 2021 ~~and 2020~~	76

	Notes to Condensed Consolidated Financial Statements	98

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1821

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3334

Item 4.	Controls and Procedures	3436

	Warning Concerning Forward-Looking Statements	3537

	Statement Concerning Limited Liability	3840

PART II	Other Information	3841

Item 1A.	Risk Factors	3841

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3941



Item 6.	Exhibits	4042

	Signatures	4143

References in this Quarterly Report on Form 10-Q to the Company, we, us or our include Industrial Logistics Properties Trust and its consolidated subsidiaries unless otherwise expressly stated or the context indicates otherwise.

Table of Contents

PART I Financial Information

Item 1. Financial Statements

INDUSTRIAL LOGISTICS PROPERTIES TRUST

CONDENSED CONSOLIDATED BALANCE SHEETS

(dollars in thousands, except per share data)

(unaudited)

September 30, December 31,
2021 2020
ASSETS
Real estate properties:
Land $ 718,565 $ 709,099
Buildings and improvements 1,217,458 1,099,971
Total real estate properties, gross 1,936,023 1,809,070
Accumulated depreciation (164,843) (141,406)
Total real estate properties, net 1,771,180 1,667,664
Investment in unconsolidated joint venture 63,260 60,590
Acquired real estate leases, net 79,475 83,644
Cash and cash equivalents 44,093 22,834
Rents receivable, including straight line rents of $68,426 and $62,753, respectively 74,224 69,511
Deferred leasing costs, net 7,037 4,595
Debt issuance costs, net 464 1,477
Due from related persons — 2,665
Other assets, net 8,362 2,765
Total assets $ 2,048,095 $ 1,915,745
LIABILITIES AND SHAREHOLDERS' EQUITY
Revolving credit facility $ 354,000 $ 221,000
Mortgage notes payable, net 645,987 645,579
Assumed real estate lease obligations, net 13,037 14,630
Accounts payable and other liabilities 16,942 14,716
Rents collected in advance 11,823 7,811
Security deposits 6,933 6,540
Due to related persons 3,344 2,279
Total liabilities 1,052,066 912,555
Commitments and contingencies 0 0
Shareholders' Equity:
Common shares of beneficial interest, $.01 par value: 100,000,000 shares authorized; 65,404,879 and 65,301,088 shares issued and outstanding, respectively 654 653
Additional paid in capital 1,011,835 1,010,819
Cumulative net income 280,701 224,226
Cumulative common distributions (297,161) (232,508)
Total shareholders' equity 996,029 1,003,190
Total liabilities and shareholders' equity $ 2,048,095 $ 1,915,745


	March 31,		December 31,
	2022		2021
ASSETS
Real estate properties:
Land	$	1,026,237	$	699,037
Buildings and improvements	3,524,573		1,049,796
Total real estate properties, gross	4,550,810		1,748,833
Accumulated depreciation	(182,482)		(167,490)
Total real estate properties, net	4,368,328		1,581,343
Assets of properties held for sale	731,964		—
Investment in unconsolidated joint venture	143,428		143,021
Acquired real estate leases, net	282,314		63,441
Cash and cash equivalents	275,075		29,397
Restricted cash	146,354		—
Rents receivable, including straight line rents of $70,253 and $69,173, respectively	77,443		75,877


Other assets, net	78,887		15,479

Total assets	$	6,103,793	$	1,908,558

LIABILITIES AND EQUITY
Revolving credit facility	$	—	$	182,000
Bridge loan facility	1,356,606		—
Mortgage notes payable, net	3,031,819		646,124
Liabilities of properties held for sale	10,516		—
Assumed real estate lease obligations, net	25,943		12,435
Accounts payable and other liabilities	68,863		27,772


Due to related persons	6,077		2,185
Total liabilities	4,499,824		870,516

Commitments and contingencies	0		0

Equity:
Equity attributable to common shareholders:
Common shares of beneficial interest, $0.01 par value: 100,000,000 shares authorized; 65,403,859 and 65,404,592 shares issued and outstanding, respectively	654		654
Additional paid in capital	1,012,622		1,012,224
Cumulative net income	337,394		343,908
Cumulative other comprehensive income	3,908		—
Cumulative common distributions	(340,328)		(318,744)
Total equity attributable to common shareholders	1,014,250		1,038,042
Noncontrolling interest:
Total equity attributable to noncontrolling interest	589,719		—
Total equity	1,603,969		1,038,042
Total liabilities and equity	$	6,103,793	$	1,908,558

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Table of Contents

INDUSTRIAL LOGISTICS PROPERTIES TRUST

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(amounts in thousands, except per share data)

(unaudited)


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2021		2020		2021		2020			2022		2021

Rental income	Rental income	$	54,981	$	65,106	$	163,378	$	194,494	Rental income	$	71,375	$	54,217

Expenses:	Expenses:									Expenses:
Real estate taxes	Real estate taxes	7,617		9,036		22,353		26,779		Real estate taxes	9,436		7,247
Other operating expenses	Other operating expenses	4,417		5,511		13,734		15,733		Other operating expenses	6,772		4,976
Depreciation and amortization	Depreciation and amortization	12,694		18,488		37,202		55,303		Depreciation and amortization	22,878		12,678
Acquisition and certain other transaction related costs		—		178		646		178

General and administrative	General and administrative	4,728		5,180		12,718		14,857		General and administrative	6,077		3,756
Total expenses	Total expenses	29,456		38,393		86,653		112,850		Total expenses	45,163		28,657

Gain on sale of real estate		940		—		940		—
Interest income		—		—		—		113
Interest expense (including net amortization of debt issuance costs, premiums and discounts of $505, $664, $1,516 and $1,893, respectively)		(9,084)		(12,886)		(26,468)		(40,610)
Gain on early extinguishment of debt		—		—		—		120
Income before income tax expense and equity in earnings of investees		17,381		13,827		51,197		41,267
Realized gain on sale of equity securities										Realized gain on sale of equity securities	1,232		—
Unrealized gain on equity securities										Unrealized gain on equity securities	2,460		—
Dividend income										Dividend income	478		—
Interest expense (including net amortization of debt issuance costs, premiums and discounts of $20,321 and $505, respectively)										Interest expense (including net amortization of debt issuance costs, premiums and discounts of $20,321 and $505, respectively)	(40,999)		(8,741)
Loss on early extinguishment of debt										Loss on early extinguishment of debt	(828)		—
Income (loss) before income tax expense and equity in earnings of investees										Income (loss) before income tax expense and equity in earnings of investees	(11,445)		16,819
Income tax expense	Income tax expense	(72)		(13)		(177)		(202)		Income tax expense	(69)		(63)
Equity in earnings of investees	Equity in earnings of investees	998		—		5,455		—		Equity in earnings of investees	1,727		2,581
Net income		18,307		13,814		56,475		41,065
Net (loss) income										Net (loss) income	(9,787)		19,337
Net loss attributable to noncontrolling interest	Net loss attributable to noncontrolling interest	—		275		—		691		Net loss attributable to noncontrolling interest	3,273		—
Net income attributable to common shareholders		$	18,307	$	14,089	$	56,475	$	41,756
Net (loss) income attributable to common shareholders										Net (loss) income attributable to common shareholders	(6,514)		19,337

Other comprehensive income:										Other comprehensive income:
Unrealized gain on derivatives										Unrealized gain on derivatives	5,632		—
Less: unrealized gain on derivatives attributable to noncontrolling interest										Less: unrealized gain on derivatives attributable to noncontrolling interest	(1,724)		—
Other comprehensive income attributable to common shareholders										Other comprehensive income attributable to common shareholders	3,908		—
Comprehensive (loss) income attributable to common shareholders										Comprehensive (loss) income attributable to common shareholders	$	(2,606)	$	19,337

Weighted average common shares outstanding - basic	Weighted average common shares outstanding - basic	65,178		65,112		65,154		65,092		Weighted average common shares outstanding - basic	65,212		65,139
Weighted average common shares outstanding - diluted	Weighted average common shares outstanding - diluted	65,230		65,129		65,205		65,101		Weighted average common shares outstanding - diluted	65,212		65,177

Per common share data (basic and diluted):	Per common share data (basic and diluted):									Per common share data (basic and diluted):
Net income attributable to common shareholders		$	0.28	$	0.22	$	0.86	$	0.64
Net (loss) income attributable to common shareholders										Net (loss) income attributable to common shareholders	$	(0.10)	$	0.30

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Table of Contents

INDUSTRIAL LOGISTICS PROPERTIES TRUST

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(dollars in thousands)

(unaudited)


																					Cumulative				Total Equity		Total Equity
		Number of			Additional				Cumulative					Number of			Additional				Other		Cumulative		Attributable to		Attributable to
		Common	Common		Paid In		Cumulative		Common		Total			Common	Common		Paid In		Cumulative		Comprehensive		Common		Common		Noncontrolling		Total
														Shares	Shares		Capital		Net Income		Income		Distributions		Shareholders		Interest		Equity
Balance at December 31, 2021													Balance at December 31, 2021	65,404,592	$	654	$	1,012,224	$	343,908	$	—	$	(318,744)	$	1,038,042	$	—	$	1,038,042
Net (loss) income													Net (loss) income	—	—		—		(6,514)		—		—		(6,514)		(3,273)		(9,787)
Share grants													Share grants	—	—		407		—		—		—		407		—		407
Share repurchases													Share repurchases	(333)	—		(7)		—		—		—		(7)		—		(7)
Share forfeitures													Share forfeitures	(400)	—		(1)		—		—		—		(1)		—		(1)
Net current period other comprehensive income													Net current period other comprehensive income	—	—		—		—		3,908		—		3,908		1,724		5,632
Contributions from noncontrolling interest													Contributions from noncontrolling interest	—	—		—		—		—		—		—		591,268		591,268
Distributions to common shareholders													Distributions to common shareholders	—	—		—		—		—		(21,584)		(21,584)		—		(21,584)
Balance at March 31, 2022													Balance at March 31, 2022	65,403,859	$	654	$	1,012,622	$	337,394	$	3,908	$	(340,328)	$	1,014,250	$	589,719	$	1,603,969
		Shares	Shares		Capital		Net Income		Distributions		Equity
Balance at December 31, 2020	Balance at December 31, 2020	65,301,088	$	653	$	1,010,819	$	224,226	$	(232,508)	$	1,003,190	Balance at December 31, 2020	65,301,088	$	653	$	1,010,819	$	224,226	—		$	(232,508)	$	1,003,190	—		$	1,003,190
Net income	Net income	—	—		—		19,337		—		19,337		Net income	—	—		—		19,337		—		—		19,337		—		19,337
Share grants	Share grants	—	—		239		—		—		239		Share grants	—	—		239		—		—		—		239		—		239

Distributions to common shareholders	Distributions to common shareholders	—	—		—		—		(21,550)		(21,550)		Distributions to common shareholders	—	—		��		—		—		(21,550)		(21,550)		—		(21,550)
Balance at March 31, 2021	Balance at March 31, 2021	65,301,088	653		1,011,058		243,563		(254,058)		1,001,216		Balance at March 31, 2021	65,301,088	$	653	$	1,011,058	$	243,563	$	—	$	(254,058)	$	1,001,216	$	—	$	1,001,216

Net income		—	—		—		18,831		—		18,831
Share grants		21,000	—		780		—		—		780
Share repurchases		(7,733)	—		(202)		—		—		(202)

Distributions to common shareholders		—	—		—		—		(21,549)		(21,549)
Balance at June 30, 2021		65,314,355	653		1,011,636		262,394		(275,607)		999,076
Net income		—	—		—		18,307		—		18,307
Share grants		118,800	1		916		—		—		917
Share repurchases		(27,576)	—		(713)		—		—		(713)
Share forfeitures		(700)	—		(4)		—		—		(4)
Distributions to common shareholders		—	—		—		—		(21,554)		(21,554)
Balance at September 30, 2021		65,404,879	$	654	$	1,011,835	$	280,701	$	(297,161)	$	996,029

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Table of Contents

INDUSTRIAL LOGISTICS PROPERTIES TRUST

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(dollars in thousands)

(unaudited)


	Three Months Ended March 31,
		2022		2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income		$	(9,787)	$	19,337
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		14,992		7,617
Net amortization of debt issuance costs, premiums and discounts		20,320		505
Amortization of acquired real estate leases and assumed real estate lease obligations		7,223		4,673
Amortization of deferred leasing costs		361		211

Unrealized gain on equity securities		(2,460)		—
Realized gain on sale of equity securities		(1,232)		—

Straight line rental income		(1,156)		(2,044)
Loss on early extinguishment of debt		828		—
Other non-cash expenses		696		239
Unconsolidated joint venture distributions		1,320		660
Equity in earnings of investees		(1,727)		(2,581)
Change in assets and liabilities:
Rents receivable		(1,309)		1,144
Deferred leasing costs		(3,226)		(771)
Due from related persons		—		1,256
Other assets		(15,018)		(787)
Accounts payable and other liabilities		22,502		508
Rents collected in advance		19,646		(289)
Security deposits		729		29
Due to related persons		3,937		(55)
Net cash provided by operating activities		56,639		29,652

CASH FLOWS FROM INVESTING ACTIVITIES:
Real estate acquisitions and deposits		(3,557,602)		—
Real estate improvements		(618)		(789)
Proceeds from sale of marketable securities		115,735		—
Net cash used in investing activities		(3,442,485)		(789)

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from issuance of mortgage notes payable		2,100,000		—
Proceeds from secured bridge loan facility		1,385,158		—
Borrowings under revolving credit facility		3,000		9,000
Repayments of revolving credit facility		(185,000)		(13,000)
Repayment of mortgage notes payable		(1,782)		—

Payment of debt issuance costs		(89,354)		—
Distributions to common shareholders		(21,584)		(21,550)
Proceeds from noncontrolling interest, net		587,440		—




Net cash (used in) provided by financing activities		3,777,878		(25,550)

Increase in cash, cash equivalents and restricted cash		392,032		3,313
Cash, cash equivalents and restricted cash at beginning of period		29,397		22,834
Cash, cash equivalents and restricted cash at end of period		$	421,429	$	26,147

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Table of Contents

~~INDUSTRIAL LOGISTICS PROPERTIES TRUST~~

~~CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY~~

~~(dollars in thousands)~~

~~(unaudited)~~

Total Equity Total Equity
Number of Additional Cumulative Attributable to Attributable to
Common Common Paid In Cumulative Common Common Noncontrolling Total
Shares Shares Capital Net Income Distributions Shareholders Interest Equity
Balance at December 31, 2019 65,180,628 $ 652 $ 999,302 $ 142,155 $ (146,419) $ 995,690 $ — $ 995,690
Net income (loss) — — — 12,846 — 12,846 (152) 12,694
Share grants 6,000 — 326 — — 326 — 326
Share repurchases (951) — (18) — — (18) — (18)
Distributions to common shareholders — — — — (21,510) (21,510) — (21,510)
Contributions from noncontrolling interest — — 6,972 — — 6,972 100,668 107,640
Balance at March 31, 2020 65,185,677 652 1,006,582 155,001 (167,929) 994,306 100,516 1,094,822
Net income (loss) — — — 14,821 — 14,821 (264) 14,557
Share grants 24,500 — 654 — — 654 — 654
Share repurchases (613) — (13) — — (13) — (13)
Distributions to common shareholders — — — — (21,511) (21,511) — (21,511)
Distributions to noncontrolling interest — — — — — — (1,898) (1,898)
Balance at June 30, 2020 65,209,564 652 1,007,223 169,822 (189,440) 988,257 98,354 1,086,611
Net income (loss) — — — 14,089 — 14,089 (275) 13,814
Share grants 108,600 1 675 — — 676 — 676
Share repurchases (16,496) — (351) — — (351) — (351)
Share forfeitures (580) — (3) — — (3) — (3)
Distributions to common shareholders — — — — (21,519) (21,519) — (21,519)
Contributions from noncontrolling interest — — 2,595 — — 2,595 (2,293) 302
Distributions to noncontrolling interest — — — — — — (2,107) (2,107)
Balance at September 30, 2020 65,301,088 $ 653 $ 1,010,139 $ 183,911 $ (210,959) $ 983,744 $ 93,679 $ 1,077,423

~~The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.~~

~~Table of~~ ~~Contents~~

~~INDUSTRIAL LOGISTICS PROPERTIES TRUST~~

~~CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS~~

~~(dollars in thousands)~~

~~(unaudited)~~
Nine Months Ended September 30,
2021 2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 56,475 $ 41,065
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation 23,500 34,307
Net amortization of debt issuance costs, premiums and discounts 1,516 1,893
Amortization of acquired real estate leases and assumed real estate lease obligations 12,567 19,458
Amortization of deferred leasing costs 620 952
Straight line rental income (5,673) (6,183)
Gain on sale of real estate (940) —
Gain on early extinguishment of debt — (120)
Other non-cash expenses 1,932 1,652
Unconsolidated joint venture distributions 1,980 —
Equity in earnings of investees (5,455) —
Change in assets and liabilities:
Rents receivable 960 (1,984)
Deferred leasing costs (2,758) (514)
Due from related persons 2,665 1,504
Other assets (5,596) (2,413)
Accounts payable and other liabilities 1,657 3,865
Rents collected in advance 4,012 (1,210)
Security deposits 393 71
Due to related persons 1,065 589
Net cash provided by operating activities 88,920 92,932

CASH FLOWS FROM INVESTING ACTIVITIES:
Real estate acquisitions and deposits (134,730) (71,628)
Real estate improvements (2,373) (4,495)
Proceeds from sale of real estate 1,206 —
Proceeds from sale of joint venture 804 —
Distributions in excess of earnings from Affiliates Insurance Company — 287
Net cash used in investing activities (135,093) (75,836)

CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under revolving credit facility 246,000 180,000
Repayments of revolving credit facility (113,000) (170,000)
Repayment of mortgage note payable — (48,750)
Distributions to common shareholders (64,653) (64,540)
Proceeds from noncontrolling interest, net — 107,942
Distributions to noncontrolling interest — (4,005)
Repurchase of common shares (915) (382)
Net cash provided by financing activities 67,432 265

Increase in cash, cash equivalents and restricted cash 21,259 17,361
Cash, cash equivalents and restricted cash at beginning of period 22,834 34,550
Cash, cash equivalents and restricted cash at end of period $ 44,093 $ 51,911

~~The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.~~

~~Table of~~ ~~Contents~~

INDUSTRIAL LOGISTICS PROPERTIES TRUST

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

(dollars in thousands)

(unaudited)


		Nine Months Ended September 30,			Three Months Ended March 31,
			2021			2020			2022		2021
SUPPLEMENTAL DISCLOSURES:	SUPPLEMENTAL DISCLOSURES:							SUPPLEMENTAL DISCLOSURES:
Interest paid	Interest paid		$	24,708		$	39,125	Interest paid	$	13,021	$	8,240
Income taxes paid	Income taxes paid		$	386		$	199	Income taxes paid	$	57	$	—

NON-CASH INVESTING ACTIVITIES:	NON-CASH INVESTING ACTIVITIES:							NON-CASH INVESTING ACTIVITIES:
Real estate acquired by assumption of mortgage notes payable								Real estate acquired by assumption of mortgage notes payable	$	323,432	$	—
Real estate improvements accrued, not paid	Real estate improvements accrued, not paid		$	799		$	741	Real estate improvements accrued, not paid	$	821	$	72

NON-CASH FINANCING ACTIVITIES:								NON-CASH FINANCING ACTIVITIES:
Assumption of mortgage notes payable								Assumption of mortgage notes payable	$	(323,432)	$	—
Increase in deferred financing fees								Increase in deferred financing fees	$	14,537	$	—


SUPPLEMENTAL DISCLOSURE OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH:	SUPPLEMENTAL DISCLOSURE OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH:	SUPPLEMENTAL DISCLOSURE OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH:
												The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the condensed consolidated balance sheets to the amounts shown in the condensed consolidated statements of cash flows:
			As of September 30,					As of March 31,
			2021		2020			2022		2021
Cash and cash equivalents	Cash and cash equivalents		$	44,093	$	39,105	Cash and cash equivalents	$	275,075	$	26,147
Restricted cash(1)	Restricted cash(1)		—		12,806		Restricted cash(1)	146,354		—
Total cash, cash equivalents and restricted cash shown in the statements of cash flows	Total cash, cash equivalents and restricted cash shown in the statements of cash flows		$	44,093	$	51,911	Total cash, cash equivalents and restricted cash shown in the statements of cash flows	$	421,429	$	26,147

(1) Restricted cash consists of amounts escrowed for capital expenditures at certain of our mortgaged properties and cash held for the operations of our consolidated joint venture arrangement in which we own a 61% equity interest.

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Table of Contents

INDUSTRIAL LOGISTICS PROPERTIES TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share data)

Note 1. Basis of Presentation

The accompanying condensed consolidated financial statements of Industrial Logistics Properties Trust and its consolidated subsidiaries, or the Company, ILPT, we, us or our, are unaudited. Certain information and disclosures required by U.S. generally accepted accounting principles, or GAAP, for complete financial statements have been condensed or omitted. We believe the disclosures made are adequate to make the information presented not misleading. However, the accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes contained in our Annual Report on Form 10-K for the year ended December 31, ~~2020,~~2021, or our ~~2020~~2021 Annual Report. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair statement of results for the interim period have been included. All intercompany transactions and balances with or among our consolidated subsidiaries have been eliminated. Our operating results for interim periods are not necessarily indicative of the results that may be expected for the full year.

On February 25, 2022, we acquired Monmouth Real Estate Investment Corporation, or MNR, pursuant to the merger of MNR with and into one of our wholly owned subsidiaries, or the Merger, as further described below. In connection with the Merger, we entered into a new joint venture arrangement for 95 of the acquired MNR properties, including 2 committed, but not yet completed, property acquisitions, located in the mainland United States, in which we retained a 61% equity interest. We have determined that this joint venture is not a variable interest entity, or VIE, as defined under the Consolidation Topic of the Financial Accounting Standards Board, or FASB, Accounting Standards Codification, or ASC, and we evaluated such entity under the voting model and concluded we should consolidate the entity. Under the voting model, we consolidate the entity if we determine that we, directly or indirectly, have greater than 50% of the voting rights and that other equity holders do not have substantive participating rights. The other joint venture investor’s interest in this consolidated entity is reflected as noncontrolling interest in our condensed consolidated financial statements. See Notes 2, 9 and 11 for further information regarding this joint venture.

The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect reported amounts. Actual results could differ from those estimates. Significant estimates in the condensed consolidated financial statements include purchase price allocations, useful lives of fixed assets, impairments of real estate and related intangibles.

Note 2. Real Estate Investments

As of ~~September 30, 2021,~~March 31, 2022, our portfolio was comprised of ~~294 wholly owned~~412 consolidated properties containing approximately ~~36,488,000~~59,736,000 rentable square feet, including 226 buildings, leasable land parcels and easements containing approximately 16,729,000 rentable square feet of primarily industrial lands located on the island of Oahu, Hawaii, or our Hawaii Properties, and 68186 properties containing approximately ~~19,759,000~~43,007,000 rentable square feet of industrial properties located in 3238 other states, or our Mainland ~~Properties.~~Properties, which includes 93 properties owned by a consolidated joint venture arrangement in which we own a 61% equity interest. As of ~~September 30, 2021,~~March 31, 2022, we also owned a 22% equity interest in an unconsolidated joint venture which owns 1218 properties located in 912 states totaling approximately ~~9,227,000~~11,726,000 rentable square feet.

We operate in 1 business segment: ownership and leasing of properties that include industrial and logistics buildings and leased industrial lands. For the three months ended ~~September 30,~~March 31, 2022 and 2021, approximately 37.4% and ~~2020, approximately 50.5% and 40.7%, respectively, of our rental income was from our Hawaii Properties. For the nine months ended September 30, 2021 and 2020, approximately 50.7% and 41.0%~~50.2%, respectively, of our rental income was from our Hawaii Properties. In addition, ~~subsidiaries~~we have a concentration of ~~Amazon.com, Inc., which are tenants at~~Mainland Properties leased to FedEx Corporation and certain of its subsidiaries, or FDX, which, as of March 31, 2022, consisted of approximately 21.6% of our ~~Mainland Properties,~~rentable square feet located in 34 states with a weighted average remaining lease term of 7.5 years and accounted for ~~$5,231,~~$13,468, or ~~9.5%~~18.9%, and ~~$10,288,~~$2,751, or ~~15.8%~~5.1%, of our rental income for the three months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020, respectively, and $16,117,~~respectively. As of March 31, 2022, the only other tenants that leased over 5% of our total rentable square footage were subsidiaries of Amazon.com, Inc., which accounted for $5,615, or ~~9.9%~~7.9%, and ~~$30,349,~~$5,538, or ~~15.6%~~10.2%, of our rental income for the ~~nine~~three months ended ~~September 30,~~March 31, 2022 and 2021, respectively.

Table of Contents

INDUSTRIAL LOGISTICS PROPERTIES TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except per share data)

Acquisition activities

On February 25, 2022, we completed the acquisition of MNR pursuant to the Agreement and Plan of Merger, dated as of November 5, 2021 and ~~2020, respectively.~~

~~During~~as amended on February 7, 2022, or the ~~nine months ended September 30, 2021, we acquired 4~~Merger Agreement, by and among us, Maple Delaware Merger Sub LLC, a Delaware limited liability company and our wholly owned subsidiary, or Merger Sub, and MNR. At the effective time on February 25, 2022, or the Effective Time, MNR merged with and into Merger Sub, with Merger Sub continuing as the surviving entity, and the separate existence of MNR ceased. MNR’s portfolio included 124 Class A, single tenant, net leased, e-commerce focused industrial properties ~~and 1 parcel of developable land~~ containing ~~1,644,508~~approximately 25,745,000 rentable square feet and 2 committed, but not yet completed, property acquisitions. The aggregate value of the consideration paid in the Merger was $3,734,485, including the assumption of $323,432 aggregate principal amount of existing MNR mortgage debt, the repayment of $885,269 of MNR debt and the payment of certain transaction fees and expenses, net of MNR’s cash on hand, and excluding 2 pending property acquisitions for an aggregate purchase price of ~~$134,730, including~~$78,843, excluding acquisition related ~~costs~~costs.

Pursuant to the terms set forth in the Merger Agreement, at the Effective Time, each share of ~~$1,030. These acquisitions~~common stock, par value $0.01 per share, of MNR that was issued and outstanding immediately prior to the Effective Time was automatically converted into the right to receive $21.00 per share in cash, or the Common Stock Consideration, and each share of 6.125% Series C Cumulative Redeemable Preferred Stock, par value $0.01 per share, of MNR, that was issued and outstanding immediately prior to the Effective Time was automatically converted into the right to receive an amount in cash equal to $25.00 plus accumulated and unpaid dividends, or the Preferred Stock Consideration.

At the Effective Time, each MNR stock option and restricted stock award outstanding immediately prior to the Effective Time, whether vested or unvested, became fully vested and converted into the right to receive, in the case of stock options, the difference between the Common Stock Consideration and the exercise price and, in the case of restricted stock awards, the Common Stock Consideration. Any out-of-money stock options were ~~accounted~~canceled for ~~as asset~~no consideration.

Immediately following the closing of the Merger, we entered into a joint venture arrangement with an institutional investor for 95 MNR properties, including 2 committed, but not yet completed, property acquisitions. ~~We allocated~~The investor acquired a 39% equity interest in the ~~purchase prices~~joint venture from us for ~~these acquisitions~~$587,440, and we retained the remaining 61% equity interest in the joint venture. In connection with the transaction, the joint venture assumed $323,432 aggregate principal amount of existing MNR mortgage debt secured by 11 properties and entered into a $1,400,000 floating rate CMBS loan secured by 82 properties, or the Floating Rate Loan. The Floating Rate Loan matures in March 2024, subject to 3 one year extension options, and requires that interest be paid at an annual rate based on the ~~estimated fair value~~secured overnight financing rate, or SOFR, plus a premium of 2.765%. See Notes 4, 9 and 11 for more information regarding this joint venture.

In connection with the closing of the ~~acquired assets~~Merger, we entered into a $1,385,158 bridge loan facility, secured by 109 properties not owned by the joint venture in which we retained a 61% equity interest, or the Bridge Loan. We also entered into a $700,000 fixed rate CMBS loan secured by 17 of our properties, or the Fixed Rate Loan.

The Bridge Loan matures in February 2023 and requires that interest be paid at an annual rate of SOFR plus a weighted average premium of 2.919%. The Fixed Rate Loan matures in March 2032 and requires that interest be paid at a weighted average annual interest rate of 4.417%. The Floating Rate Loan, the Bridge Loan and the Fixed Rate Loan are collectively referred to as ~~follows:~~the Loans.

Number Rentable Buildings Acquired Acquired
of Square Purchase and Real Estate Real Estate
Date Market Area Properties Feet Price Land Improvements Leases Lease Obligations
May 2021 Dallas, TX 1 — $ 2,319 $ 2,319 $ — $ — $ —
June 2021 Columbus, OH 1 357,504 31,762 1,491 27,407 2,864 —
August 2021 Memphis, TN 3 1,287,004 100,649 5,922 87,600 7,192 (65)
5 1,644,508 $ 134,730 $ 9,732 $ 115,007 $ 10,056 $ (65)

~~As a result of eminent domain taking in September 2021, we sold a portion of a land parcel located in Rock Hill, South Carolina for $1,400, excluding closing costs, resulting in a net gain on~~We used the proceeds from our sale of ~~real estate~~the equity interest in our joint venture in which we retained a 61% equity interest to partially fund our acquisition of ~~$940.~~MNR. We funded our equity interest in that joint venture and the balance of the acquisition of MNR with proceeds from our Bridge Loan and our Fixed Rate Loan.

In connection with the Merger and the Loans, we repaid the outstanding principal balance under our $750,000 unsecured revolving credit facility and then terminated the agreement governing the facility, which was scheduled to expire in June 2022, in accordance with its terms and without penalty.

Table of Contents

INDUSTRIAL LOGISTICS PROPERTIES TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except per share data)

~~In October 2021, we entered into an agreement to acquire a recently built property located in~~The following table summarizes the ~~Detroit, Michigan market area containing approximately 1,009,000 rentable square feet and net leased to a single e-commerce tenant for a~~ purchase price allocation for the Merger:


Land	$	327,200
Buildings	2,478,047
Acquired real estate leases (1)	226,820
Assets of properties held for sale	724,073
Cash	8,814
Other assets, net	14,194
Securities available for sale (2)	146,550
Total assets	3,925,698
Mortgage notes payable, at fair value	(323,432)
Accounts payable and other liabilities	(20,750)
Assumed real estate lease obligations	(14,233)
Liabilities of properties held for sale	(3,596)
Equity attributable to noncontrolling interest on the joint venture	(3,827)
Net assets acquired	3,559,860
Assumed working capital	(148,807)
Assumed mortgage notes payable, principal	323,432
Purchase price	$	3,734,485

(1)As of ~~$120,000, excluding~~the date of acquisition, ~~related costs. This acquisition is expected~~the weighted average amortization periods for the above market lease values, lease origination value and capitalized below market lease values were 11.05 years, 8.50 years and 7.83 years, respectively.

(2)As part of the Merger, we acquired a portfolio of marketable securities and classified them as held for sale. During the three months ended March 31, 2022, we sold securities with a cost of $114,503 for net proceeds of $115,735, resulting in a $1,232 realized gain on sale of equity securities for the three months ended March 31, 2022. As of March 31, 2022, we owned securities with a cost of $32,047 and a fair value of $34,508 resulting in a $2,460 unrealized gain on equity securities for the three months ended March 31, 2022. The securities are included in other assets, net on our condensed consolidated balance sheet as of March 31, 2022. We expect to ~~close~~complete the sales of these marketable securities during the ~~fourth~~second quarter of ~~2021. However, this acquisition is subject to conditions; accordingly, we cannot be sure that we will complete this acquisition, that this will not be delayed or that the terms will not change.~~2022. See Note 5 for more information regarding these marketable securities.

Table of Contents

INDUSTRIAL LOGISTICS PROPERTIES TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except per share data)

During the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, we committed ~~$7,074~~$4,772 for expenditures related to leasing related costs for leases executed during the period for approximately ~~2,002,000~~885,000 square feet. Committed, but unspent, tenant related obligations based on existing leases as of ~~September 30, 2021~~March 31, 2022 were ~~$2,315.~~ $28,700.

Certain of our industrial lands in Hawaii may require environmental remediation, especially if the use of those lands is changed; however, we do not have plans to change the use of those lands. As of both ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, accrued environmental remediation costs of $6,940 were included in accounts payable and other liabilities in our condensed consolidated balance sheets. These accrued environmental remediation costs relate to maintenance of our properties for current uses, and, because of the indeterminable timing of the remediation, these amounts have not been discounted to present value. In general, we do not have ~~any~~ insurance designated to limit any losses that we may incur as a result of known or unknown environmental conditions which are not caused by an insured event, such as fire or flood, although some of our tenants may maintain such insurance that may benefit us. ~~Although~~While we do not believe that there are environmental conditions at any of our properties that will have a material adverse effect on us, we cannot be sure that such conditions are not present at our properties or that costs we incur to remediate contamination will not have a material adverse effect on our business or financial condition. Charges for environmental remediation costs, if any, are included in other operating expenses in our condensed consolidated statements of comprehensive ~~income.~~income (loss).

Disposition activities

As of March 31, 2022, we classified 30 properties we acquired as part of the MNR acquisition as held for sale in our condensed consolidated balance sheet. We are currently marketing these properties for sale, which contain approximately 4,921,000 rentable square feet. We cannot be sure we will sell any properties we are marketing for prices in excess of our carrying values or that we will not recognize impairment losses or losses on sale with respect to these properties.

Joint Venture Activities

As of ~~September 30, 2021,~~March 31, 2022, we have an equity ~~investment~~investments in aour joint ~~venture~~ventures that ~~consists~~consist of the following:

ILPT Carrying Value

ILPT

of Investment at

Number of

Square

ILPT

of Investment

Number of

Square

Joint Venture

Ownership

September 30, 2021

Properties

Location

Feet

Joint Venture

Presentation

Ownership

at March 31, 2022

Properties

Location

Feet

12 properties

22%

63,260

NaN states

9,226,729

Mountain Industrial REIT LLC

Consolidated

61%

N/A

Various

20,754,664

The Industrial Fund REIT LLC

Unconsolidated

22%

143,428

Various

11,726,000

The following table provides a summary of the ~~mortgage debts~~mortgages of our joint ~~venture:~~ventures:

Principal Balance
at September 30,
Joint Venture
Coupon Rate (1)
Maturity Date
2021 (2)
Mortgage note payable (secured by 1 property in Florida) 3.60% 10/1/2023 $ 56,980
Mortgage note payable (secured by 11 other properties in 8 states) 3.33% 11/7/2029 350,000
Weighted average/total 3.37% $ 406,980


			Principal Balance
			at March 31,
Joint Venture (Consolidated)	Coupon Rate	Maturity Date	2022 (1)
Mortgage notes payable (secured by 11 properties in 10 states)	3.690%	Various	$	321,650
Mortgage notes payable (secured by 82 properties in 25 states)	3.060%	3/9/2024	1,400,000

Weighted average/total	3.178%		$	1,721,650

~~(1) Includes the effect of mark to market purchase accounting.~~


			Principal Balance
			at March 31,
Joint Venture (Unconsolidated)	Coupon Rate (2)	Maturity Date	2022 (1)
Mortgage notes payable (secured by 1 property in Florida)	3.60%	10/1/2023	$	56,980
Mortgage notes payable (secured by 11 other properties in 8 states)	3.33%	11/7/2029	350,000
Weighted average/total	3.37%		$	406,980

~~(2)~~ (1)Amounts are not adjusted for our minority interest; none of the debt is recourse to us.

~~During~~(2)Includes the ~~nine months ended September 30, 2020, we entered into agreements related~~effect of mark to this joint venture for 12 of our properties in the mainland United States, or our joint venture, with an Asian institutional investor and contributed those 12 properties to our joint venture. We received an aggregate of $108,676 from that investor for a 39% equity interest in our joint venture and we retained the remaining 61% equity interest in our joint venture.

We recognized a 39% noncontrolling interest in our condensed consolidated financial statements for the three and nine months ended September 30, 2020. The portion of our joint venture's net loss not attributable to us, or $275 and $691 for the three and nine months ended September 30, 2020, respectively, is reported as noncontrolling interest in our condensed consolidated statements of comprehensive income. During the three and nine months ended September 30, 2020, our joint venture made aggregate cash distributions of $2,107 and $4,005, respectively, to the first joint venture investor, which were reflected as a decrease in total equity attributable to noncontrolling interest in our condensed consolidated balance sheets.market purchase accounting.

1011

Table of Contents

INDUSTRIAL LOGISTICS PROPERTIES TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except per share data)

~~In November 2020,~~Consolidated Joint Venture - Mountain Industrial REIT LLC

Immediately following the closing of the Merger, we ~~sold~~entered into a joint venture arrangement with an ~~additional~~institutional investor for 95 of the acquired MNR properties in 27 states, including 2 committed, but not yet completed, property acquisitions. The investor acquired a 39% noncontrolling equity interest in the joint venture from ~~our then~~us for $587,440, and we retained the remaining 61% equity interest toin the joint venture. The joint venture assumed $323,432 aggregate principal amount of existing MNR mortgage debt on certain of the properties. We control this joint venture and therefore account for the properties on a ~~second unrelated third party institutional investor and retained~~consolidated basis in our condensed consolidated financial statements.

We recognized a ~~22% equity~~39% noncontrolling interest in our condensed consolidated financial statements for the three months ended March 31, 2022. The portion of this joint ~~venture. Effective~~venture's net loss not attributable to us, or $3,261 for the three months ended March 31, 2022, is reported as noncontrolling interest in our condensed consolidated statements of ~~the date of the sale, we deconsolidated our~~comprehensive income (loss). There were no distributions made by this joint venture during the three months ended March 31, 2022. See Notes 1, 9 and ~~since that time,~~11 for more information regarding this joint venture.

Unconsolidated Joint Venture - The Industrial Fund REIT LLC

As of March 31, 2022 and December 31, 2021, we also owned an interest in an unconsolidated joint venture with 18 properties in 12 states. We account for ~~our~~the unconsolidated joint venture ~~using~~under the equity method of accounting under the fair value option.

During the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021, we recorded ~~an increase~~a change in the fair value of our investment in ~~our~~the unconsolidated joint venture of ~~$998~~$1,727 and ~~$5,455,~~$2,581, respectively, as equity in earnings of investees in our condensed consolidated statements of comprehensive ~~income.~~income (loss). In addition, during the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021, ~~our~~the unconsolidated joint venture made aggregate cash distributions of ~~$660~~$1,320 and ~~$1,980,~~$660, respectively, to us.

See ~~Note~~Notes 5, 9 and 11 for more information regarding our joint ~~venture.~~ventures.

Note 3. Leases

We are a lessor of industrial and logistics properties. Our leases provide our tenants with the contractual right to use and economically benefit from all the physical space specified in ~~the~~their respective leases; therefore, we have determined to evaluate our leases as lease arrangements.

Our leases provide for base rent payments and ~~in addition~~ may also include variable payments. Rental income from operating leases, including any payments derived by index or market-based indices, is recognized on a straight line basis over the lease term when we have determined that the collectability of substantially all of the lease payments is probable. Some of our leases have options to extend or terminate the lease exercisable at the option of our tenants, which are considered when determining the lease term. We do not include in our measurement of our lease receivables certain variable payments, including payments determined by changes in the index or market-based indices after the inception of the lease, certain tenant reimbursements and other income until the specific events that trigger the variable payments have occurred. Such payments totaled ~~$9,478~~$12,380 and ~~$11,943~~$9,872 for the three months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ respectively, of which tenant reimbursements totaled ~~$9,233~~$12,135 and ~~$11,698, respectively, and $28,733 and $35,103 for the nine months ended September 30, 2021 and 2020, respectively, of which tenant reimbursements totaled $27,998 and $34,368,~~$9,627, respectively.

We increased rental income to record revenue on a straight line basis by ~~$1,678~~$1,156 and ~~$2,120~~$2,044 for the three months ended ~~September 30,~~March 31, 2022 and 2021, respectively.

Right of use asset and ~~2020, respectively, and $5,673 and $6,183~~lease liability. In connection with our acquisition of MNR, we assumed the lease for ~~the nine months ended September 30, 2021 and 2020, respectively. Rents receivable included $68,426 and $62,753 of straight line rents at September 30, 2021 and~~MNR’s former corporate headquarters, which expires on December 31, ~~2020, respectively.~~

~~During~~2029, and three of the ~~year ended December 31, 2020, certain~~properties we acquired as part of ~~our tenants requested,~~the MNR acquisition were subject to ground leases under which we are the lessee. For leases under which we are the lessee, we are required to record a right of use asset and we granted, relief from their obligations to pay rent due to us in response to the economic conditions resulting from the COVID-19 pandemic. In most cases, the tenants granted deferrals were obligated to pay the deferred rents inlease liability for all leases with a term greater than 12 ~~equal monthly installments beginning in September 2020.~~months. As of ~~September 30, 2021~~March 31, 2022, the value of the right of use asset and ~~December 31, 2020, deferred payments totaling $1,168~~related liability representing our future obligations under the lease arrangements under which we are the lessee were $5,147 and ~~$2,630, respectively,~~$5,192, respectively. The right of use asset and related lease liability are included in ~~rents receivable~~other assets, net and accounts payable and other liabilities, respectively, in our condensed consolidated balance sheets. ~~These deferred amounts did not impact our operating results for the three or nine months ended September 30, 2021 or 2020.~~

1112

Table of Contents

INDUSTRIAL LOGISTICS PROPERTIES TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except per share data)

Generally, payments of ground lease obligations are made by our tenants. However, if a tenant does not perform obligations under a ground lease or does not renew any ground lease, we may have to perform obligations under, or renew, the ground lease in order to protect our investment in the affected property.

Note 4. Indebtedness

As of ~~September 30, 2021,~~March 31, 2022, our outstanding indebtedness consisted of the following:

Net Book
Value
Principal Balance as of of Collateral
September 30, December 31, Interest At September 30,
2021 (1)
2020 (1)
Rate Maturity 2021
Unsecured revolving credit facility (2)
$ 354,000 $ 221,000 1.39 % Dec 2021 $ —
Mortgage notes payable (secured by 186 properties in Hawaii) 650,000 650,000 4.31 % Feb 2029 491,119
1,004,000 871,000 $ 491,119
Unamortized debt issuance costs (4,013) (4,421)
$ 999,987 $ 866,579


											Net Book
											Value
			Principal Balance as of								of Collateral
			March 31,		December 31,		Interest				At March 31,
Entity	Type	Secured By:	2022 (1)		2021 (1)		Rate		Maturity		2022

ILPT	Revolving credit facility (2)	Unsecured	$	—	$	182,000	1.410	%	N/A		$	—
ILPT	Bridge Loan Facility	109 Properties	1,385,158		—		3.214	%	Feb 2023		1,206,972
ILPT	Fixed Rate - Interest only	186 Properties	650,000		650,000		4.310	%	Feb 2029		490,882
ILPT	Fixed Rate - Interest only	17 Properties	700,000		—		4.417	%	Mar 2032		528,498
Mountain (3)	Floating Rate - Interest only	82 Properties	1,400,000		—		3.060	%	Mar 2024	(4)	1,946,182
Mountain (3)	Fixed Rate - Amortizing	One Property	13,644		—		3.670	%	May 2031		31,352
Mountain (3)	Fixed Rate - Amortizing	One Property	27,446		—		3.100	%	Jun 2035		48,843
Mountain (3)	Fixed Rate - Amortizing	One Property	15,585		—		3.560	%	Sep 2030		51,807
Mountain (3)	Fixed Rate - Amortizing	One Property	45,534		—		4.130	%	Nov 2033		132,174
Mountain (3)	Fixed Rate - Amortizing	One Property	15,032		—		4.140	%	Jul 2032		45,854
Mountain (3)	Fixed Rate - Amortizing	One Property	32,634		—		4.020	%	Oct 2033		88,253
Mountain (3)	Fixed Rate - Amortizing	One Property	5,290		—		3.770	%	Apr 2030		40,668
Mountain (3)	Fixed Rate - Amortizing	One Property	5,594		—		3.850	%	Apr 2030		40,668
Mountain (3)	Fixed Rate - Amortizing	One Property	44,042		—		2.950	%	Jan 2036		103,379
Mountain (3)	Fixed Rate - Amortizing	One Property	47,742		—		4.270	%	Nov 2037		114,816
Mountain (3)	Fixed Rate - Amortizing	One Property	54,012		—		3.250	%	Jan 2038		118,337
Mountain (3)	Fixed Rate - Amortizing	One Property	15,095		—		3.760	%	Oct 2028		65,064
			4,456,808		832,000						$	5,053,749
	Unamortized debt issuance costs		(68,383)		(3,876)
			$	4,388,425	$	828,124

(1)The principal balances are the amounts stated in contracts. In accordance with GAAP, our carrying values and recorded interest expense may be different because of market conditions at the time we assumed certain of these debts.

~~(2)The maturity date of our revolving credit facility is December 29, 2021 and we have the option to extend the maturity date for 2,~~ ~~six~~ ~~month periods through December 29, 2022.~~

~~We have a~~(2)In February 2022, we repaid the outstanding principal balance under our $750,000 unsecured revolving credit facility ~~or our revolving credit~~and then terminated the agreement governing the facility ~~that~~in accordance with its terms and without penalty.

(3)Mountain is ~~available for our general business purposes, including acquisitions.~~ Mountain Industrial REIT LLC.

(4)The ~~maturity date~~Floating Rate Loan matures in March 2024, subject to three, one year extension options.

Our principal debt obligations at March 31, 2022 were: (1) $1,385,158 outstanding principal amount of the Bridge Loan; (2) $1,400,000 outstanding principal amount of the Floating Rate Loan; (3) $700,000 outstanding principal amount of the Fixed Rate Loan; (4) $650,000 outstanding principal amount of a mortgage loan secured by 186 of our ~~revolving credit facility is December 29, 2021. We have the option to extend the maturity date~~properties; and (5) $321,650 aggregate principal amount of ~~our revolving credit facility for 2,~~ ~~six~~ month periods, subject to payment of extension fees and satisfaction of other conditions. We may borrow, repay and reborrow funds under our revolving credit facility until maturity, and no principal repayment is due until maturity. Interest on borrowings under our revolving credit facility is calculated at floating rates based on LIBOR plus a premium that varies based on our leverage ratio. We are also required to pay a commitment fee on the unused portion of our revolving credit facility. The agreement governing our revolving credit facility, or our credit agreement, also includes a feature under which the maximum borrowing availability under our revolving credit facility may be increased to up to $1,500,000 in certain circumstances. As of September 30, 2021, interest payable on the amount outstanding under our revolving credit facility was LIBOR plus 130 basis points and our commitment fee was 25 basis points. As of September 30, 2021 and December 31, 2020, the interest rate payable on borrowings under our revolving credit facility was 1.39% and 1.70%, respectively. The weighted average interest rate for borrowings under our revolving credit facility was 1.42% and 1.57% for the three months ended September 30, 2021 and 2020, respectively, and 1.46% and 2.51% for the nine months ended September 30, 2021 and September 30, 2020, respectively. As of September 30, 2021 and October 25, 2021, we had $354,000 and $327,000, respectively, outstanding under our revolving credit facility, and $396,000 and $423,000, respectively, available to borrow under our revolving credit facility.

Our credit agreement provides for acceleration of payment of all amounts due thereunder upon the occurrence and continuation of certain events of default, such as a change of control of us, which includes The RMR Group LLC, or RMR LLC, ceasing to act as our business manager and property manager. Our credit agreement also contains a number of covenants, including covenants that restrict our ability to incur debts or to make distributions in certain circumstances, and generally requires us to maintain certain financial ratios. We believe we were in compliance with the terms and conditions of the covenants under our credit agreement at September 30, 2021.

~~In May 2020, we prepaid at par plus accrued interest a mortgage note~~mortgages secured by ~~1 of~~11 properties owned by our ~~properties with an outstanding principal balance of approximately $48,750, an annual interest rate of 3.48% and~~consolidated joint venture in which we own a maturity date in November 2020. As a result of the prepayment of this mortgage note, we recorded a gain on early extinguishment of debt of $120 for the nine months ended September 30, 2020 to write off unamortized debt premiums.61% equity interest.

1213

Table of Contents

INDUSTRIAL LOGISTICS PROPERTIES TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except per share data)

As of December 31, 2021, we had a $750,000 unsecured revolving credit facility that was available for our general business purposes, including acquisitions. The maturity date of this revolving credit facility was June 29, 2022 and had an option to extend the maturity date for 1, six month period, subject to payment of extension fees and satisfaction of other conditions. As of December 31, 2021, the annual interest rate payable on borrowings under this revolving credit facility was 1.41%. The weighted average annual interest rate for borrowings under this revolving credit facility was 1.41% and 1.57% for the period from January 1, 2022 to February 25, 2022 and the three months ended 2021, respectively. In connection with the closing of the Merger, we entered into the Loans, and repaid the outstanding principal balance under this revolving credit facility and then terminated the agreement governing the facility in accordance with its terms and without penalty. During the three months ended March 31, 2022, we recorded a $828 loss on extinguishment of debt to write off any unamortized costs related to this facility.

On February 25, 2022, subsidiaries of our consolidated joint venture entered into a loan agreement with Citi Real Estate Funding Inc., UBS AG, Bank of America, N.A., Bank of Montreal and Morgan Stanley Bank, N.A., or collectively, the Floating Rate Lenders, pursuant to which this joint venture obtained the Floating Rate Loan. Also on February 25, 2022, our consolidated joint venture entered into a guaranty in favor of the Floating Rate Lenders, pursuant to which this joint venture guaranteed certain limited recourse obligations of its subsidiaries with respect to the Floating Rate Loan. The Floating Rate Loan matures in March 2024, subject to 3, one year extension options, and requires that interest be paid at an annual rate of SOFR plus a premium of 2.25%. Effective in March 2022, the Floating Rate Lenders exercised their option to increase the premium in connection with the securitization of the Floating Rate Loan, resulting in an increase of 51.5 basis points in the premium. As of March 31, 2022, the weighted average annual interest rate payable under our Floating Rate Loan was 3.060% and the weighted average interest rate for borrowings under the Floating Rate Loan was 3.011% for the period from February 25, 2022 to March 31, 2022.

Also on February 25, 2022, certain of our subsidiaries entered into a loan agreement with Citibank, N.A., UBS AG, Bank of America, N.A., Bank of Montreal and Morgan Stanley Bank, N.A., or collectively, the Bridge Lenders, and a mezzanine loan agreement with an institutional lender, or the Bridge Mezz Lender, together pursuant to which we obtained the Bridge Loan. Also on February 25, 2022, we entered into a guaranty in favor of the Bridge Lenders and the Bridge Mezz Lender, pursuant to which we guaranteed certain limited recourse obligations of its subsidiaries with respect to the Bridge Loan. The Bridge Loan matures in February 2023 and requires that interest be paid at an annual rate of SOFR plus a premium of 1.75% under the loan agreement and a premium of 8.0% under the mezzanine loan agreement. As of March 31, 2022, the weighted average annual interest rate payable under our Bridge Loan was 3.214% and the weighted average annual interest rate for borrowings under the Bridge Loan was 3.143% for the period from February 25, 2022 to March 31, 2022.

Also on February 25, 2022, certain of our subsidiaries entered into a loan agreement with Citi Real Estate Funding Inc., UBS AG, Bank of America, N.A., Bank of Montreal and Morgan Stanley Bank, N.A., or collectively, the Fixed Rate Lenders, and mezzanine loan agreements with Citigroup Global Markets Realty Corp., UBS AG, Bank of America, N.A., Bank of Montreal and Morgan Stanley Mortgage Capital Holdings LLC, or collectively the Fixed Mezz Lenders, pursuant to which we obtained the Fixed Rate Loan. Also on February 25, 2022, we entered into a guaranty in favor of the Fixed Rate Lenders and the Fixed Mezz Lenders, pursuant to which we guaranteed certain limited recourse obligations of our subsidiaries with respect to the Fixed Rate Loan. The Fixed Rate Loan matures in March 2032 and requires that interest be paid at a weighted average annual fixed rate of 4.417%.

We used the aggregate net proceeds from the Loans to fund the acquisition of MNR. Principal payments on the Loans are not required prior to the end of the respective initial term, subject to certain conditions set forth in the applicable loan agreement. Subject to the satisfaction of certain stated conditions, we have the option under the applicable loan agreement: (1) to prepay up to $280,000 of the Floating Rate Loan after March 2023, at par with no premium, and to prepay the balance of the Floating Rate Loan at any time, subject to a premium; (2) to prepay the Bridge Loan, in full or in part at any time, subject to breakage costs; and (3) to prepay the Fixed Rate Loan in full or part at any time, subject to a premium, and beginning in September 2031, without a premium.

The agreements governing the Loans contain customary covenants and provide for acceleration of payment of all amounts due thereunder upon the occurrence and continuation of certain events of default.

Table of Contents

INDUSTRIAL LOGISTICS PROPERTIES TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except per share data)

In connection with the Merger, our consolidated joint venture in which we own a 61% equity interest assumed an aggregate $323,432 of existing MNR mortgages secured by 11 properties which are owned by this joint venture. These amortizing mortgages require monthly payments of principal and interest until maturity. The value of these mortgages approximated their estimated fair value on the date of acquisition.

See Notes 2 and 5 for further information regarding our acquisition of MNR.

Note 5. Fair Value of Assets and Liabilities

Our financial instruments include cash and cash equivalents, restricted cash, rents receivable, ~~our revolving credit facility,~~the Floating Rate Loan, the Bridge Loan, the Fixed Rate Loan, mortgage notes payable, accounts payable, rents collected in advance, marketable securities available for sale, interest rate caps, security deposits and amounts due from or to related persons. At ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, the fair value of our financial instruments approximated their carrying values in our condensed consolidated financial statements, due to their short term nature or floating interest rates, except as follows:

At September 30, 2021 At December 31, 2020
Carrying Estimated Carrying Estimated

Value (1)
Fair Value
Value (1)
Fair Value
Mortgage notes payable $ 645,987 $ 713,330 $ 645,579 $ 730,119


	At March 31, 2022				At December 31, 2021
	Carrying		Estimated		Carrying		Estimated
	Value (1)		Fair Value		Value (1)		Fair Value
Mortgage notes payable, 4.310% interest rate, due in 2029	$	646,260	$	653,231	$	646,124	$	709,198
Bridge Loan, 3.214% weighted average interest rate, due in 2023	1,356,606		1,356,606		—		—
Mortgage notes payable, 3.060% interest rate, due in 2024 (2)	1,369,635		1,369,635		—		—
Mortgage notes payable, 4.417% interest rate, due in 2032	694,274		694,274		—		—
Mortgage note payable, 3.670% interest rate, due in 2031	13,644		13,644		—		—
Mortgage note payable, 3.100% interest rate, due in 2035	27,446		27,446		—		—
Mortgage note payable, 3.560% interest rate, due in 2030	15,585		15,585		—		—
Mortgage note payable, 4.130% interest rate, due in 2033	45,534		45,534		—		—
Mortgage note payable, 4.140% interest rate, due in 2032	15,032		15,032		—		—
Mortgage note payable, 4.020% interest rate, due in 2033	32,634		32,634		—		—
Mortgage note payable, 3.770% interest rate, due in 2030	5,290		5,290		—		—
Mortgage note payable, 3.850% interest rate, due in 2030	5,594		5,594		—		—
Mortgage note payable, 2.950% interest rate, due in 2036	44,042		44,042		—		—
Mortgage note payable, 4.270% interest rate, due in 2037	47,742		47,742		—		—
Mortgage note payable, 3.250% interest rate, due in 2038	54,012		54,012		—		—
Mortgage note payable, 3.760% interest rate, due in 2028	15,095		15,095		—		—
	$	4,388,425	$	4,395,396	$	646,124	$	709,198

(1)Includes unamortized debt issuance costs of ~~$4,013~~$68,383 and ~~$4,421~~$3,876 as of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, respectively.

(2)The Floating Rate Loan matures in March 2024, subject to three, one year extension options.

Table of Contents

INDUSTRIAL LOGISTICS PROPERTIES TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except per share data)

We estimate the fair value of our mortgage notes payable using discounted cash flow analyses and ~~currently~~current prevailing market rates as of the measurement date (Level 3 inputs). ~~Because~~As Level 3 inputs are unobservable, our estimated fair value may differ materially from the actual fair value.

The table below presents certain of our assets measured on a recurring basis at fair value at ~~September 30, 2021~~,March 31, 2022, categorized by the level of inputs as defined in the fair value hierarchy under GAAP, used in the valuation of each asset:


				Quoted Prices in		Significant Other		Significant					Quoted Prices in		Significant Other		Significant
				Active Markets for		Observable		Unobservable					Active Markets for		Observable		Unobservable
				Identical Assets		Inputs		Inputs					Identical Assets		Inputs		Inputs
		Total		(Level 1)		(Level 2)		(Level 3)			Total		(Level 1)		(Level 2)		(Level 3)
Recurring fair value measurements	Recurring fair value measurements									Recurring fair value measurements
Investment in unconsolidated joint venture (1)	Investment in unconsolidated joint venture (1)	$	63,260	$	—	$	—	$	63,260	Investment in unconsolidated joint venture (1)	$	143,428	$	—	$	—	$	143,428

Interest rate cap derivatives (2)										Interest rate cap derivatives (2)	$	9,859	$	—	$	9,859	$	—
Investment in marketable securities held for sale (3)										Investment in marketable securities held for sale (3)	$	34,508	$	34,508	$	—	$	—

(1)We own a 22% equity interest in a joint venture that owns 1218 properties and is included in investment in unconsolidated joint venture in our condensed consolidated balance sheet, and is reported at fair value, which is based on significant unobservable inputs (Level 3 inputs). The significant unobservable inputs used in the fair value are discount rates of between ~~4.8%~~5.25% and ~~7.3%~~6.50%, exit capitalization rates of between ~~4.4%~~4.50% and ~~6.8%~~5.50%, direct capitalization rates of between 4.00% and 4.50%, holding periods of approximately 10 years and market rents. The assumptions are based on the location, type and nature of each property, and current and anticipated market conditions, which are derived from appraisers, industry publications and our experience. See Note 2 for further information regarding our investment in this joint venture.

(2)Our derivative assets are carried at fair value as required by GAAP. The estimated fair values of the derivative assets are based on current market prices for similar instruments. Given the meaningful level of secondary market activity for derivative contracts, active pricing is available for similar assets and accordingly, we classify our derivative assets as Level 2. See Note 10 for more information regarding our derivatives and hedging activities.

(3)See Note 2 for more information regarding our investments in marketable securities held for sale.

~~Table of Contents~~

~~INDUSTRIAL LOGISTICS PROPERTIES TRUST~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(dollars in thousands, except per share data)~~

Note 6. Shareholders’ Equity

Common Share ~~Awards~~Purchase:

~~On June 2, 2021, in accordance with our Trustee compensation arrangements,~~During the three months ended March 31, 2022, we ~~awarded to each of our 6 Trustees 3,500~~purchased 333 of our common shares ~~valued~~ at ~~$25.62 per share, the closing~~a price of ~~our~~$22.67 per common ~~shares on~~share, from a former employee of The ~~Nasdaq Stock Market~~RMR Group LLC, or ~~Nasdaq, on that day.~~

On September 15, 2021, we awarded under our equity compensation plan an aggregate of 118,800 of our common shares, valued at $25.98 per share, the closing price of our common shares on Nasdaq on that day, to our officers and certain other employees of RMR, ~~LLC.~~

~~Common Share Repurchases~~

During the three and nine months ended September 30, 2021, we purchased an aggregate of 27,576 and 35,309 of our common shares valued at a weighted average share price of $25.84 and $25.98 per share, respectively, from our officers and certain current and former officers and employees of RMR LLC in satisfaction of tax withholding and payment obligations in connection with the vesting of awards of our common shares.

~~Distributions~~Distributions:

During the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, we declared and paid a regular quarterly ~~distributions~~distribution to common shareholders as follows:

Declaration Date Record Date Payment Date Distribution Per Share Total Distribution
January 14, 2021 January 25, 2021 February 18, 2021 $ 0.33 $ 21,550
April 15, 2021 April 26, 2021 May 20, 2021 0.33 21,549
July 15, 2021 July 26, 2021 August 19, 2021 0.33 21,554
$ 0.99 $ 64,653


Record Date	Payment Date	Distribution Per Share		Total Distribution
January 24, 2022	February 17, 2022	$	0.33	$	21,584

On ~~October~~April 14, ~~2021,~~2022, we declared a regular quarterly distribution to common shareholders of record on ~~October~~April 25, ~~2021~~2022 of $0.33 per share, or approximately ~~$21,600 in aggregate.~~$21,600. We expect to pay this distribution to our shareholders on or about ~~November 18, 2021.~~

May 19, 2022.

1416

Table of Contents

INDUSTRIAL LOGISTICS PROPERTIES TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except per share data)

Note 7. Per Common Share Amounts

~~We calculate basic earnings per common share by dividing net income attributable to common shareholders by~~The following table provides a reconciliation of the weighted average number of ~~our~~ common shares ~~outstanding during~~used in the period. We calculate diluted earnings per share using the more dilutive of the two class method or the treasury stock method. Unvested common share awards and other potentially dilutive common shares, and the related impact on earnings, are considered when calculating diluted earnings per share. The calculation of basic and diluted earnings per share ~~is as follows:~~(in thousands):

Three Months Ended September 30, Nine Months Ended September 30,
2021 2020 2021 2020
Numerators:
Net income attributable to common shareholders $ 18,307 $ 14,089 $ 56,475 $ 41,756
Income attributable to unvested participating securities (43) (24) (140) (70)
Net income attributable to common shareholders used in calculating earnings per share $ 18,264 $ 14,065 $ 56,335 $ 41,686
Denominators:
Weighted average common shares for basic earnings per share 65,178 65,112 65,154 65,092
Effect of dilutive securities: unvested share awards 52 17 51 9
Weighted average common shares for diluted earnings per share 65,230 65,129 65,205 65,101
Net income attributable to common shareholders per common share - basic $ 0.28 $ 0.22 $ 0.86 $ 0.64
Net income attributable to common shareholders per common share - diluted $ 0.28 $ 0.22 $ 0.86 $ 0.64


	Three Months Ended March 31,
	2022	2021
Weighted average common shares for basic earnings per share	65,212	65,139
Effect of dilutive securities: unvested share awards	—	38
Weighted average common shares for diluted earnings per share (1)	65,212	65,177

(1)For the three months ended March 31, 2022, 18 unvested common shares were not included in the calculation of diluted earnings per share because doing so would have been antidilutive.

Note 8. Business and Property Management Agreements with RMR ~~LLC~~

We have no employees. The personnel and various services we require to operate our business are provided to us by ~~RMR LLC.~~RMR. We have 2 agreements with RMR ~~LLC~~ to provide management services to us: (1) a business management agreement, which relates to our business generally; and (2) a property management agreement, which relates to our property level operations.

Pursuant to our business management agreement with RMR, ~~LLC,~~ we recognized net business management fees of ~~$2,708~~$4,399 and ~~$7,832~~$2,544 for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021, ~~respectively, and $3,410 and $9,994 for the three and nine months ended September 30, 2020,~~ respectively.The net business management fees we recognized for the three and nine months ended September 30, 2020 include $347 and $823, respectively, of management fees paid to RMR LLC for those periods by our joint venture we then owned a majority interest in and whose operating results we reported on a consolidated basis. Beginning in November 2020, our ownership in our joint venture was reduced to a minority interest; as a result, we ceased at that time to consolidate our joint venture’s operating results and, since then, we do not include the management fees it pays to RMR LLC in the management fees we pay to RMR LLC. Our joint venture is further described in Notes 2 and 9. Based on our common share total return, as defined in our business management agreement, as of ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ no incentive fees are included in the net business management fees we recognized for the three ~~or nine~~ months ended ~~September 30, 2021~~March 31, 2022 or ~~2020.~~2021. The actual amount of annual incentive fees for ~~2021,~~2022, if any, will be based on our common share total return, as defined in our business management agreement, for the ~~three year~~three-year period ending December 31, ~~2021,~~2022, and will be payable in January ~~2022.~~2023. We did not incur any incentive fee payable to RMR ~~LLC~~ for the year ended December 31, ~~2020.~~2021. We include business management fees in general and administrative expenses in our condensed consolidated statements of comprehensive ~~income.~~income (loss). RMR provides management services to our 2 joint ventures. See Note 9 for further information regarding our joint ventures’ management arrangements with RMR and the related impact on our management fees payable to RMR.

We and RMR ~~LLC~~ amended our business management agreement effective August 1, 2021 to ~~replace the benchmark index used in the calculation of incentive management fees. Pursuant to the amendment,~~provide that (i) for periods beginning on and after August 1, 2021, the MSCI U.S. REIT/Industrial REIT Index will ~~replace the discontinued SNL U.S. REIT Industrial Index and~~ be used to calculate benchmark returns per share for purposes of determining any incentive management fee payable by us to RMR ~~LLC. For~~and (ii) for periods prior to August 1, 2021, the SNL U.S. REIT Industrial Index will continue to be used. ~~Accordingly, the calculation~~

~~Table of Contents~~

~~INDUSTRIAL LOGISTICS PROPERTIES TRUST~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(dollars in thousands, except per share data)~~

~~of incentive management fees for the next three measurement periods will continue to use the SNL U.S. REIT Industrial Index in calculating the benchmark returns for periods through July 31, 2021.~~ This change of index was due to S&P Global ceasing to publish the SNL U.S. REIT Industrial Index.

Pursuant to our property management agreement with RMR, ~~LLC,~~ we recognized aggregate property management and construction supervision fees of ~~$1,675~~$2,763 and ~~$4,860~~$1,594 for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021, ~~respectively, and $1,914 and $5,697 for the three and nine months ended September 30, 2020,~~ respectively. Of these amounts, for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021, ~~$1,598~~$2,098 and ~~$4,751,~~$1,582, respectively, were expensed to other operating expenses in our condensed consolidated financial statements and ~~$77~~$31 and $109, respectively, were capitalized as building improvements in our condensed consolidated balance sheets. For the three and nine months ended September 30, 2020, $1,866 and $5,539, respectively, were expensed to other operating expenses in our condensed consolidated financial statements and $48 and $158,$12, respectively, were capitalized as building improvements in our condensed consolidated balance sheets. The amounts capitalized are being depreciated over the estimated useful lives of the related capital assets.

We are generally responsible for all of our operating expenses, including certain expenses incurred or arranged by RMR ~~LLC~~ on our behalf. We are generally not responsible for payment of ~~RMR LLC’s~~RMR’s employment, office or administrative expenses incurred to provide management services to us, except for the employment and related expenses of ~~RMR LLC’s~~RMR’s employees assigned to work exclusively or partly at our properties, our share of the wages, benefits and other related costs of ~~RMR LLC’s~~RMR’s centralized accounting personnel, our share of ~~RMR LLC’s~~RMR’s costs for providing our internal audit function, or as otherwise agreed. Our property level operating expenses are generally incorporated into the rents charged to our tenants, including certain payroll and related costs incurred by ~~RMR LLC.~~RMR. We reimbursed RMR ~~LLC $1,184~~$1,604 and ~~$3,451~~$1,141 for these expenses and costs for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021, ~~respectively, and $1,328 and $3,744 for the three and nine months ended September 30, 2020,~~ respectively. These amounts are included in other operating expenses and general and administrative expenses, as applicable, in our condensed consolidated statements of comprehensive ~~income.~~income (loss).

Table of Contents

INDUSTRIAL LOGISTICS PROPERTIES TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except per share data)

See Note 9 for further information regarding our relationships, agreements and transactions with ~~RMR LLC.~~RMR.

Note 9. Related Person Transactions

We have relationships and historical and continuing transactions with RMR, ~~LLC,~~ The RMR Group Inc., or RMR Inc., and others related to them, including other companies to which RMR ~~LLC~~ or its subsidiaries provide management services and some of which have trustees, directors or officers who are also our Trustees or officers. RMR ~~LLC~~ is a majority owned subsidiary of RMR Inc. The Chair of our Board of Trustees and one of our Managing Trustees, Adam Portnoy, is the sole trustee, an officer and the controlling shareholder of ABP Trust, which is the controlling shareholder of RMR Inc., chair of the board of directors, a managing director and the president and chief executive officer of RMR Inc. and an officer and employee of ~~RMR LLC.~~RMR. John Murray, our other Managing Trustee and our former President and Chief Executive Officer until March 31, 2022, also serves as an officer and employee of RMR, ~~LLC,~~ and each of our other officers is also an officer and employee of ~~RMR LLC.~~RMR. Some of our Independent Trustees also serve as independent trustees or independent directors of other public companies to which RMR ~~LLC~~ or its subsidiaries provide management services. Adam Portnoy serves as chair of the boards ~~of trustees or boards of directors~~ and as a managing trustee or managing director of those companies. Other officers of RMR, ~~LLC,~~ including Mr. Murray and certain of our other officers, serve as managing trustees, managing directors or officers of certain of these companies.

See Note 6 for information relating to the awards of our common shares we made in September 2021 to our officers and certain other employees of RMR LLC and common shares we purchased from our officers and certain current and former officers and employees of RMR LLC in satisfaction of tax withholding and payment obligations in connection with the vesting of awards of our common shares. We include amounts recognized as expense for awards of our common shares to our officers and RMR LLC employees in general and administrative expenses in our condensed consolidated statements of comprehensive income.

Our Manager, RMR ~~LLC~~. We have 2 agreements with RMR ~~LLC~~ to provide management services to us. See Note 8 for further information regarding our management agreements with ~~RMR LLC.~~RMR.

~~Our~~MNR Acquisition and Related Joint Venture. On February 25, 2022, we acquired MNR. In connection with the Merger, we entered into a new joint venture arrangement with an institutional investor for 95 of the acquired MNR properties, including 2 committed, but not yet completed, property acquisitions. The investor acquired a 39% equity interest in the joint venture from us for $587,440.

Joint Ventures. Following the Merger, we have 2 separate joint venture arrangements, one with 2, third party institutional investors for 18 properties in which we own a 22% equity interest, and the other with 1, third party institutional investor for 95 properties, including 2 committed, but not yet completed, property acquisitions, in which we own a 61% equity interest. We entered into our joint venture that currently owns 18 properties prior to January 1, 2021, and we entered into the other joint venture that currently owns 95 MNR properties, including two committed, but not yet completed,property acquisitions, in February 2022 in connection with the Merger. RMR provides management services to both of these joint ventures. We do not include our 18 property joint venture as a consolidated subsidiary and, as a result, we are not obligated to pay management fees to RMR under our management agreements with RMR for the services it provides regarding that joint venture. Our 95 property joint venture is our consolidated subsidiary and, as a result, we are obligated to pay management fees to RMR under our management agreements with RMR for the services it provides regarding that joint venture; however, that joint venture pays management fees directly to RMR, and any such fees paid by that joint venture are credited against the fees payable by us to RMR.

In December 2021, we sold 6 properties to our then existing joint venture. We received proceeds of approximately $160,516 from the other equity investors in connection with this sale. We and the other equity investors maintained our respective percentage equity interests in that joint venture following this transaction. As of December 31, ~~2020,~~2021 and March 31, 2022, we owed $225 and $629, respectively, to that joint venture for rents that we collected on behalf of that joint venture. This amount is presented as due to related persons in our condensed consolidated balance sheet. We paid the amount we owed as of December 31, 2021 in January 2022.

See Notes 2, 4, 5 and 11 for further information regarding our joint venture owed to us $2,665 for post-closing adjustments relating to our sale of some of our equity interests in the joint venture to a second third party institutional investor in November 2020. Our joint venture paid these amounts due to us during the nine months ended September 30, 2021.

~~Table of Contents~~

~~INDUSTRIAL LOGISTICS PROPERTIES TRUST~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(dollars in thousands, except per share data)~~

ventures.

TA.In May 2021, we acquired a property located in the Dallas, Texas market from TravelCenters of America Inc., or TA, for a purchase price of $2,319, including acquisition related costs of $119. RMR ~~LLC~~ provides management services to TA and Mr. Portnoy serves as the chair of the board of directors and as a managing director of TA. ~~See Note 2 for further information regarding this acquisition.~~

For further information about these and other such relationships and certain other related person transactions, see our ~~2020~~2021 Annual Report.

1718

Table of Contents

INDUSTRIAL LOGISTICS PROPERTIES TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except per share data)

Note 10. Derivatives and Hedging Activities

Risk Management Objective of Using Derivatives

We are exposed to certain risks relating to our ongoing business operations, including the impact of changes in interest rates. The only risk currently managed by us using derivative instruments is a part of our interest rate risk. We have an interest rate cap agreement to manage our interest rate risk exposure on each of the Bridge Loan and the Floating Rate Loan, both with interest payable at a rate equal to SOFR plus a premium. The use of derivative financial instruments carries certain risks, including the risk that the counterparties to these contractual arrangements are not able to perform under the agreements. To mitigate this risk, we only enter into derivative financial instruments with counterparties with high credit ratings and with major financial institutions with which we or our related parties may also have other financial relationships. We do not anticipate that any of the counterparties will fail to meet their obligations.

Cash Flow Hedges of Interest Rate Risk

As required by ASC 815, Derivatives and Hedging, we record all derivatives on the balance sheet at fair value. The following table summarizes the terms of our outstanding interest rate cap agreements designated as cash flow hedges of interest rate risk as of March 31, 2022:


Interest Rate Derivative	Balance Sheet Line Item	Debt	Number of Instruments	Strike Rate	Notional Amount		Fair Value at March 31, 2022
Interest Rate Cap	Other assets	Floating Rate Loan	1	3.40%	$	1,400,000	$	7,815
Interest Rate Cap	Other assets	Bridge Loan Facility	2	2.70%	$	1,385,158	$	2,044

Interest rate caps designated as cash flow hedges involve the receipt of variable amounts from a counterparty if interest rates rise above the strike rate on the contract in exchange for an up-front premium. For derivatives designated and qualifying as cash flow hedges of interest rate risk, the gain or loss on the derivative is recorded in accumulated other comprehensive income and subsequently reclassified into interest expense in the same period during which the hedged transaction affects earnings. Gains and losses on the derivative representing hedge components excluded from the assessment of effectiveness are recognized over the life of the hedge on a systematic and rational basis, as documented at hedge inception in accordance with our accounting policy election. The earnings recognition of excluded components is presented in interest expense. Amounts reported in accumulated other comprehensive income related to derivatives will be reclassified to interest expense as interest payments are made on our applicable debt.


	Three Months Ended March 31, 2022
Balance at December 31, 2021	$	—
Amount of income recognized in cumulative other comprehensive income	5,375
Amount reclassified from cumulative other comprehensive income into interest expense	257
Unrealized gain on derivative instrument	$	5,632

Table of Contents

Note 11. Noncontrolling Interest

On February 25, 2022, we completed the acquisition of MNR. In connection with the Merger, we entered into a joint venture arrangement with an institutional investor for 95 of the acquired MNR properties, including 2 committed, but not yet completed, property acquisitions. The investor acquired a 39% noncontrolling equity interest in the joint venture for $587,440, and we retained the remaining 61% equity interest in the joint venture. The joint venture assumed $323,432 aggregate principal amount of existing MNR mortgage debt on certain of the properties. We control this joint venture and therefore account for the properties on a consolidated basis in our condensed consolidated financial statements.

We recognized a 39% noncontrolling interest in our condensed consolidated financial statements for the three months ended March 31, 2022. The portion of this joint venture's net loss not attributable to us, or $3,261 for the three months ended March 31, 2022, is reported as noncontrolling interest in our condensed consolidated statements of comprehensive income (loss). There were no distributions made by the joint venture during the three months ended March 31, 2022. See Notes 1, 2, 4 and 5 for further information regarding this joint venture.

An unrelated third party owns an approximate 33% tenancy in common interest in 1 of the properties we acquired as part of the MNR acquisition located in Somerset, New Jersey, and we own the remaining 67% tenancy in common interest in this property. The portion of this property’s net loss not attributable to us, or $12 for the three months ended March 31, 2022, is reported as noncontrolling interest in our condensed consolidated statements of comprehensive income (loss).

Table of Contents

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following information should be read in conjunction with our condensed consolidated financial statements and accompanying notes included in this Quarterly Report on Form 10-Q and with our ~~2020~~2021 Annual Report.

OVERVIEW (dollars in thousands, except per share and per square foot data)

We are a real estate investment trust, or REIT, organized under Maryland law. As of ~~September 30, 2021,~~March 31, 2022, our portfolio was comprised of ~~294 wholly owned~~412 consolidated properties containing approximately ~~36.5~~59.7 million rentable square feet located in 39 states, including 226 buildings, leasable land parcels and easements containing approximately 16.7 million rentable square feet located on the island of Oahu, Hawaii, and 68186 properties containing approximately ~~19.8~~43.0 million rentable square feet located in 3238 other states. Our 412 consolidated properties include 93 properties that we own in a consolidated joint venture arrangement in which we own a 61% equity interest. As of ~~September 30, 2021,~~March 31, 2022, we also owned a 22% equity interest in an unconsolidated joint venture, which owns 1218 properties located in ~~nine~~12 states containing approximately ~~9.2~~11.7 million rentable square feet that were 100% leased with an average (by annualized rental revenues) remaining lease term of ~~7.7~~6.4 years. As of ~~September 30, 2021,~~March 31, 2022, our consolidated properties were approximately ~~99.0%~~98.9% leased (based on rentable square feet) to ~~261~~304 different tenants with a weighted average remaining lease term (based on annualized rental revenues) of approximately ~~9.0~~8.6 years. We define the term annualized rental revenues as used in this section as the annualized contractual rents, as of ~~September 30, 2021,~~March 31, 2022, including straight line rent adjustments and excluding lease value amortization, adjusted for tenant concessions including free rent and amounts reimbursed to tenants, plus estimated recurring expense reimbursements from tenants.

~~Our business is~~On February 25, 2022, we completed the acquisition of MNR as a result of which we acquired 124 Class A, single tenant, net leased, e-commerce focused industrial properties located in 32 states containing approximately 25,745,000 rentable square feet and two committed, but not yet completed, property acquisitions. The aggregate value of the consideration paid in the Merger was $3,734,485, including the assumption of $323,432 aggregate principal amount of existing MNR mortgage debt, the repayment of $885,269 of MNR debt and the payment of certain transaction fees and expenses, net of MNR’s cash on ~~industrial~~hand, and ~~logistics properties.~~excluding two pending property acquisitions for an aggregate purchase price of $78,843, excluding acquisition related costs. The ~~industrial~~124 MNR properties were 97.9% leased to various tenants and logistics sector has fared better than some other industries thus far during the COVID-19 pandemic, including other real estate sectors, due, in part, to the demand for e-commerce. Although, to date, the COVID-19 pandemic has not had a ~~significant adverse impact~~remaining weighted average (by rental revenues) lease term of eight years as of the date of the acquisition.

Immediately following the closing of the Merger, we entered into a joint venture arrangement with an institutional investor for 95 MNR properties, including two committed, but not yet completed, property acquisitions. The investor acquired a 39% equity interest in the joint venture from us for $587,440, and we retained the remaining 61% equity interest in the joint venture. The joint venture assumed $323,432 aggregate principal amount of existing MNR mortgage debt on ~~our business,~~ certain of ~~our tenants requested relief from their obligations to pay rent due to us in response to~~ the economic conditions resulting from the COVID-19 pandemic. As of October 25, 2021, we granted requests to certain of our tenants to defer aggregate rent payments of $3,753 with respect to leases that represent, as of September 30, 2021, approximately 1.7% of our annualized rental revenues. As of September 30, 2021, we recognized $1,168 in our accounts receivable related to the remaining deferred amounts. In most cases, these tenants were obligated to pay the deferred rents in 12 equal monthly installments beginning in September 2020. These deferred amounts did not negatively impact our operating results for the three or nine months ended September 30, 2021, and will continue to be reflected in our financial results in the applicable future reporting periods, assuming these tenants continue to pay the deferred rents due to us.

There remains uncertainty as to the ultimate duration and severity of the COVID-19 pandemic. As a result, we are unable to determine what the ultimate impact will be on our, our tenants’ and other stakeholders’ businesses, operations, financial results and financial position. For further information and risks relating to the COVID-19 pandemic on us and our business, see Part I, Item 1, “Business—Impact of COVID-19” and Part I, Item 1A, “Risk Factors”, of our 2020 Annual Report.properties.

Property Operations

Occupancy data for our properties as of ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ is as follows (square feet in thousands):


		All Properties				Comparable Properties (1)					All Properties				Comparable Properties (1)
		As of September 30,				As of September 30,					As of March 31,				As of March 31,
		2021		2020		2021		2020			2022		2021		2022		2021
Total properties	Total properties	294		301		287		287		Total properties	412		289		286		286
Total rentable square feet (2)	Total rentable square feet (2)	36,488		43,759		33,377		33,404		Total rentable square feet (2)	59,736		34,870		33,634		33,658
Percent leased (3)	Percent leased (3)	99.0	%	98.8	%	98.9	%	98.4	%	Percent leased (3)	98.9	%	98.6	%	99.3	%	98.5	%

(1)Consists of properties that we owned continuously since January 1, ~~2020~~2021 and excludes 1218 properties owned by an unconsolidated joint venture in which we own a 22% equity interest.

(2)Subject to modest adjustments when space is remeasured or reconfigured for new tenants and when land leases are converted to building leases.

(3)Percent leased includes (i) space being fitted out for occupancy pursuant to existing leases as of ~~September 30, 2021,~~March 31, 2022, if any, and (ii) space which is leased but is not occupied or is being offered for sublease by tenants, if any.

1821

Table of Contents

The average effective rental rates per square foot, as defined below, for our properties for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ are as follows:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2021		2020		2021		2020			2022		2021
Average effective rental rates per square foot leased: (1)	Average effective rental rates per square foot leased: (1)									Average effective rental rates per square foot leased: (1)
All properties	All properties	$	6.22	$	6.03	$	6.28	$	6.01	All properties	$	6.56	$	6.31
Comparable properties (2)	Comparable properties (2)	$	6.28	$	6.15	$	6.32	$	6.15	Comparable properties (2)	$	6.25	$	6.33

(1)Average effective rental rates per square foot leased represents annualized rental income during the period specified divided by the average rentable square feet leased during the period specified.

(2)~~Comparable~~Consists of properties ~~for the three months ended September 30, 2021 and 2020 consist of 288 buildings, leasable land parcels and easements~~ that we owned continuously since ~~July~~January 1, ~~2020~~2021 and ~~exclude 12~~excludes properties owned by an unconsolidated joint venture in which we own a 22% equity interest. Comparable properties for the nine months ended September 30, 2021 and 2020 consist of 287 buildings, leasable land parcels and easements that are owned continuously since January 1, 2020 and exclude 12 properties owned by an unconsolidated joint venture in which we own a 22% equity interest.venture.

During the three ~~and nine~~ months ended ~~September 30, 2021,~~March 31, 2022, we entered into new and renewal leases as summarized in the following tables:

Three Months Ended September 30, 2021
New Leases Renewals Totals
Square feet leased during the period (in thousands) 17 754 771
Weighted average rental rate change (by rentable square feet) 24.2 % 19.3 % 19.5 %
Weighted average lease term by square feet (years) (2)
8.3 8.2 8.2
Total leasing costs and concession commitments (1)
$ 21 $ 2,505 $ 2,526
Total leasing costs and concession commitments per square foot (1)
$ 1.20 $ 3.33 $ 3.28
Total leasing costs and concession commitments per square foot per year (1)
$ 0.15 $ 0.41 $ 0.40


		Nine Months Ended September 30, 2021										Three Months Ended March 31, 2022
		New Leases			Renewals			Totals				New Leases			Renewals			Totals
Square feet leased during the period (in thousands)	Square feet leased during the period (in thousands)	404			1,472			1,876			Square feet leased during the period (in thousands)	281			548			829
Weighted average rental rate change (by rentable square feet)	Weighted average rental rate change (by rentable square feet)	12.8		%	18.1		%	17.0		%	Weighted average rental rate change (by rentable square feet)	60.9		%	15.7		%	31.0		%
Weighted average lease term by square feet (years) (2)	Weighted average lease term by square feet (years) (2)	9.4			9.1			9.2			Weighted average lease term by square feet (years) (2)	12.6			6.9			8.9
Total leasing costs and concession commitments (1)	Total leasing costs and concession commitments (1)	$	2,676		$	4,397		$	7,073		Total leasing costs and concession commitments (1)	$	2,355		$	2,417		$	4,772
Total leasing costs and concession commitments per square foot (1)	Total leasing costs and concession commitments per square foot (1)	$	6.63		$	2.99		$	3.77		Total leasing costs and concession commitments per square foot (1)	$	8.38		$	4.41		$	5.76
Total leasing costs and concession commitments per square foot per year (1)	Total leasing costs and concession commitments per square foot per year (1)	$	0.70		$	0.33		$	0.41		Total leasing costs and concession commitments per square foot per year (1)	$	0.66		$	0.64		$	0.65

(1)Includes commitments made for leasing expenditures and concessions, such as leasing commissions, tenant improvements or other tenant inducements.

(2)The weighted average (by square feet) lease term for leases that were in effect for the same land area or building area during the prior lease term was ~~8.2~~8.9 years for the three months ended ~~September 30, 2021~~March 31, 2022 and ~~9.2~~11.7 years for the ~~nine~~three months ended ~~September 30,~~March 31, 2021.

During the three ~~and nine~~ months ended ~~September 30, 2021,~~March 31, 2022, we entered into new and renewal leases for approximately 829,000 square feet at weighted average (by square feet) rental rates that were approximately 31.0% higher than prior rental rates for the same space (with leasing rate increases for vacant space based upon the most recent rental rate for the same space). The weighted average (by square feet) lease term for leases that were in effect for the same space during the prior lease term was 8.9 years. Commitments for tenant improvements, leasing costs and concessions for leases entered into during the three months ended March 31, 2022 totaled $4,772, or approximately $0.65 per square foot per year of the new weighted average lease term.

During the three months ended March 31, 2022, we completed rent resets for approximately ~~47,000 and 127,000~~56,000 square feet of land at our Hawaii Properties ~~respectively,~~ at rental rates that were approximately ~~34.5% and 36.3%, respectively,~~35.8% higher than the prior rental rates.

1922

Table of Contents

As shown in the table below, approximately ~~0.1%~~3.3% of our total leased square feet and ~~approximately 0.2%~~3.6% of our total annualized rental revenues as of ~~September 30, 2021~~March 31, 2022 are included in leases scheduled to expire by December 31, ~~2021.~~2022.

As of ~~September 30, 2021,~~March 31, 2022, our lease expirations by year are as follows (dollars and square feet in thousands):


										% of Total		Cumulative											% of Total		Cumulative
				% of Total		Cumulative %		Annualized		Annualized		% of Total					% of Total		Cumulative %		Annualized		Annualized		% of Total
			Leased	Leased		of Total Leased		Rental		Rental		Annualized				Leased	Leased		of Total Leased		Rental		Rental		Annualized
		Number of	Square Feet	Square Feet		Square Feet		Revenues		Revenues		Rental Revenues			Number of	Square Feet	Square Feet		Square Feet		Revenues		Revenues		Rental Revenues
Period / Year	Period / Year	Tenants	Expiring (1)	Expiring (1)		Expiring (1)		Expiring		Expiring		Expiring		Period / Year	Tenants	Expiring (1)	Expiring (1)		Expiring (1)		Expiring		Expiring		Expiring
10/1/2021-12/31/2021		5	33	0.1	%	0.1	%	$	350	0.2	%	0.2	%
2022		52	2,046	5.7	%	5.8	%	14,687		6.6	%	6.8	%
4/1/2022-12/31/2022														4/1/2022-12/31/2022	38	1,977	3.3	%	3.3	%	$	14,672	3.6	%	3.6	%
2023	2023	35	3,368	9.3	%	15.1	%	21,143		9.5	%	16.3	%	2023	40	4,147	7.0	%	10.3	%	25,963		6.4	%	10.0	%
2024	2024	34	6,483	17.9	%	33.0	%	28,215		12.7	%	29.0	%	2024	48	7,052	11.9	%	22.2	%	35,217		8.7	%	18.7	%
2025	2025	16	2,554	7.1	%	40.1	%	14,102		6.4	%	35.4	%	2025	29	4,457	7.5	%	29.7	%	25,469		6.3	%	25.0	%
2026	2026	10	1,736	4.8	%	44.9	%	10,571		4.8	%	40.2	%	2026	22	2,763	4.7	%	34.4	%	20,277		5.0	%	30.0	%
2027	2027	13	4,648	12.9	%	57.8	%	25,383		11.4	%	51.6	%	2027	31	8,216	13.9	%	48.3	%	47,833		11.8	%	41.8	%
2028	2028	21	2,817	7.8	%	65.6	%	19,685		8.9	%	60.5	%	2028	27	4,749	8.0	%	56.3	%	33,377		8.2	%	50.0	%
2029	2029	9	1,853	5.1	%	70.7	%	6,657		3.0	%	63.5	%	2029	17	3,428	5.8	%	62.1	%	16,531		4.1	%	54.1	%
2030	2030	9	1,232	3.4	%	74.1	%	9,522		4.3	%	67.8	%	2030	14	2,155	3.6	%	65.7	%	18,026		4.4	%	58.5	%
2031														2031	16	3,265	5.5	%	71.2	%	24,570		6.1	%	64.6	%
Thereafter	Thereafter	92	9,350	25.9	%	100.0	%	71,501		32.2	%	100.0	%	Thereafter	117	16,850	28.8	%	100.0	%	144,239		35.4	%	100.0	%
Total	Total	296	36,120	100.0	%			$	221,816	100.0	%			Total	399	59,059	100.0	%			$	406,174	100.0	%

Weighted average remaining lease term (in years):	Weighted average remaining lease term (in years):		7.9					9.0						Weighted average remaining lease term (in years):		7.7					8.6

(1)Leased square feet is pursuant to existing leases as of ~~September 30, 2021~~March 31, 2022 and includes (i) space being fitted out for occupancy, if any, and (ii) space which is leased but is not occupied or is being offered for sublease by tenants, if any.

2023

Table of Contents

We generally receive rents from our tenants monthly and in advance. As of ~~September 30, 2021,~~March 31, 2022, tenants representing 1% or more of our total annualized rental revenues were as follows (square feet in thousands):


								% of Total									% of Total
				No. of	Leased	% of Total		Annualized Rental					No. of	Leased	% of Total		Annualized Rental
Tenant	Tenant		States	Properties	Sq. Ft. (1)	Leased Sq. Ft. (1)		Revenues		Tenant		States	Properties	Sq. Ft. (1)	Leased Sq. Ft. (1)		Revenues
1	1	Amazon.com Services, Inc./ Amazon.com Services LLC	AZ, SC, TN, VA	4	3,869	10.7	%	9.5	%	1	Federal Express Corporation/ FedEx Ground Package System, Inc.	AL, AR, CO, FL, GA, HI, IA, ID, IL, IN, KS, LA, MD, MI, MN, MO, MS, NC, ND, NE, NJ, NV, NY, OH, OK, PA, SC, TN, TX, UT, VA, VT, WA, WI	83	12,883	21.8	%	29.6	%
2	2	Federal Express Corporation/ FedEx Ground Package System, Inc.	AR, CO, HI, IA, ID, IL, MN, MO, NC, ND, NV, OH, OK, UT	17	952	2.6	%	4.3	%	2	Amazon.com Services, Inc./ Amazon.com Services LLC	AL,IN, OK, SC, TN, VA	8	4,539	7.7	%	7.0	%
3	3	Restoration Hardware, Inc.	MD	1	1,195	3.3	%	2.8	%	3	Home Depot U.S.A., Inc.	GA, IL	2	829	1.4	%	1.8	%
4	4	American Tire Distributors, Inc.	CO, LA, NE, NY, OH	5	722	2.0	%	2.4	%	4	UPS Supply Chain Solutions, Inc.	NH, NY	3	794	1.3	%	1.6	%
5	5	Servco Pacific, Inc.	HI	6	590	1.6	%	2.3	%	5	Restoration Hardware, Inc.	MD	1	1,195	2.0	%	1.6	%
6	6	Par Hawaii Refining, LLC	HI	3	3,148	8.7	%	2.2	%	6	Servco Pacific, Inc.	HI	7	629	1.1	%	1.5	%
7	7	UPS Supply Chain Solutions, Inc.	NH	1	614	1.7	%	2.2	%	7	American Tire Distributors, Inc.	CO, LA, NE, NY, OH	5	722	1.2	%	1.3	%
8	8	EF Transit, Inc.	IN	1	535	1.5	%	1.9	%	8	Par Hawaii Refining, LLC	HI	3	3,148	5.3	%	1.2	%
9	9	BJ's Wholesale Club, Inc.	NJ	1	634	1.8	%	1.6	%	9	TD SYNNEX Corporation	OH	2	939	1.6	%	1.2	%
10	10	Shurtech Brands, LLC	OH	1	645	1.8	%	1.6	%	10	EF Transit, Inc.	IN	1	535	0.9	%	1.0	%
11	11	Coca-Cola Bottling of Hawaii, LLC	HI	4	351	1.0	%	1.6	%	11	Shaw Industries, Inc.	GA	1	832	1.4	%	1.0	%
12	12	Safeway Inc.	HI	2	146	0.4	%	1.5	%	12	Mercedes Benz US International, Inc.	AL	1	530	0.9	%	1.0	%
13	13	ELC Distribution Center LLC	KS	1	645	1.8	%	1.5	%	13	UGN, Inc.	OH, SC	2	703	1.2	%	1.0	%
14		Manheim Remarketing, Inc.	HI	1	338	0.9	%	1.4	%
15		Exel Inc.	SC	1	945	2.6	%	1.4	%
16		Avnet, Inc.	OH	1	581	1.6	%	1.4	%
17		StyleCraft Home Collection, Inc.	MS	1	603	1.7	%	1.3	%
18		Warehouse Rentals Inc.	HI	5	278	0.8	%	1.2	%
19		YNAP Corporation	NJ	1	167	0.5	%	1.1	%
20		ODW Logistics, Inc.	OH	3	760	2.1	%	1.1	%
21		Refresco Beverages US Inc.	MO, SC	2	421	1.2	%	1.0	%
22		Honolulu Warehouse Co., Ltd.	HI	1	298	0.8	%	1.0	%
23		Hellmann Worldwide Logistics, Inc.	FL	1	240	0.7	%	1.0	%
24		Flextronics International Holding LLC	TN	1	438	1.2	%	1.0	%

		Total		65	19,115	53.0	%	48.3	%

											Total		119	28,278	47.8	%	50.8	%

Tenant Concentration. We have a concentration of Mainland Properties leased to FDX, which as of March 31, 2022, consisted of approximately 21.8% of our rentable square feet located in 34 states, with a weighted average remaining lease term of 7.5 years.

For the three months ended March 31, 2022, approximately $13,468, or 18.9% of our rental income was from FDX. Other than FDX, the only other tenants that leased over 5% of our total rentable square footage were subsidiaries of Amazon.com, Inc. at certain of our Mainland Properties. Subsidiaries of Amazon.com, Inc. accounted for $5,615 and $5,538, or 7.9% and 10.2%, of our rental income for the three months ended March 31, 2022 and 2021, respectively.

Mainland Properties. As of ~~September 30, 2021,~~March 31, 2022, our Mainland Properties represented approximately ~~50.7%~~72.7% of our annualized rental revenues. We generally will seek to renew or extend the terms of leases at our Mainland Properties as their expirations approach. Due to the capital many of the tenants in our Mainland Properties have invested in these properties and because many of these properties appear to be of strategic importance to the tenants’ businesses, we believe that it is likely that these tenants will renew or extend their leases prior to their expirations. If we are unable to extend or renew our leases, it may be time consuming and expensive to relet some of these properties and the terms of any leases we may enter may be less favorable to us than the terms of our existing leases for those properties.

Hawaii Properties. As of ~~September 30, 2021,~~March 31, 2022, our Hawaii Properties represented approximately ~~49.3%~~27.3% of our annualized rental revenues. As of ~~September 30, 2021,~~March 31, 2022, certain of our Hawaii Properties are lands leased for rents that periodically reset based on fair market values, generally every ten years. Revenues from our Hawaii Properties have generally increased under our or our predecessors’ ownership as rents under the leases for those properties have been reset or renewed. Lease renewals, lease extensions, new leases and rental rates for our Hawaii Properties in the future will depend on prevailing market conditions when these lease renewals, lease extensions, new leases and rental rates are set. As rent reset dates or lease expirations approach at our Hawaii Properties, we generally negotiate with existing or new tenants for new lease terms. If we are unable to reach an agreement with a tenant on a rent reset, our Hawaii Properties’ leases typically provide that rent is reset based on an appraisal

Table of Contents

process. Despite our and our predecessors’ prior experience with rent resets, lease extensions and new leases in Hawaii, our

~~Table of Contents~~

ability to increase rents when rents reset, leases are extended, or leases expire depends upon market conditions which are beyond our control. Accordingly, we cannot be sure that the historical increases achieved at our Hawaii Properties will continue in the future.

The following chart shows the annualized rental revenues as of ~~September 30, 2021~~March 31, 2022 scheduled to reset at our Hawaii Properties:

Scheduled Rent Resets at Hawaii Properties

(dollars in thousands)


		Annualized			Annualized
		Rental Revenues as of			Rental Revenues as of
		September 30, 2021			March 31, 2022
		Scheduled to Reset			Scheduled to Reset

10/1/2021-12/31/2021		$	323
2022		3,224
4/1/2022-12/31/2022				4/1/2022-12/31/2022	$	1,132
2023	2023	2,085		2023	2,085
2024	2024	2,101		2024	1,266
2025	2025	3,103		2025	3,103
2026 and thereafter		16,927
2026				2026	1,296
2027 and thereafter				2027 and thereafter	17,454
Total	Total	$	27,763	Total	$	26,336

As of ~~September 30, 2021, $4,306,~~March 31, 2022, $16,591, or ~~1.9%~~4.1%, of our annualized rental revenues are included in leases scheduled to expire through ~~September 30, 2022~~March 31, 2023 and ~~1.0%~~1.1% of our rentable square feet are currently vacant. Rental rates for which available space may be leased in the future will depend on prevailing market conditions when lease extensions, lease renewals or new leases are negotiated. Whenever we extend, renew or enter new leases for our properties, we intend to seek rents that are equal to or higher than our historical rents for the same properties; however, our ability to maintain or increase the rents for our current properties will depend in large part upon market conditions, which are beyond our control.

Tenant Review Process. Our manager, RMR, ~~LLC,~~ employs a tenant review process ~~on our behalf.~~for us. RMR ~~LLC~~ assesses tenants on an individual basis based on various applicable credit criteria. In general, depending on facts and circumstances, RMR ~~LLC~~ evaluates the creditworthiness of a tenant based on information that is provided by the tenant and, in some cases, information that is publicly available or obtained from third party sources. RMR ~~LLC~~ also often uses a third party service to monitor the credit ratings of debt securities of our existing tenants whose debt securities are rated by a nationally recognized credit rating agency.

Investing and Financing Activities (dollars in thousands)

~~During~~As previously disclosed, on February 25, 2022, we completed the ~~nine months ended September 30, 2021, we acquired four~~acquisition of MNR. MNR’s portfolio included 124 Class A, single tenant, net leased, e-commerce focused industrial properties ~~and one parcel of developable land~~located in 32 states containing ~~1,644,508~~approximately 25,745,000 rentable square feet with a remaining weighted average (by rental revenues) lease term of eight years as of the date of the acquisition, and two committed, but not yet completed, property acquisitions. The aggregate value of the consideration paid in the Merger was $3,734,485, including the assumption of $323,432 aggregate principal amount of existing MNR mortgage debt, the repayment of $885,269 of MNR debt and the payment of certain transaction fees and expenses, net of MNR’s cash on hand, and excluding two pending property acquisitions for an aggregate purchase price of ~~$134,730, including~~$78,843, excluding acquisition related ~~costs~~costs.

Table of ~~$1,030. As a result~~Contents

Immediately following the closing of eminent domain taking in September 2021, we sold a portion of a land parcel located in Rock Hill, South Carolina for $1,400, excluding closing costs, resulting in a net gain on sale of real estate of $940.

~~In October 2021,~~the Merger, we entered into ~~an agreement to acquire~~ a recently built property located in Detroit, Michigan market area containing approximately 1,009,000 rentable square feet and net leased to a single e-commerce tenant for a purchase price of $120,000, excluding acquisition related costs. This acquisition is expected to close during the fourth quarter of 2021. However, this acquisition is subject to conditions; accordingly, we cannot be sure that we will complete this acquisition, that this acquisition will not be delayed or that the terms will not change.

~~During the nine months ended September 30, 2020, we entered into agreements related to our~~ joint venture ~~for 12 of our properties in the mainland United States~~arrangement with an ~~Asian~~ institutional investor ~~and contributed those 12~~for 95 of the acquired MNR properties, ~~to our joint venture. We received an aggregate of $108,676 from that~~including two committed, but not yet completed, property acquisitions. The investor ~~for~~acquired a 39% noncontrolling equity interest in ~~our~~the joint venture from us for $587,440, and we retained the remaining 61% equity interest in ~~our~~the joint venture. The joint venture assumed $323,432 aggregate principal amount of existing MNR mortgage debt on certain of the properties and entered into a $1,400,000 floating rate CMBS loan secured by 82 properties. The Floating Rate Loan matures in March 2024, subject to three one year extension options, and requires that interest be paid at an annual rate of SOFR plus a premium of 2.765%.

In connection with the closing of the Merger, we entered into a $1,385,158 bridge loan facility, secured by 109 properties not owned by the joint venture in which we retained a 61% equity interest. We ~~recognized~~also entered into a ~~39% noncontrolling interest~~$700,000 fixed rate CMBS loan secured by 17 of our properties. We control this joint venture and therefore account for the properties on a consolidated basis in our condensed consolidated financial ~~statements for the three and nine months ended September 30, 2020. The portion~~statements.

As of ~~our joint venture's net loss not attributable to us, or $275 and $691 for the three and nine months ended September 30, 2020, respectively, is reported as noncontrolling~~March 31, 2022, we also own an interest in ~~our condensed consolidated statements of comprehensive income. During the three and nine months ended September 30, 2020, our joint~~

~~Table of Contents~~

~~venture made aggregate cash distributions of $5,402 and $10,269, respectively, including $2,107 and $4,005, respectively, to the first~~an unconsolidated joint venture ~~investor.~~

In November 2020, we sold an additional 39% equity interest from our then remaining 61% equity interest to a second unrelated third party institutional investor and retained a 22% equity interest in our joint venture. Effective as of the date of the sale, we deconsolidated our joint venture and, since that ~~time, we~~owns 18 properties. We account for our 18 property unconsolidated joint venture ~~using~~under the equity method of accounting under the fair value option.

During the three ~~and nine~~ months ended ~~September 30, 2021,~~March 31, 2022, we recorded ~~an increase~~the change in the fair value of our investment in our unconsolidated joint venture of ~~$998 and $5,455, respectively, as equity in earnings of investees~~$1,727 in our condensed consolidated statements of comprehensive ~~income.~~income (loss). In addition, during the three ~~and nine~~ months ended ~~September 30, 2021,~~March 31, 2022, our unconsolidated joint venture made aggregate cash distributions of ~~$660 and $1,980, respectively,~~$1,320 to us.

For further information regarding our investing and financing activities, see Notes 2, 4, 5, 9 and 511 to the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 and “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Our Investing and Financing Liquidity and Resources” of this Quarterly Report on Form 10-Q.

2326

Table of Contents

RESULTS OF OPERATIONS

Three Months Ended ~~September 30, 2021,~~March 31, 2022, Compared to Three Months Ended ~~September 30, 2020~~March 31, 2021 (dollars and share amounts in thousands, except per share data)


		Comparable Properties Results (1)								Non-Comparable Properties Results (2)						Consolidated Results									Comparable Properties Results (1)								Non-Comparable Properties Results (2)							Consolidated Results
		Three Months Ended September 30,								Three Months Ended September 30,						Three Months Ended September 30,									Three Months Ended March 31,								Three Months Ended March 31,							Three Months Ended March 31,
						$		%						$						$		%							$		%						$									$			%
		2021		2020		Change		Change		2021		2020		Change		2021		2020		Change		Change			2022		2021		Change		Change		2022		2021		Change			2022			2021			Change			Change

Rental income	Rental income	$	53,138	$	51,741	$	1,397	2.7	%	$	1,843	$	13,365	$	(11,522)	$	54,981	$	65,106	$	(10,125)	(15.6	%)	Rental income	$	52,109	$	52,411	$	(302)	(0.6	%)	$	19,266	$	1,806	$	17,460		$	71,375		$	54,217		$	17,158		31.6		%

Operating expenses:	Operating expenses:																							Operating expenses:
Real estate taxes	Real estate taxes	7,488		7,244		244		3.4	%	129		1,792		(1,663)		7,617		9,036		(1,419)		(15.7	%)	Real estate taxes	7,242		7,045		197		2.8	%	2,194		202		1,992			9,436			7,247			2,189			30.2		%
Other operating expenses	Other operating expenses	4,253		4,303		(50)		(1.2	%)	164		1,208		(1,044)		4,417		5,511		(1,094)		(19.9	%)	Other operating expenses	4,912		4,772		140		2.9	%	1,860		204		1,656			6,772			4,976			1,796			36.1		%
Total operating expenses	Total operating expenses	11,741		11,547		194		1.7	%	293		3,000		(2,707)		12,034		14,547		(2,513)		(17.3	%)	Total operating expenses	12,154		11,817		337		2.9	%	4,054		406		3,648			16,208			12,223			3,985			32.6		%

Net operating income (3)	Net operating income (3)	$	41,397	$	40,194	$	1,203	3.0	%	$	1,550	$	10,365	$	(8,815)	42,947		50,559		(7,612)		(15.1	%)	Net operating income (3)	$	39,955	$	40,594	$	(639)	(1.6	%)	$	15,212	$	1,400	$	13,812		55,167			41,994			13,173			31.4		%

Other expenses:	Other expenses:																							Other expenses:
Depreciation and amortization	Depreciation and amortization															12,694		18,488		(5,794)		(31.3	%)	Depreciation and amortization																22,878			12,678			10,200			80.5		%
Acquisition and certain other transaction related costs																—		178		(178)		(100.0	%)

General and administrative	General and administrative															4,728		5,180		(452)		(8.7	%)	General and administrative																6,077			3,756			2,321			61.8		%
Total other expenses	Total other expenses															17,422		23,846		(6,424)		(26.9	%)	Total other expenses																28,955			16,434			12,521			76.2		%

Gain on sale of real estate																940		—		940		N/M

Realized gain on sale of equity securities																							Realized gain on sale of equity securities																1,232			—			1,232			—		%
Unrealized gain on equity securities																							Unrealized gain on equity securities																2,460			—			2,460			—		%
Dividend income																							Dividend income																478			—			478			—		%
Interest expense	Interest expense															(9,084)		(12,886)		3,802		(29.5	%)	Interest expense																(40,999)			(8,741)			(32,258)			N/M

Income before income tax expense and equity in earnings of investees																17,381		13,827		3,554		25.7	%
Loss on early extinguishment of debt																							Loss on early extinguishment of debt																(828)			—			(828)			N/M
Income (loss) before income tax expense and equity in earnings of investees																							Income (loss) before income tax expense and equity in earnings of investees																(11,445)			16,819			(28,264)			(168.0		%)
Income tax expense	Income tax expense															(72)		(13)		(59)		N/M		Income tax expense																(69)			(63)			(6)			9.5		%
Equity in earnings of investees	Equity in earnings of investees															998		—		998		N/M		Equity in earnings of investees																1,727			2,581			(854)			(33.1		%)
Net income																18,307		13,814		4,493		32.5	%
Net (loss) income																							Net (loss) income																(9,787)			19,337			(29,124)			(150.6		%)
Net loss attributable to noncontrolling interest	Net loss attributable to noncontrolling interest															—		275		(275)		(100.0	%)	Net loss attributable to noncontrolling interest																3,273			—			3,273			—		%
Net income attributable to common shareholders																$	18,307	$	14,089	$	4,218	29.9	%
Net (loss) income attributable to common shareholders																							Net (loss) income attributable to common shareholders																$	(6,514)		$	19,337		$	(25,851)		(133.7		%)

Weighted average common shares outstanding - basic	Weighted average common shares outstanding - basic															65,178		65,112		66		0.1	%	Weighted average common shares outstanding - basic																65,212			65,139			73			0.1		%
Weighted average common shares outstanding - diluted	Weighted average common shares outstanding - diluted															65,230		65,129		101		0.2	%	Weighted average common shares outstanding - diluted																65,212			65,177			35			0.1		%

Per common share data (basic and diluted):	Per common share data (basic and diluted):																							Per common share data (basic and diluted):
Net income attributable to common shareholders																$	0.28	$	0.22	$	0.06	27.3	%
Net (loss) income attributable to common shareholders																							Net (loss) income attributable to common shareholders																$	(0.10)		$	0.30		$	(0.40)		(133.3		%)

N/M - Not Meaningful

(1)Consists of ~~288~~ properties that we owned continuously since ~~July~~January 1, ~~2020~~2021 and excludes 12 properties owned by an unconsolidated joint venture.

(2)Consists of 131 properties that we acquired during the period from January 1, 2021 to March 31, 2022, including 93 properties we contributed to a consolidated joint venture in which we own a 61% equity interest and six properties we sold in December 2021 to our 18 property unconsolidated joint venture in which we own a 22% equity interest.

~~(2)~~Consists of six properties that we acquired during the period from July 1, 2020 to September 30, 2021, one property we sold in 2020 and 12 properties we contributed during the nine months ended September 30, 2020 to our joint venture in which we currently own a 22% equity interest. We consolidated our properties owned by the joint venture until November 2020.

(3)See our definition of NOI and our reconciliation of net income (loss) to NOI below under the heading “Non-GAAP Financial Measures.”

References to changes in the income and expense categories below relate to the comparison of results for the three months ended ~~September 30, 2021~~March 31, 2022 compared to the three months ended ~~September 30, 2020.~~March 31, 2021.

Table of Contents

Rental income. The ~~decrease~~increase in rental income is primarily a result of our acquisition and disposition activities, which includes ~~the contribution~~our acquisition of ~~12 properties to~~MNR. The increase also reflects our ~~joint venture that was deconsolidated in November 2020, partially offset by increases from~~ leasing activity and rent resets at certain of our comparable properties. Rental income at our comparable properties decreased primarily due to the sale of six properties to our unconsolidated joint venture in December 2021. Rental income includes non-cash straight line rent adjustments totaling approximately ~~$1,678~~$1,156 for the 2022 period and approximately $2,044 for the 2021 period, and ~~approximately $2,120 for the 2020 period, and~~ net

~~Table of Contents~~

amortization of acquired real estate leases and assumed real estate lease obligations totaling approximately ~~$174~~$320 for the 2022 period and approximately $180 for the 2021 ~~period and approximately $202 for the 2020~~ period.

Real estate taxes. The ~~decrease~~increase in real estate taxes primarily reflects our acquisition and disposition ~~activities, partially offset by higher tax assessments at certain of our comparable properties.~~activities.

Other operating expenses. Other operating expenses primarily include repairs and maintenance, utilities, insurance, snow removal, legal and property management fees. The ~~decrease~~increase in other operating expenses is primarily due to our acquisition and disposition activities, ~~and decreases~~as well as an increase in ~~repairs and maintenance~~insurance costs at certain of our comparable properties in the ~~2021~~2022 period.

Depreciation and amortization. The ~~decrease~~increase in depreciation and amortization primarily reflects our acquisition and disposition activities and certain leasing related assets becoming fully amortized in the 2021 period, partially offset by an increase in depreciation of improvements made to certain of our properties after July 1, 2020.

~~Acquisition and certain other transaction related costs.~~ ~~Acquisition and certain other transaction related costs consist of costs related to potential acquisitions that were not completed or other transactions.~~activities.

General and administrative. General and administrative expenses primarily include fees paid under our business management agreement with RMR, ~~LLC,~~ legal fees, audit fees, Trustee fees and expenses and equity compensation expense. The ~~decrease~~increase in general and administrative expenses is primarily due to ~~a decrease~~an increase in business management fees as a result of our net ~~disposition of properties in the 2020 period.~~acquisition activity since January 2021.

~~Gain~~Realized gain on sale of ~~real estate.~~equity securities. ~~Gain~~Realized gain on sale of ~~real estate~~equity securities represents the ~~net~~realized gain ~~from~~of $1,232 on the sale of ~~a portion~~certain equity securities we acquired as part of ~~a land parcel~~our acquisition of MNR.

Unrealized gain on equity securities. Unrealized gain on equity securities represents the increase in fair value of certain equity securities we acquired as ~~a result~~part of ~~an eminent domain taking in~~our acquisition of MNR for the ~~2021 period.~~period from February 25, 2022 to March 31, 2022.

Dividend income. Dividend income represents the distributions received on certain equity securities we held during the period from February 25, 2022 to March 31, 2022.

Interest expense. The ~~decrease~~increase in interest expense is ~~primarily~~ due to ~~lower~~higher average interest rates incurred on larger average outstanding ~~indebtedness during~~balances in the ~~2021~~2022 period as compared to the ~~2020~~2021 period, primarily due to our acquisition of MNR.

Loss on early extinguishment of debt. Loss on extinguishment of debt relates to unamortized costs related the termination of our $750,000 unsecured credit facility during the 2022 period.

Income tax expense. Income tax expense primarily reflects state income taxes payable in certain ~~jurisdictions where we are subject to state income taxes.~~jurisdictions.

Equity in earnings of investees. Equity in earnings of investees is the change in the fair value of our investment in our unconsolidated joint venture.

Net (loss) income. The ~~increase in~~net loss for the 2022 period compared to the net income for the 2021 ~~period compared to the 2020~~ period reflects the changes noted above.

Net loss attributable to noncontrolling interest. Net loss attributable to noncontrolling interest represents the net loss attributable to the 39% equity interest in our consolidated joint venture that we did not own during the ~~2020 period when we owned a 61% equity interest in the venture.~~

~~Weighted average common shares outstanding - basic and diluted.~~ ~~The increase in weighted average common shares outstanding primarily reflects common shares awarded under our equity compensation plan since July 1, 2020.~~

~~Net income attributable to common shareholders per common share - basic and diluted.~~ ~~The increase in net income attributable to common shareholders per common share reflects the changes to net income attributable to common shareholders and weighted average common shares noted above.~~

~~Table of Contents~~

~~Nine Months Ended September 30, 2021, Compared to Nine Months Ended September 30, 2020 (dollars and share amounts in thousands, except per share data)~~

Comparable Properties Results (1)
Non-Comparable Properties Results (2)
Consolidated Results
Nine Months Ended September 30, Nine Months Ended September 30, Nine Months Ended September 30,
$ % $ $ %
2021 2020 Change Change 2021 2020 Change 2021 2020 Change Change
Rental income $ 156,226 $ 151,488 $ 4,738 3.1 % $ 7,152 $ 43,006 $ (35,854) $ 163,378 $ 194,494 $ (31,116) (16.0 %)
Operating expenses:
Real estate taxes 21,608 20,969 639 3.0 % 745 5,810 (5,065) 22,353 26,779 (4,426) (16.5 %)
Other operating expenses 13,112 11,810 1,302 11.0 % 622 3,923 (3,301) 13,734 15,733 (1,999) (12.7 %)
Total operating expenses 34,720 32,779 1,941 5.9 % 1,367 9,733 (8,366) 36,087 42,512 (6,425) (15.1 %)
Net operating income (3)
$ 121,506 $ 118,709 $ 2,797 2.4 % $ 5,785 $ 33,273 $ (27,488) 127,291 151,982 (24,691) (16.2 %)
Other expenses:
Depreciation and amortization 37,202 55,303 (18,101) (32.7 %)
Acquisition and certain other transaction related costs 646 178 468 N/M
General and administrative 12,718 14,857 (2,139) (14.4 %)
Total other expenses 50,566 70,338 (19,722) (28.1 %)
Gain on sale of real estate 940 — 940 N/M
Interest income — 113 (113) (100.0 %)
Interest expense (26,468) (40,610) 14,142 (34.8 %)
Gain on early extinguishment of debt — 120 (120) (100.0 %)
Income before income tax expense and equity in earnings of investees 51,197 41,267 9,930 24.1 %
Income tax expense (177) (202) 25 (12.4 %)
Equity in earnings of investees 5,455 — 5,455 N/M
Net income 56,475 41,065 15,410 37.5 %
Net loss attributable to noncontrolling interest — 691 (691) (100.0 %)
Net income attributable to common shareholders $ 56,475 $ 41,756 $ 14,719 35.3 %
Weighted average common shares outstanding - basic 65,154 65,092 62 0.1 %
Weighted average common shares outstanding - diluted 65,205 65,101 104 0.2 %
Per common share data (basic and diluted):
Net income attributable to common shareholders $ 0.86 $ 0.64 $ 0.22 34.4 %

~~N/M - Not Meaningful~~

~~(1)~~Consists of 287 buildings, leasable land parcels and easements that we owned continuously since January 1, 2020 and excludes 12 properties owned by an unconsolidated joint venture in which we own a 22% equity interest.

~~(2)~~Consists of seven properties that we acquired during the period from January 1, 2020 to September 30, 2021, one property we sold in 2020 and 12 properties we contributed in the first quarter of 2020 to a joint venture in which we currently own a 22% equity interest. We consolidated our properties owned by the joint venture until November 2020.

~~(3)See our definition of NOI and our reconciliation of net income to NOI below under the heading “Non-GAAP Financial Measures.”~~

References to changes in the income and expense categories below relate to the comparison of results for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020.

~~Rental income.~~ The decrease in rental income is primarily a result of our acquisition and disposition activities, which includes the contribution of 12 properties to our joint venture that was deconsolidated in November 2020, partially offset by increases from leasing activity and rent resets at certain of our comparable properties. Rental income includes non-cash straight line rent adjustments totaling approximately $5,673 for the 2021 period and approximately $6,183 for the 2020 period, and net

~~Table of Contents~~

~~amortization of acquired real estate leases and assumed real estate lease obligations totaling approximately $525 for the 2021 period and approximately $606 for the 2020~~2022 period.

~~Real estate taxes.~~ ~~The decrease in real estate taxes primarily reflects our acquisition and disposition activities, partially offset by higher tax assessments at certain of our comparable properties.~~

~~Other operating expenses.~~ The decrease in other operating expenses is primarily due to our acquisition and disposition activities, partially offset by an increase in snow removal, repairs and maintenance and insurance costs during the 2021 period at certain of our comparable properties.

~~Depreciation and amortization.~~ The decrease in depreciation and amortization primarily reflects our acquisition and disposition activities and certain leasing related assets becoming fully amortized in the 2021 period, partially offset by an increase in depreciation of improvements made to certain of our properties after January 1, 2020.

~~General and administrative.~~ ~~The decrease in general and administrative expenses is primarily due to a decrease in business management fees as a result of our net disposition of properties in the 2020 period.~~

~~Gain on real estate.~~ ~~Gain on sale of real estate represents the net gain from the sale of a portion of a land parcel as a result of an eminent domain taking in the 2021 period.~~

~~Interest income.~~ ~~The decrease in interest income is primarily due to a decrease in the interest rate earned on invested cash during the 2021 period as compared to the 2020 period.~~

~~Interest expense.~~ ~~The decrease in interest expense is primarily due to lower average outstanding indebtedness during the 2021 period as compared to the 2020 period.~~

~~Gain on early extinguishment of debt.~~ ~~We recorded a gain on early extinguishment of debt in connection with our prepayment of a mortgage note during the 2020 period.~~

~~Income tax expense.~~ ~~Income tax expense reflects state income taxes payable in certain jurisdictions where we are subject to state income taxes.~~

~~Equity in earnings of investees.~~ ~~Equity in earnings of investees is the change in the fair value of our investment in our joint venture.~~

~~Net income.~~ ~~The increase in net income for the 2021 period compared to the 2020 period reflects the changes noted above.~~

~~Net loss attributable to noncontrolling interest.~~ Net loss attributable to noncontrolling interest represents the net loss attributable to the 39% equity interest in our joint venture that we did not own during the 2020 period when we owned a 61% equity interest in the venture.

Weighted average common shares outstanding - basic and diluted. The increase in weighted average common shares outstanding primarily reflects common shares awarded under our equity compensation plan since January 1, ~~2020.~~

2021.

Net (loss) income attributable to common shareholders per common share - basic and diluted. The ~~increase in~~net loss attributable to common shareholders per common share for the 2022 period compared to the net income attributable to common shareholders per ~~common~~ share for the 2021 period reflects the changes to net income attributable to common shareholders and weighted average common shares noted above.

2728

Table of Contents

Non-GAAP Financial Measures

We present certain “non-GAAP financial measures” within the meaning of the applicable rules of the Securities and Exchange Commission, or SEC, including net operating income, or NOI, funds from operations, or FFO, attributable to common shareholders and normalized funds from operations, or Normalized FFO, attributable to common shareholders. These measures do not represent cash generated by operating activities in accordance with GAAP and should not be considered alternatives to net income (loss) or net income (loss) attributable to common shareholders as indicators of our operating performance or as measures of our liquidity. These measures should be considered in conjunction with net income (loss) and net income (loss) attributable to common shareholders as presented in our condensed consolidated statements of comprehensive ~~income.~~income (loss). We consider these non-GAAP measures to be appropriate supplemental measures of operating performance for a REIT, along with net income (loss) and net income (loss) attributable to common shareholders. We believe these measures provide useful information to investors because by excluding the effects of certain historical amounts, such as depreciation and amortization expense, they may facilitate a comparison of our operating performance between periods and with other REITs and, in the case of NOI, reflecting only those income and expense items that are generated and incurred at the property level may help both investors and management to understand the operations of our properties.

Net Operating Income

We calculate NOI as shown below. We define NOI as income from our rental of real estate less our property operating expenses. The calculation of NOI excludes certain components of net income (loss) in order to provide results that are more closely related to our property level results of operations. NOI excludes amortization of capitalized tenant improvement costs and leasing commissions that we record as depreciation and amortization expense. We use NOI to evaluate individual and company-wide property level performance. Other real estate companies and REITs may calculate NOI differently than we do.

The following table presents the reconciliation of net income to NOI for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ (dollars in thousands):


		Three Months Ended September 30,								Nine Months Ended September 30,										Three Months Ended March 31,
		2021				2020				2021				2020						2022			2021
Reconciliation of Net Income to NOI:
Net income		$	18,307			$	13,814			$	56,475			$	41,065
Reconciliation of Net (Loss) Income to NOI:																			Reconciliation of Net (Loss) Income to NOI:
Net (loss) income																			Net (loss) income							$	(9,787)	$	19,337
Equity in earnings of investees	Equity in earnings of investees	(998)				—				(5,455)				—		Equity in earnings of investees				(1,727)			(2,581)
Income tax expense	Income tax expense	72				13				177				202		Income tax expense				69			63
Income before income tax expense and equity in earnings of investees		17,381				13,827				51,197				41,267
Gain on sale of real estate		(940)				—				(940)				—
Gain on early extinguishment of debt		—				—				—				(120)
Income (loss) before income tax expense and equity in earnings of investees																			Income (loss) before income tax expense and equity in earnings of investees							(11,445)		16,819

Loss on early extinguishment of debt																			Loss on early extinguishment of debt							828		—
Interest expense	Interest expense	9,084				12,886				26,468				40,610		Interest expense				40,999			8,741
Interest income		—				—				—				(113)
Realized gain on sale of equity securities																			Realized gain on sale of equity securities							(1,232)		—
Unrealized gain on equity securities																			Unrealized gain on equity securities							(2,460)		—
Dividend income																			Dividend income							(478)		—

General and administrative	General and administrative	4,728				5,180				12,718				14,857		General and administrative				6,077			3,756
Acquisition and transaction related costs		—				178				646				178

Depreciation and amortization	Depreciation and amortization	12,694				18,488				37,202				55,303		Depreciation and amortization				22,878			12,678
NOI	NOI			$	42,947			$	50,559			$	127,291			$	151,982	NOI			$	55,167		$	41,994

NOI:	NOI:																	NOI:
Hawaii Properties	Hawaii Properties			$	20,628			$	19,273			$	61,312			$	58,573	Hawaii Properties			$	19,294		$	19,992
Mainland Properties	Mainland Properties			22,319				31,286				65,979				93,409		Mainland Properties			35,873			22,002
NOI	NOI			$	42,947			$	50,559			$	127,291			$	151,982	NOI			$	55,167		$	41,994

Funds From Operations and Normalized Funds From Operations Attributable to Common Shareholders

We calculate FFO attributable to common shareholders and Normalized FFO attributable to common shareholders as shown below. FFO attributable to common shareholders is calculated on the basis defined by The National Association of Real Estate Investment Trusts, which is net income (loss) attributable to common shareholders, calculated in accordance with GAAP, excluding any gain or loss on sale of real estate, ~~and~~ equity in earnings of an unconsolidated joint venture and realized and unrealized gain on equity securities, plus real estate depreciation and amortization of consolidated properties and our ~~proportionate share of FFO of unconsolidated joint venture~~

2829

Table of Contents

proportionate share of FFO of unconsolidated joint venture properties and minus FFO adjustments attributable to noncontrolling interest, as well as certain other adjustments currently not applicable to us. In calculating Normalized FFO attributable to common shareholders, we adjust for the items shown below including similar adjustments for our unconsolidated joint venture, if ~~any.~~any, and exclude acquisition and transaction costs expensed under GAAP. FFO attributable to common shareholders and Normalized FFO attributable to common shareholders are among the factors considered by our Board of Trustees when determining the amount of distributions to our shareholders. Other factors include, but are not limited to, requirements to maintain our qualification for taxation as a REIT, limitations in the agreements governing our debt, the availability to us of debt and equity capital, our distribution rate as a percentage of the trading price of our common shares, or dividend yield, and our dividend yield compared to the dividend yields of other industrial REITs, our expectation of our future capital requirements and operating performance and our expected needs for and availability of cash to pay our obligations. Other real estate companies and REITs may calculate FFO attributable to common shareholders and Normalized FFO attributable to common shareholders differently than we do.

The following table presents our calculation of FFO attributable to common shareholders and Normalized FFO attributable to common shareholders and reconciliations of net income (loss) attributable to common shareholders to FFO attributable to common shareholders and Normalized FFO attributable to common shareholders for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ (dollars in thousands, except per share data):

Three Months Ended September 30, Nine Months Ended September 30,
2021 2020 2021 2020
Reconciliation of Net Income attributable to common shareholders to FFO attributable to common shareholders and Normalized FFO attributable to common shareholders:
Net income attributable to common shareholders $ 18,307 $ 14,089 $ 56,475 $ 41,756
Depreciation and amortization 12,694 18,488 37,202 55,303
Equity in earnings of unconsolidated joint venture (998) — (5,455) —
Share of FFO from unconsolidated joint venture 1,215 — 3,621 —
Gain on sale of real estate (940) — (940) —
FFO adjustments attributable to noncontrolling interest — (2,638) — (6,272)
FFO attributable to common shareholders 30,278 29,939 90,903 90,787
Acquisition and certain other transaction related costs — 178 646 178
Gain on early extinguishment of debt — — — (120)
Normalized FFO attributable to common shareholders $ 30,278 $ 30,117 $ 91,549 $ 90,845
Per common share data:
FFO attributable to common shareholders - basic $ 0.46 $ 0.46 $ 1.40 $ 1.39
FFO attributable to common shareholders - diluted $ 0.46 $ 0.46 $ 1.39 $ 1.39
Normalized FFO attributable to common shareholders - basic $ 0.46 $ 0.46 $ 1.41 $ 1.40
Normalized FFO attributable to common shareholders - diluted $ 0.46 $ 0.46 $ 1.40 $ 1.40


	Three Months Ended March 31,
	2022		2021
Reconciliation of Net Income (Loss) Attributable to Common Shareholders to FFO Attributable to Common Shareholders and Normalized FFO Attributable to Common Shareholders:
Net (loss) income attributable to common shareholders	$	(6,514)	$	19,337
Depreciation and amortization	22,878		12,678
Equity in earnings of unconsolidated joint venture	(1,727)		(2,581)
Realized gain on sale of equity securities	(1,232)		—
Unrealized gain on equity securities	(2,460)		—
Share of FFO from unconsolidated joint venture	1,761		1,236

FFO adjustments attributable to noncontrolling interest	(4,604)		—
FFO attributable to common shareholders	8,102		30,670

Loss on early extinguishment of debt	828		—
Acquisition and certain other transaction costs	18,673		—
Normalized FFO attributable to common shareholders	$	27,603	$	30,670

Weighted average common shares outstanding - basic	65,212		65,139
Weighted average common shares outstanding - diluted	65,212		65,177

Per common share data (basic and diluted):
FFO attributable to common shareholders	$	0.12	$	0.47
Normalized FFO attributable to common shareholders	$	0.42	$	0.47

LIQUIDITY AND CAPITAL RESOURCES

Our Operating Liquidity and Resources (dollars in thousands)

Our principal sources of funds to meet our operating and capital expenses, pay debt service obligations and make distributions to our shareholders are rents from tenants at our ~~properties and borrowings under our revolving credit facility.~~properties. With ~~$423,000~~$275,075 of ~~availability under our revolving credit facility as of October 25, 2021, 70.9%~~cash on hand, 77.3% of our annualized rental revenues derived from investment grade rated tenants, subsidiaries of investment grade rated parent entities or our Hawaii land leases and only ~~1.9%~~4.1% of our annualized rental revenues as of ~~September 30, 2021~~March 31, 2022 from expiring leases over the next 12 months, we believe that these sources of funds will be sufficient to meet our operating and capital expenses, pay debt service obligations and make distributions to our shareholders for the next 12 months and for the foreseeable future thereafter. Our future cash flows from operating activities will depend primarily upon our ability to:

•collect rents from our tenants when due;

•maintain the occupancy of, and maintain or increase the rental rates at, our properties;

•~~control our operating cost increases;~~

2930

Table of Contents

•control our operating cost increases;

•purchase additional properties that produce cash flows in excess of our costs of acquisition capital and property operating expenses; and

•develop properties to produce cash flows in excess of our cost of capital.

The following is a summary of our sources and uses of cash flows for the periods presented, as reflected in our condensed consolidated statements of cash flows (dollars in thousands):


		Nine Months Ended September 30,					Three Months Ended March 31,
		2021		2020			2022		2021
Cash and cash equivalents and restricted cash at beginning of period	Cash and cash equivalents and restricted cash at beginning of period	$	22,834	$	34,550	Cash and cash equivalents and restricted cash at beginning of period	$	29,397	$	22,834
Net cash provided by (used in):	Net cash provided by (used in):					Net cash provided by (used in):
Operating activities	Operating activities	88,920		92,932		Operating activities	56,639		29,652
Investing activities	Investing activities	(135,093)		(75,836)		Investing activities	(3,442,485)		(789)
Financing activities	Financing activities	67,432		265		Financing activities	3,777,878		(25,550)
Cash and cash equivalents and restricted cash at end of period	Cash and cash equivalents and restricted cash at end of period	$	44,093	$	51,911	Cash and cash equivalents and restricted cash at end of period	$	421,429	$	26,147

The ~~decrease~~increase in net cash provided by operating activities for the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 compared to the ~~2020~~2021 period is primarily due to increased operating cash flow from the acquisition of MNR and changes in our working capital. The increase in net cash used in investing activities for the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 compared to the ~~2020~~2021 period is primarily due to our acquisition of ~~four properties and one parcel of developable land for an aggregate purchase price of $134,730~~MNR during the ~~2021~~2022 period as compared to ~~one~~no property ~~for a purchase price of $71,628~~acquisitions during the ~~2020~~2021 period. The ~~increase~~change in net cash provided by financing activities for the ~~nine~~three months ended ~~September 30,~~March 31, 2022 to net cash used in financing activities during the 2021 ~~compared to the 2020~~ period is primarily due to ~~higher~~the net borrowings ~~under~~and sale of joint venture equity interests used to finance our ~~revolving credit facility during~~acquisition of MNR in the ~~2021 period to fund acquisitions.~~2022 period.

Our Investing and Financing Liquidity and Resources (dollars in thousands, except per share and per square foot data)

Our future acquisition or development activity cannot be accurately projected because such activity depends upon available opportunities that come to our attention and upon our ability to successfully acquire, develop and operate properties, financing available to us, our cost of capital, other commitments we have made and alternative uses for the amounts that would be required for the acquisition or development, the extent of our leverage, and the expected impact of the acquisition or development on our debt covenants and certain other financial metrics. We generally do not intend to purchase “turn around” properties, or properties that do not generate positive cash flows, but we may ~~undertake~~conduct construction or redevelopment activities on our properties. During the nine months ended September 30, 2021, we acquired a developable land parcel for $2,319, including acquisition costs of $119. We expect to spend approximately $16,600 to construct a building for lease on this land.

As of ~~September 30, 2021,~~March 31, 2022, we had cash and cash equivalents of ~~$44,093.~~$275,075. To maintain our qualification for taxation as a REIT under the Internal Revenue Code of 1986, as amended, or the IRC, we generally are required to distribute at least 90% of our REIT taxable income annually, subject to specified adjustments and excluding any net capital gain. This distribution requirement limits our ability to retain earnings and thereby provide capital for our operations or acquisitions. ~~In order~~We may use our cash and cash equivalents on hand, the cash flow from our operations, net proceeds from any sales of assets and net proceeds of offerings of equity or debt securities to fund ~~cash needs that may result from timing differences between~~ our ~~receipt of rents and our desire or need to make~~ distributions to ~~pay operating~~our shareholders. We currently expect to reduce our debt with the proceeds from the sale of 30 properties we have classified as held for sale as of March 31, 2022.

On February 25, 2022, subsidiaries of our consolidated joint venture entered into a loan agreement with Citi Real Estate Funding Inc., UBS AG, Bank of America, N.A., Bank of Montreal and Morgan Stanley Bank, N.A., or ~~capital expenses or~~collectively, the Floating Rate Lenders, pursuant to ~~fund any future property acquisitions, development or redevelopment efforts, we maintain~~which this joint venture obtained the Floating Rate Loan. Also on February 25, 2022, our consolidated joint venture entered into a ~~$750,000 unsecured revolving credit facility~~guaranty in favor of the Floating Rate Lenders, pursuant to which this joint venture guaranteed certain limited recourse obligations of its subsidiaries with ~~a group of lenders. We pay~~respect to the Floating Rate Loan. The Floating Rate Loan matures in March 2024, subject to three, one year extension options, and requires that interest ~~on borrowings under our revolving credit facility~~be paid at ~~the~~a rate of ~~LIBOR~~SOFR plus a premium ~~that varies based on our leverage ratio. We are required~~of 2.25%. Effective in March 2022, the Floating Rate Lenders exercised their option to ~~pay a commitment fee on~~increase the ~~unused portion~~premium in connection with the securitization of ~~our revolving credit facility. At September 30, 2021,~~ the ~~interest rate premium on our revolving credit facility was 130~~Floating Rate Loan resulting in an increase of 51.5 basis points ~~and our commitment fee was 25 basis points. We can borrow, repay and reborrow funds available under our revolving credit facility until maturity, and no principal repayment is due until maturity.~~in the premium. As of ~~September 30, 2021,~~March 31, 2022, the weighted average annual interest rate payable onunder our Floating Rate Loan was 3.060% and the weighted average interest rate for borrowings under ~~our revolving credit facility~~the Floating Rate Loan was ~~1.39%. As of September 30, 2021 and October~~3.011% for the period from February 25, ~~2021, we had $354,000 and $327,000, respectively, outstanding under our revolving credit facility, and $396,000 and $423,000 respectively, available~~2022 to ~~borrow under our revolving credit facility.~~

The maturity date of our revolving credit facility is December 29, 2021. We have the option to extend the maturity date of our revolving credit facility for two, six month periods, subject to payment of extension fees and satisfaction of other conditions. Our credit agreement includes a feature under which the maximum borrowing availability under the facility may be increased to up to $1,500,000 in certain circumstances.March 31, 2022.

3031

Table of Contents

The agreements governing the Loans contain customary covenants and provide for acceleration of payment of all amounts due thereunder upon the occurrence and continuation of certain events of default.

In connection with the Merger, our ~~debt maturities (other than our revolving credit facility), consisted~~consolidated joint venture in which we own a 61% equity interest assumed an aggregate $323,432 of ~~mortgage notes with~~existing MNR mortgages secured by 11 properties which are owned by this joint venture. These amortizing mortgages require monthly payments of principal and interest until maturity. The value of these mortgages approximated their estimated fair value on the date of acquisition.

As of March 31, 2022, we have an aggregate principal amount of ~~$650,000, which is~~$4,456,808 of debt, including the Loans, scheduled to mature between 2022 and 2038.

For further information regarding our investing and financing activities, including our acquisition of MNR, see Notes 2, 4, 5, 9 and 11 to the Notes to Condensed Consolidated Financial Statements included in ~~2029.~~Part I, Item 1 of this Quarterly Report on Form 10-Q.

~~During~~

Table of Contents

Consolidated Joint Venture

Immediately following the ~~nine months ended September 30, 2020,~~closing of the Merger, we entered into ~~agreements related to our~~a joint venture ~~for 12 of our properties in the mainland United States~~arrangement with an ~~Asian~~ institutional investor ~~and contributed those 12~~for 95 of the acquired MNR properties, ~~to our joint venture. We received an aggregate of $108,676 from that~~including two committed, but not yet completed, property acquisitions. The investor ~~for~~acquired a 39% noncontrolling equity interest in ~~our~~the joint venture from us for $587,440, and we retained the remaining 61% equity interest in ~~our~~the joint venture. The joint venture assumed $323,432 aggregate principal amount of existing MNR mortgages on certain of the properties. We account for this joint venture on a consolidated basis in our condensed consolidated financial statements.

We recognized a 39% noncontrolling interest in our condensed consolidated financial statements for the three ~~and nine~~ months ~~ended September 30, 2020.~~ending March 31, 2022. The portion of ~~our~~this joint venture's net loss not attributable to us, or ~~$275 and $691~~$3,261 for the three ~~and nine~~ months ended ~~September 30, 2020, respectively,~~March 31, 2022, is reported as noncontrolling interest in our condensed consolidated statements of comprehensive ~~income. During~~income (loss). There were no distributions made by this joint venture during the three ~~and nine~~ months ended ~~September 30, 2020, our joint venture made aggregate cash distribution of $5,402 and $10,269, respectively, including $2,107 and $4,005, respectively,~~March 31, 2022. We may seek to ~~the first joint venture investor.~~

~~In November 2020, we sold an~~sell additional ~~39%~~ equity ~~interest from our then remaining 61% equity interest to a second unrelated third party institutional investor and retained a 22% equity interest~~interests in ~~our joint venture. Effective as of the date of the sale, we deconsolidated our~~this joint venture and ~~since that time,~~use the proceeds to reduce our debt. See Notes 1, 9 and 11 to the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for more information regarding this joint venture.

Unconsolidated Joint Venture

As of March 31, 2022 and December 31, 2021, we also owned an interest in an unconsolidated joint venture. We account for ~~our~~the unconsolidated joint venture ~~using~~under the equity method of accounting under the fair value option.

During the three months ~~and nine months~~ ended ~~September 30,~~March 31, 2022 and 2021, we recorded ~~an increase~~the change in the fair value of our investment in our unconsolidated joint venture of ~~$998~~$1,727 and ~~$5,455,~~$2,581, respectively, as equity in earnings of investees in our condensed consolidated statements of comprehensive ~~income.~~income (loss). In addition, during the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021, our unconsolidated joint venture made aggregate cash distributions of ~~$660~~$1,320 and ~~$1,980,~~$660, respectively, to us.

For further information regarding ~~our investing and financing activities,~~this joint venture, see Notes 2, 5 and 511 to the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

We expect to use ~~borrowings under our revolving credit facility,~~ payments we may receive ~~for~~from the other investors in our joint ventures in connection with any additional properties we may sell to our joint ventures, equity contributions from any third party investors in our joint ~~venture~~ventures or any future joint ventures ~~we may enter into~~ and net proceeds from offerings of equity or debt securities to fund any future property acquisitions, development or redevelopment efforts. We may also assume mortgage notes in connection with future acquisitions. When ~~significant amounts are outstanding under our revolving credit facility or~~ the maturities of our ~~revolving credit facility or our other~~ debt approach, we intend to explore refinancing alternatives. Such alternatives may include incurring term debt, obtaining financing secured by mortgages on properties we own, issuing new equity or debt securities, ~~extending the maturity date of our~~obtaining a revolving credit facility, participating in joint ventures or selling properties. We currently have an effective shelf registration statement that allows us to issue public securities on an expedited basis, but we cannot be sure that there will be purchasers for such securities. Further, any issuances of our equity securities may be dilutive to our existing shareholders. Although we cannot be sure that we will be successful in completing any particular type of financing, we believe that we will have access to financing, such as debt or equity offerings, to fund capital expenditures, future acquisitions, development, redevelopment and other activities and to pay our obligations.

The completion and the costs of any future financings will depend primarily upon our success in operating our business and upon market conditions. In particular, the feasibility and cost of any future debt financings will depend primarily on our then current credit qualities and on market conditions. We have no control over market conditions. Potential lenders in future debt transactions will evaluate our ability to fund required debt service and repay principal balances when they become due by reviewing our financial condition, results of operations, business practices and plans and our ability to maintain our earnings, to stagger our debt maturities and to balance our use of debt and equity capital so that our financial performance and leverage ratios afford us flexibility to withstand any reasonably anticipated adverse changes. We intend to conduct our business activities in a manner which will afford us reasonable access to capital for investing and financing activities. However, there remains uncertainty as to the ultimate duration and severity of the COVID-19 pandemic and its impact on the economy and public health as well as our business. A protracted and extensive economic downturn resulting from the COVID-19 pandemic or otherwise may have various negative consequences, including a decline in financing availability and increased costs for financing. Further, such conditions could also disrupt capital markets and limit our access to financing from public sources.

During the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, we paid a quarterly cash ~~distributions~~distribution to our shareholders totaling ~~$64,653~~$21,584 using existing cash ~~balances and borrowings under our revolving credit facility.~~balances. For more information regarding the distribution we paid in ~~2021,~~2022, see Note 6 to the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

~~Table of Contents~~

On ~~October~~April 14, ~~2021,~~2022, we declared a regular quarterly distribution ~~to common shareholders of record on October 25, 2021~~ of $0.33 per common share, or approximately $21,600, ~~in aggregate.~~to shareholders of record on April 25, 2022. We expect to pay this distribution to our shareholders on or about ~~November 18, 2021~~May 19, 2022 using existing cash ~~balances and borrowings under our revolving credit facility.~~balances.

Table of Contents

During the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ amounts capitalized for tenant improvements, leasing costs, building improvements and development and redevelopment activities were as follows:


		Three Months Ended				Nine Months Ended					Three Months Ended
		September 30,				September 30,					March 31,
		2021		2020		2021		2020			2022		2021
Tenant improvements and leasing costs (1)	Tenant improvements and leasing costs (1)	$	1,819	$	242	$	3,083	$	879	Tenant improvements and leasing costs (1)	$	3,361	$	823

Building improvements (2)	Building improvements (2)	1,625		1,000		2,417		2,978		Building improvements (2)	110		232
Development, redevelopment and other activities (3)	Development, redevelopment and other activities (3)	—		10		104		11		Development, redevelopment and other activities (3)	294		—
		$	3,444	$	1,252	$	5,604	$	3,868		$	3,765	$	1,055

(1)Tenant improvements and leasing costs include capital expenditures used to improve tenants’ space or amounts paid directly to tenants to improve their space and leasing related costs, such as brokerage commissions and tenant inducements.

(2)Building improvements generally include expenditures to replace obsolete building components and expenditures that extend the useful life of existing assets.

(3)Development, redevelopment and other activities generally include capital expenditure projects that reposition a property or result in new sources of revenues.

As of ~~September 30, 2021,~~March 31, 2022, we had estimated unspent leasing related obligations of ~~$2,315.~~$28,700.

Debt Covenants (dollars in thousands)

Our principal debt obligations at ~~September 30, 2021 were borrowings~~March 31, 2022 were: (1) $1,385,158 outstanding ~~under our revolving credit facility and~~principal amount of the Bridge Loan; (2) $1,400,000 outstanding principal amount of the Floating Rate Loan; (3) $700,000 outstanding principal amount of the Fixed Rate Loan; (4) $650,000 outstanding principal amount of a ~~$650,000 non-recourse,~~ mortgage loan ~~that is~~ secured by 186 of our ~~properties. The mortgage loan agreement contains certain exceptions~~properties; and (5) $321,650 aggregate principal amount of mortgages secured by 11 properties owned by our consolidated joint venture in which we own a 61% equity interest. For further information regarding our indebtedness, see Note 4 to the ~~general non-recourse provisions that obligate us~~Notes to ~~indemnify the lenders for certain potential environmental losses relating to hazardous materials and violations~~Condensed Consolidated Financial Statements included in Part I, Item 1 of ~~environmental law.~~

Our credit agreement provides for acceleration of payment of all amounts outstanding upon the occurrence and continuation of certain events of default, such as a change of control of us, which includes RMR LLC ceasing to act as our business and property manager. Our credit agreement contains covenants, including those that restrict our ability to incur debts, including debts secured by mortgagesthis Quarterly Report on our properties, in excess of calculated amounts, restrict our ability to make distributions to our shareholders in certain circumstances and generally require us to maintain certain financial ratios. As of September 30, 2021, we believe we were in compliance with all the covenants and other terms under our credit agreement.

Our credit agreement does not contain provisions for acceleration which could be triggered by our leverage ratio. However, under our credit agreement, our leverage ratio is used to determine the interest rates for calculating the amount of interest payable on outstanding borrowings and the fees we pay. Accordingly, if our leverage ratio increases above the applicable thresholds, our interest expense and related costs under our credit agreement would increase.

~~Our revolving credit facility has cross default provisions to other indebtedness that is recourse of $25,000 or more and indebtedness that is non-recourse of $50,000 or more.~~Form 10-Q.

The ~~loan agreement~~agreements and related documents governing ~~our~~the Loans and the $650,000 mortgage loan contain customary covenants, ~~and~~ provide for acceleration of payment of all amounts due thereunder upon the occurrence and continuation of certain events of default and, in the case of the $650,000 mortgage loan, also require us to maintain a minimum consolidated net worth of at least $250,000 and liquidity of at least $15,000. As of ~~September 30, 2021,~~March 31, 2022, we believe we were in compliance with all the covenants and other terms under ~~this~~the agreements governing the Loans and the $650,000 mortgage loan.

Certain of the mortgages we assumed in conjunction with our acquisition of MNR are non-recourse, subject to certain limitations, and do not contain any material financial covenants. The agreements governing the Loans and the $650,000 mortgage loan ~~agreement.~~

contain certain exceptions to the general non-recourse provisions, including our obligation to indemnify the lenders for certain potential environmental losses~~Table of Contents~~.

Related Person Transactions

We have relationships and historical and continuing transactions with RMR, ~~LLC,~~ RMR Inc. and others related to them. For further information about these and other such relationships and related person transactions, see Notes 8 and 9 to the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q, our ~~2020~~2021 Annual Report, our definitive Proxy Statement for our ~~2021~~2022 Annual Meeting of Shareholders and our other filings with the SEC. In addition, see the section captioned “Risk Factors” of our ~~2020~~2021 Annual Report for a description of risks that may arise as a result of these and other related person transactions and relationships. We may engage in additional transactions with related persons, including businesses to which RMR ~~LLC~~ or its subsidiaries provide management services.

Item 3. Quantitative and Qualitative Disclosures About Market Risk (dollars in thousands, except per share data)

We are exposed to risks associated with market changes in interest rates. We manage our exposure to this market risk by monitoring available financing alternatives. Our strategy to manage exposure to changes in interest rates is materially unchanged since December 31, ~~2020.~~2021. Other than as described below, we do not currently expect any significant changes in our exposure to fluctuations in interest rates or in how we manage this exposure in the near future.

Table of Contents

Fixed Rate Debt

At ~~September 30, 2021,~~March 31, 2022, our outstanding fixed rate debt consisted of the following mortgage notes:

Annual Annual Interest
Principal Interest Interest Payments
Debt
Balance (1)
Rate (1)
Expense (1)
Maturity Due
Mortgage notes (186 properties in Hawaii) $ 650,000 4.31 % $ 28,015 2029 Monthly
$ 650,000 $ 28,015



			Annual		Annual			Interest
	Principal		Interest		Interest			Payments
Debt	Balance (1)		Rate (1)		Expense (1)		Maturity	Due

Mortgage notes (186 properties in Hawaii)	$	650,000	4.310	%	$	28,015	2029	Monthly
Mortgage notes (17 U.S. Mainland Properties )	700,000		4.417	%	30,919		2032	Monthly
Mortgage note (2)	13,644		3.670	%	501		2031	Monthly
Mortgage note (2)	27,446		3.100	%	851		2035	Monthly
Mortgage note (2)	15,585		3.560	%	555		2030	Monthly
Mortgage note (2)	45,534		4.130	%	1,881		2033	Monthly
Mortgage note (2)	15,032		4.140	%	622		2032	Monthly
Mortgage note (2)	32,634		4.020	%	1,312		2033	Monthly
Mortgage note (2)	5,290		3.770	%	199		2030	Monthly
Mortgage note (2)	5,594		3.850	%	215		2030	Monthly
Mortgage note (2)	44,042		2.950	%	1,299		2036	Monthly
Mortgage note (2)	47,742		4.270	%	2,039		2037	Monthly
Mortgage note (2)	54,012		3.250	%	1,755		2038	Monthly
Mortgage note (2)	15,095		3.760	%	568		2028	Monthly



	$	1,671,650			$	70,731

(1)The principal balance, annual interest rate and annual interest expense are the amounts stated in the applicable contract. In accordance with GAAP, our carrying values and recorded interest expense may differ from these amounts because of market conditions at the time we assumed or issued this debt.

~~These~~(2)Our consolidated joint venture, in which we have a 61% interest, assumed MNR’s existing mortgages secured by 11 properties in aggregate.

Our $650,000 and $700,000 mortgage notes require interest only payments until maturity. The remaining fixed rate mortgage notes require amortizing payment of principal and interest until maturity. Because our mortgage notes require interest to be paid at a fixed rate, changes in market interest rates during the terms of these mortgage notes will not affect our interest obligations. If these mortgage notes are refinanced at an interest rate which is one percentage point higher or lower than shown above, our annual interest cost would increase or decrease by approximately ~~$6,500.~~$16,717.

Changes in market interest rates would affect the fair value of our fixed rate debt obligations. Increases in market interest rates decrease the fair value of our fixed rate debt, while decreases in market interest rates increase the fair value of our fixed rate debt. Based on the balance outstanding at ~~September 30, 2021~~March 31, 2022 and discounted cash flow analyses through the maturity date, and assuming no other changes in factors that may affect the fair value of our fixed rate debt obligation, a hypothetical immediate one percentage point change in the interest rates would change the fair value of this obligation by approximately ~~$44,108.~~$55,883.

Table of Contents

Floating Rate Debt

At ~~September 30, 2021,~~March 31, 2022, our outstanding floating rate debt consisted of ~~$354,000~~the following:


			Annual		Annual				Interest
	Principal		Interest		Interest				Payments
Debt	Balance (1)		Rate (1)		Expense (1)		Maturity		Due
Bridge Loan - mortgage	$	1,125,982	2.040	%	$	22,970	2023		Monthly
Bridge Loan - mezzanine	259,176		8.290	%	21,486		2023		Monthly
Floating Rate Loan	1,400,000		3.060	%	42,840		2024	(2)	Monthly
	2,785,158				$	87,296

(2)The Floating Rate Loan matures in March 2024, subject to three, one year extension options.

At March 31, 2022, our aggregate floating rate debt was $2,785,158, consisting of the $1,400,000 outstanding ~~under~~principal amount of the Floating Rate Loan secured by 82 properties owned by our ~~revolving credit facility. Our revolving credit facility~~consolidated joint venture and the $1,385,158 outstanding principal amount of the Bridge Loan. The Bridge Loan matures on ~~December 29, 2021~~February 24, 2023 and subject to the payment of extension fees and satisfaction of other conditions, we have the option to extend the maturity date for two, six month periods. No principal repayments are required under our revolving credit facility prior to maturity, and prepayments may be made at any time without penalty.

~~Borrowings under our revolving credit facility are in U.S. dollars and require~~requires that interest to be paid at ~~LIBOR~~an annual rate of SOFR plus a premium of 1.75% under the loan agreement and a premium of 8.00% under the mezzanine loan agreement. The Floating Rate Loan matures on March 9, 2024, subject to three, one year extension options, and requires that ~~varies based on~~interest be paid at an annual rate of SOFR plus a premium of 2.765% . In conjunction with these borrowings, to hedge our ~~leverage ratio. Accordingly,~~exposure to risks related to changes in SOFR rates, we purchased interest rate caps with a strike rate of 2.70% for the Bridge Loan and 3.40% for the Floating Rate Loan. However, we are vulnerable to changes in the U.S. dollar based short term rates, specifically ~~LIBOR.~~ SOFR.

In addition, upon renewal or refinancing of ~~this obligation,~~these obligations, we are vulnerable to increases in interest rate premiums due to market conditions or our perceived credit risk. Generally, a change in interest rates would not affect the value

~~Table of Contents~~

of our floating rate debt but would affect our operating results. The following table presents the approximate impact a one percentage point increase in interest rates would have on our annual floating rate interest expense at ~~September 30, 2021:~~March 31, 2022:


		Impact of an Increase in Interest Rates									Impact of an Increase in Interest Rates
						Total Interest		Annual							Total Interest		Annual
		Interest Rate		Outstanding		Expense		Earnings Per			Interest Rate		Outstanding		Expense		Earnings Per
		Per Year		Debt		Per Year		Share Impact (1)			Per Year		Debt		Per Year		Share Impact (1)
At September 30, 2021		1.39	%	$	354,000	$	4,921	$	(0.08)
At March 31, 2022										At March 31, 2022	3.13	%	$	2,785,158	$	87,296	$	1.34
One percentage point increase	One percentage point increase	2.39	%	$	354,000	$	8,461	$	(0.13)	One percentage point increase	4.13	%	$	2,785,158	$	115,148	$	1.77

(1)Based on the diluted weighted average common shares outstanding for the ~~nine~~three months ended ~~September 30, 2021.~~

The following table presents the approximate impact a one percentage point increase in interest rates would have on our annual floating rate interest expense at September 30, 2021 if we were fully drawn on our revolving credit facility:

Impact of an Increase in Interest Rates
Total Interest Annual
Interest Rate Outstanding Expense Earnings Per
Per Year Debt Per Year
Share Impact (1)
At September 30, 2021 1.39 % $ 750,000 $ 10,425 $ (0.16)
One percentage point increase 2.39 % $ 750,000 $ 17,925 $ (0.28)

~~(1)Based on the diluted weighted average common shares outstanding for the nine months ended September 30, 2021.~~March 31, 2022.

The foregoing tables show the impact of an immediate one percentage point change in floating interest rates. If interest rates were to change gradually over time, the impact would be spread over time. Our exposure to fluctuations in floating interest rates will increase or decrease in the future with increases or decreases in the outstanding amounts of ~~our revolving credit facility and~~ any ~~other~~ floating rate ~~debt.~~

~~LIBOR Phase Out~~

LIBOR is currently expected to be phased out for new contracts by December 31, 2021 and for pre-existing contracts by June 30, 2023. We are required to pay interest on borrowings under our revolving credit facility at floating rates based on LIBOR. Interestdebt we may pay on any future debt that we may incur may also require that we pay interest based upon LIBOR. We currently expect that the determination of interest under our revolving credit facility would be revised as provided under our credit agreement or amended as necessary to provide for an interest rate that approximates the existing interest rate as calculated in accordance with LIBOR. Despite our current expectations, we cannot be sure that, if LIBOR is phased out or transitioned, the changes to the determination of interest under our agreements would approximate the current calculation in accordance with LIBOR. We cannot be certain of what standard, if any, will replace LIBOR if it is phased out or transitioned.incur.

Item 4. Controls and Procedures

As of the end of the period covered by this Quarterly Report on Form 10-Q, our management carried out an evaluation, under the supervision and with the participation of our Managing Trustees, our President and Chief ~~Executive~~Operating Officer and our Chief Financial Officer and Treasurer, of the effectiveness of our disclosure controls and procedures pursuant to Rules 13a-15 and 15d-15 under the Securities Exchange Act of 1934, as amended. Based upon that evaluation, our Managing Trustees, our President and Chief ~~Executive~~Operating Officer and our Chief Financial Officer and Treasurer concluded that our disclosure controls and procedures are effective.

There have been no changes in our internal control over financial reporting during the quarter ended

~~September 30, 2021~~ March 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

3436

Table of Contents

Warning Concerning Forward-Looking Statements

This Quarterly Report on Form 10-Q contains statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other securities laws. Also, whenever we use words such as “believe”, “expect”, “anticipate”, “intend”, “plan”, “estimate”, “will”, “may” and negatives or derivatives of these or similar expressions, we are making forward-looking statements. These forward-looking statements are based upon our present intent, beliefs or expectations, but forward-looking statements are not guaranteed to occur and may not occur. Forward-looking statements in this Quarterly Report on Form 10-Q relate to various aspects of our business, including:

•Our tenants’ ability and willingness to pay their rent obligations to us,

•The likelihood that our tenants will renew or extend their leases or that we will be able to obtain replacement tenants on terms as favorable to us as the terms of our existing leases,

•Our belief that the industrial and logistics sector and many of our tenants are critical to sustaining a resilient supply chain and that our business will benefit as a result,

•Our acquisitions or sales of properties,

•The development, redevelopment or repositioning of our properties,

•Our ability to compete for ~~acquisitions~~tenancies and ~~tenancies~~acquisitions effectively,

•The likelihood that our rents will increase when we renew or extend our leases, when we enter new leases, or when our rents reset at our Hawaii Properties,

•Our ability to pay distributions to our shareholders and to sustain the amount of such distributions,

•~~The future availability of borrowings under our revolving credit facility,~~

•Our policies and plans regarding investments, financings and dispositions,

•Our ability to raise debt or equity capital,

•Our ability to pay interest on and principal of our debt or refinance such debt,

•Our ability to appropriately balance our use of debt and equity capital,

•Our ability to expand our existing, or enter into additional, real estate joint ventures or to attract co-venturers and benefit from our existing joint ~~venture~~ventures or any real estate joint ventures we may enter into,

•Whether we may contribute additional properties to our joint ~~venture~~ventures and receive proceeds from the other investors in our joint ~~venture~~ventures in connection with ~~those~~any such contributions,

•The credit qualities of our tenants,

•Changes in the security of cash flows from our properties,

•~~The duration and severity of the COVID-19 pandemic and its impact on us and our tenants,~~

•Our expectations about our ability and the ability of the industrial and logistics properties real estate sector and our tenants to operate throughout the remainder of the COVID-19 pandemic and current economic conditions,

•Our ability to maintain sufficient liquidity, including for the ~~duration~~remainder of the COVID-19 pandemic and any resulting economic impact,

•Our ability to prudently pursue, and successfully and profitably complete, expansion and renovation projects at our properties and to realize our expected returns on those projects,

•Our expectation that we benefit from our relationships with RMR, ~~LLC,~~

•Our qualification for taxation as a REIT under the IRC,

•Changes in federal or state tax laws,

•Changes in environmental laws or in their interpretations or enforcement as a result of climate change or otherwise, or our incurring environmental remediation costs or other liabilities,

•Changes in global supply chain conditions, and

3537

Table of Contents

•Other matters.

Our actual results may differ materially from those contained in or implied by our forward-looking statements. Forward-looking statements involve known and unknown risks, uncertainties and other factors, some of which are beyond our control. Risks, uncertainties and other factors that could have a material adverse effect on our forward-looking statements and upon our business, results of operations, financial condition, FFO attributable to common shareholders, Normalized FFO attributable to common shareholders, NOI, cash flows, liquidity and prospects include, but are not limited to:

•The impact of economic conditions and the capital markets on us and our tenants, including if the current inflationary environment continues or intensifies,

•Competition within the real estate industry, particularly for industrial and logistics properties in those markets in which our properties are located,

•Compliance with, and changes to, federal, state and local laws and regulations, accounting rules, tax laws and similar matters,

•Limitations imposed on our business and our ability to satisfy complex rules in order for us to maintain our qualification for taxation as a REIT for U.S. federal income tax purposes,

•Actual and potential conflicts of interest with our related parties, including our managing trustees, RMR ~~LLC~~ and others affiliated with them, and

•Acts of terrorism, outbreaks of pandemics, ~~including COVID-19,~~war or other hostilities, further material or prolonged disruption to supply chains, or other manmade or natural disasters beyond our control.

For example:

•Our ability to make future distributions to our shareholders and to make payments of principal and interest on our indebtedness depends upon a number of factors, including our receipt of rent from our tenants, future earnings, the capital costs we incur to lease our properties and our working capital requirements. We may be unable to pay our debt obligations or to increase or maintain our current rate of distributions on our common shares and future distributions may be reduced or eliminated,

•Our ability to grow our business and increase our distributions depends in large part upon our ability to acquire properties and lease them for rents, less their property operating costs, that exceed our capital costs. We may be unable to further grow our business by acquiring additional properties. We may be unable to identify properties that we want to acquire, and we may fail to reach agreement with the sellers and complete the purchases of any properties we do want to acquire. In addition, we might encounter unanticipated difficulties and expenditures relating to ~~any~~the properties we acquired ~~properties, and any~~in the MNR acquisition or other properties we may acquire in the future, and these properties may not provide us with rents less property operating costs that exceed our capital costs or achieve our expected returns,

•Contingencies in our acquisition and sale agreements may not be satisfied and any expected acquisitions and sales may not occur, may be delayed or the terms of such transactions may change,

•~~Rents that~~We may not be able to sell the MNR properties we ~~can charge~~acquired and are seeking to sell, and any such sales may be at prices lower than the carrying values,

•We may experience declining rents or incur significant costs when we renew our leases with current tenants or lease our properties to new tenants or when our rents reset at our properties ~~may decline upon rent resets, lease renewals or lease expirations because of changing market conditions or otherwise,~~in Hawaii,

•Leasing for some of our properties depends on a single tenant and we may be adversely affected by the bankruptcy, insolvency, a downturn of business or a lease termination of a single tenant at these properties,

•Certain of our Hawaii Properties are lands leased for rents that periodically reset based on then current fair market values. Rental income from our properties in Hawaii have generally increased during our and our predecessors’ ownership as the leases for those properties have been reset, extendedAny existing or renewed. Although we expect that rents for our Hawaii Properties could increase in the future, subject to the impact of the COVID-19 pandemic, we cannot be sure they will increase. Future rents from these properties could decrease or not increase to the extent they have in the past or by the amount we expect, particularly in the current economic conditions,

•~~Any~~ possible development, redevelopment or ~~redevelopment~~repositioning of our properties may not be successful and may cost more or take longer to complete than we currently ~~expect.~~expect or than we expected when the project commenced. In addition, we may not realize the returns we expect from these projects and we may incur losses from these projects,

•It is difficult to accurately estimate leasing related obligations and costs of development and tenant improvement costs. Our leasing related obligations, development projects and tenant improvements may cost more and may

3638

Table of Contents

take longer to complete than we currently expect or than we expected when the project commenced, and we may incur increasing amounts for these and similar purposes in the future,

•Economic conditions in areas where our properties are located may decline in the future. Such circumstances or other conditions may reduce demand for leasing industrial space. If the demand for leasing industrial space is reduced, we may be unable to renew leases with our tenants as leases expire or enter new leases at rental rates as high as expiring rents and our financial results may decline,

•E-commerce retail sales may not continue to grow and increase the demand for industrial and logistics real estate as we expect,

•Increasing development of industrial and logistics properties may reduce the demand for, and rents from, our properties,

•We may not achieve or sustain our targeted capitalization rates for properties we acquire and we may incur losses with respect to those acquisitions,

•Our belief that there is a likelihood that tenants may renew or extend our leases prior to their expirations whenever they have made significant investments in the leased properties, or because those properties may be of strategic importance to them, may not be realized,

•Some of our tenants may not renew expiring leases, and we may be unable to obtain new tenants to maintain or increase the historical occupancy rates of, or rents from, our properties, and we may need to make significant expenditures to lease our properties,

•We may not be able to maintain good relations with, and continue to be responsive to the needs of, our significant and other tenants,

•The competitive advantages we believe we have may not in fact exist or provide us with the advantages we expect. We may fail to maintain any of these advantages or our competition may obtain or increase their competitive advantages relative to us,

•We intend to conduct our business activities in a manner that will afford us reasonable access to capital for investing and financing activities. However, we may not succeed in this regard and we may not have reasonable access to capital,

•Continued availability of borrowings under our revolving credit facility is subject to our satisfying certain financial covenants and other credit facility conditions. However, if challenging market conditions last for a long period or worsen, our tenants may experience liquidity constraints and as a result may be unable to pay rent to us and our ability to operate our business effectively may be challenged. If our operating results and financial condition are significantly negatively impacted by the current economic conditions or otherwise, we may fail to satisfy those covenants and conditions,

•Actual costs under our ~~revolving credit facility~~floating rate debt will be higher than ~~LIBOR~~the stated rate plus a premium because of fees and expenses associated with ~~such debt,~~

•~~The maximum borrowing availability under our revolving credit~~the applicable facility, may be increased to up to $1.5 billion in certain circumstances. However, increasing the maximum borrowing availability under our revolving credit facility is subject to our obtaining additional commitments from lenders, which may not occur,

•We ~~have the option to extend the maturity date of our revolving credit facility upon payment of a fee and meeting other conditions. However, the applicable conditions~~ may ~~not be met,~~

•~~The premiums used to determine the interest rate payable on our revolving credit facility and the unused fee payable on our revolving credit facility are based on our leverage. Changes in our~~incur additional debt. Additional debt leverage may ~~cause the interest~~limit our ability to make acquisitions, pay distributions and ~~fees~~pursue other opportunities we ~~pay to~~may deem desirable. Further, increased leverage may increase our cost of capital,

•We may not ~~reduce~~be able to obtain replacement financing on desirable terms when our ~~level of indebtedness~~debts mature,

•Our existing, and any future, derivative contracts we are party to or ~~maintain any reduction we~~ may ~~effect~~enter into may not have the intended or desired beneficial impact, and ~~increased leverage~~ may ~~restrict our ability~~expose us to ~~acquire properties~~additional risks such as counterparty credit risk and ~~pursue business opportunities,~~may involve additional costs,

•We may spend more for capital expenditures than we currently expect orand we expect to spend more than we have in the past,

•Our existing joint ~~venture~~ventures and any ~~other~~additional joint ventures ~~that~~ we may enter into in the future may not be successful, and we may not be able to sell any additional equity interests in our existing joint ventures at expected prices or at all,

•Our Board of Trustees considers, among other factors, our dividend yield and our dividend yield compared to the dividend yields of other industrial REITs when setting our distributions to shareholders. This may imply that we

~~Table of Contents~~

will maintain or seek to maintain a specific dividend yield on our common shares. However, the dividend yield is only one of many factors our Board of Trustees considers in its discretion when setting our distributions to shareholders. Further, various market and other factors impact trading prices for our and our competitors’ securities and the corresponding yields on those securities. As a result, the trading prices on our common shares

Table of Contents

and the yields on our common shares are subject to change and may fluctuate significantly. We do not intend to maintain or to seek to maintain any specific yield on our common shares,

•We believe that we are well positioned to weather the present COVID-19 pandemic conditions in the economy and the real estate industry. However, the full extent of the future impact of the COVID-19 pandemic to us is unknown and we may not realize similar or better operating results in the future,

•We face limited lease expirations in 2021 and we have granted requests to certain of our tenants to defer rent payments in exchange for increased payments over, in most cases, a 12-month period which began in September 2020. However, current market and economic conditions may deteriorate and such deterioration may result in an increase in tenant defaults and terminations, and these concessions and assistance given to our tenants may not allow them to continue to be successful during this challenging time,

•The business and property management agreements between us and RMR ~~LLC~~ have continuing 20 year terms. However, those agreements permit early termination in certain circumstances. Accordingly, we cannot be sure that these agreements will remain in effect for continuing 20 year terms,

•We expect that we will benefit from RMR’s Environmental, Social and Governance, or ESG, program and initiatives. However, we may incur extensive costs and may not realize the benefits we expect from such program and initiatives and we or RMR may not succeed in meeting existing or future standards, or investors’ expectations, regarding ESG,

•We believe that our relationships with our related parties, including RMR, ~~LLC,~~ RMR Inc. and others affiliated with them may benefit us and provide us with competitive advantages in operating and growing our business. However, the advantages we believe we may realize from these relationships may not ~~materialize.~~materialize, and

•We may not succeed in selling the marketable securities acquired as part of the MNR acquisition on the expected timeline or at all.

Currently unexpected results could occur due to many different circumstances, some of which are beyond our control, such as ~~the COVID-19 pandemic and its aftermath,~~ acts of terrorism, war or other hostilities, pandemics, natural disasters, or climate change and climate related events, changes in our tenants’ financial conditions, the market demand for leased space or changes in capital markets or the economy generally.

The information contained elsewhere in this Quarterly Report on Form 10-Q and in our ~~2020~~2021 Annual Report or in our other filings with the SEC, including under the caption “Risk Factors”, or incorporated herein or therein, identifies other important factors that could cause differences from our forward-looking statements. Our filings with the SEC are available on the SEC’s website at www.sec.gov.

You should not place undue reliance upon our forward-looking statements.

Except as required by law, we do not intend to update or change any forward-looking statements as a result of new information, future events or otherwise.

Statement Concerning Limited Liability

The Amended and Restated Declaration of Trust establishing Industrial Logistics Properties Trust, dated January 11, 2018, as amended, as filed with the State Department of Assessments and Taxation of Maryland, provides that no trustee, officer, shareholder, employee or agent of Industrial Logistics Properties Trust shall be held to any personal liability, jointly or severally, for any obligation of, or claim against, Industrial Logistics Properties Trust. All persons dealing with Industrial Logistics Properties Trust in any way shall look only to the assets of Industrial Logistics Properties Trust for the payment of any sum or the performance of any obligation.

Table of Contents

PART II. Other Information

Item 1A. Risk Factors

There have been no material changes to the risk factors from those we previously provided in our ~~2020~~2021 Annual Report.

~~Table of Contents~~

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Issuer purchases of equity securities. The following table provides information about our purchases of our equity securities during the quarter ended ~~September 30, 2021:~~March 31, 2022:

Maximum

Total Number of

Approximate Dollar

Total Number of

Approximate Dollar

Shares Purchased

Value of Shares that

Shares Purchased

Value of Shares that

Number of

Average

as Part of Publicly

May Yet Be Purchased

Number of

Average

as Part of Publicly

May Yet Be Purchased

Price Paid

Announced Plans

Under the Plans or

Price Paid

Announced Plans

Under the Plans or

Calendar Month

Purchased (1)

per Share

or Programs

Programs

Calendar Month

Purchased (1)

per Share

or Programs

Programs

September 2021

27,576

25.84

—

March 2022

333

22.67

—

Total

27,576

25.84

—

Total

333

22.67

—

(1)~~These~~ This common share ~~withholdings~~withholding and ~~purchases were~~purchase was made to satisfy tax withholding and payment obligations of ~~our officers and certain current and~~a former ~~officers and employees~~employee of RMR ~~LLC~~ in connection with the vesting of our common share awards. We withheld and purchased these common shares at their fair market value based upon the trading price of our common shares at the close of trading on Nasdaq on the purchase date.

3941

Table of Contents

Item 6. Exhibits


Exhibit Number			Description

3.1			Composite Copy of Amended and Restated Declaration of Trust of the Company, dated as of January 11, 2018, as amended to date. (Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2020.)

3.2			Amended and Restated Bylaws of the Company, adopted March 25, 2019. (Incorporated by reference to the Company's Current Report on Form 8-K filed on March 26, 2019.)

4.1			Form of Common Share Certificate. (Incorporated by reference to Amendment No. 2 to the Company's Registration Statement on Form S-11, File No. 333-221708.)

10.1			~~Second~~Loan Agreement, dated as of February 25, 2022, among certain subsidiaries of Mountain Industrial REIT LLC and Citi Real Estate Funding Inc., UBS AG, Bank of America, N.A., Bank of Montreal and Morgan Stanley Bank, N.A. (Incorporated by reference to the Company’s Current Report on Form 8-K filed on February 28, 2022.)

10.2			First Amendment to ~~Business Management~~Loan Agreement ~~effective~~and Other Loan Documents, dated as of ~~August 1, 2021, between the Company~~March 8, 2022, among certain subsidiaries of Mountain Industrial REIT LLC and ~~The RMR Group LLC.~~Citi Real Estate Funding Inc., UBS AG, Bank of America, N.A., Bank of Montreal and Morgan Stanley Bank, N.A. (Filed herewith.)

10.3			Loan Agreement, dated as of February 25, 2022, among certain subsidiaries of the Company, Citibank, N.A., UBS AG Stamford Branch, Bank of America, N.A., Bank of Montreal and Morgan Stanley Bank, N.A. (Incorporated by reference to the Company’s Current Report on Form 8-K filed on February 28, 2022.)

10.4			Mezzanine Loan Agreement, dated as of February 25, 2022, among certain subsidiaries of the Company and BREF VI Holdings LLC. (Incorporated by reference to the Company’s Current Report on Form 8-K filed on February 28, 2022.)

10.5			Loan Agreement, dated as of February 25, 2022, among certain subsidiaries of the Company and Citi Real Estate Funding Inc., UBS AG, Bank of America, N.A., Bank of Montreal and Morgan Stanley Bank, N.A. (Incorporated by reference to the Company’s Current Report on Form 8-K filed on February 28, 2022.)

10.6			Mezzanine A Loan Agreement, dated as of February 25, 2022, among ILPT Mezz Fixed Borrower 2 LLC, Citigroup Global Markets Realty Corp., UBS AG, Bank of America, N.A., Bank of Montreal and Morgan Stanley Mortgage Capital Holdings LLC. (Incorporated by reference to the Company’s Current Report on Form 8-K filed on February 28, 2022.)

10.7			Mezzanine B Loan Agreement, dated as of February 25, 2022, among ILPT Mezz Fixed Borrower LLC, Citigroup Global Markets Realty Corp., UBS AG, Bank of America, N.A., Bank of Montreal and Morgan Stanley Mortgage Capital Holdings LLC. (Incorporated by reference to the Company’s Current Report on Form 8-K filed on February 28, 2022.)

10.8			Form of Indemnification Agreement. (Filed herewith.)

31.1			Rule 13a-14(a) Certification. (Filed herewith.)

31.2			Rule 13a-14(a) Certification. (Filed herewith.)

31.3			Rule 13a-14(a) Certification. (Filed herewith.)

31.4			Rule 13a-14(a) Certification. (Filed herewith.)

32.1			Section 1350 Certification. (Furnished herewith.)

99.1			Letter dated February 25, 2022, between the Company and The RMR Group LLC, regarding the Business Management Agreement. (Filed herewith.)

101.INS			XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH			XBRL Taxonomy Extension Schema Document. (Filed herewith.)

101.CAL			XBRL Taxonomy Extension Calculation Linkbase Document. (Filed herewith.)

101.DEF			XBRL Taxonomy Extension Definition Linkbase Document. (Filed herewith.)

101.LAB			XBRL Taxonomy Extension Label Linkbase Document. (Filed herewith.)

101.PRE			XBRL Taxonomy Extension Presentation Linkbase Document. (Filed herewith.)

104			Cover Page Interactive Data File. (Formatted as Inline XBRL and contained in Exhibit 101.)

4042

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


			INDUSTRIAL LOGISTICS PROPERTIES TRUST


			By:			/s/ ~~John G. Murray~~Yael Duffy
						~~John G. Murray~~Yael Duffy
						President and Chief ~~Executive~~Operating Officer
						Dated: ~~October 27, 2021~~April 26, 2022


			By:			/s/ Richard W. Siedel, Jr.
						Richard W. Siedel, Jr.
						Chief Financial Officer and Treasurer
						~~(principal financial officer and principal accounting officer)~~
						Dated: ~~October 27, 2021~~April 26, 2022

4143


		Number	Rentable					Buildings		Acquired		Acquired
		of	Square	Purchase				and		Real Estate		Real Estate
Date	Market Area	Properties	Feet	Price		Land		Improvements		Leases		Lease Obligations
May 2021	Dallas, TX	1	—	$	2,319	$	2,319	$	—	$	—	$	—
June 2021	Columbus, OH	1	357,504	31,762		1,491		27,407		2,864		—
August 2021	Memphis, TN	3	1,287,004	100,649		5,922		87,600		7,192		(65)
		5	1,644,508	$	134,730	$	9,732	$	115,007	$	10,056	$	(65)


			Principal Balance
			at September 30,
Joint Venture	Coupon Rate (1)	Maturity Date	2021 (2)
Mortgage note payable (secured by 1 property in Florida)	3.60%	10/1/2023	$	56,980
Mortgage note payable (secured by 11 other properties in 8 states)	3.33%	11/7/2029	350,000
Weighted average/total	3.37%		$	406,980


	At September 30, 2021				At December 31, 2020
	Carrying		Estimated		Carrying		Estimated
	Value (1)		Fair Value		Value (1)		Fair Value
Mortgage notes payable	$	645,987	$	713,330	$	645,579	$	730,119


Declaration Date	Record Date	Payment Date	Distribution Per Share		Total Distribution
January 14, 2021	January 25, 2021	February 18, 2021	$	0.33	$	21,550
April 15, 2021	April 26, 2021	May 20, 2021	0.33		21,549
July 15, 2021	July 26, 2021	August 19, 2021	0.33		21,554
			$	0.99	$	64,653


	Three Months Ended September 30, 2021
	New Leases			Renewals			Totals
Square feet leased during the period (in thousands)	17			754			771
Weighted average rental rate change (by rentable square feet)	24.2		%	19.3		%	19.5		%
Weighted average lease term by square feet (years) (2)	8.3			8.2			8.2
Total leasing costs and concession commitments (1)	$	21		$	2,505		$	2,526
Total leasing costs and concession commitments per square foot (1)	$	1.20		$	3.33		$	3.28
Total leasing costs and concession commitments per square foot per year (1)	$	0.15		$	0.41		$	0.40