What changed in this filing

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Item 1. Financial Statements

2020-10-28 compared with 2020-07-29 · 140 added, 83 removed, 288 unchanged (44% of the section changed)

3 unchanged sentences

(dollars in thousands, except per share data)

September 30, December 31,

Real estate properties:

Land $ 757,522 $ 747,794

Buildings and improvements 1,632,842 1,588,170

2 unchanged sentences

Total real estate properties, net 2,229,794 2,204,496

Assets of property held for sale 10,136 —

Acquired real estate leases, net 123,146 138,596

2 unchanged sentences

Rents receivable, including straight line rents of $ 64,236 and $ 58,336 , respectively

70,597 62,782

Deferred leasing costs, net 6,037 6,581

2 unchanged sentences

Other assets, net 5,527 3,438

Total assets $ 2,498,994 $ 2,454,901

LIABILITIES AND EQUITY

1 unchanged sentence

Mortgage notes payable, net 1,048,521 1,096,608

Liabilities of property held for sale 227 —

Assumed real estate lease obligations, net 15,778 17,508

15 unchanged sentences

Total equity attributable to noncontrolling interest 93,679 —

Total equity 1,077,423 995,690

Total liabilities and equity $ 2,498,994 $ 2,454,901

3 unchanged sentences

(amounts in thousands, except per share data)

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

Rental income $ 65,106 $ 60,958 $ 194,494 $ 167,035

2 unchanged sentences

Depreciation and amortization 18,488 17,568 55,303 43,888

Acquisition and certain other transaction related costs 178 — 178 —

General and administrative 5,180 4,475 14,857 13,131

2 unchanged sentences

Interest expense (including net amortization of debt issuance costs, premiums and discounts of $ 664 , $ 524 , $ 1,893 and $ 1,421 , respectively)

( 12,886 ) ( 14,687 ) ( 40,610 ) ( 36,207 )

Gain on early extinguishment of debt — — 120 —

2 unchanged sentences

Equity in earnings of an investee — 83 — 617

Net income 13,814 10,922 41,065 40,824

Net loss attributable to noncontrolling interest 275 — 691 —

12 unchanged sentences

(dollars in thousands)

Attributable to

Noncontrolling

Distributions

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 )

3 unchanged sentences

Net income (loss) — — — 14,821 — 14,821 ( 264 ) 14,557

Share grants 24,500 — 654 — — 654 — 654

Share repurchases ( 613 ) — ( 13 ) — — ( 13 ) — ( 13 )

2 unchanged sentences

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.

2 unchanged sentences

(dollars in thousands)

Comprehensive

Distributions

Number of Additional Other Cumulative

Common Common Paid In Cumulative Comprehensive Common Total

Shares Shares Capital Net Income Income Distributions Equity

Balance at December 31, 2018 65,074,791 $ 651 $ 998,447 $ 89,657 $ — $ ( 60,482 ) $ 1,028,273

Net income — — — 16,786 — — 16,786

Equity in unrealized gains of investee — — — — 66 — 66

Share grants — — 73 — — — 73

Distributions to common shareholders — — — — — ( 21,474 ) ( 21,474 )

Balance at March 31, 2019 65,074,791 651 998,520 106,443 66 ( 81,956 ) 1,023,724

Net income — — — 13,116 — — 13,116

Equity in unrealized gains of investee — — — — 71 — 71

Share grants 15,000 — 345 — — — 345

Share repurchases ( 1,362 ) — ( 28 ) — — — ( 28 )

2 unchanged sentences

Balance at June 30, 2019 65,088,189 651 998,836 119,559 137 ( 103,431 ) 1,015,752

Net income — — — 10,922 — — 10,922

Equity in unrealized losses of investee — — — — ( 46 ) — ( 46 )

Share grants 104,200 1 521 — — — 522

Share repurchases ( 10,476 ) — ( 223 ) — — — ( 223 )

Distributions to common shareholders — — — — — ( 21,479 ) ( 21,479 )

Balance at September 30, 2019 65,181,913 $ 652 $ 999,134 $ 130,481 $ 91 $ ( 124,910 ) $ 1,005,448

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

2 unchanged sentences

(dollars in thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income $ 41,065 $ 40,824

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation 34,307 27,161

Net amortization of debt issuance costs, premiums and discounts 1,893 1,421

9 unchanged sentences

Due from related persons 1,504 858

Other assets ( 2,413 ) ( 7,863 )

Accounts payable and other liabilities 3,865 7,440

22 unchanged sentences

Cash, cash equivalents and restricted cash at end of period $ 51,911 $ 23,336

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

INDUSTRIAL LOGISTICS PROPERTIES TRUST

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

(dollars in thousands)

Nine Months Ended September 30,

SUPPLEMENTAL DISCLOSURES:

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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,

Cash and cash equivalents $ 39,105 $ 23,336

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Significant estimates in the condensed consolidated financial statements include purchase price allocations, useful lives of fixed assets, impairments of real estate and related intangibles.

In February and March 2020, we entered into agreements related to a joint venture for 12 of our properties located in the mainland United States.

In February and March 2020, we entered into agreements related to a joint venture with an institutional investor for 12 of our properties located in the mainland United States.

The investor owns a 39 % equity interest in the joint venture, and we own the remaining 61 % equity interest in the joint venture.

We have determined that this joint venture is a variable interest entity, or VIE, as defined under the Consolidation Topic of the Financial Accounting Standards Board, or FASB, Accounting Standards Codification.

We concluded that we must consolidate this VIE because we are the entity with the power to direct the activities that most significantly impact the VIE’s economic performance and we have the obligation to absorb losses of, and the right to receive benefits from, the VIE that could be significant to the VIE, and therefore are the primary beneficiary of the VIE.

The assets of this VIE were $ 660,958 as of June 30, 2020 and consist primarily of the real estate owned by the joint venture.

The liabilities of this VIE were $ 408,181 as of June 30, 2020 and consist primarily of mortgage debts secured by the properties owned by the joint venture.

The assets of this VIE were $ 655,618 as of September 30, 2020 and consist primarily of the real estate owned by the joint venture.

The liabilities of this VIE were $ 408,906 as of September 30, 2020 and consist primarily of mortgage debts secured by the properties owned by the joint venture.

The joint venture investor's interest in this consolidated entity is reflected as noncontrolling interest in our condensed consolidated financial statements.

8 unchanged sentences

Real Estate Properties

As of June 30, 2020 , we owned 301 properties with a total of approximately 43,759,000 rentable square feet, including 226 buildings, leasable land parcels and easements with a total of approximately 16,756,000 rentable square feet of primarily industrial lands located on the island of Oahu, HI, or our Hawaii Properties, and 75 properties with a total of approximately 27,003,000 rentable square feet of industrial properties located in 30 other states, or our Mainland Properties, including 12 properties with approximately 9,227,000 rentable square feet owned by a joint venture in which we own a 61 % equity interest.

As of September 30, 2020, we owned 301 properties with a total of approximately 43,759,000 rentable square feet, including 226 buildings, leasable land parcels and easements with a total of approximately 16,756,000 rentable square feet of primarily industrial lands located on the island of Oahu, HI, or our Hawaii Properties, and 75 properties with a total of approximately 27,003,000 rentable square feet of industrial properties located in 30 other states, or our Mainland Properties, including 12 properties with approximately 9,227,000 rentable square feet owned by a joint venture in which we own a 61 % equity interest and one property with approximately 308,000 rentable square feet which is classified as held for sale.

INDUSTRIAL LOGISTICS PROPERTIES TRUST

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ownership and leasing of properties that include industrial and logistics buildings and leased industrial lands.

For the three months ended June 30, 2020 and 2019, approximately 41.3 % and 42.2 % , respectively, of our rental income was from our Hawaii Properties.

For the six months ended June 30, 2020 and 2019, approximately 41.2 % and 47.9 % , respectively, of our rental income was from our Hawaii Properties.

In addition, a subsidiary of Amazon.com, Inc., which is a tenant at certain of our Mainland Properties, accounted for $ 10,399 , or 16.0 % , and $ 8,700 , or 14.5 % , of our rental income for the three months ended June 30, 2020 and 2019, respectively, and $ 20,061 , or 15.5 % , and $ 13,565 , or 12.8 % , of our rental income for the six months ended June 30, 2020 and 2019, respectively.

During the six months ended June 30, 2020 , we completed the acquisition of an industrial property containing 820,384 rentable square feet for a purchase price of $ 71,628 , including acquisition related costs of $ 147 .

For the three months ended September 30, 2020 and 2019, approximately 40.7 % and 40.5 %, respectively, of our rental income was from our Hawaii Properties.

For the nine months ended September 30, 2020 and 2019, approximately 41.0 % and 45.2 %, respectively, of our rental income was from our Hawaii Properties.

In addition, a subsidiary of Amazon.com, Inc., which is a tenant at certain of our Mainland Properties, accounted for $ 10,288 , or 15.8 %, and $ 8,992 , or 14.8 %, of our rental income for the three months ended September 30, 2020 and 2019, respectively, and $ 30,349 , or 15.6 %, and $ 22,557 , or 13.5 %, of our rental income for the nine months ended September 30, 2020 and 2019, respectively.

During the nine months ended September 30, 2020, we completed the acquisition of an industrial property containing 820,384 rentable square feet for a purchase price of $ 71,628 , including acquisition related costs of $ 147 .

This acquisition was accounted for as an asset acquisition.

We allocated the purchase price for this acquisition based on the estimated fair value of the acquired assets as follows:

February 2020

During the six months ended June 30, 2020 , we committed $ 687 for expenditures related to tenant improvements and leasing costs for leases executed during the period for approximately 363,000 square feet.

Committed but unspent tenant related obligations based on existing leases as of June 30, 2020 were $ 561 .

Number Rentable Buildings Acquired

of Square Purchase and Real Estate

Date Market Area Properties Feet Price Land Improvements Leases

February 2020 Phoenix, AZ 1 820,384 $ 71,628 $ 11,214 $ 54,676 $ 5,738

1 820,384 $ 71,628 $ 11,214 $ 54,676 $ 5,738

In September 2020, we entered into an agreement to sell one property located in Virginia containing approximately 308,000 rentable square feet for a sales price of $ 11,000 , excluding closing costs.

This sale is expected to occur during the fourth quarter of 2020.

However, this sale is subject to conditions;

accordingly, we cannot be sure that we will complete this sale, that this sale will not be delayed or that the terms will not change.

We have classified this property as held for sale in our condensed consolidated balance sheets as of September 30, 2020.

During the nine months ended September 30, 2020, we committed $ 1,614 for expenditures related to tenant improvements and leasing costs for leases executed during the period for approximately 849,000 square feet.

Committed but unspent tenant related obligations based on existing leases as of September 30, 2020 were $ 499 .

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 any present plans to change the use of those lands.

As of both June 30, 2020 and December 31, 2019 , accrued environmental remediation costs of $ 6,940 were included in accounts payable and other liabilities in our condensed consolidated balance sheets.

As of both September 30, 2020 and December 31, 2019, 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.

9 unchanged sentences

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 $ 11,640 and $ 9,483 for the three months ended June 30, 2020 and 2019, respectively, of which tenant reimbursements totaled $ 11,395 and $ 9,483 , respectively, and $ 23,160 and $ 17,764 for the six months ended June 30, 2020 and 2019, respectively, of which tenant reimbursements totaled $ 22,670 and $ 16,602 , respectively.

Such payments totaled $ 11,943 and $ 10,915 for the three months ended September 30, 2020 and 2019, respectively, of which tenant reimbursements totaled

INDUSTRIAL LOGISTICS PROPERTIES TRUST

1 unchanged sentence

(dollars in thousands, except per share data)

We increased rental income to record revenue on a straight line basis by $ 2,096 and $ 2,002 for the three months ended June 30, 2020 and 2019, respectively, and $ 4,063 and $ 2,981 for the six months ended June 30, 2020 and 2019, respectively.

Rents receivable include $ 62,399 and $ 58,336 of straight line rents at June 30, 2020 and December 31, 2019, respectively.

$ 11,698 and $ 10,915 , respectively, and $ 35,103 and $ 28,679 for the nine months ended September 30, 2020 and 2019, respectively, of which tenant reimbursements totaled $ 34,368 and $ 27,517 , respectively.

We increased rental income to record revenue on a straight line basis by $ 2,120 and $ 979 for the three months ended September 30, 2020 and 2019, respectively, and $ 6,183 and $ 3,960 for the nine months ended September 30, 2020 and 2019, respectively.

Certain of our tenants have requested relief from their obligations to pay rent due to us in response to the current economic conditions resulting from the COVID-19 pandemic.

As of July 27, 2020 , we granted requests for certain of our tenants to defer rent payments totaling $ 2,799 .

These tenants will be obligated to pay, in most cases, the deferred rents in 12 equal monthly installments commencing in September 2020 .

As of October 23, 2020, we granted requests to certain of our tenants to defer aggregate rent payments of $ 3,578 .

In most cases, these tenants were obligated to pay the deferred rents in 12 equal monthly installments beginning in September 2020.

We have elected to use the FASB relief package regarding the application of lease accounting guidance to lease concessions provided as a result of the COVID-19 pandemic.

The FASB relief package provides entities with the option to account for lease concessions resulting from the COVID-19 pandemic outside of the existing lease modification guidance if the resulting cash flows from the modified lease are substantially the same as the original lease.

Because the deferred rents referenced above will be repaid over a 12 -month period, the cash flows from the respective leases are substantially the same as before the rent deferrals.

These deferred amounts did not impact our results for the three and six months ended June 30, 2020 and as of June 30, 2020, we recognized an increase in our accounts receivable related to these deferred amounts of $ 2,317 .

As of June 30, 2020, our outstanding indebtedness consisted of the following:

Principal Balance as of

of Collateral

Because the deferred rents referenced above will be repaid, the cash flows from the respective leases are substantially the same as before the rent deferrals.

These deferred amounts did not impact our operating results for the three and nine months ended September 30, 2020 and as of September 30, 2020, we recognized $ 2,847 in our accounts receivable related to these deferred amounts.

As of September 30, 2020, our outstanding indebtedness consisted of the following:

Principal Balance as of of Collateral

September 30, December 31, Interest At September 30,

Rate Maturity 2020

Unsecured revolving credit facility (2)

$ 320,000 $ 310,000 1.56 % Dec 2021 $ —

Mortgage note payable (secured by one property in Florida) (3)

56,980 56,980 4.22 % Oct 2023 104,173

Mortgage note payable (secured by 186 properties in Hawaii)

650,000 650,000 4.31 % Feb 2029 491,724

Mortgage note payable (secured by 11 Mainland Properties) (3)

350,000 350,000 3.33 % Nov 2029 490,109

Mortgage note payable (secured by one property in Virginia)

— 48,750 N/A N/A N/A

1,376,980 1,415,730 $ 1,086,006

Unamortized debt issuance costs, premiums and discounts ( 8,459 ) ( 9,122 )

$ 1,368,521 $ 1,406,608

(1) The principal balances are the amounts stated in contracts.

12 unchanged sentences

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 June 30, 2020 , interest payable on the amount outstanding under our revolving credit facility was LIBOR plus 140 basis points and our commitment fee was 25 basis points .

As of June 30, 2020 and December 31, 2019 , the interest rate payable on borrowings under our revolving credit facility was 1.59 % and 3.26 % , respectively.

The weighted average interest rate for borrowings under our revolving credit facility was 2.04 % and 3.76 % for the three months ended June 30, 2020 and 2019, respectively, and 2.80 % and 3.77 % for the six months ended June 30, 2020 and June 30, 2019, respectively.

As of June 30, 2020 and July 27, 2020 , we had $ 320,000 outstanding under our revolving credit facility, and $ 430,000 available to borrow under our revolving credit facility.

As of September 30, 2020, interest payable on the amount outstanding under our revolving credit facility was LIBOR plus 140 basis points and our commitment fee was 25 basis points.

As of September 30, 2020 and December 31, 2019, the interest rate payable on borrowings under our revolving credit facility was 1.56 % and 3.26 %, respectively.

The weighted average interest rate for borrowings under our revolving credit facility was 1.57 % and 3.73 % for the three months ended September 30, 2020 and 2019, respectively, and 2.51 % and 3.75 % for the nine months ended September 30, 2020 and 2019, respectively.

As of September 30, 2020 and October 26, 2020, we had $ 320,000 and $ 293,000 , respectively, outstanding under our revolving credit facility, and $ 430,000 and $ 457,000 , 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 June 30, 2020 .

We believe we were in compliance with the terms and conditions of the covenants under our credit agreement at September 30, 2020.

In May 2020, we prepaid at par plus accrued interest a mortgage note secured by one of our properties with an outstanding principal balance of approximately $ 48,750 , an annual interest rate of 3.48 % and 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 three and six months ended June 30, 2020 to write off unamortized debt premiums.

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.

Fair Value of Assets and Liabilities

Our financial instruments include cash and cash equivalents, restricted cash, rents receivable, our revolving credit facility, mortgage notes payable, accounts payable, rents collected in advance, security deposits and amounts due from or to related persons.

At June 30, 2020 and December 31, 2019 , 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 June 30, 2020

At December 31, 2019

At September 30, 2020 and December 31, 2019, 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, 2020 At December 31, 2019

Carrying Estimated Carrying Estimated

Fair Value Value (1)

Mortgage notes payable $ 1,048,521 $ 1,140,188 $ 1,096,608 $ 1,143,437

Includes unamortized debt issuance costs, premiums and discounts of $ 8,754 and $ 9,122 as of June 30, 2020 and December 31, 2019 , respectively.

(1) Includes unamortized debt issuance costs, premiums and discounts of $ 8,459 and $ 9,122 as of September 30, 2020 and December 31, 2019, respectively.

We estimate the fair value of our mortgage notes payable using discounted cash flow analyses and currently prevailing market rates as of the measurement date (Level 3 inputs).

6 unchanged sentences

(dollars in thousands, except per share data)

On May 28, 2020, in accordance with our Trustee compensation arrangements, we awarded to each of our seven Trustees 3,500 of our common shares, valued at $ 18.77 per share, the closing price of our common shares on Nasdaq on that day.

On May 28, 2020, in accordance with our Trustee compensation arrangements, we awarded to each of our then seven Trustees 3,500 of our common shares, valued at $ 18.77 per share, the closing price of our common shares on Nasdaq on that day.

On September 17, 2020, we awarded under our equity compensation plan an aggregate of 108,600 of our common shares, valued at $ 22.65 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 Purchases:

During the six months ended June 30, 2020, we purchased our common shares from certain 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, valued at the closing price of our common shares on Nasdaq on the purchase dates, as follows:

Date Purchased

Number of Shares

Price per Share

During the nine months ended September 30, 2020, we purchased our common shares from our officers and certain former and current 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, valued at the closing price of our common shares on Nasdaq on the purchase dates, as follows:

Date Purchased Number of Shares Price per Share

1/9/2020 420 $ 22.01

3/13/2020 531 $ 17.75

6/30/2020 613 $ 20.55

9/21/2020 16,496 $ 21.27

Distributions:

During the six months ended June 30, 2020, we declared and paid a regular quarterly distribution to common shareholders as follows:

Distribution Per Share

Total Distribution

During the nine months ended September 30, 2020 , we declared and paid a regular quarterly distribution to common shareholders as follows:

Record Date Payment Date Distribution Per Share Total Distribution

January 27, 2020

February 20, 2020

$ 0.33 $ 21,510

April 16, 2020

On July 16, 2020, we declared a regular quarterly distribution of $ 0.33 per common share, or approximately $ 21,500 , to shareholders of record on July 27, 2020.

We expect to pay this distribution on or about August 20, 2020.

$ 0.33 $ 21,511

July 27, 2020 August 20, 2020 $ 0.33 $ 21,519

On October 15, 2020, we declared a regular quarterly distribution of $ 0.33 per common share, or approximately $ 21,550 , to shareholders of record on October 26, 2020.

We expect to pay this distribution on or about November 19, 2020.

Per Common Share Amounts

We calculate basic earnings per common share by dividing net income attributable to common shareholders by the weighted average number of our common shares outstanding during the period.

We calculate diluted earnings per share using the more dilutive of the two class method or the treasury stock method.

Unvested 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:

Three Months Ended June 30,

Six Months ended June 30,

Net income attributable to common shareholders

Income attributable to unvested participating securities

Net income attributable to common shareholders used in calculating earnings per share

Denominators:

Weighted average common shares outstanding - basic

The following table provides a reconciliation of the weighted average number of common shares used in the calculation of basic and diluted earnings per share (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

Weighted average common shares for basic earnings per share 65,112 65,055 65,092 65,042

Effect of dilutive securities:

unvested share awards 17 5 9 6

Weighted average common shares outstanding - diluted

Net income attributable to common shareholders per common share - basic

Net income attributable to common shareholders per common share - diluted

INDUSTRIAL LOGISTICS PROPERTIES TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except per share data)

Weighted average common shares for diluted earnings per share 65,129 65,060 65,101 65,048

Business and Property Management Agreements with RMR LLC

4 unchanged sentences

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 $ 3,277 and $ 6,584 for the three and six months ended June 30, 2020 , respectively, and $ 3,092 and $ 5,285 for the three and six months ended June 30, 2019, respectively.

T he net business management fees we recognized for the three and six months ended June 30, 2020 include $ 347 and $ 476 , respectively, of management fees related to our subsidiary level management agreement with RMR LLC entered in connection with our joint venture arrangement, which arrangement is further described in Note 11.

Based on our common share total return, as defined in our business management agreement, as of June 30, 2020 and 2019, no incentive fees are included in the net business management fees we recognized for the three or six months ended June 30, 2020 or 2019.

INDUSTRIAL LOGISTICS PROPERTIES TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except per share data)

Pursuant to our business management agreement with RMR LLC, we recognized net business management fees of $ 3,410 and $ 9,994 for the three and nine months ended September 30, 2020, respectively, and $ 3,291 and $ 8,576 for the three and nine months ended September 30, 2019, respectively.

T he net business management fees we recognized for the three and nine months ended September 30, 2020 include $ 347 and $ 823 , respectively, of management fees related to our subsidiary level management agreement with RMR LLC entered in connection with our joint venture arrangement, which arrangement is further described in Note 11.

Based on our common share total return, as defined in our business management agreement, as of September 30, 2020 and 2019, no incentive fees are included in the net business management fees we recognized for the three or nine months ended September 30, 2020 or 2019.

The actual amount of annual incentive fees for 2020, if any, will be based on our common share total return, as defined in our business management agreement, for the period from January 12, 2018 to December 31, 2020 and will be payable in 2021.

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We include business management fees in general and administrative expenses in our condensed consolidated statements of comprehensive income.

Pursuant to our property management agreement with RMR LLC, we recognized aggregate property management and construction supervision fees of $ 1,860 and $ 3,783 for the three and six months ended June 30, 2020 , respectively, and $ 1,922 and $ 3,269 for the three and six months ended June 30, 2019, respectively.

Pursuant to our property management agreement with RMR LLC, we recognized aggregate property management and construction supervision fees of $ 1,914 and $ 5,697 for the three and nine months ended September 30, 2020, respectively, and $ 2,098 and $ 5,367 for the three and nine months ended September 30, 2019, respectively.

These amounts are included in other operating expenses or have been capitalized, as appropriate, in our condensed consolidated financial statements.

We are generally responsible for all 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 employment, office or administrative expenses incurred to provide management services to us, except for the employment and related expenses of RMR LLC’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 centralized accounting personnel, our share of RMR LLC’s costs for providing our internal audit function, or as otherwise agreed.

We are generally not responsible for payment of RMR LLC’s employment, office or administrative expenses incurred to provide management services to us, except for the applicable employment and related expenses of RMR LLC’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 centralized accounting personnel, our share of RMR LLC’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.

We reimbursed RMR LLC $ 1,217 and $ 2,416 for these expenses and costs for the three and six months ended June 30, 2020 , respectively, and $ 1,026 and $ 1,929 for the three and six months ended June 30, 2019, respectively.

We reimbursed RMR LLC $ 1,328 and $ 3,744 for these expenses and costs for the three and nine months ended September 30, 2020, respectively, and $ 1,203 and $ 3,132 for the three and nine months ended September 30, 2019, respectively.

These amounts are included in other operating expenses and general and administrative expenses, as applicable, in our condensed consolidated statements of comprehensive income.

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and an officer and employee of RMR LLC.

John Murray, our other Managing Trustee and our President and Chief Executive Officer, also serves as an executive officer of RMR LLC, and each of our other officers is also an officer and employee of RMR LLC.

John Murray, our other Managing Trustee and our President and Chief Executive Officer, also serves as an officer of RMR LLC, and each of our other officers is also an officer and employee of RMR LLC.

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.

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Murray and certain of our other officers, serve as managing trustees, managing directors or officers of certain of these companies.

See Note 7 for information relating to the awards of our common shares we made in September 2020 to our officers and certain other employees of RMR LLC and common shares we purchased in 2020 from our officers and certain former and current 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 .

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(dollars in thousands, except per share data)

Office Properties Income Trust, or OPI, owed to us $ 1,023 and $ 1,504 as of June 30, 2020 and December 31, 2019, respectively, for rents that it collected on our behalf from certain of our tenants.

Office Properties Income Trust, or OPI, owed to us $ 1,504 as of December 31, 2019 for rents that it collected on our behalf from certain of our tenants.

A predecessor of OPI previously owned those properties and those tenants first became tenants at those properties prior to our ownership.

OPI paid these amounts due to us or collected on our behalf in July 2020 and January 2020, respectively.

OPI paid these amounts due to us or collected on our behalf in January 2020.

Until its dissolution on February 13, 2020, we, ABP Trust and five other companies to which RMR LLC provides management services owned Affiliates Insurance Company, or AIC, an Indiana insurance company, in equal amounts.

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we have instead purchased standalone property insurance coverage with unrelated third party insurance providers.

As of June 30, 2020 and December 31, 2019, our investment in AIC had a carrying value of $ 11 and $ 298 , respectively.

As of September 30, 2020 and December 31, 2019, our investment in AIC had a carrying value of $ 11 and $ 298 , respectively.

These amounts are included in other assets in our condensed consolidated balance sheets.

In June 2020, we received an additional liquidating distribution of approximately $ 287 from AIC in connection with its dissolution.

We did no t recognize any income related to our investment in AIC for the three and six months ended June 30, 2020, respectively, and recognized $ 130 and $ 534 related to our investment in AIC for the three and six months ended June 30, 2019, respectively, which amounts are presented as equity in earnings of an investee in our condensed consolidated statements of comprehensive income.

We did no t recognize any income related to our investment in AIC for the three and nine months ended September 30, 2020, respectively, and recognized $ 83 and $ 617 related to our investment in AIC for the three and nine months ended September 30, 2019, respectively, which amounts are presented as equity in earnings of an investee in our condensed consolidated statements of comprehensive income.

Our other comprehensive income included our proportionate share of unrealized gains on securities, if any, which were owned by AIC, related to our investment in AIC.

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We contributed to the joint venture 11 of these properties in February 2020 and the remaining property in March 2020.

We received from the investor $ 82,035 and $ 26,231 in February and March 2020, respectively, for a 39 % equity interest in the joint venture, and we retained the remaining 61 % equity interest.

We received from the investor $ 108,676 in aggregate for a 39 % equity interest in the joint venture, and we retained the remaining 61 % equity interest.

The joint venture assumed $ 406,980 of then existing mortgage debts on the properties we contributed.

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The difference between the net proceeds received from this transaction and the noncontrolling interest recognized, which was $ 9,567 , has been reflected as an increase in additional paid in capital in our condensed consolidated balance sheets.

The portion of the joint venture's net loss not attributable to us, or $ 264 and $ 416 for the three and six months ended June 30, 2020, respectively, is reported as noncontrolling interest in our condensed consolidated statements of comprehensive income.

During the three and six months ended June 30, 2020, the joint venture made aggregate cash distributions of $ 1,898 to the other joint venture investor, which are reflected as a decrease in total equity attributable to noncontrolling interest in our condensed consolidated balance sheets.

As of June 30, 2020, the joint venture held real estate assets with an aggregate net book value of $ 660,958 , including restricted cash of $ 13,703 , and had liabilities of $ 408,181 .

The portion of the 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, the joint venture made aggregate cash distributions of $ 2,107 and $ 4,005 , respectively, to the other joint venture investor, which are reflected as a decrease in total equity attributable to noncontrolling interest in our condensed consolidated balance sheets.

As of September 30, 2020, the joint venture held real estate assets with an aggregate net book value of $ 655,618 , including restricted cash of $ 12,806 , and had liabilities of $ 408,906 .

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements