What changed in this filing

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Item 1. Financial Statements

2022-04-27 compared with 2021-10-27 · 388 added, 240 removed, 202 unchanged (76% of the section changed)

3 unchanged sentences

(dollars in thousands, except per share data)

September 30, December 31,

March 31, December 31,

Real estate properties:

4 unchanged sentences

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

1 unchanged sentence

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

Deferred leasing costs, net 7,037 4,595

Debt issuance costs, net 464 1,477

Due from related persons — 2,665

Other assets, net 78,887 15,479

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

LIABILITIES AND SHAREHOLDERS' EQUITY

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

Rents collected in advance 11,823 7,811

Security deposits 6,933 6,540

Due to related persons 6,077 2,185

1 unchanged sentence

Commitments and contingencies

Shareholders' Equity:

Equity attributable to common shareholders:

Common shares of beneficial interest, $ 0.01 par value:

3 unchanged sentences

Cumulative net income 337,394 343,908

Cumulative other comprehensive income 3,908 —

Cumulative common distributions ( 340,328 ) ( 318,744 )

Total shareholders' equity 996,029 1,003,190

Total liabilities and shareholders' equity $ 2,048,095 $ 1,915,745

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.

INDUSTRIAL LOGISTICS PROPERTIES TRUST

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(amounts in thousands, except per share data)

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

2021 2020 2021 2020

Three Months Ended March 31,

Rental income $ 71,375 $ 54,217

2 unchanged sentences

Depreciation and amortization 22,878 12,678

Acquisition and certain other transaction related costs — 178 646 178

General and administrative 6,077 3,756

Total expenses 45,163 28,657

Gain on sale of real estate 940 — 940 —

Interest income — — — 113

Realized gain on sale of equity securities 1,232 —

Unrealized gain on equity securities 2,460 —

Dividend income 478 —

Interest expense (including net amortization of debt issuance costs, premiums and discounts of $ 20,321 and $ 505 , respectively)

( 40,999 ) ( 8,741 )

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

Loss on early extinguishment of debt ( 828 ) —

Income (loss) before income tax expense and equity in earnings of investees ( 11,445 ) 16,819

Income tax expense ( 69 ) ( 63 )

Equity in earnings of investees 1,727 2,581

Net income 18,307 13,814 56,475 41,065

Net (loss) income ( 9,787 ) 19,337

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 ( 6,514 ) 19,337

Other comprehensive income:

Unrealized gain on derivatives 5,632 —

unrealized gain on derivatives attributable to noncontrolling interest ( 1,724 ) —

Other comprehensive income attributable to common shareholders 3,908 —

Comprehensive (loss) income attributable to common shareholders $ ( 2,606 ) $ 19,337

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

1 unchanged sentence

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 $ ( 0.10 ) $ 0.30

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

2 unchanged sentences

(dollars in thousands)

Number of Additional Cumulative

Common Common Paid In Cumulative Common Total

Shares Shares Capital Net Income Distributions Equity

Cumulative Total Equity Total Equity

Number of Additional Other Cumulative Attributable to Attributable to

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 65,404,592 $ 654 $ 1,012,224 $ 343,908 $ — $ ( 318,744 ) $ 1,038,042 $ — $ 1,038,042

Net income — — — 19,337 — 19,337

Share grants — — 239 — — 239

Distributions to common shareholders — — — — ( 21,550 ) ( 21,550 )

Balance at March 31, 2021 65,301,088 653 1,011,058 243,563 ( 254,058 ) 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

Net (loss) income — — — ( 6,514 ) — — ( 6,514 ) ( 3,273 ) ( 9,787 )

Share grants — — 407 — — — 407 — 407

1 unchanged sentence

Share forfeitures ( 400 ) — ( 1 ) — — — ( 1 ) — ( 1 )

Net current period other comprehensive income — — — — 3,908 — 3,908 1,724 5,632

Contributions from noncontrolling interest — — — — — — — 591,268 591,268

Distributions to common shareholders — — — — — ( 21,584 ) ( 21,584 ) — ( 21,584 )

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.

INDUSTRIAL LOGISTICS PROPERTIES TRUST

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(dollars in thousands)

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 March 31, 2022 65,403,859 $ 654 $ 1,012,622 $ 337,394 $ 3,908 $ ( 340,328 ) $ 1,014,250 $ 589,719 $ 1,603,969

Balance at December 31, 2020 65,301,088 $ 653 $ 1,010,819 $ 224,226 — $ ( 232,508 ) $ 1,003,190 — $ 1,003,190

Net income (loss) — — — 12,846 — 12,846 ( 152 ) 12,694

Net income — — — 19,337 — — 19,337 — 19,337

Share grants — — 239 — — — 239 — 239

Share repurchases ( 951 ) — ( 18 ) — — ( 18 ) — ( 18 )

Distributions to common shareholders — — — — — ( 21,550 ) ( 21,550 ) — ( 21,550 )

Contributions from noncontrolling interest — — 6,972 — — 6,972 100,668 107,640

Balance at March 31, 2021 65,301,088 $ 653 $ 1,011,058 $ 243,563 $ — $ ( 254,058 ) $ 1,001,216 $ — $ 1,001,216

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.

2 unchanged sentences

(dollars in thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income $ 56,475 $ 41,065

Net (loss) income $ ( 9,787 ) $ 19,337

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

3 unchanged sentences

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 )

Gain on sale of real estate ( 940 ) —

Gain on early extinguishment of debt — ( 120 )

Loss on early extinguishment of debt 828 —

Other non-cash expenses 696 239

14 unchanged sentences

Real estate improvements ( 618 ) ( 789 )

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

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 note payable — ( 48,750 )

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 —

Distributions to noncontrolling interest — ( 4,005 )

Repurchase of common shares ( 915 ) ( 382 )

Net cash provided by financing activities 67,432 265

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

5 unchanged sentences

(dollars in thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

SUPPLEMENTAL DISCLOSURES:

2 unchanged sentences

NON-CASH INVESTING ACTIVITIES:

Real estate acquired by assumption of mortgage notes payable $ 323,432 $ —

Real estate improvements accrued, not paid $ 821 $ 72

NON-CASH FINANCING ACTIVITIES:

Assumption of mortgage notes payable $ ( 323,432 ) $ —

Increase in deferred financing fees $ 14,537 $ —

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,

Cash and cash equivalents $ 275,075 $ 26,147

1 unchanged sentence

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.

11 unchanged sentences

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 two 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.

2 unchanged sentences

Real Estate Investments

As of September 30, 2021, our portfolio was comprised of 294 wholly owned properties containing approximately 36,488,000 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 68 properties containing approximately 19,759,000 rentable square feet of industrial properties located in 32 other states, or our Mainland Properties.

As of September 30, 2021, we also owned a 22 % equity interest in an unconsolidated joint venture which owns 12 properties located in nine states totaling approximately 9,227,000 rentable square feet.

As of March 31, 2022, our portfolio was comprised of 412 consolidated properties containing approximately 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 186 properties containing approximately 43,007,000 rentable square feet of industrial properties located in 38 other states, or our Mainland Properties, which includes 93 properties owned by a consolidated joint venture arrangement in which we own a 61 % equity interest.

As of March 31, 2022, we also owned a 22 % equity interest in an unconsolidated joint venture which owns 18 properties located in 12 states totaling approximately 11,726,000 rentable square feet.

We operate in one business segment:

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

For the three months ended September 30, 2021 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 %, respectively, of our rental income was from our Hawaii Properties.

In addition, subsidiaries of Amazon.com, Inc., which are tenants at certain of our Mainland Properties, accounted for $ 5,231 , or 9.5 %, and $ 10,288 , or 15.8 %, of our rental income for the three months ended September 30, 2021 and 2020, respectively, and $ 16,117 , or 9.9 %, and $ 30,349 , or 15.6 %, of our rental income for the nine months ended September 30, 2021 and 2020, respectively.

During the nine months ended September 30, 2021, we acquired four industrial properties and one parcel of developable land containing 1,644,508 rentable square feet for an aggregate purchase price of $ 134,730 , including acquisition related costs of $ 1,030 .

These acquisitions were accounted for as asset acquisitions.

We allocated the purchase prices for these acquisitions based on the estimated fair value of the acquired assets as follows:

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 sale of real estate of $ 940 .

For the three months ended March 31, 2022 and 2021, approximately 37.4 % and 50.2 %, respectively, of our rental income was from our Hawaii Properties.

In addition, we have a concentration of 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 rentable square feet located in 34 states with a weighted average remaining lease term of 7.5 years and accounted for $ 13,468 , or 18.9 %, and $ 2,751 , or 5.1 %, of our rental income for the three months ended March 31, 2022 and 2021, 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 7.9 %, and $ 5,538 , or 10.2 %, of our rental income for the three months ended March 31, 2022 and 2021, respectively.

INDUSTRIAL LOGISTICS PROPERTIES TRUST

1 unchanged sentence

(dollars in thousands, except per share data)

In October 2021, we entered into an agreement to acquire a recently built property located in 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 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 will not be delayed or that the terms will not change.

During the nine months ended September 30, 2021, we committed $ 7,074 for expenditures related to leasing related costs for leases executed during the period for approximately 2,002,000 square feet.

Committed but unspent tenant related obligations based on existing leases as of September 30, 2021 were $ 2,315 .

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 as amended on February 7, 2022, or the 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 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 hand, and excluding two pending property acquisitions for an aggregate purchase price of $ 78,843 , excluding acquisition related costs.

Pursuant to the terms set forth in the Merger Agreement, at the Effective Time, each share of 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 canceled for 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 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.

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 three one year extension options, and requires that interest be paid at an annual rate based on the 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 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 the Loans.

We used the proceeds from our sale of the equity interest in our joint venture in which we retained a 61 % equity interest to partially fund our acquisition of 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.

INDUSTRIAL LOGISTICS PROPERTIES TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except per share data)

The following table summarizes the purchase price allocation for the Merger:

Land $ 327,200

Buildings 2,478,047

Acquired real estate leases (1)

Assets of properties held for sale 724,073

Other assets, net 14,194

Securities available for sale (2)

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 the date of acquisition, 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 complete the sales of these marketable securities during the second quarter of 2022.

See Note 5 for more information regarding these marketable securities.

INDUSTRIAL LOGISTICS PROPERTIES TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except per share data)

During the three months ended March 31, 2022, we committed $ 4,772 for expenditures related to leasing related costs for leases executed during the period for approximately 885,000 square feet.

Committed, but unspent, tenant related obligations based on existing leases as of March 31, 2022 were $ 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 and December 31, 2020, accrued environmental remediation costs of $ 6,940 were included in accounts payable and other liabilities in our condensed consolidated balance sheets.

As of both March 31, 2022 and December 31, 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 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.

In general, we do not have 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.

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 (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, we have an equity investment in a joint venture that consists of the following:

As of March 31, 2022, we have equity investments in our joint ventures that consist of the following:

ILPT Carrying Value

ILPT of Investment at Number of Square

Joint Venture Ownership September 30, 2021 Properties Location Feet

12 properties

22 % $ 63,260 12 Nine states

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

ILPT of Investment Number of Square

Joint Venture Presentation Ownership at March 31, 2022 Properties Location Feet

Mountain Industrial REIT LLC Consolidated 61 % N/A 93

Various 20,754,664

The Industrial Fund REIT LLC Unconsolidated 22 % $ 143,428 18 Various 11,726,000

The following table provides a summary of the mortgages of our joint ventures:

Principal Balance

at September 30,

Joint Venture Coupon Rate (1)

Joint Venture (Consolidated) Coupon Rate Maturity Date 2022 (1)

Mortgage notes payable (secured by 11 properties in 10 states)

Various $ 321,650

Mortgage notes payable (secured by 82 properties in 25 states)

3/9/2024 1,400,000

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

Principal Balance

Joint Venture (Unconsolidated) Coupon Rate (2)

Maturity Date 2022 (1)

Mortgage note payable (secured by one property in Florida)

Mortgage notes payable (secured by one property in Florida)

10/1/2023 $ 56,980

Mortgage note payable (secured by 11 other properties in eight states)

Mortgage notes payable (secured by 11 other properties in eight states)

11/7/2029 350,000

Weighted average/total 3.37 % $ 406,980

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

(1) Amounts are not adjusted for our minority interest;

none of the debt is recourse to us.

During the nine months ended September 30, 2020, we entered into agreements related 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.

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

INDUSTRIAL LOGISTICS PROPERTIES TRUST

1 unchanged sentence

(dollars in thousands, except per share data)

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 account for our joint venture using the equity method of accounting under the fair value option.

During the three and nine months ended September 30, 2021, we recorded an increase in the fair value of our investment in our joint venture of $ 998 and $ 5,455 , respectively, as equity in earnings of investees in our condensed consolidated statements of comprehensive income.

In addition, during the three and nine months ended September 30, 2021, our joint venture made aggregate cash distributions of $ 660 and $ 1,980 , respectively, to us.

See Note 5 for more information regarding our joint venture.

Consolidated Joint Venture - Mountain Industrial REIT LLC

Immediately following the closing of the Merger, we entered into a joint venture arrangement with an institutional investor for 95 of the acquired MNR properties in 27 states, including two committed, but not yet completed, property acquisitions.

The investor acquired a 39 % noncontrolling 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 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 this joint venture during the three months ended March 31, 2022.

See Notes 1, 9 and 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 the unconsolidated joint venture under the equity method of accounting under the fair value option.

During the three months ended March 31, 2022 and 2021, we recorded a change in the fair value of our investment in the unconsolidated joint venture of $ 1,727 and $ 2,581 , respectively, as equity in earnings of investees in our condensed consolidated statements of comprehensive income (loss).

In addition, during the three months ended March 31, 2022 and 2021, the unconsolidated joint venture made aggregate cash distributions of $ 1,320 and $ 660 , respectively, to us.

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

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 leases;

Our leases provide our tenants with the contractual right to use and economically benefit from all the physical space specified in 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 include variable payments.

Our leases provide for base rent payments and 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.

1 unchanged sentence

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 and $ 11,943 for the three months ended September 30, 2021 and 2020, respectively, of which tenant reimbursements totaled $ 9,233 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 , respectively.

We increased rental income to record revenue on a straight line basis by $ 1,678 and $ 2,120 for the three months ended September 30, 2021 and 2020, respectively, and $ 5,673 and $ 6,183 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 December 31, 2020, respectively.

During the year ended December 31, 2020, certain of our tenants requested, 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 in 12 equal monthly installments beginning in September 2020.

As of September 30, 2021 and December 31, 2020, deferred payments totaling $ 1,168 and $ 2,630 , respectively, are included in rents receivable 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.

Such payments totaled $ 12,380 and $ 9,872 for the three months ended March 31, 2022 and 2021, respectively, of which tenant reimbursements totaled $ 12,135 and $ 9,627 , respectively.

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

Right of use asset and lease liability.

In connection with our acquisition of MNR, we assumed the lease for MNR’s former corporate headquarters, which expires on December 31, 2029, and three of the properties we acquired as part of 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 lease liability for all leases with a term greater than 12 months.

As of March 31, 2022, the value of the right of use asset and related liability representing our future obligations under the lease arrangements under which we are the lessee were $ 5,147 and $ 5,192 , respectively.

The right of use asset and related lease liability are included in other assets, net and accounts payable and other liabilities, respectively, in our condensed consolidated balance sheets.

INDUSTRIAL LOGISTICS PROPERTIES TRUST

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(dollars in thousands, except per share data)

As of September 30, 2021, our outstanding indebtedness consisted of the following:

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.

As of March 31, 2022, our outstanding indebtedness consisted of the following:

Principal Balance as of of Collateral

September 30, December 31, Interest At September 30,

March 31, December 31, Interest At March 31,

Entity Type Secured By:

Rate Maturity 2022

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

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

Floating Rate - Interest only 82 Properties 1,400,000 — 3.060 % Mar 2024 (4)

Fixed Rate - Amortizing One Property 13,644 — 3.670 % May 2031 31,352

Fixed Rate - Amortizing One Property 27,446 — 3.100 % Jun 2035 48,843

Fixed Rate - Amortizing One Property 15,585 — 3.560 % Sep 2030 51,807

Fixed Rate - Amortizing One Property 45,534 — 4.130 % Nov 2033 132,174

Fixed Rate - Amortizing One Property 15,032 — 4.140 % Jul 2032 45,854

Fixed Rate - Amortizing One Property 32,634 — 4.020 % Oct 2033 88,253

Fixed Rate - Amortizing One Property 5,290 — 3.770 % Apr 2030 40,668

Fixed Rate - Amortizing One Property 5,594 — 3.850 % Apr 2030 40,668

Fixed Rate - Amortizing One Property 44,042 — 2.950 % Jan 2036 103,379

Fixed Rate - Amortizing One Property 47,742 — 4.270 % Nov 2037 114,816

Fixed Rate - Amortizing One Property 54,012 — 3.250 % Jan 2038 118,337

Fixed Rate - Amortizing One Property 15,095 — 3.760 % Oct 2028 65,064

4,456,808 832,000 $ 5,053,749

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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 two , six month periods through December 29, 2022.

We have a $ 750,000 unsecured revolving credit facility, or our revolving credit facility, that is available for our general business purposes, including acquisitions.

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.

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 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 nine months ended September 30, 2020 to write off unamortized debt premiums.

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

(3) Mountain is Mountain Industrial REIT LLC.

(4) The 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 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.

INDUSTRIAL LOGISTICS PROPERTIES TRUST

1 unchanged sentence

(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 one , 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 three , 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.

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.

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 September 30, 2021 and December 31, 2020, 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

Our financial instruments include cash and cash equivalents, restricted cash, rents receivable, 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 March 31, 2022 and December 31, 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 March 31, 2022 At December 31, 2021

Carrying Estimated Carrying Estimated

Fair Value Value (1)

Mortgage notes payable $ 645,987 $ 713,330 $ 645,579 $ 730,119

(1) Includes unamortized debt issuance costs of $ 4,013 and $ 4,421 as of September 30, 2021 and December 31, 2020, 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).

Because 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 , categorized by the level of inputs as defined in the fair value hierarchy under GAAP, used in the valuation of each asset:

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 $ 68,383 and $ 3,876 as of March 31, 2022 and December 31, 2021, respectively.

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

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 current prevailing market rates as of the measurement date (Level 3 inputs).

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 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

5 unchanged sentences

$ 143,428 $ — $ — $ 143,428

Interest rate cap derivatives (2)

$ 9,859 $ — $ 9,859 $ —

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 18 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 % and 7.3 %, exit capitalization rates of between 4.4 % and 6.8 %, holding periods of approximately 10 years and market rents.

The significant unobservable inputs used in the fair value are discount rates of between 5.25 % and 6.50 %, exit capitalization rates of between 4.50 % and 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.

INDUSTRIAL LOGISTICS PROPERTIES TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except per share data)

(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.

Shareholders’ Equity

Common Share Awards

On June 2, 2021, in accordance with our Trustee compensation arrangements, we awarded to each of our six Trustees 3,500 of our common shares, valued at $ 25.62 per share, the closing price of our common shares on The Nasdaq Stock Market 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.

Common Share Purchase:

During the three months ended March 31, 2022, we purchased 333 of our common shares at a price of $ 22.67 per common share, from a former employee of The RMR Group LLC, or RMR, in satisfaction of tax withholding and payment obligations in connection with the vesting of awards of our common shares.

Distributions:

During the nine months ended September 30, 2021, we declared and paid regular quarterly distributions 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

On October 14, 2021, we declared a regular quarterly distribution to common shareholders of record on October 25, 2021 of $ 0.33 per share, or approximately $ 21,600 in aggregate.

We expect to pay this distribution to our shareholders on or about November 18, 2021.

During the three months ended March 31, 2022 , we declared and paid a regular quarterly distribution to common shareholders as follows:

Record Date Payment Date Distribution Per Share Total Distribution

January 24, 2022 February 17, 2022 $ 0.33 $ 21,584

On April 14, 2022, we declared a regular quarterly distribution to common shareholders of record on April 25, 2022 of $ 0.33 per share, or approximately $ 21,600 .

We expect to pay this distribution to our shareholders on or about May 19, 2022.

INDUSTRIAL LOGISTICS PROPERTIES TRUST

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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 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:

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

2021 2020 2021 2020

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:

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 March 31,

Weighted average common shares for basic earnings per share 65,212 65,139

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Weighted average common shares for diluted earnings per share (1)

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

Business and Property Management Agreements with RMR LLC

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.

Business and Property Management Agreements with RMR

We have no employees.

The personnel and various services we require to operate our business are provided to us by RMR LLC.

We have two agreements with RMR LLC to provide management services to us:

The personnel and various services we require to operate our business are provided to us by RMR.

We have two agreements with RMR 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 and $ 7,832 for the three and nine months ended September 30, 2021, respectively, and $ 3,410 and $ 9,994 for the three and nine months ended September 30, 2020, 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 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, 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 or 2020.

Pursuant to our business management agreement with RMR, we recognized net business management fees of $ 4,399 and $ 2,544 for the three months ended March 31, 2022 and 2021, respectively.

Based on our common share total return, as defined in our business management agreement, as of March 31, 2022 and 2021, no incentive fees are included in the net business management fees we recognized for the three months ended March 31, 2022 or 2021.

The actual amount of annual incentive fees for 2022, if any, will be based on our common share total return, as defined in our business management agreement, for the three-year period ending December 31, 2022, and will be payable in January 2023.

We did no t incur any incentive fee payable to RMR LLC for the year ended December 31, 2020.

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

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, 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 periods prior to August 1, 2021, the SNL U.S.

We did no t incur any incentive fee payable to RMR for the year ended December 31, 2021.

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

RMR provides management services to our two 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 amended our business management agreement effective August 1, 2021 to provide that (i) for periods beginning on and after August 1, 2021, the MSCI U.S.

REIT/Industrial REIT Index will be used to calculate benchmark returns per share for purposes of determining any incentive management fee payable by us to RMR and (ii) for periods prior to August 1, 2021, the SNL U.S.

REIT Industrial Index will continue to be used.

Accordingly, the calculation

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 and $ 4,860 for the three and nine months ended September 30, 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, 2021, $ 1,598 and $ 4,751 , respectively, were expensed to other operating expenses in our condensed consolidated financial statements and $ 77 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 , respectively, were capitalized as building improvements in our condensed consolidated balance sheets.

Pursuant to our property management agreement with RMR, we recognized aggregate property management and construction supervision fees of $ 2,763 and $ 1,594 for the three months ended March 31, 2022 and 2021, respectively.

Of these amounts, for the three months ended March 31, 2022 and 2021, $ 2,098 and $ 1,582 , respectively, were expensed to other operating expenses in our condensed consolidated financial statements and $ 31 and $ 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 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.

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 $ 1,184 and $ 3,451 for these expenses and costs for the three and nine months ended September 30, 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.

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

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., a managing director and the president and chief executive officer of RMR Inc.

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 officer and employee 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.

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 two agreements with RMR LLC to provide management services to us.

See Note 8 for further information regarding our management agreements with RMR LLC.

Our Joint Venture .

As of December 31, 2020, 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.

We are generally responsible for all of our operating expenses, including certain expenses incurred or arranged by RMR on our behalf.

We are generally not responsible for payment of RMR’s employment, office or administrative expenses incurred to provide management services to us, except for the employment and related expenses of RMR’s employees assigned to work exclusively or partly at our properties, our share of the wages, benefits and other related costs of RMR’s centralized accounting personnel, our share of 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.

We reimbursed RMR $ 1,604 and $ 1,141 for these expenses and costs for the three months ended March 31, 2022 and 2021, respectively.

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

INDUSTRIAL LOGISTICS PROPERTIES TRUST

1 unchanged sentence

(dollars in thousands, except per share data)

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

Related Person Transactions

We have relationships and historical and continuing transactions with RMR, The RMR Group Inc., or RMR Inc., and others related to them, including other companies to which RMR or its subsidiaries provide management services and some of which have trustees, directors or officers who are also our Trustees or officers.

RMR 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.

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, and each of our other officers is also an officer and employee of RMR.

Some of our Independent Trustees also serve as independent trustees or independent directors of other public companies to which RMR or its subsidiaries provide management services.

Adam Portnoy serves as chair of the boards and as a managing trustee or managing director of those companies.

Other officers of RMR, including Mr.

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

Our Manager, RMR .

We have two agreements with RMR to provide management services to us.

See Note 8 for further information regarding our management agreements with RMR.

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 two 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 two separate joint venture arrangements, one with two , third party institutional investors for 18 properties in which we own a 22 % equity interest, and the other with one , third party institutional investor for 95 properties, including two 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 six 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, 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 ventures.

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.

RMR 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 2021 Annual Report.

INDUSTRIAL LOGISTICS PROPERTIES TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except per share data)

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

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 two 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.

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 one 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).

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