What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2022-10-25 compared with 2022-07-26 · 202 added, 195 removed, 347 unchanged (53% of the section changed)

3 unchanged sentences

We are a real estate investment trust, or REIT, organized under Maryland law.

As of June 30, 2022, our portfolio was comprised of 412 consolidated properties containing approximately 59.7 million rentable square feet located in 39 states, including 226 buildings, leasable land parcels and easements containing approximately 16.7 million rentable square feet located on the island of Oahu, Hawaii, and 186 properties containing approximately 43.0 million rentable square feet located in 38 other states.

As of June 30, 2022, our 412 consolidated properties include 93 properties that we own in a consolidated joint venture arrangement in which we own a 61% equity interest.

As of June 30, 2022, we also owned a 22% equity interest in an unconsolidated joint venture, which owns 18 properties located in 12 states containing approximately 11.7 million rentable square feet that were 100% leased with an average (by annualized rental revenues) remaining lease term of 6.1 years.

As of June 30, 2022, our consolidated properties were approximately 98.9% leased (based on rentable square feet) to 305 different tenants with a weighted average remaining lease term (based on annualized rental revenues) of approximately 9.2 years.

We define the term annualized rental revenues as used in this section as the annualized contractual rents, as of June 30, 2022, including straight line rent adjustments and excluding lease value amortization, adjusted for tenant concessions including free rent and amounts reimbursed to tenants, plus estimated recurring expense reimbursements from tenants.

On February 25, 2022, we completed the acquisition of MNR as a result of which we acquired 124 Class A, single tenant, net leased, e-commerce focused industrial properties located in 32 states containing approximately 25,745,000 rentable square feet and two committed, but not yet then completed, property acquisitions.

As of September 30, 2022, our portfolio was comprised of 413 consolidated properties containing approximately 59,962,000 rentable square feet located in 39 states, including 226 buildings, leasable land parcels and easements containing approximately 16,729,000 rentable square feet located on the island of Oahu, Hawaii, and 187 properties containing approximately 43,233,000 rentable square feet located in 38 other states.

As of September 30, 2022, our 413 consolidated properties include 94 properties that we own in a consolidated joint venture arrangement in which we own a 61% equity interest.

As of September 30, 2022, we also owned a 22% equity interest in an unconsolidated joint venture, which owns 18 properties located in 12 states containing approximately 11,726,000 rentable square feet that were 100% leased with an average (by annualized rental revenues) remaining lease term of 5.9 years.

As of September 30, 2022, our consolidated properties were approximately 99.2% leased (based on rentable square feet) to 305 different tenants with a weighted average remaining lease term (based on annualized rental revenues) of approximately 8.9 years.

We define the term annualized rental revenues as used in this section as the annualized contractual rents, as of September 30, 2022, including straight line rent adjustments and excluding lease value amortization, adjusted for tenant concessions including free rent and amounts reimbursed to tenants, plus estimated recurring expense reimbursements from tenants.

Investing and Financing Activities

On February 25, 2022, we completed the acquisition of MNR.

The aggregate value of the consideration paid in the Merger was $3,739,048, including the assumption of $323,432 aggregate principal amount of former 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 then pending property acquisitions for an aggregate purchase price of $78,843, excluding acquisition related costs.

The 124 MNR properties were 97.9% leased to various tenants and had a remaining weighted average (by rental revenues) lease term of eight years as of the date of the acquisition.

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

The investor acquired a 39% equity interest in the joint venture from us for $587,440, and we retained the remaining 61% equity interest in the joint venture.

The joint venture assumed $323,432 aggregate principal amount of former MNR mortgage debt on certain of the properties.

Federal Reserve recently raised interest rates in an effort to combat inflation, which could result in negative consequences in the U.S.

economy, and concerns about a potential recession are becoming more pronounced.

It is unclear whether the U.S.

economy will be able to withstand such challenges and continue sustained growth.

A recession could adversely affect our financial condition and that of our tenants, could adversely impact the ability of our tenants to renew our leases or pay rent to us, would impair our ability to effectively deploy our capital or realize upon investments on favorable terms and may cause the values of our properties and of our securities to decline.

We could also be affected by any overall weakening of, or disruptions in, the financial markets.

In connection with the closing of the Merger, we entered into the $1,385,158 Bridge Loan, secured by 109 of our properties.

The Bridge Loan was scheduled to mature in February 2023 and required that interest only 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.

We also entered into the $700,000 Fixed Rate Loan secured by 17 of our properties.

The Fixed Rate loan matures in March 2032 and requires that interest be paid at a weighted average annual fixed rate of 4.42%.

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, including two then committed, but not yet then completed, property acquisitions.

The investor acquired a 39% noncontrolling equity interest in the joint venture from us for $589,411, as of the completion of this transaction, 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 former MNR mortgage debt on certain of the properties and entered into the $1,400,000 Floating Rate Loan secured by 82 properties.

The Floating Rate Loan matures in March 2024, subject to three one year extension options, and requires that interest be paid at an annual rate of SOFR plus a premium of 2.77%.

During the nine months ended September 30, 2022, this joint venture made aggregate cash distributions of $1,365 to the other joint venture investor.

In July 2022, our consolidated joint venture acquired a property located in Augusta, GA containing 226,000 rentable square feet for a purchase price of approximately $38,053, including acquisition related costs of $53.

This property is 100% leased to a single tenant with a remaining lease term of approximately 14.9 years at the time of acquisition.

This property was one of two committed MNR property acquisitions at the time of the Merger and was acquired directly by our consolidated joint venture.

In September 2022, our consolidated joint venture terminated the agreement for the other committed MNR property acquisition.

In September 2022, we entered into the $1,235,000 ILPT Floating Rate Loan, secured by 104 of our properties.

The interest only ILPT Floating Rate Loan matures in October 2024, subject to three, one year extension options, and requires that interest be paid at an annual rate of SOFR, which is capped at an annual rate of 2.25% for the initial term of the ILPT Floating Rate Loan, plus a weighted average premium of 3.93%.

The Bridge Loan was repaid in full on September 22, 2022 with cash on hand and proceeds from the ILPT Floating Rate Loan.

As of September 30, 2022, we also own an interest in an unconsolidated joint venture that owns 18 properties.

We account for the unconsolidated joint venture under the equity method of accounting under the fair value option.

During the three and nine months ended September 30, 2022, we recorded the change in the fair value of our investment in the unconsolidated joint venture of $3,297 and $6,634, respectively, in our condensed consolidated statements of comprehensive income (loss).

In addition, during the three and nine months ended September 30, 2022, the unconsolidated joint venture made aggregate cash distributions of $1,320 and $3,962, respectively, to us.

In October 2022, the unconsolidated joint venture made a cash distribution to us of $20,900, including amounts related to a debt financing.

For further information regarding our investing and financing activities, see Notes 2, 4, 5, 9 10, and 11 to the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 and “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Our Investing and Financing Liquidity and Resources” of this Quarterly Report on Form 10-Q.

In response to inflationary pressures, the U.S.

Federal Reserve increased the federal funds rate by 300 basis points over five consecutive meetings from March 2022 to September 2022 and has signaled that further large increases are likely to occur.

These inflationary pressures and rising interest rates in the United States and globally have given rise to increasing concerns that the U.S.

economy is now in, or may soon enter, an economic recession and they have caused disruptions in the financial markets.

An economic recession, or continued or intensified disruptions in the financial markets could adversely affect our financial condition and that of our tenants, could adversely impact the ability of our tenants to renew our leases or pay rent to us, may restrict our access to, and would likely increase our cost of capital, and may cause the values of our properties and of our securities to decline.

Property Operations

Occupancy data for our properties as of June 30, 2022 and 2021 is as follows (square feet in thousands):

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

All Properties Comparable Properties (1)

As of June 30, As of June 30,

As of September 30, As of September 30,

2022 2021 2022 2021

6 unchanged sentences

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

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

The average effective rental rates per square foot, as defined below, for our properties for the three and six months ended June 30, 2022 and 2021 are as follows:

Three Months Ended June 30, Six Months Ended June 30,

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

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

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

2022 2021 2022 2021

4 unchanged sentences

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

(2) Consists of properties that we owned continuously since January 1, 2021 and excludes properties owned by an unconsolidated joint venture.

During the three and six months ended June 30, 2022, we entered into new and renewal leases as summarized in the following tables:

Three Months Ended June 30, 2022

(2) Consists of properties that we owned continuously since July 1, 2021 and January 1, 2021, respectively, and excludes properties owned by an unconsolidated joint venture.

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

Three Months Ended September 30, 2022

New Leases Renewals Totals

2 unchanged sentences

Weighted average lease term by square feet (years) (2)

28.3 9.1 22.7

Total leasing costs and concession commitments (1)

4 unchanged sentences

$ 0.89 $ 0.24 $ 0.55

Six Months Ended June 30, 2022

Nine months ended September 30, 2022

New Leases Renewals Totals

10 unchanged sentences

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

(2) The weighted average (by square feet) lease term for leases that were in effect for the same land area or building area during the prior lease term was 22.7 years for the three months ended June 30, 2022 and 20.2 years for the six months ended June 30, 2022.

During the three and six months ended June 30, 2022, we completed rent resets for approximately 138,000 and 194,000 square feet of land, respectively, at our Hawaii Properties at rental rates that were approximately 37.2% and 36.8%, respectively, higher than the prior rental rates.

As shown in the table below, approximately 2.1% of our total leased square feet and 2.2% of our total annualized rental revenues as of June 30, 2022 are included in leases scheduled to expire by December 31, 2022.

As of June 30, 2022, our lease expirations by year are as follows (dollars and square feet in thousands):

(2) The weighted average (by square feet) lease term for leases that were in effect for the same land area or building area during the prior lease term was 4.9 years for the three months ended September 30, 2022 and 16.1 years for the nine months ended September 30, 2022.

During the nine months ended September 30, 2022, we completed rent resets for approximately 194,000 square feet of land, respectively, at our Hawaii Properties at rental rates that were approximately 36.8% higher than the prior rental rates.

As shown in the table below, approximately 1.0% of our total leased square feet and 1.0% of our total annualized rental revenues as of September 30, 2022 are included in leases scheduled to expire by December 31, 2022.

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

% of Total Cumulative

17 unchanged sentences

Weighted average remaining lease term (in years):

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

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

We generally receive rents from our tenants monthly and in advance.

As of June 30, 2022, tenants representing 1% or more of our total annualized rental revenues were as follows (square feet in thousands):

As of September 30, 2022, tenants representing 1% or more of our total annualized rental revenues were as follows (square feet in thousands):

of Leased % of Total Annualized Rental

1 unchanged sentence

1 Federal Express Corporation/ FedEx Ground Package System, Inc.

AL, AR, CO, FL, GA, HI, IA, ID, IL, IN, KS, LA, MD, MI, MN, MO, MS, NC, ND, NE, NJ, NV, NY, OH, OK, PA, SC, TN, TX, UT, VA, VT, WA, WI 83 12,883 21.8 % 29.2 %

Various (34 states) 84 13,109 22.0 % 29.6 %

2 Amazon.com Services, Inc./ Amazon.com Services LLC AL, IN, OK, SC, TN, VA 8 4,539 7.6 % 6.8 %

10 unchanged sentences

8 TD SYNNEX Corporation OH 2 939 1.6 % 1.1 %

9 EF Transit, Inc.

IN 1 535 0.9 % 1.0 %

10 Shaw Industries, Inc.

GA 1 832 1.4 % 1.0 %

11 Mercedes-Benz US International, Inc.

AL 1 530 0.9 % 1.0 %

Total 114 25,292 42.5 % 47.7 %

Tenant Concentration.

1 unchanged sentence

% of Number Remaining Rental Income Rental Income

Rentable of Lease Term Three Months Ended Six Months Ended

Rentable of Lease Term Three Months Ended Nine Months Ended

Tenant Square Feet States (in years) 9/30/2022 9/30/2021 9/30/2022 9/30/2021

6 unchanged sentences

Mainland Properties.

As of June 30, 2022, our Mainland Properties represented approximately 71.0% of our annualized rental revenues.

As of September 30, 2022, our Mainland Properties represented approximately 71.5% of our annualized rental revenues.

We generally will seek to renew or extend the terms of leases at our Mainland Properties as their expirations approach.

2 unchanged sentences

Hawaii Properties.

As of June 30, 2022, our Hawaii Properties represented approximately 29.0% of our annualized rental revenues.

As of June 30, 2022, certain of our Hawaii Properties are lands leased for rents that periodically reset based on fair market values, generally every ten years.

As of September 30, 2022, our Hawaii Properties represented approximately 28.5% of our annualized rental revenues.

As of September 30, 2022, certain of our Hawaii Properties are lands leased for rents that periodically reset based on fair market values, generally every ten years.

Revenues from our Hawaii Properties have generally increased under our or our predecessors’ ownership as rents under the leases for those properties have been reset or renewed.

4 unchanged sentences

Accordingly, we cannot be sure that the historical increases achieved at our Hawaii Properties will continue in the future.

The following chart shows the annualized rental revenues as of June 30, 2022 scheduled to reset at our Hawaii Properties:

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

Scheduled Rent Resets at Hawaii Properties

1 unchanged sentence

Rental Revenues as of

June 30, 2022

September 30, 2022

Scheduled to Reset

2 unchanged sentences

Total $ 23,121

As of June 30, 2022, $17,568, or 4.2%, of our annualized rental revenues are included in leases scheduled to expire through June 30, 2023 and 1.1% of our rentable square feet are currently vacant.

As of September 30, 2022, $20,740, or 4.9%, of our annualized rental revenues are included in leases scheduled to expire through September 30, 2023 and 0.8% of our rentable square feet are currently vacant.

Rental rates for which available space may be leased in the future will depend on prevailing market conditions when lease extensions, lease renewals or new leases are negotiated.

Whenever we extend, renew or enter new leases for our properties, we intend to seek rents that are equal to or higher than our

historical rents for the same properties;

Whenever we extend, renew or enter new leases for our properties, we intend to seek rents that are equal to or higher than our historical rents for the same properties;

however, our ability to maintain or increase the rents for our current properties will depend in large part upon market conditions, which are beyond our control.

4 unchanged sentences

RMR also may use a third party service to monitor the credit ratings of debt securities of our existing tenants whose debt securities are rated by a nationally recognized credit rating agency.

Investing and Financing Activities (dollars in thousands)

On February 25, 2022, we completed the acquisition of MNR.

MNR’s portfolio included 124 Class A, single tenant, net leased, e-commerce focused industrial properties located in 32 states containing approximately 25,745,000 rentable square feet with a remaining weighted average (by rental revenues) lease term of eight years as of the date of the acquisition, and two committed, but not yet then 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 former 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 then pending property acquisitions for an aggregate purchase price of $78,843, excluding acquisition related costs.

In connection with the closing of the Merger, we entered into a $1,385,158 bridge loan facility, secured by 109 of our properties.

We also entered into a $700,000 fixed rate CMBS loan secured by 17 of our properties.

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 former MNR mortgage debt on certain of the properties and entered into a $1,400,000 floating rate CMBS loan secured by 82 properties.

The Floating Rate Loan matures in March 2024, subject to three one year extension options, and requires that interest be paid at an annual rate of SOFR plus a premium of 2.765%.

We control this joint venture and therefore account for the properties on a consolidated basis in our condensed consolidated financial statements.

During the six months ended June 30, 2022, this joint venture made aggregate cash distributions of $1,365 to the other joint venture investor.

In July 2022, our consolidated joint venture acquired a property located in Augusta, GA containing 226,000 rentable square feet for a purchase price of approximately $38,000, excluding acquisition related costs.

This property is 100% leased to a single tenant with a remaining lease term of approximately 14.9 years.

This property was a committed MNR acquisition at the time we acquired MNR and was purchased directly by our consolidated joint venture.

As of June 30, 2022, we also own an interest in an unconsolidated joint venture that owns 18 properties.

We account for our 18 property unconsolidated joint venture under the equity method of accounting under the fair value option.

During the three and six months ended June 30, 2022, we recorded the change in the fair value of our investment in our unconsolidated joint venture of $1,610 and $3,337, respectively, in our condensed consolidated statements of comprehensive income (loss).

In addition, during the three and six months ended June 30, 2022, our unconsolidated joint venture made aggregate cash distributions of $1,322 and $2,642, respectively, to us.

For further information regarding our investing and financing activities, see Notes 2, 4, 5, 9 and 11 to the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 and “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Our Investing and Financing Liquidity and Resources” of this Quarterly Report on Form 10-Q.

RESULTS OF OPERATIONS

Three Months Ended June 30, 2022, Compared to Three Months Ended June 30, 2021 (dollars and share amounts in thousands, except per share data)

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

Comparable Properties Results (1)

1 unchanged sentence

Consolidated Results

Three Months Ended June 30, Three Months Ended June 30, Three Months Ended June 30,

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

2022 2021 Change Change 2022 2021 Change 2022 2021 Change Change

10 unchanged sentences

Depreciation and amortization 48,519 12,694 35,825 N/M

Acquisition and certain other transaction costs — 646 (646) (100.0%)

Acquisition and other transaction related costs 586 — 586 —%

General and administrative 9,110 4,728 4,382 92.7%

Loss on impairment of real estate 100,747 — 100,747 N/M

Total other expenses 58,215 17,422 40,793 N/M

Interest and other income 354 — 354 N/M

Interest and other income 1,068 — 1,068 —%

Interest expense (89,739) (9,084) (80,655) N/M

Loss on sale of real estate (10) — (10) N/M

Loss on equity securities (9,450) — (9,450) N/M

(Loss) income before income tax expense and equity in earnings of investees (152,915) 16,997 (169,912) N/M

Gain on sale of real estate — 940 (940) (100.0%)

Loss on early extinguishment of debt (21,370) — (21,370) —

(Loss) income before income tax expense and equity in earnings of unconsolidated joint venture (87,243) 17,381 (104,624) N/M

Income tax expense (28) (72) 44 (61.1%)

Equity in earnings of investees 1,610 1,876 (266) (14.2%)

Equity in earnings of unconsolidated joint venture 3,297 998 2,299 230.4%

Net (loss) income (83,974) 18,307 (102,281) N/M

1 unchanged sentence

Net (loss) income attributable to common shareholders $ (45,627) $ 18,307 $ (63,934) N/M

Weighted average common shares outstanding - basic 65,221 65,146 75 N/M

Weighted average common shares outstanding - diluted 65,221 65,207 14 N/M

Weighted average common shares outstanding - basic 65,250 65,178 72 0.1%

Weighted average common shares outstanding - diluted 65,250 65,230 20 —%

Per common share data (basic and diluted):

1 unchanged sentence

N/M - Not Meaningful

(1) Consists of properties that we owned continuously since April 1, 2021 and excludes properties owned by an unconsolidated joint venture.

(2) Consists of 131 properties that we acquired during the period from April 1, 2021 to June 30, 2022, including 93 properties we contributed to a consolidated joint venture in which we own a 61% equity interest and six properties we sold in December 2021 to our 18 property unconsolidated joint venture in which we own a 22% equity interest.

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

(2) Consists of 131 properties including (i) properties we acquired during the period from July 1, 2021 to September 30, 2022, including 94 properties we contributed to a consolidated joint venture in which we own a 61% equity interest, and (ii) properties we sold in December 2021 to our 18 property unconsolidated joint venture in which we own a 22% equity interest.

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

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

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

Rental income.

The increase in rental income is primarily a result of our acquisition and disposition activities, which includes our acquisition of MNR.

The increase also reflects our leasing activity and rent resets at certain of our comparable properties.

Rental income increased at certain of our comparable properties primarily due to increases from leasing activity and rent resets and a $3,500 reduction of a non-cash assumed lease obligation following an early lease termination.

Rental income includes non-cash straight line rent adjustments totaling approximately $3,220 for the 2022 period and approximately $1,951 for the 2021 period, and net amortization of acquired real estate leases and assumed real estate lease obligations totaling approximately $3,695 for the 2022 period and approximately $171 for the 2021 period.

Rental income increased at certain of our comparable properties primarily due to increases from leasing activity and rent resets.

Rental income includes non-cash straight line rent adjustments of $3,794 and $1,678 for the 2022 and 2021 periods, respectively, and net amortization of acquired real estate leases and assumed real estate lease obligations of $250 and $174 for the 2022 and 2021 periods, respectively.

Real estate taxes.

The increase in real estate taxes primarily reflects our acquisition and disposition activities.

Real estate taxes at our comparable properties increased primarily due to higher assessed values at certain of our properties.

Other operating expenses.

1 unchanged sentence

The increase in other operating expenses is primarily due to our acquisition and disposition activities.

Other operating expenses at our comparable properties in the 2022 period were consistent with the 2021 period.

Other operating expenses increased primarily due to increases in repairs and maintenance and insurance expenses at certain of our comparable properties.

Depreciation and amortization.

The increase in depreciation and amortization primarily reflects our acquisition and disposition activities.

Acquisition and certain other transaction costs.

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

Acquisition and other transaction related costs.

Acquisition and other transaction related costs primarily consists of costs related to potential acquisition and disposition activities that were not completed.

General and administrative.

1 unchanged sentence

The increase in general and administrative expenses is primarily due to an increase in business management fees as a result of our net acquisition activity.

Loss on impairment of real estate.

We recorded a $100,747 loss on impairment of real estate in the 2022 period to reduce the carrying value of 25 of the 30 properties reclassified from held for sale to held and used to their estimated fair value.

Interest and other income.

Interest and other income represents interest earned on our cash balances and distributions received on equity securities.

The increase in interest and other income is primarily due to higher cash balances during the 2022 period as compared to the 2021 period and distributions we received on certain equity securities we held during the 2022 period.

Interest expense.

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

Loss on sale of real estate.

Loss on sale of real estate represents a final true up adjustment to the $11,114 gain from the sale of six properties to our unconsolidated joint venture during the three months ended December 31, 2021.

Loss on equity securities.

Loss on equity securities represents the realized loss of $9,450 on the sale of certain equity securities we acquired as part of our acquisition of MNR.

The increase in interest expense is due to higher average interest rates and higher average outstanding debt balances in the 2022 period as compared to the 2021 period, primarily related to our acquisition of MNR.

Gain on sale of real estate.

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

Loss on early extinguishment of debt.

Loss on early extinguishment of debt primarily relates to the write off of unamortized costs related to the repayment of the Bridge Loan in September 2022.

Income tax expense.

Income tax expense primarily reflects state income taxes payable in certain jurisdictions.

Equity in earnings of investees.

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

Equity in earnings of unconsolidated joint venture.

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

Net (loss) income.

3 unchanged sentences

Weighted average common shares outstanding - basic and diluted.

The increase in weighted average common shares outstanding primarily reflects common shares awarded under our equity compensation plan since January 1, 2021.

The increase in weighted average common shares outstanding primarily reflects common shares awarded under our equity compensation plan since July 1, 2021.

Net (loss) income attributable to common shareholders per common share - basic and diluted.

The net loss attributable to common shareholders per common share for the 2022 period compared to the net income attributable to common shareholders per share for the 2021 period reflects the changes to net income attributable to common shareholders and weighted average common shares noted above.

Six Months Ended June 30, 2022, Compared to Six Months Ended June 30, 2021 (dollars and share amounts in thousands, except per share data)

Nine Months Ended September 30, 2022, Compared to Nine Months Ended September 30, 2021 (dollars and share amounts in thousands, except per share data)

Comparable Properties Results (1)

1 unchanged sentence

Consolidated Results

Six Months Ended June 30, Six Months Ended June 30, Six Months Ended June 30,

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

2022 2021 Change Change 2022 2021 Change 2022 2021 Change Change

10 unchanged sentences

Depreciation and amortization 114,096 37,202 76,894 206.7%

Acquisition and certain other transaction costs — 646 (646) (100.0%)

Acquisition and other transaction related costs 586 646 (60) (9.3%)

General and administrative 24,896 12,718 12,178 95.8%

Loss on impairment of real estate 100,747 — 100,747 N/M

Loss on impairment of real estate 100,747 — 100,747 —%

Total other expenses 240,325 50,566 189,759 N/M

Interest and other income 832 — 832 N/M

Interest and other income 1,900 — 1,900 —%

Interest expense (208,286) (26,468) (181,818) N/M

Loss on sale of real estate (10) — (10) N/M

Loss on equity securities (5,758) — (5,758) N/M

Loss on early extinguishment of debt (828) — (828) N/M

(Loss) income before income tax expense and equity in earnings of investees (164,360) 33,816 (198,176) N/M

(Loss) gain on sale of real estate (10) 940 (950) (101.1%)

Loss on equity securities (5,758) — (5,758) —%

Loss on early extinguishment of debt (22,198) — (22,198) —%

(Loss) income before income tax expense and equity in earnings of unconsolidated joint venture (251,603) 51,197 (302,800) N/M

Income tax expense (113) (177) 64 (36.2%)

Equity in earnings of investees 3,337 4,457 (1,120) (25.1%)

Equity in earnings of unconsolidated joint venture 6,634 5,455 1,179 21.6%

Net (loss) income (245,082) 56,475 (200,810) N/M

Net loss attributable to noncontrolling interest 11,055 — 11,055 N/M

Net loss attributable to noncontrolling interest 49,402 — 49,402 —%

Net (loss) income attributable to common shareholders $ (195,680) $ 56,475 $ (252,155) N/M

Weighted average common shares outstanding - basic 65,217 65,142 75 N/M

Weighted average common shares outstanding - diluted 65,217 65,192 25 N/M

Weighted average common shares outstanding - basic 65,228 65,154 74 0.1%

Weighted average common shares outstanding - diluted 65,228 65,205 23 —%

Per common share data (basic and diluted):

2 unchanged sentences

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

(2) Consists of 131 properties that we acquired during the period from January 1, 2021 to June 30, 2022, including 93 properties we contributed to a consolidated joint venture in which we own a 61% equity interest and six properties we sold in December 2021 to our 18 property unconsolidated joint venture in which we own a 22% equity interest.

(2) Consists of 133 properties including (i) properties we acquired during the period from January 1, 2021 to September 30, 2022, including 94 properties we contributed to a consolidated joint venture in which we own a 61% equity interest, and (ii) properties we sold in December 2021 to our 18 property unconsolidated joint venture in which we own a 22% equity interest.

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

References to changes in the income and expense categories below relate to the comparison of results for the six months ended June 30, 2022 compared to the six months ended June 30, 2021.

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

Rental income.

The increase in rental income is primarily a result of our acquisition and disposition activities, which includes our acquisition of MNR.

The increase also reflects our leasing activity and rent resets at certain of our comparable properties.

Rental income increased at certain of our comparable properties primarily due to increases from leasing activity and rent resets and a $3,500 reduction of a non-cash assumed lease obligation.

Rental income includes non-cash straight line rent adjustments totaling approximately $4,376 for the 2022 period and approximately $3,995 for the 2021 period, and net amortization of acquired real estate leases and assumed real estate lease obligations totaling approximately $4,015 for the 2022 period and approximately $351 for the 2021 period.

Rental income increased at certain of our comparable properties primarily due to increases from leasing activity and rent resets and a $3,428 write off of capitalized below market lease value related to a terminated tenant.

Rental income includes non-cash straight line rent adjustments of $8,170 and $5,673 for the 2022 and 2021 periods, respectively, and net amortization of acquired real estate leases and assumed real estate lease obligations of $4,265 and $525 for the 2022 and 2021 periods, respectively.

Real estate taxes.

1 unchanged sentence

Other operating expenses.

The increase in other operating expenses is primarily due to our acquisition and disposition activities, Other operating expenses at our comparable properties in the 2022 period were consistent with the 2021 period.

The increase in other operating expenses is primarily due to our acquisition and disposition activities.

Other operating expenses increased primarily due to increases in repairs and maintenance, snow removal and insurance expenses at certain of our comparable properties.

Depreciation and amortization.

The increase in depreciation and amortization primarily reflects our acquisition and disposition activities.

Acquisition and certain other transaction costs.

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

Acquisition and other transaction related costs.

Acquisition and other transaction related costs primarily consists of costs related to potential acquisition and disposition activities that were not completed.

General and administrative.

1 unchanged sentence

Loss on impairment of real estate.

We recorded a $100,747 loss on impairment of real estate in the 2022 period to reduce the carrying value of 25 properties we reclassified from held for sale to held and used in June 2022 to their estimated fair values.

Interest and other income.

1 unchanged sentence

Interest expense.

Loss on sale of real estate.

Loss on sale of real estate represents a final true up adjustment to the $11,114 gain from the sale of six properties to our joint venture during the three months ended December 31, 2021.

Loss (gain) on sale of real estate.

Loss (gain) on sale of real estate in the 2022 period includes an adjustment to the gain from the sale of six properties to our joint venture during December 2021 and a net gain from the sale of a portion of a land parcel as a result of an eminent domain taking in the 2021 period.

Loss on equity securities.

1 unchanged sentence

Loss on early extinguishment of debt.

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

Loss on early extinguishment of debt primarily relates to our write off of unamortized costs related to the repayment of the Bridge Loan in September 2022 and terminating our unsecured revolving credit facility in February 2022.

Income tax expense.

Income tax expense primarily reflects state income taxes payable in certain jurisdictions.

Equity in earnings of investees.

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

Equity in earnings of unconsolidated joint venture.

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

Net (loss) income.

19 unchanged sentences

Other real estate companies and REITs may calculate NOI differently than we do.

The following table presents the reconciliation of net (loss) income to NOI for the three and six months ended June 30, 2022 and 2021 (dollars in thousands):

Three Months Ended June 30, Six Months Ended June 30,

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

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

2022 2021 2022 2021

1 unchanged sentence

Net (loss) income $ (83,974) $ 18,307 $ (245,082) $ 56,475

Equity in earnings of investees (1,610) (1,876) (3,337) (4,457)

Equity in earnings of unconsolidated joint venture

(3,297) (998) (6,634) (5,455)

Income tax expense 28 72 113 177

(Loss) income before income tax expense and equity in earnings of investees (152,915) 16,997 (164,360) 33,816

(Loss) income before income tax expense and equity in earnings of unconsolidated joint venture

(87,243) 17,381 (251,603) 51,197

Loss on early extinguishment of debt 21,370 — 22,198 —

1 unchanged sentence

Interest expense 89,739 9,084 208,286 26,468

Loss (gain) on sale of real estate — (940) 10 (940)

Loss on equity securities — — 5,758 —

Loss on real estate 10 — 10 —

General and administrative 9,110 4,728 24,896 12,718

Acquisition and certain other transaction costs — 646 — 646

Acquisition and other transaction related costs 586 — 586 646

Loss on impairment of real estate — — 100,747 —

6 unchanged sentences

We calculate FFO attributable to common shareholders and Normalized FFO attributable to common shareholders as shown below.

FFO attributable to common shareholders is calculated on the basis defined by The National Association of Real Estate Investment Trusts, which is net income (loss) attributable to common shareholders, calculated in accordance with GAAP, excluding loss on impairment of real estate, any gain or loss on sale of real estate, equity in earnings of an unconsolidated joint venture and any realized and unrealized gains or losses on equity securities, plus real estate depreciation and amortization of consolidated properties and our proportionate share of FFO of unconsolidated joint venture properties and minus FFO adjustments attributable to noncontrolling interest, as well as certain other adjustments currently not applicable to us.

In calculating Normalized FFO attributable to common shareholders, we adjust for the items shown below including similar adjustments for our unconsolidated joint venture, if any, and exclude acquisition and transaction costs expensed under GAAP.

FFO attributable to common shareholders is calculated on the basis defined by The National Association of Real Estate Investment Trusts, which is net income (loss) attributable to common shareholders, calculated in accordance with GAAP, excluding loss on impairment of real estate, any gain or loss on sale of real estate, equity in earnings of unconsolidated joint venture and any realized and unrealized gains or losses on equity securities, plus real estate depreciation and amortization of consolidated properties and our proportionate share of FFO of unconsolidated joint venture properties and minus FFO adjustments attributable to noncontrolling interest, as well as certain other adjustments currently not applicable to us.

In calculating Normalized FFO attributable to common shareholders, we adjust for the items shown below including similar adjustments for the unconsolidated joint venture, if any.

FFO attributable to common shareholders and Normalized FFO attributable to common shareholders are among the factors considered by our Board of Trustees when determining the amount of distributions to our shareholders.

1 unchanged sentence

Other real estate companies and REITs may calculate FFO attributable to common shareholders and Normalized FFO attributable to common shareholders differently than we do.

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

Three Months Ended June 30, Six Months Ended June 30,

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

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

2022 2021 2022 2021

6 unchanged sentences

Loss on impairment of real estate — — 100,747 —

Loss on sale of real estate 10 — 10 —

(Gain) loss on sale of real estate — (940) 10 (940)

FFO adjustments attributable to noncontrolling interest (11,407) — (27,445) —

1 unchanged sentence

Loss on early extinguishment of debt 21,370 — 22,198 —

Acquisition and certain other transaction costs (1)

Acquisition and other transaction related costs (1)

32,016 — 80,992 646

Normalized FFO adjustments attributable to noncontrolling interest (28,379) — (28,379) —

Normalized FFO attributable to common shareholders $ 14,873 $ 30,278 $ 70,778 $ 91,549

1 unchanged sentence

Weighted average common shares outstanding - diluted 65,250 65,230 65,228 65,205

Per common share data (basic and diluted):

FFO attributable to common shareholders $ (0.03) $ 0.46 $ 0.09 $ 0.93

Normalized FFO attributable to common shareholders $ 0.43 $ 0.47 $ 0.86 $ 0.94

(1) Amounts for the three and six months ended June 30, 2022 include certain finance fees related to our bridge loan facility and/or other transaction related expenses that are expensed under GAAP.

Per common share data:

FFO attributable to common shareholders - basic $ (0.16) $ 0.46 $ (0.06) $ 1.40

FFO attributable to common shareholders - diluted $ (0.16) $ 0.46 $ (0.06) $ 1.39

Normalized FFO attributable to common shareholders - basic $ 0.23 $ 0.46 $ 1.09 $ 1.41

Normalized FFO attributable to common shareholders - diluted $ 0.23 $ 0.46 $ 1.09 $ 1.40

(1) Amounts for the three and nine months ended September 30, 2022 primarily include certain debt issuance costs recorded as interest expense related to the Bridge Loan and other transaction related costs expensed under GAAP.

LIQUIDITY AND CAPITAL RESOURCES

1 unchanged sentence

Our principal sources of funds to meet our operating and capital expenses, pay debt service obligations and make distributions to our shareholders are rents from tenants at our properties.

With $291,866 of cash on hand, 78.0% of our annualized rental revenues derived from investment grade rated tenants, subsidiaries of investment grade rated parent entities or our Hawaii land leases and only 3 .8% of our annualized rental revenues as of June 30, 2022 from expiring leases over the next 12 months, we believe that these sources of funds will be sufficient to meet our operating and capital expenses, pay debt service obligations and make distributions to our shareholders for the next 12 months and for the foreseeable future thereafter.

As of September 30, 2022, investment grade rated tenants, subsidiaries of investment grade rated parent entities or our Hawaii land leases represented 78.1% of our annualized rental revenues and only 4.9% of our annualized rental revenues were from leases expiring over the next 12 months.

We believe that these sources of funds will be sufficient to meet our operating and capital expenses, pay debt service obligations and make distributions to our shareholders for the next 12 months and for the foreseeable future thereafter.

Our future cash flows from operating activities will depend primarily upon our ability to:

5 unchanged sentences

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

Six Months Ended June 30,

Nine Months Ended September 30,

Cash and cash equivalents and restricted cash at beginning of period $ 29,397 $ 22,834

4 unchanged sentences

Cash and cash equivalents and restricted cash at end of period $ 126,669 $ 44,093

The increase in net cash provided by operating activities for the six months ended June 30, 2022 compared to the 2021 period is primarily due to increased operating cash flow from the acquisition of MNR and changes in our working capital.

The increase in net cash used in investing activities for the six months ended June 30, 2022 compared to the 2021 period is primarily due to our acquisition of MNR during the 2022 period as compared to two properties acquired during the 2021 period.

The change in net cash provided by financing activities for the six months ended June 30, 2022 to net cash used in financing activities during the 2021 period is primarily due to the net borrowings and sale of joint venture equity interests used to finance our acquisition of MNR in the 2022 period.

The decrease in net cash provided by operating activities for the nine months ended September 30, 2022 compared to the 2021 period is primarily due to changes in our working capital.

The increase in net cash used in investing activities for the nine months ended September 30, 2022 compared to the 2021 period is primarily due to our acquisition of MNR during the 2022 period as compared to our acquisition of four properties and one parcel of developable land during the 2021 period.

The increase in net cash provided by financing activities for the nine months ended September 30, 2022 compared to the 2021 period is primarily due to the net borrowings and sale of joint venture equity interests used to finance our acquisition of MNR in the 2022 period.

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

1 unchanged sentence

We generally do not intend to purchase “turn around” properties, or properties that do not generate positive cash flows, but we may conduct construction or redevelopment activities on our properties.

As of June 30, 2022, we had cash and cash equivalents of $291,866.

As of September 30, 2022, we had cash and cash equivalents of $26,381.

To maintain our qualification for taxation as a REIT under the Internal Revenue Code of 1986, as amended, or the IRC, we generally are required to distribute at least 90% of our REIT taxable income annually, subject to specified adjustments and excluding any net capital gain.

2 unchanged sentences

On July 14, 2022, we announced that we reduced our quarterly cash distribution rate on our common shares to $0.01 per share and we expect our distributions to our common shareholders in 2022 will be, together with distributions we paid earlier in 2022, at least equal to the minimum amounts required for us to remain a REIT for federal income tax purposes.

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.

On February 25, 2022, subsidiaries of our consolidated joint venture entered into a loan agreement with 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.

1 unchanged sentence

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 June 30, 2022, the weighted average annual interest rate payable under our Floating Rate Loan was 4.04% and the weighted average interest rate for borrowings under the Floating Rate Loan was 3.61% and 3.38% for the three months ended June 30, 2022 and the period from February 25, 2022 to June 30, 2022, respectively.

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.

We also purchased an interest rate cap through March 2024 with a SOFR strike rate equal to 3.40%.

As of September 30, 2022, the weighted average annual interest rate payable under the Floating Rate Loan was 5.62% and the weighted average interest rate for borrowings under the Floating Rate Loan was 4.94% and 4.23% for the three months ended September 30, 2022 and the period from February 25, 2022 to September 30, 2022, respectively.

Also on February 25, 2022, certain of our subsidiaries entered into a loan agreement with the Bridge Lenders, and a mezzanine loan agreement with 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 June 30, 2022, the weighted average annual interest rate payable under our Bridge Loan was 4.20% and the weighted average annual interest rate for borrowings under the Bridge Loan was 5.29% and 5.23% for the three months ended June 30, 2022 and the period from February 25, 2022 to June 30, 2022, respectively.

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.

We also purchased an interest rate cap with a SOFR strike rate equal to 2.70%.

The Bridge Loan was repaid in full on September 22, 2022 with cash on hand and proceeds from the ILPT Floating Rate Loan.

During the three and nine months ended September 30, 2022, we also recorded a $22,231 loss on early extinguishment of debt to write off unamortized costs related to the Bridge Loan and related interest rate cap.

The weighted average annual interest rate for borrowings under the Bridge Loan was 5.01% and 4.24% for the period from July 1, 2022 to September 22, 2022 and the period from February 25, 2022 to September 22, 2022, respectively.

Also on February 25, 2022, certain of our subsidiaries entered into a loan agreement with the Fixed Rate Lenders, and mezzanine loan agreements with 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 4.42%.

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 their respective initial terms, subject to certain conditions set forth in the applicable loan agreement.

The interest only Fixed Rate Loan matures in March 2032 and requires that interest be paid at a weighted average annual fixed rate of 4.42%.

We used the aggregate net proceeds from the Loans to partially fund the acquisition of MNR.

Principal payments on the Floating Rate Loan and Fixed Rate Loan are not required prior to the end of their respective initial terms, 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 (2) 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.

On September 22, 2022, certain of our subsidiaries entered into a loan agreement with the ILPT Floating Rate Lenders, and a mezzanine loan agreement with the ILPT Floating Rate Mezz Lenders, pursuant to which we obtained ILPT Floating Rate loan, secured by 104 of our properties.

The ILPT Floating Rate Loan is comprised of a $1,100,000 mortgage loan and a $135,000 mezzanine loan.

Also, on September 22, 2022, we entered into a guaranty in favor of the ILPT Floating Rate Lenders and the ILPT Floating Rate Mezz Lenders, pursuant to which we guaranteed certain limited recourse obligations of our subsidiaries with respect to the ILPT Floating Rate Loan.

The interest only ILPT Floating Rate Loan matures on October 9, 2024, subject to three, one year extension options, and requires that interest be paid at an annual rate of SOFR, which is capped at an annual rate of 2.25% for the initial term of the ILPT Floating Rate Loan, plus a weighted average premium of 3.93%.

The weighted average interest rate payable under the ILPT Floating Rate Loan as of September 30, 2022 and for the period from September 22, 2022 to September 30, 2022 was 6.18%.

For further information on our interest rate caps, see Notes 5 and 10 to the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

The agreements governing the Floating Rate Loan, Fixed Rate Loan and the ILPT Floating Rate Loan contain customary covenants and provide for acceleration of payment of all amounts due thereunder upon the occurrence and continuation of certain events of default.

In connection with the Merger, our consolidated joint venture, in which we own a 61% equity interest, assumed an aggregate $323,432 of former MNR mortgages secured by 11 properties which are owned by this joint venture.

1 unchanged sentence

The value of these mortgages approximated their estimated fair value on the date of acquisition.

As of June 30, 2022, we have an aggregate principal amount of $4,451,429 of debt, including the Loans, scheduled to mature between 2022 and 2038.

As of September 30, 2022, we have an aggregate principal amount of $4,295,842 of debt, including the Floating Rate Loan, Fixed Rate Loan and the ILPT Floating Rate Loan, scheduled to mature between 2022 and 2038.

Since committing to the acquisition of MNR, there have been unanticipated increases in interest rates and uncertainty in real estate market conditions.

As a result, it is taking longer than originally expected to complete our long term financing plan for the MNR acquisition, which includes the repayment of the Bridge Loan with borrowings under a longer term financing arrangement and proceeds from property sales.

In addition, we plan to sell additional equity interests in our consolidated joint venture, which would reduce our ownership percentage in that joint venture and raise additional proceeds to reduce our outstanding indebtedness.

The current economic conditions have negatively impacted the real estate market and we may not be able to sell properties and/or additional equity interests in our joint venture as expected or at all.

This property is 100% leased to a single tenant with a remaining lease term of approximately 14.9 years.

This property was a committed MNR acquisition at the time we acquired MNR and was purchased directly by our consolidated joint venture.

As a result, the debt financing used to acquire MNR has been more expensive than originally anticipated and it is taking longer than originally expected to complete our long term financing plan for the MNR acquisition.

We planned to sell certain properties and to sell additional equity interests in our consolidated joint venture, which would reduce our ownership percentage in that joint venture and raise additional proceeds to reduce our outstanding indebtedness.

The current economic conditions have negatively impacted the real estate market and we may not be able to sell properties or additional equity interests in our joint venture as expected or at all.

This property is 100% leased to a single tenant with a remaining lease term of approximately 14.9 years at the time of acquisition.

This property was one of two committed MNR property acquisitions at the time of the Merger and was acquired directly by our consolidated joint venture.

In September 2022, our consolidated joint venture terminated the agreement for the other committed MNR property acquisition.

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

Consolidated Joint Venture

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 former MNR mortgages on certain of the properties.

We account for this joint venture on a consolidated basis in our condensed consolidated financial statements.

We recognized a 39% noncontrolling interest in our condensed consolidated financial statements for the three months ending June 30, 2022.

The portion of this joint venture's net loss not attributable to us, or $7,781 and $11,042 for the three and six months ended June 30, 2022, respectively, is reported as noncontrolling interest in our condensed consolidated statements of comprehensive income (loss).

During the three and six months ended June 30, 2022, this joint venture made aggregate cash distributions of $1,365,000 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.

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 then committed, but not yet then completed, property acquisitions.

The joint venture assumed $323,432 aggregate principal amount of former MNR mortgage debt on certain of the properties.

In July 2022, our consolidated joint venture completed one of the two committed MNR property acquisitions, and in September 2022, our consolidated joint venture terminated the agreement for the other committed MNR property acquisition.

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 and nine months ended September 30, 2022.

The portion of this joint venture's net loss not attributable to us, or $38,318 and $49,360 for the three and nine months ended September 30, 2022, respectively, is reported as noncontrolling interest in our condensed consolidated statements of comprehensive income (loss).

During the nine months ended September 30, 2022, this joint venture made aggregate cash distributions of $1,365 to the other joint venture investor, which is reflected as a decrease in total equity attributable to noncontrolling interest in our condensed consolidated balance sheets.

No distributions were made during the three months ended September 30, 2022.

We may seek to sell additional equity interests in this joint venture and use the proceeds to reduce our debt.

1 unchanged sentence

Unconsolidated Joint Venture

As of June 30, 2022 and December 31, 2021, we also owned an interest in an unconsolidated joint venture.

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

We recorded a change in the fair value of our investment in our unconsolidated joint venture of $1,610 and $1,876 for the three months ended June 30, 2022 and 2021, respectively, and $3,337 and $4,457 for the six months ended June 30, 2022 and 2021, respectively, as equity in earnings of investees in our condensed consolidated statements of comprehensive income (loss).

In addition, our unconsolidated joint venture made aggregate cash distributions of $1,322 and $660 during the three months ended June 30, 2022 and 2021, respectively, and $2,642 and $1,320, during the six months ended June 30, 2022 and 2021, respectively, to us.

As of September 30, 2022 and December 31, 2021, we also owned a 22% 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.

We recorded a change in the fair value of our investment in the unconsolidated joint venture of $3,297 and $998 for the three months ended September 30, 2022 and 2021, respectively, and $6,634 and $5,455 for the nine months ended September 30, 2022 and 2021, respectively, as equity in earnings of unconsolidated joint venture in our condensed consolidated

statements of comprehensive income (loss).

In addition, the unconsolidated joint venture made aggregate cash distributions to us of $1,320 and $660 during the three months ended September 30, 2022 and 2021, respectively, and $3,962 and $1,980, during the nine months ended September 30, 2022 and 2021, respectively.

In October 2022, the unconsolidated joint venture made a cash distribution to us of $20,900, including amounts related to a debt financing.

For further information regarding this joint venture, see Notes 2, 5 and 11 to the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

1 unchanged sentence

We may also assume mortgage notes in connection with future acquisitions.

When the maturities of our debt approach, we intend to explore refinancing alternatives.

Such alternatives may include incurring term debt, obtaining financing secured by mortgages on properties we own, issuing new equity or debt securities, obtaining a

revolving credit facility, participating in joint ventures or selling properties.

When the maturities of our debt approach or we desire to reduce our leverage or refinance debt, we intend to explore refinancing alternatives, property sales or sales of equity interests in joint ventures.

Such alternatives may include incurring term debt, obtaining financing secured by mortgages on properties we own, issuing new equity or debt securities, obtaining a revolving credit facility, participating or selling equity interests in joint ventures or selling properties.

We currently have an effective shelf registration statement that allows us to issue public securities on an expedited basis, but we cannot be sure that there will be purchasers for such securities.

6 unchanged sentences

We intend to conduct our business activities in a manner which will afford us reasonable access to capital for investing and financing activities.

During the six months ended June 30, 2022, we paid quarterly cash distributions to our shareholders totaling $43,167 using existing cash balances.

During the nine months ended September 30, 2022, we paid quarterly cash distributions to our shareholders totaling $43,821 using existing cash balances.

For more information regarding these distributions we paid in 2022, see Note 6 to the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

On July 14, 2022, we declared a quarterly distribution of $0.01 per common share, or approximately $650, to shareholders of record on July 25, 2022.

We expect to pay this distribution to our shareholders on or about August 18, 2022 using cash balances.

On October 13, 2022, we declared a quarterly distribution of $0.01 per common share, or approximately $656, to shareholders of record on October 24, 2022.

We expect to pay this distribution to our shareholders on or about November 17, 2022 using cash balances.

We reduced our quarterly dividend to enhance our liquidity until we complete our long term financing plan for the MNR acquisition and/or our leverage profile otherwise improves.

During the three and six months ended June 30, 2022 and 2021, amounts capitalized for tenant improvements, leasing costs, building improvements and development and redevelopment activities were as follows:

Three Months Ended Six Months Ended

June 30, June 30,

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

Three Months Ended Nine Months Ended

September 30, September 30,

2022 2021 2022 2021

9 unchanged sentences

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

As of June 30, 2022, we had estimated unspent leasing related obligations of $27,998.

As of September 30, 2022, we had estimated unspent leasing related obligations of $25,939.

Debt Covenants (dollars in thousands)

Our principal debt obligations at June 30, 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;

Our principal debt obligations at September 30, 2022 were:

(1) $1,235,000 outstanding principal amount of the ILPT Floating Rate Loan secured by 104 of our properties;

(2) $1,400,000 outstanding principal amount of the Floating Rate Loan secured by 82 properties owned by our consolidated joint venture;

(3) $700,000 outstanding principal amount of the Fixed Rate Loan secured by 17 our properties;

(4) $650,000 outstanding principal amount of a mortgage loan secured by 186 of our properties;

1 unchanged sentence

For further information regarding our indebtedness, see Note 4 to the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

The agreements and related documents governing the Loans and the $650,000 mortgage loan contain customary covenants, provide for acceleration of payment of all amounts due thereunder upon the occurrence and continuation of certain events of default and, in the case of the $650,000 mortgage loan, also require us to maintain a minimum consolidated net worth of at least $250,000 and liquidity of at least $15,000.

As of June 30, 2022, we believe that we were in compliance with all of the covenants and other terms under the agreements governing the Loans and the $650,000 mortgage loan.

The agreements and related documents governing the ILPT Floating Rate Loan, Floating Rate Loan, Fixed Rate Loan and the $650,000 mortgage loan contain customary covenants, provide for acceleration of payment of all amounts due thereunder upon the occurrence and continuation of certain events of default and, in the case of the $650,000 mortgage loan, also require us to maintain a minimum consolidated net worth of at least $250,000 and liquidity of at least $15,000.

As of September 30, 2022, we believe that we were in compliance with all of the covenants and other terms under the agreements governing the ILPT Floating Rate Loan, Floating Rate Loan, Fixed Rate Loan and the $650,000 mortgage loan.

Certain of the mortgages we assumed in conjunction with our acquisition of MNR are non-recourse, subject to certain limitations, and do not contain any material financial covenants.

The agreements governing the Loans and the $650,000 mortgage loan contain certain exceptions to the general non-recourse provisions, including our obligation to indemnify the lenders for certain potential environmental losses.

The agreements governing the ILPT Floating Rate Loan, Floating Rate Loan, Fixed Rate Loan and the $650,000 mortgage loan contain certain exceptions to the general non-recourse provisions, including our obligation to indemnify the lenders for certain potential environmental losses.

Related Person Transactions

11 unchanged sentences

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 2. Management’s Discussion and Analysis