What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2023-07-25 compared with 2023-04-25 · 165 added, 115 removed, 401 unchanged (41% of the section changed)

3 unchanged sentences

(dollars in thousands, except per share data)

March 31, December 31,

June 30, December 31,

Real estate properties:

4 unchanged sentences

Total real estate properties, net 4,812,760 4,902,641

Assets of properties held for sale 37,261 —

Investment in unconsolidated joint venture 129,082 124,358

8 unchanged sentences

Mortgages and notes payable, net $ 4,301,276 $ 4,244,501

Liabilities of properties held for sale 31 —

Accounts payable and other liabilities 73,916 73,547

19 unchanged sentences

(amounts in thousands, except per share data)

Three Months Ended March 31,

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

2023 2022 2023 2022

Rental income $ 108,043 $ 107,222 $ 218,301 $ 178,597

3 unchanged sentences

General and administrative 8,131 9,709 16,038 15,786

Loss on impairment of real estate 254 100,747 254 100,747

Total expenses 76,913 173,483 156,062 218,646

3 unchanged sentences

Loss on sale of real estate — ( 10 ) ( 974 ) ( 10 )

Realized gain on equity securities — 1,232

Unrealized gain on equity securities — 2,460

Loss on equity securities — ( 9,450 ) — ( 5,758 )

Loss on early extinguishment of debt ( 359 ) — ( 359 ) ( 828 )

6 unchanged sentences

Other comprehensive income:

Unrealized (loss) gain on derivatives ( 8,778 ) 5,632

Unrealized gain on derivatives 12,021 4,438 3,243 10,070

unrealized gain (loss) on derivatives attributable to noncontrolling interest ( 419 ) ( 774 ) 1,341 ( 2,498 )

20 unchanged sentences

Balance at March 31, 2023 65,565,969 $ 656 $ 1,014,585 $ 92,376 $ 14,885 $ ( 363,877 ) $ 758,625 $ 527,550 $ 1,286,175

Balance at December 31, 2021 65,404,592 $ 654 $ 1,012,224 $ 343,908 $ — $ ( 318,744 ) $ 1,038,042 $ — $ 1,038,042

Net loss — — — ( 25,828 ) — — ( 25,828 ) ( 10,752 ) ( 36,580 )

3 unchanged sentences

Distributions to common shareholders — — — — — ( 656 ) ( 656 ) — ( 656 )

Net current period other comprehensive loss — — — — 11,602 — 11,602 419 12,021

Distributions to noncontrolling interest — — — — — — — ( 225 ) ( 225 )

Balance at June 30, 2023 65,697,959 $ 657 $ 1,015,138 $ 66,548 $ 26,487 $ ( 364,533 ) $ 744,297 $ 516,992 $ 1,261,289

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)

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

Share grants — — 407 — — — 407 — 407

Share repurchases ( 333 ) — ( 7 ) — — — ( 7 ) — ( 7 )

Share forfeitures ( 400 ) — ( 2 ) — — — ( 2 ) — ( 2 )

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

Net (loss) income — — — ( 143,539 ) — — ( 143,539 ) ( 7,782 ) ( 151,321 )

Share grants 24,500 — 800 — — — 800 — 800

Share forfeitures ( 900 ) — ( 4 ) — — — ( 4 ) — ( 4 )

Net current period other comprehensive income — — — — 3,664 — 3,664 774 4,438

Distributions to noncontrolling interest — — — — — — — ( 1,365 ) ( 1,365 )

Distributions to common shareholders — — — — — ( 21,583 ) ( 21,583 ) — ( 21,583 )

Balance at June 30, 2022 65,427,459 $ 654 $ 1,013,418 $ 193,855 $ 7,572 $ ( 361,911 ) $ 853,588 $ 581,346 $ 1,434,934

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

2 unchanged sentences

(dollars in thousands)

Three Months Ended March 31,

Six Months Ended June 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

2 unchanged sentences

Depreciation 62,464 43,375

Loss on impairment of real estate 254 100,747

Net amortization of debt issuance costs, premiums and discounts 13,434 54,769

1 unchanged sentence

Amortization of deferred leasing costs 1,101 735

Unrealized gain on equity securities — ( 2,460 )

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

Loss on equity securities — 5,758

Straight line rental income ( 7,117 ) ( 4,376 )

25 unchanged sentences

(dollars in thousands)

Three Months Ended March 31,

Six Months Ended June 30,

CASH FLOWS FROM FINANCING ACTIVITIES:

8 unchanged sentences

Repurchase of common shares ( 15 ) ( 7 )

Net cash (used in) provided by financing activities ( 6,223 ) 3,777,878

Distributions to noncontrolling interest ( 225 ) ( 1,365 )

Net cash provided by financing activities 41,570 3,742,638

Increase in cash, cash equivalents and restricted cash 69,588 407,547

10 unchanged sentences

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:

Three Months Ended March 31,

As of June 30,

Cash and cash equivalents $ 71,695 $ 291,866

20 unchanged sentences

Real Estate Investments

As of March 31, 2023, our portfolio was comprised of 413 consolidated properties containing approximately 59,983,000 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 187 industrial properties containing approximately 43,254,000 rentable square feet located in 38 other states, or our Mainland Properties, which included 94 properties owned by a consolidated joint venture in which we own a 61 % equity interest.

As of March 31, 2023, we also owned a 22 % equity interest in an unconsolidated joint venture which owns 18 industrial properties located in 12 states totaling approximately 11,726,000 rentable square feet.

As of June 30, 2023, our portfolio was comprised of 413 consolidated properties containing approximately 59,983,000 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 187 industrial properties containing approximately 43,254,000 rentable square feet located in 38 other states, or our Mainland Properties, which included 94 properties owned by a consolidated joint venture in which we own a 61 % equity interest.

As of June 30, 2023, we also owned a 22 % equity interest in an unconsolidated joint venture which owns 18 industrial 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.

We incurred capital expenditures and leasing costs at certain of our properties of $ 4,931 and $ 3,765 during the three months ended March 31, 2023 and 2022, respectively.

During the three months ended March 31, 2023, we committed $ 1,937 for expenditures related to tenant improvements and leasing costs for leases executed during the period for approximately 1,143,000 square feet.

Committed, but unspent, tenant related obligations based on existing leases as of March 31, 2023 were $ 25,054 , of which $ 8,365 is expected to be spent during the next 12 months.

We incurred capital expenditures and leasing costs at certain of our properties of $ 7,651 and $ 10,080 during the three months ended June 30, 2023 and 2022, respectively, and $ 12,582 and $ 13,845 for the six months ended June 30, 2023 and 2022, respectively.

During the six months ended June 30, 2023, we committed $ 5,832 for expenditures related to tenant improvements and leasing costs for leases executed during the period for approximately 3,110,000 square feet.

Committed, but unspent, tenant related obligations based on existing leases as of June 30, 2023 were $ 23,876 , of which $ 6,481 is expected to be spent during the next 12 months.

We regularly evaluate whether events or changes in circumstances have occurred that could indicate an impairment in the value of long lived assets.

Impairment indicators may include declining tenant occupancy, lack of progress releasing vacant space, tenant bankruptcies, low long term prospects for improvement in property performance, weak or declining tenant profitability, cash flow or liquidity, our decision to dispose of an asset before the end of its estimated useful life and legislative, market or industry changes that could permanently reduce the value of a property.

If there is an indication that the carrying value of an asset is not recoverable, we estimate the projected undiscounted cash flows to determine if an impairment loss should be recognized.

The future net undiscounted cash flows are subjective and are based in part on assumptions regarding hold periods, market rents and terminal capitalization rates.

We determine the amount of any impairment loss by comparing the historical carrying value to estimated fair value.

We estimate fair value through an evaluation of recent financial performance and projected discounted cash flows using standard industry valuation techniques.

In addition to consideration of impairment upon the events or changes in circumstances described above, we regularly evaluate the remaining useful lives of our long lived assets.

If we change our estimate of the remaining useful lives, we allocate the carrying value of the affected assets over their revised remaining useful lives.

INDUSTRIAL LOGISTICS PROPERTIES TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except per share data)

During the three months ended June 30, 2023, we recorded a loss on impairment of real estate of $ 254 to reduce the carrying value of one of the two properties that were classified as held for sale at June 30, 2023 to its estimated sales price less costs to sell.

As of March 31, 2022, we classified 30 properties we acquired as part of our acquisition of Monmouth Real Estate Investment Corporation, or MNR, on February 25, 2022, as held for sale in our condensed consolidated balance sheet.

During the three months ended June 30, 2022, we determined not to sell these properties as a result of market conditions and reclassified those properties to held and used and recorded a $ 100,747 loss on impairment of real estate to adjust the carrying value of 25 of those 30 properties to their estimated fair value.

Disposition Activities

As of June 30, 2023, we had two Mainland Properties with 551,000 square feet and an aggregate carrying value of $ 36,864 classified as held for sale.

See Note 5 for more information on our properties held for sale.

In March 2023, we received gross proceeds of $ 270 and recorded a $ 974 net loss on sale of real estate as a result of a partial eminent domain taking at a property in Everett, Washington.

As of July 25, 2023, we have entered into agreements to sell three properties containing approximately 762,000 rentable square feet for an aggregate sales price of $ 65,265 , excluding closing costs.

These pending sales are subject to conditions;

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

Joint Venture Activities

As of March 31, 2023, we had equity investments in our joint ventures that consisted of the following:

As of June 30, 2023, we had equity investments in our joint ventures that consisted of the following:

ILPT Carrying Value

ILPT of Investment Number of Square

Joint Venture Presentation Ownership at March 31, 2023 Properties Location Feet

Joint Venture Presentation Ownership at June 30, 2023 Properties Location Feet

Mountain Industrial REIT LLC Consolidated 61 % N/A 94 Various 20,980,661

The Industrial Fund REIT LLC Unconsolidated 22 % $ 129,082 18 Various 11,726,137

INDUSTRIAL LOGISTICS PROPERTIES TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except per share data)

Consolidated Joint Venture - Mountain Industrial REIT LLC:

1 unchanged sentence

We control our consolidated joint venture and therefore account for the properties owned by 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 ended March 31, 2023 and for the period from this joint venture’s formation date, February 25, 2022, to March 31, 2022.

The portion of this joint venture's net loss not attributable to us, or $ 10,728 and $ 3,261 , for the three months ended March 31, 2023 and for the period from February 25, 2022 to March 31, 2022, respectively, is reported as net loss attributable to noncontrolling interest in our condensed consolidated statements of comprehensive income (loss).

This joint venture made no distributions for the three months ended March 31, 2023 or for the period from February 25, 2022 to March 31, 2022.

As of March 31, 2023, this joint venture had total assets of $ 3,064,043 and total liabilities of $ 1,721,021 .

We recognized a 39 % noncontrolling interest in our condensed consolidated financial statements for the three months ended June 30, 2023 and 2022, for the six months ended June 30, 2023 and the period from this joint venture’s formation date, February 25, 2022 to June 30, 2022.

The portion of this joint venture's net loss not attributable to us, or $ 10,676 and $ 7,781 , for the three months ended June 30, 2023 and 2022, respectively, and $ 21,404 and $ 11,042 for the six months ended June 30, 2023 and for the period from February 25, 2022 to June 30, 2022, respectively, is reported as net loss attributable to noncontrolling interest in our condensed consolidated statements of comprehensive income (loss).

As of June 30, 2023, our consolidated joint venture had total assets of $ 3,092,534 and total liabilities of $ 1,775,802 .

Unconsolidated Joint Venture - The Industrial Fund REIT LLC:

1 unchanged sentence

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 $ 3,961 and $ 1,727 for the three months ended March 31, 2023 and 2022, 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 $ 990 and $ 1,320 during the three months ended March 31, 2023 and 2022, respectively.

We recorded a change in the fair value of our investment in the unconsolidated joint venture of $ 2,743 and $ 1,610 for the three months ended June 30, 2023 and 2022, respectively, and $ 6,704 and $ 3,337 for the six months ended June 30, 2023 and 2022, 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 $ 990 and

INDUSTRIAL LOGISTICS PROPERTIES TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except per share data)

$ 1,322 during the three months ended June 30, 2023 and 2022, respectively, and $ 1,980 and $ 2,642 for the six months ended June 30, 2023 and 2022, respectively.

Consolidated Tenancy in Common:

An unrelated third party owns an approximate 33 % tenancy in common interest in one property 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 $ 9 and $ 12 , for the three months ended March 31, 2023 and for the period from February 25, 2022 to March 31, 2022, respectively, is reported as net loss attributable to noncontrolling interest in our condensed consolidated statements of comprehensive income (loss).

The portion of this property’s net loss not attributable to us, or $ 76 and $ 1 , for the three months ended June 30, 2023 and 2022, respectively, and $ 85 and $ 13 for the six months ended June 30, 2023 and the period from the date we acquired our interest in this property, February 25, 2022 to June 30, 2022, respectively, is reported as net loss attributable to noncontrolling interest in our condensed consolidated statements of comprehensive income (loss).

During the three and six months ended June 30, 2023, this tenancy in common made cash distributions of $ 225 to the unrelated third party investor, which is reflected as a decrease in the total equity attributable to noncontrolling interest in our condensed consolidated balance sheet.

See Notes 4, 5, 7, 8 and 9 for more information regarding these joint ventures.

3 unchanged sentences

We recognize rental income from operating leases 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.

We increased rental income by $ 3,762 and $ 1,156 to record revenue on a straight line basis during the three months ended March 31, 2023 and 2022, respectively.

We increased rental income by $ 3,355 and $ 3,220 to record revenue on a straight line basis during the three months ended June 30, 2023 and 2022, respectively, and $ 7,117 and $ 4,376 for the six months ended June 30, 2023 and 2022, respectively.

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 $ 21,099 and $ 12,380 for the three months ended March 31, 2023 and 2022, respectively.

Such payments totaled $ 18,291 and $ 16,828 for the three months ended June 30, 2023 and 2022, respectively, and $ 39,390 and $ 29,407 for the six months ended June 30, 2023 and 2022, respectively.

Right of use assets and lease liabilities.

Three of our properties are subject to ground leases and we are also the lessee under a lease for one office property, which we assumed as part of our acquisition of Monmouth Real Estate Investment Corporation, or MNR, in February 2022.

Three of our properties are subject to ground leases and we are also the lessee under a lease for one office property, which we assumed as part of our acquisition of MNR in February 2022.

For these 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.

The values of our right of use assets and related liabilities representing our future obligations under the lease arrangements under which we are the lessee were $ 4,976 and $ 5,046 , respectively, as of March 31, 2023, and $ 5,084 and $ 5,149 , respectively, as of December 31, 2022.

Our right of use assets and related lease liabilities are included in other assets, net and accounts payable and other liabilities, respectively, in our

INDUSTRIAL LOGISTICS PROPERTIES TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except per share data)

condensed consolidated balance sheets.

The values of our right of use assets and related liabilities representing our future obligations under the lease arrangements under which we are the lessee were $ 4,867 and $ 4,943 , respectively, as of June 30, 2023, and $ 5,084 and $ 5,149 , respectively, as of December 31, 2022.

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

We have a sublease for a portion of the MNR lease that expires on December 30, 2029.

Rent expense incurred under the MNR lease, net of sublease revenue, if any, was $ 101 for three months ended March 31, 2023 and $ 87 for the period from February 25, 2022 to March 31, 2022.

Rent expense incurred under the MNR lease, net of sublease revenue, if any, was $ 28 and $ 91 for three months ended June 30, 2023 and 2022, respectively, and $ 129 and $ 179 for the six months ended June 30, 2023 and the period from February 25, 2022 to June 30, 2022, respectively.

Rent expense is included in general and administrative expense in our condensed consolidated statements of comprehensive income (loss).

1 unchanged sentence

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.

INDUSTRIAL LOGISTICS PROPERTIES TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except per share data)

Tenant Concentration

Subsidiaries of FedEx Corporation, or FedEx, accounted for $ 34,787 , or 31.6 % and $ 13,468 , or 18.9 % of our rental income for the three months ended March 31, 2023 and 2022, respectively.

In addition, subsidiaries of Amazon.com, Inc., or Amazon, accounted for $ 7,515 , or 6.8 % and $ 5,615 , or 7.9 % of our rental income for the three months ended March 31, 2023 and 2022, respectively.

As of June 30, 2023, we had a concentration of properties leased to tenants, including their applicable subsidiaries, that leased over 5.0 % of our total rentable square footage.

The following table presents rental income recognized from these tenants for the three and six months ended June 30, 2023 and 2022:

Rentable Rental Income Rental Income

Square Three Months Ended Six Months Ended

Tenant Feet 6/30/2023 6/30/2022 6/30/2023 6/30/2022

FedEx Corporation/ FedEx Ground Package System, Inc.

22.0 % $ 32,934 30.5 % $ 31,063 29.0 % $ 67,721 31.0 % $ 44,531 24.9 %

Amazon.com Services, Inc./ Amazon.com Services LLC 7.6 % 7,326 6.8 % 7,236 6.7 % 14,841 6.8 % 12,852 7.2 %

Total 29.6 % $ 40,260 37.3 % $ 38,299 35.7 % $ 82,562 37.8 % $ 57,383 32.1 %

Geographic Concentration

For the three months ended March 31, 2023 and 2022, approximately 27.4 % and 37.4 %, respectively, of our rental income was from our Hawaii Properties.

For the three months ended June 30, 2023 and 2022, approximately 28.1 % and 29.8 %, respectively, of our rental income was from our Hawaii Properties.

For the six months ended June 30, 2023 and 2022, approximately 27.8 % and 32.8 %, respectively, of our rental income was from our Hawaii Properties.

INDUSTRIAL LOGISTICS PROPERTIES TRUST

1 unchanged sentence

(dollars in thousands, except per share data)

As of March 31, 2023, our outstanding indebtedness consisted of the following:

As of June 30, 2023, our outstanding indebtedness consisted of the following:

Principal Balance as of of Collateral

March 31, December 31, Interest At March 31,

June 30, December 31, Interest At June 30,

Entity Type Secured By:

10 unchanged sentences

Mountain JV (2)

Fixed Rate - Amortizing One Property

Fixed Rate - Interest only Four Properties

91,000 — 6.25 % 06/10/30 190,883

25 unchanged sentences

Fixed Rate - Amortizing One Property

41,425 42,087 2.95 % 01/01/36 101,199

— 13,556 3.76 % 10/01/28 N/A

Mountain JV (2)

Fixed Rate - Amortizing One Property

45,553 46,109 4.27 % 11/01/37 112,286

— 4,865 3.77 % 04/01/30 N/A

Mountain JV (2)

Fixed Rate - Amortizing One Property

51,360 52,031 3.25 % 01/01/38 115,824

— 5,145 3.85 % 04/01/30 N/A

Mountain JV (2)

Fixed Rate - Amortizing One Property

— 14,392 3.56 % 09/01/30 N/A

Total indebtedness $ 4,334,755 $ 4,290,363 $ 4,796,873

6 unchanged sentences

Our $ 1,235,000 interest only floating rate loan, secured by 104 of our properties, or the 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 secured overnight financing rate, or 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 interest rate payable on the ILPT Floating Rate Loan as of March 31, 2023 and the weighted average interest rate for the three months ended March 31, 2023 were both 6.18 %.

The interest rate payable on the ILPT Floating Rate Loan as of June 30, 2023 was 6.18 %.

The weighted average interest rate payable under the ILPT Floating Rate Loan was 6.18 % for both the three and six months ended June 30, 2023.

Subject to the satisfaction of certain conditions, we have the option to prepay up to $ 247,000 of the ILPT Floating Rate Loan at par with no premium, and to prepay the balance of the ILPT Floating Rate Loan in full or in part at any time, subject to a premium, and beginning in October 2023, without a premium.

Our $ 1,400,000 interest only floating rate loan, secured by 82 properties owned by our consolidated joint venture, or 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, which is capped at an annual rate of 3.40 % through the initial term of the Floating Rate Loan, plus a premium of 2.77 %.

The interest rate payable on the Floating Rate Loan as of March 31, 2023 was 6.17 %.

The weighted average annual interest rate payable under the Floating Rate Loan was 6.17 % for the three months ended March 31, 2023, and was 3.01 % for the period from February 25, 2022 to March 31, 2022.

Subject to the satisfaction of certain conditions, we have the option to prepay up to $ 280,000 of the Floating Rate Loan at par with no premium, and to prepay the balance of the Floating Rate Loan at any time, subject to a premium.

The interest rate payable on the Floating Rate Loan as of June 30, 2023 was 6.17 %.

The weighted average annual interest rate payable under the Floating Rate Loan was 6.17 % for both the three and six months ended June 30, 2023.

The weighted average annual interest rate payable under the Floating Rate Loan was 3.61 % and 3.38 % for the three months ended June 30, 2022 and the period from the date we obtained the Floating Rate loan, February 25, 2022 to June 30, 2022,

INDUSTRIAL LOGISTICS PROPERTIES TRUST

1 unchanged sentence

(dollars in thousands, except per share data)

respectively.

See Note 9 for more information regarding our interest rate caps.

In May 2023, our consolidated joint venture obtained a $ 91,000 fixed rate, interest only mortgage loan secured by four properties owned by our consolidated joint venture.

This mortgage loan matures in June 2030 and requires that interest be paid at an annual rate of 6.25 %.

A portion of the net proceeds from this mortgage loan was used to repay four outstanding mortgage loans of our consolidated joint venture with an aggregate outstanding principal balance of $ 35,910 and a weighted average interest rate of 3.70 %.

We recognized a loss on extinguishment of debt of $ 359 in conjunction with the repayment of these mortgage loans.

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

Principal Balance

Interest at March 31,

Interest at June 30,

Joint Venture (Unconsolidated) Rate Maturity Date 2023 (1)

1 unchanged sentence

3.60 % (2) 10/1/2023 $ 56,980

Mortgage notes payable (secured by 5 properties in four states)

Mortgage notes payable (secured by six properties in four states)

5.30 % 10/1/2027 123,700

6 unchanged sentences

The agreements governing certain of our indebtedness 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)

Fair Value of Assets and Liabilities

Our financial instruments include cash and cash equivalents, restricted cash, rents receivable, floating and fixed rate loans, accounts payable, rents collected in advance, interest rate caps, security deposits and amounts due from or to related persons.

At March 31, 2023 and December 31, 2022, 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, 2023

At June 30, 2023 and December 31, 2022, the fair value of our financial instruments approximated their carrying values in our condensed consolidated financial statements, due to their short term nature or floating interest rates, except as follows:

At June 30, 2023

At December 31, 2022

29 unchanged sentences

— — 5,145 4,829

Fixed rate loan, 3.56 % interest rate, due in 2030 (2)

— — 14,392 13,315

(1) Includes unamortized debt issuance costs, premiums and discounts of $ 8,348 and $ 8,627 as of March 31, 2023 and December 31, 2022, respectively.

$ 1,690,681 $ 1,549,780 $ 1,646,736 $ 1,487,147

(1) Includes unamortized debt issuance costs, premiums and discounts of $ 9,073 and $ 8,628 as of June 30, 2023 and December 31, 2022, respectively.

(2) This loan was repaid in May 2023.

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).

3 unchanged sentences

(dollars in thousands, except per share data)

The table below presents certain of our assets measured on a recurring and non-recurring basis at fair value at March 31, 2023 and December 31, 2022, categorized by the level of inputs as defined in the fair value hierarchy under GAAP, used in the valuation of each asset:

The table below presents certain of our assets measured on a recurring and non-recurring basis at fair value at June 30, 2023, 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

2 unchanged sentences

Total (Level 1) (Level 2) (Level 3)

At March 31, 2023

Recurring fair value measurements

Investment in unconsolidated joint venture (1)

$ 127,329 $ — $ — $ 127,329

Interest rate cap derivatives (2)

$ 58,215 $ — $ 58,215 $ —

At December 31, 2022

At June 30, 2023

Recurring fair value measurements

13 unchanged sentences

See Notes 4 and 9 for more information regarding our derivatives and hedging activities.

(3) We recorded a loss on impairment of real estate of $ 100,747 during the year ended December 31, 2022 to reduce the carrying value of 25 properties in our condensed consolidated balance sheet to their estimated fair value, based on third party offers (Level 3 inputs as defined in the fair value hierarchy under GAAP), due to a change in plans to sell and the reclassification of those properties from held for sale to held and used.

(3) We recorded a loss on impairment of real estate of $ 254 to reduce the carrying value of one of the two properties that were classified as held for sale at June 30, 2023 on our condensed consolidated balance sheet to its estimated sales price less costs to sell (Level 3 inputs).

See Note 2 for more information on our properties held for sale.

Shareholders’ Equity

Common Share Awards:

On June 1, 2023, in accordance with our Trustee compensation arrangements, we awarded to each of our seven Trustees 20,000 of our common shares, valued at $ 1.78 per share, the closing price of our common shares on The Nasdaq Stock Market LLC, or Nasdaq, on that day.

Common Share Purchases:

During the three months ended March 31, 2023, we purchased an aggregate of 976 of our common shares, valued at a weighted average price of $ 3.33 per common share, from certain former officers and employees 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.

During the six months ended June 30, 2023, we purchased an aggregate of 8,086 of our common shares, valued at a weighted average price of $ 2.00 per common share, from certain former officers and employees 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 three months ended March 31, 2023, we declared and paid regular quarterly distributions to common shareholders as follows:

During the six months ended June 30, 2023, we declared and paid regular quarterly distributions to common shareholders as follows:

Declaration Date Record Date Payment Date Distribution Per Share Total Distribution

January 12, 2023 January 23, 2023 February 16, 2023 $ 0.01 $ 656

On April 13, 2023, we declared a regular quarterly distribution to common shareholders of record on April 24, 2023 of $ 0.01 per share, or approximately $ 656 .

We expect to pay this distribution to our shareholders on or about May 18, 2023 using cash balances.

April 13, 2023 April 24, 2023 May 18, 2023 0.01 656

$ 0.02 $ 1,312

On July 13, 2023, we declared a regular quarterly distribution to common shareholders of record on July 24, 2023 of $ 0.01 per share, or approximately $ 657 .

We expect to pay this distribution to our shareholders on or about August 17, 2023 using cash balances.

INDUSTRIAL LOGISTICS PROPERTIES TRUST

1 unchanged sentence

(dollars in thousands, except per share data)

Per Common Share Amounts

We calculate basic earnings per common share by dividing net loss 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 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 March 31,

Net loss attributable to common shareholders $ ( 24,809 ) $ ( 6,514 )

Loss attributable to unvested participating securities 3 —

Net loss attributable to common shareholder used in calculating earnings per share $ ( 24,806 ) $ ( 6,514 )

Denominators:

Weighted average common shares for basic earnings per share 65,309 65,212

Effect of dilutive securities:

unvested share awards — —

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

65,309 65,212

Net loss attributable to common shareholders per common share - basic and diluted $ ( 0.38 ) $ ( 0.10 )

(1) For the three months ended March 31, 2023 and 2022, 257 and 18 unvested common shares, respectively, 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

4 unchanged sentences

and (2) a property management agreement, which relates to our property level operations.

Pursuant to our business management agreement with RMR, we recognized net business management fees of $ 5,726 and $ 4,399 for the three months ended March 31, 2023 and 2022, respectively.

Based on our common share total return, as defined in our business management agreement, as of March 31, 2023 and 2022, no incentive fees are included in the net business management fees we recognized for the three months ended March 31, 2023 or 2022.

Pursuant to our business management agreement with RMR, we recognized net business management fees of $ 5,656 and $ 11,382 for the three and six months ended June 30, 2023, respectively, and $ 6,957 and $ 11,356 for the three and six months ended June 30, 2022, respectively.

Based on our common share total return, as defined in our business management agreement, as of June 30, 2023 and 2022, no incentive fees are included in the net business management fees we recognized for the three and six months ended June 30, 2023 or 2022.

The actual amount of annual incentive fees for 2023, 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, 2023, and will be payable in January 2024.

1 unchanged sentence

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.

Pursuant to our property management agreement with RMR, we recognized aggregate property management and construction supervision fees of $ 3,452 and $ 2,763 for the three months ended March 31, 2023 and 2022, respectively.

Of these amounts, for the three months ended March 31, 2023 and 2022, $ 3,319 and $ 2,098 , respectively, were expensed to other operating expenses in our condensed consolidated financial statements and $ 133 and $ 31 , 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 $ 3,370 and $ 6,822 for the three and six months ended June 30, 2023, respectively, and $ 2,764 and $ 5,527 for the three and six months ended June 30, 2022, respectively.

Of these amounts, for the three and six months ended June 30, 2023, $ 3,133 and $ 6,452 , respectively, were expensed to other operating expenses in our condensed consolidated financial statements and $ 237 and $ 370 , respectively, were capitalized as building improvements in our condensed consolidated balance sheets.

For the three and six months ended June 30, 2022, $ 2,396 and $ 5,128 , respectively, were expensed to other operating expenses in our condensed consolidated financial statements and $ 368 and $ 399 , 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.

1 unchanged sentence

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

INDUSTRIAL LOGISTICS PROPERTIES TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except per share data)

incurred by RMR.

We reimbursed RMR $ 1,841 and $ 1,604 for these expenses and costs for the three months ended March 31, 2023 and 2022, respectively.

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 $ 2,000 and $ 3,841 for these expenses and costs for the three and six months ended June 30, 2023, respectively, and $ 1,704 and $ 3,308 for the three and six months ended June 30, 2022, 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).

7 unchanged sentences

See Note 8 for further information regarding our relationships, agreements and transactions with RMR.

INDUSTRIAL LOGISTICS PROPERTIES TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except per share data)

Related Person Transactions

6 unchanged sentences

Murray, one of our Managing Trustees until June 1, 2022 and our President and Chief Executive Officer until March 31, 2022, also serves as an officer and employee of RMR, and each of our current 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.

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

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

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

Other officers of RMR, including Messrs.

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

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

Our Manager, RMR .

5 unchanged sentences

See Notes 2, 4, 5, 7 and 9 for further information regarding our joint ventures and RMR’s management agreements with our joint ventures.

As of December 31, 2022 and March 31, 2023, we owed $ 616 and $ 640 , respectively, to the unconsolidated joint venture for rents that we collected on behalf of that joint venture.

As of June 30, 2023 and December 31, 2022, we owed $ 556 and $ 616 , respectively, to the unconsolidated joint venture for rents that we collected on behalf of that joint venture.

These amounts are presented as due to related persons in our condensed consolidated balance sheet.

We paid these amounts in January 2023 and April 2023, respectively.

We paid these amounts in January 2023 and July 2023, respectively.

For further information about these and other such relationships and certain other related person transactions, see our 2022 Annual Report.

5 unchanged sentences

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

INDUSTRIAL LOGISTICS PROPERTIES TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except per share data)

and with major financial institutions with which we or our related parties may also have other financial relationships.

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.

1 unchanged sentence

As required by Accounting Standards Codification 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, 2023:

Interest Rate Derivative Balance Sheet Line Item Underlying Instrument Number of Instruments Strike Rate Notional Amount Fair Value at March 31, 2023

The following table summarizes the terms of our outstanding interest rate cap agreements designated as cash flow hedges of interest rate risk as of June 30, 2023:

Interest Rate Derivative Balance Sheet Line Item Underlying Instrument Number of Instruments Strike Rate Notional Amount Fair Value at June 30, 2023

Interest Rate Cap Other assets Floating Rate Loan (1)

2 unchanged sentences

(1) The Floating Rate Loan was entered into by our consolidated joint venture.

INDUSTRIAL LOGISTICS PROPERTIES TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except per share data)

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.

3 unchanged sentences

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,

Amount of (loss) gain recognized in cumulative other comprehensive income (loss) $ ( 3,776 ) $ 5,375

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

2023 2022 2023 2022

Amount of gain recognized in cumulative other comprehensive income (loss) $ 20,025 $ 3,778 $ 16,249 $ 9,153

Amount reclassified from cumulative other comprehensive income (loss) into interest expense ( 8,004 ) 660 ( 13,006 ) 917

Unrealized (loss) gain on derivative instrument recognized in cumulative other comprehensive (loss) income, net $ ( 8,778 ) $ 5,632

Unrealized gain on derivative instrument recognized in cumulative other comprehensive (loss) income, net $ 12,021 $ 4,438 $ 3,243 $ 10,070

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