What changed in this filing

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Item 1. Financial Statements

2023-10-25 compared with 2023-07-25 · 244 added, 252 removed, 314 unchanged (61% of the section changed)

3 unchanged sentences

(dollars in thousands, except per share data)

June 30, December 31,

September 30, December 31,

Real estate properties:

30 unchanged sentences

Total equity attributable to common shareholders 713,515 790,724

Total equity attributable to noncontrolling interest 516,992 540,047

Noncontrolling interest

504,623 540,047

Total equity 1,218,138 1,330,771

4 unchanged sentences

(amounts in thousands, except per share data)

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

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

2023 2022 2023 2022

4 unchanged sentences

General and administrative 7,712 9,110 23,750 24,896

Acquisition and other transaction related costs — 586 — 586

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

13 unchanged sentences

Other comprehensive income:

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 )

Unrealized (loss) gain on derivatives

( 6,635 ) 8,847 ( 3,392 ) 18,917

unrealized loss (gain) on derivatives attributable to noncontrolling interest

2,290 ( 4,119 ) 3,631 ( 6,617 )

Other comprehensive (loss) income attributable to common shareholders

( 4,345 ) 4,728 239 12,300

Comprehensive loss attributable to common shareholders $ ( 30,457 ) $ ( 40,899 ) $ ( 76,510 ) $ ( 183,380 )

Weighted average common shares outstanding (basic and diluted)

65,488 65,250 65,389 65,228

Per common share data (basic and diluted):

4 unchanged sentences

(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

Cumulative Total Equity

Number of Additional Other Cumulative Attributable to

Common Common Paid In Cumulative

Comprehensive Common Common

Noncontrolling Total

Shares Shares Capital Net Income

Distributions Shareholders

Interest Equity

Balance at December 31, 2022 65,568,145 $ 656 $ 1,014,201 $ 117,185 $ 21,903 $ ( 363,221 ) $ 790,724 $ 540,047 $ 1,330,771

Net loss — — — ( 24,809 ) — — ( 24,809 ) ( 10,737 ) ( 35,546 )

Share grants — — 388 — — — 388 — 388

Share repurchases ( 976 ) — ( 3 ) — — — ( 3 ) — ( 3 )

Share forfeitures ( 1,200 ) — ( 1 ) — — — ( 1 ) — ( 1 )

Share grants, repurchases and forfeitures

( 2,176 ) — 384 — — — 384 — 384

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

Net current period other comprehensive loss — — — — ( 7,018 ) — ( 7,018 ) ( 1,760 ) ( 8,778 )

Other comprehensive loss

— — — — ( 7,018 ) — ( 7,018 ) ( 1,760 ) ( 8,778 )

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

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

Share grants 140,000 1 567 — — — 568 — 568

Share repurchases ( 7,110 ) — ( 12 ) — — — ( 12 ) — ( 12 )

Share forfeitures ( 900 ) — ( 2 ) — — — ( 2 ) — ( 2 )

Share grants, repurchases and forfeitures 131,990 1 553 — — — 554 — 554

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

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

Other comprehensive income

— — — — 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

Net loss — — — ( 26,112 ) — — ( 26,112 ) ( 10,079 ) ( 36,191 )

Share grants, repurchases and forfeitures 147,114 1 330 — — — 331 — 331

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

Other comprehensive loss — — — — ( 4,345 ) — ( 4,345 ) ( 2,290 ) ( 6,635 )

Balance at September 30, 2023 65,845,073 $ 658 $ 1,015,468 $ 40,436 $ 22,142 $ ( 365,189 ) $ 713,515 $ 504,623 $ 1,218,138

Cumulative Total Equity

Number of Additional Other Cumulative Attributable to

Common Common Paid In Cumulative

Comprehensive Common Common

Noncontrolling Total

Shares Shares Capital Net 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

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

Share grants, repurchases and forfeitures ( 733 ) — 398 — — — 398 — 398

Other comprehensive income

— — — — 3,908 — 3,908 1,724 5,632

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

1 unchanged sentence

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

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

Share grants, repurchases and forfeitures 23,600 — 796 — — — 796 — 796

Other comprehensive income

— — — — 3,664 — 3,664 774 4,438

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

1 unchanged sentence

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

Net loss — — — ( 45,627 ) — — ( 45,627 ) ( 38,347 ) ( 83,974 )

Share grants, repurchases and forfeitures 141,245 2 384 — — — 386 — 386

Other comprehensive income

— — — — 4,728 — 4,728 4,119 8,847

Contributions from noncontrolling interest — — — — — — — 1,971 1,971

Distributions to common shareholders — — — — — ( 654 ) ( 654 ) — ( 654 )

Balance at September 30, 2022 65,568,704 $ 656 $ 1,013,802 $ 148,228 $ 12,300 $ ( 362,565 ) $ 812,421 $ 549,089 $ 1,361,510

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

2 unchanged sentences

(dollars in thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

16 unchanged sentences

Rents receivable 3,260 ( 16,299 )

Deferred leasing costs ( 4,194 ) ( 4,565 )

Other assets ( 11,459 ) 3,615

Accounts payable and other liabilities 9,745 14,921

Rents collected in advance ( 1,238 ) 9,030

Security deposits 301 672

Due to related persons 1,072 2,309

4 unchanged sentences

Proceeds from sale of marketable securities — 140,792

Proceeds from settlement of derivatives 24,445 —

Proceeds from sale of real estate 243 —

Proceeds from settlement of derivatives 40,426 —

Distributions in excess of earnings from unconsolidated joint venture 4,400 —

Net cash provided by (used in) investing activities 31,420 ( 3,457,034 )

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

INDUSTRIAL LOGISTICS PROPERTIES TRUST

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

(dollars in thousands)

Six Months Ended June 30,

CASH FLOWS FROM FINANCING ACTIVITIES:

2 unchanged sentences

Proceeds from secured bridge loan facility — 1,385,158

Repayment of secured bridge loan facility — ( 1,385,158 )

Borrowings under revolving credit facility — 3,000

20 unchanged sentences

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the condensed consolidated balance sheets to the amounts shown in the condensed consolidated statements of cash flows:

As of June 30,

As of September 30,

Cash and cash equivalents $ 83,283 $ 26,381

2 unchanged sentences

Total cash, cash equivalents and restricted cash shown in the statements of cash flows $ 222,503 $ 126,669

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

(1) Restricted cash consists of amounts escrowed for capital expenditures at certain of our mortgaged properties and cash held for the operations of our consolidated joint venture.

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

15 unchanged sentences

Real Estate Investments

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.

As of September 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 in 27 states totaling approximately 20,981,000 rentable square feet, owned by a consolidated joint venture in which we own a 61 % equity interest.

As of September 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 $ 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 incurred capital expenditures and leasing costs at certain of our properties of $ 5,275 and $ 8,574 during the three months ended September 30, 2023 and 2022, respectively, and $ 17,857 and $ 22,419 for the nine months ended September 30, 2023 and 2022, respectively.

During the nine months ended September 30, 2023, we committed $ 7,273 for expenditures related to tenant improvements and leasing costs for leases executed during the period for approximately 3,868,000 rentable square feet.

Committed, but unspent, tenant related obligations based on existing leases as of September 30, 2023 were $ 5,923 , of which $ 3,529 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.

Impairment indicators may include declining tenant occupancy, lack of progress leasing 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.

If the carrying value exceeds the projected undiscounted cash flows, 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.

2 unchanged sentences

INDUSTRIAL LOGISTICS PROPERTIES TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(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.

During the nine months ended September 30, 2023, we recognized a loss on impairment of real estate of $ 254 to reduce the carrying value of a property that was classified as held for sale at September 30, 2023 to its estimated sales price less costs to sell.

During the nine months ended September 30, 2022, we recognized a $ 100,747 loss on impairment for 25 properties we acquired as part of our acquisition of Monmouth Real Estate Investment Corporation, or MNR, on February 25, 2022, to adjust the carrying value of these 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 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 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

Consolidated Joint Venture - Mountain Industrial REIT LLC:

We own a 61 % equity interest in Mountain Industrial REIT LLC, or our consolidated joint venture.

In March 2023, we received gross proceeds of $ 270 and recognized a $ 974 net loss on sale of real estate as a result of a property in Everett, Washington partially taken by eminent domain.

As of September 30, 2023, we had three Mainland Properties with an aggregate carrying value of $ 56,944 , classified as held for sale in our condensed consolidated balance sheet.

As of October 25, 2023, one of these properties is under agreement to sell for a sales price of $ 21,500 , excluding closing costs.

This pending sale is subject to conditions;

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

We terminated agreements to sell two of these properties for an aggregate sales price of $ 43,765 and we continue to market one of these two properties for sale.

Consolidated Joint Venture

We own a 61 % equity interest in Mountain Industrial REIT LLC, or Mountain JV, or our consolidated joint venture, which owns 94 properties in 27 states totaling approximately 20,981,000 rentable square feet.

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 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:

We own a 22 % equity interest in The Industrial Fund REIT LLC, or the unconsolidated joint venture.

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

The portion of this joint venture's net loss not attributable to us, or $ 10,238 and $ 38,318 , for the three months ended September 30, 2023 and 2022, respectively, and $ 31,642 and $ 49,360 for the nine months ended September 30, 2023 and for the period from February 25, 2022 to September 30, 2022, respectively, is reported as net loss attributable to noncontrolling interest in our condensed consolidated statements of comprehensive income (loss).

As of September 30, 2023, our consolidated joint venture had total assets of $ 3,065,834 and total liabilities of $ 1,781,222 .

Consolidated Tenancy in Common

An unrelated third party owns an approximate 33 % tenancy in common interest in one property located in Somerset, New Jersey with approximately 64,000 rentable square feet, and we own the remaining 67 % tenancy in common interest in this property.

The portion of this property’s net income (loss) not attributable to us, or $ 159 and ($ 29 ), for the three months ended September 30, 2023 and 2022, respectively, and $ 74 and ($ 42 ) for the nine months ended September 30, 2023 and the period from the date we acquired our interest in this property, February 25, 2022 to September 30, 2022, respectively, is reported as net loss attributable to noncontrolling interest in our condensed consolidated statements of comprehensive income (loss).

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

Unconsolidated Joint Venture

We own a 22 % equity interest in The Industrial Fund REIT LLC, or the unconsolidated joint venture, which owns 18 industrial properties located in 12 states totaling approximately 11,726,000 rentable square feet.

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 $ 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

We recognize changes in the fair value of our investment in the unconsolidated joint venture as equity in earnings of the unconsolidated joint venture in our condensed consolidated statements of comprehensive income (loss).

INDUSTRIAL LOGISTICS PROPERTIES TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(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 $ 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.

We are a lessor of industrial and logistics properties.

2 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 $ 3,355 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 increased rental income by $ 3,414 and $ 3,794 to record revenue on a straight line basis during the three months ended September 30, 2023 and 2022, respectively, and $ 10,531 and $ 8,170 for the nine months ended September 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 $ 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.

Such payments totaled $ 19,310 and $ 16,664 for the three months ended September 30, 2023 and 2022, respectively, and $ 58,700 and $ 46,071 for the nine months ended September 30, 2023 and 2022, respectively.

Generally, payments of ground lease obligations are made by our tenants.

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

We define annualized rental revenues as the annualized contractual base rents from our tenants pursuant to our lease agreements as of the measurement date, including straight line rent adjustments and estimated recurring expense reimbursements to be paid to us, and excluding lease value amortization.

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 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 $ 4,867 and $ 4,943 , respectively, as of June 30, 2023, and $ 5,084 and $ 5,149 , respectively, as of December 31, 2022.

We are the lessee for three of our properties subject to ground leases and one office property that we assumed as part of our acquisition of MNR.

For leases with a term greater than 12 months under which we are the lessee, we are required to record a right of use asset and lease liability.

The values of our right of use assets and related lease liabilities were $ 4,757 and $ 4,837 , respectively, as of September 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 $ 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.

We sublease a portion of our office property assumed in the acquisition of MNR.

Rent expense incurred under this lease, net of sublease revenue, was $ 12 and $ 176 for three months ended September 30, 2023 and 2022, respectively, and $ 141 and $ 355 for the nine months ended September 30, 2023 and the period from February 25, 2022 to September 30, 2022, respectively.

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

Generally, payments of ground lease obligations are made by our tenants.

INDUSTRIAL LOGISTICS PROPERTIES TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except per share data)

Tenant Concentration

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 %

Subsidiaries of FedEx Corporation and Amazon.com Services, Inc.

were responsible for approximately 29.8 % and 6.7 % of our annualized rental revenues as of September 30, 2023, respectively, and 29.6 % and 6.8 % as of September 30, 2022, respectively.

Geographic Concentration

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.

For the three months ended September 30, 2023 and 2022, approximately 28.1 % and 26.8 %, respectively, of our rental income was from our Hawaii Properties.

For the nine months ended September 30, 2023 and 2022, approximately 27.9 % and 30.6 %, respectively, of our rental income was from our Hawaii Properties.

INDUSTRIAL LOGISTICS PROPERTIES TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share data)

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

Principal Balance as of of Collateral

June 30, December 31, Interest At June 30,

Entity Type Secured By:

Rate Maturity 2023

ILPT Floating Rate - Interest only 104 Properties

$ 1,235,000 $ 1,235,000 6.18 % 10/09/24 $ 1,056,804

ILPT Fixed Rate - Interest only 186 Properties

650,000 650,000 4.31 % 02/07/29 490,023

ILPT Fixed Rate - Interest only 17 Properties

700,000 700,000 4.42 % 03/09/32 511,664

Mountain JV (2)

Floating Rate - Interest only 82 Properties

1,400,000 1,400,000 6.17 % 03/09/24 1,883,377

Mountain JV (2)

Fixed Rate - Interest only Four Properties

91,000 — 6.25 % 06/10/30 190,883

Mountain JV (2)

Fixed Rate - Amortizing One Property

12,042 12,691 3.67 % 05/01/31 29,257

Mountain JV (2)

Fixed Rate - Amortizing One Property

13,536 14,144 4.14 % 07/01/32 44,143

Mountain JV (2)

Fixed Rate - Amortizing One Property

29,797 30,949 4.02 % 10/01/33 85,968

Mountain JV (2)

Fixed Rate - Amortizing One Property

41,636 43,219 4.13 % 11/01/33 130,644

Mountain JV (2)

Fixed Rate - Amortizing One Property

25,310 26,175 3.10 % 06/01/35 47,056

Mountain JV (2)

Fixed Rate - Amortizing One Property

40,759 42,087 2.95 % 01/01/36 100,502

Mountain JV (2)

Fixed Rate - Amortizing One Property

44,991 46,109 4.27 % 11/01/37 111,510

Mountain JV (2)

Fixed Rate - Amortizing One Property

As of September 30, 2023 and December 31, 2022, our outstanding indebtedness consisted of the following:

Principal Balance at

Carrying Value of Collateral at

September 30, December 31, Interest September 30, December 31,

Entity Secured By

2023 2022 Rate (1)

Type Maturity

$ 1,235,000 $ 1,235,000 6.18 % Floating 10/9/2024 $ 1,049,983 $ 1,071,815

650,000 650,000 4.31 % Fixed 2/7/2029 489,901 490,416

700,000 700,000 4.42 % Fixed 3/9/2032 508,383 518,806

1,400,000 1,400,000 6.17 % Floating 3/9/2024 1,870,541 1,909,185

91,000 — 6.25 % Fixed 6/10/2030 184,375 —

11,712 12,691 3.67 % Fixed 5/1/2031 29,094 30,800

13,228 14,144 4.14 % Fixed 7/1/2032 43,826 44,777

29,213 30,949 4.02 % Fixed 10/1/2033 85,380 87,143

40,832 43,219 4.13 % Fixed 11/1/2033 130,197 131,539

24,873 26,175 3.10 % Fixed 6/1/2035 46,725 47,718

40,087 42,087 2.95 % Fixed 1/1/2036 99,805 101,896

44,423 46,109 4.27 % Fixed 11/1/2037 110,881 113,063

50,002 52,031 3.25 % Fixed 1/1/2038 114,259 116,607

— 13,556 N/A Fixed 10/1/2028 — 63,314

— 4,865 N/A Fixed 4/1/2030 — 39,724

— 5,145 N/A Fixed 4/1/2030 — 39,724

— 14,392 N/A Fixed 9/1/2030 — 50,825

Total / weighted average

4,330,370 4,290,363 5.47 % $ 4,763,350 $ 4,857,352

Mountain JV (2)

Fixed Rate - Amortizing One Property

— 13,556 3.76 % 10/01/28 N/A

Mountain JV (2)

Fixed Rate - Amortizing One Property

— 4,865 3.77 % 04/01/30 N/A

Mountain JV (2)

Fixed Rate - Amortizing One Property

— 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

Unamortized debt issuance costs ( 26,739 ) ( 45,862 )

Total indebtedness, net $ 4,303,631 $ 4,244,501

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

In accordance with GAAP, our carrying values and recorded interest expense may be different because of market conditions at the time we assumed certain of these debts.

(2) Mountain JV is our consolidated joint venture in which we own a 61 % equity interest .

See Notes 2, 5, 7, 8 and 9 for more information regarding this joint venture.

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 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 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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except per share data)

respectively.

(1) Interest rates are as of September 30, 2023 and reflect the impact of interest rate caps, if any, and exclude the impact of the amortization of debt issuance costs, premiums and discounts.

Our $ 1,235,000 loan, 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, plus a weighted average premium of 3.93 %.

The weighted average interest rate payable under the ILPT Floating Rate Loan was 6.18 %, including the impact of our interest rate cap on SOFR of 2.25 %, for both the three and nine months ended September 30, 2023.

Beginning in October 2023, subject to the satisfaction of certain conditions, we have the option to prepay the ILPT Floating Rate Loan in full or in part at any time at par with no premium.

Our $ 1,400,000 loan, 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 plus a premium of 2.77 %.

The weighted average annual interest rate payable under the Floating Rate Loan was 6.17 %, including the impact of our interest rate cap on SOFR of 3.40 %, for both the three and nine months ended September 30, 2023.

The weighted average annual interest rate payable 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.

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.

3 unchanged sentences

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 June 30,

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

Mortgage notes payable (secured by one property in Florida)

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

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

5.30 % 10/1/2027 123,700

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

3.33 % 11/7/2029 350,000

Weighted average/total 3.82 % (2) $ 530,680

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

none of the debt is recourse to us.

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

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.

We recognized a loss on early extinguishment of debt of $ 359 for the nine months ended September 30, 2023 in conjunction with the repayment of these mortgage loans.

INDUSTRIAL LOGISTICS PROPERTIES TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(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 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

Our financial instruments include cash and cash equivalents, restricted cash, mortgages and notes payables, accounts payable and interest rate caps.

At September 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 September 30, 2023

At December 31, 2022

Carrying Estimated Carrying Estimated

Carrying Carrying

Fair Value Value (1)

30 unchanged sentences

$ 1,686,618 $ 1,548,147 $ 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.

(1) Includes unamortized debt issuance costs, premiums and discounts of $ 8,751 and $ 8,628 at September 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).

As Level 3 inputs are unobservable, our estimated fair value may differ materially from the actual fair value.

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

INDUSTRIAL LOGISTICS PROPERTIES TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(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 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:

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

Quoted Prices in Significant Other Significant

2 unchanged sentences

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

At June 30, 2023

At September 30, 2023

Recurring fair value measurements

6 unchanged sentences

$ 1,414 $ — $ — $ 1,414

(1) The investment in the unconsolidated joint venture reflected in our condensed consolidated balance sheet is reported at fair value based on significant unobservable inputs (Level 3 inputs).

The significant unobservable inputs used in the fair value are discount rates of between 5.25 % and 7.00 %, exit capitalization rates of between 4.95 % and 6.00 %, holding periods of approximately 10 years and market rents.

Our assumptions are based on the location, type and nature of each property, and current and anticipated market conditions, which are derived from appraisers, industry publications and our experience.

See Notes 2, 4, 7 and 8 for more information regarding this joint venture.

(2) Our derivative assets are carried at fair value as required by GAAP.

The estimated fair values of the derivative assets are based on current market prices in secondary markets for similar derivative contracts (Level 2 inputs).

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 $ 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.

At December 31, 2022

Recurring fair value measurements

Investment in unconsolidated joint venture

$ 124,358 $ — $ — $ 124,358

Interest rate cap derivatives (1)

$ 73,133 $ — $ 73,133 $ —

Non-recurring fair value measurements

Real estate properties (2)

$ 555,123 $ — $ — $ 555,123

(1) The estimated fair values of our interest rate cap derivatives are based on then current market prices in secondary markets for similar derivative contracts.

(2) At September 30, 2023 and December 31, 2022, we reduced the carrying value of one property and 25 properties, respectively, to their estimated fair value based on third party offers.

See Note 2 for more information.

At September 30, 2023 and December 31, 2022, the fair value of our investment in the unconsolidated joint venture was determined by discounting expected future cash flows based on prevailing market rents over a holding period and including an exit capitalization rate to determine the final year of cash flows.

The discount rates, exit capitalization rates and holding periods used are Level 3 significant unobservable inputs and are shown in the table below:

Capitalization

Valuation Technique

Discount Rates

Holding Periods

At September 30, 2023

Investment in unconsolidated joint venture

Discounted cash flow

5.25 % - 7.00 %

4.95 % - 6.00 %

10 - 12 years

At December 31, 2022

Investment in unconsolidated joint venture Discounted cash flow

5.25 % - 7.00 %

4.75 % - 6.00 %

The table below presents a summary of the changes in fair value for our investment in the unconsolidated joint venture:

Ended September 30,

Beginning balance

$ 129,082 $ 143,716 $ 124,358 $ 143,021

Equity in earnings of unconsolidated joint venture

719 3,297 7,423 6,634

Distributions from unconsolidated joint venture

( 5,390 ) ( 1,320 ) ( 7,370 ) ( 3,962 )

Ending balance

$ 124,411 $ 145,693 $ 124,411 $ 145,693

INDUSTRIAL LOGISTICS PROPERTIES TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share data)

Shareholders’ Equity

1 unchanged sentence

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.

On September 13, 2023, we awarded under our equity compensation plan an aggregate of 188,350 of our common shares, valued at $ 3.63 per share, the closing price of our common shares on Nasdaq on that day, to our officers and certain other employees of The RMR Group LLC, or RMR.

Common Share Purchases

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.

During the three and nine months ended September 30, 2023, we purchased an aggregate of 40,636 and 48,722 of our common shares, respectively, valued at a weighted average price of $ 3.54 and $ 3.29 per common share, respectively, from our officers and certain other current and former employees of RMR in satisfaction of tax withholding and payment obligations in connection with the vesting of awards of our common shares.

Distributions

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

During the nine months ended September 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

1 unchanged sentence

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

July 13, 2023 July 24, 2023 August 17, 2023 0.01 656

$ 0.03 $ 1,968

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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except per share data)

On October 12, 2023, we declared a regular quarterly distribution to common shareholders of record on October 23, 2023 of $ 0.01 per share, or approximately $ 658 .

We expect to pay this distribution to our shareholders on or about November 16, 2023 using cash balances.

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 $ 5,656 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.

Pursuant to our business management agreement with RMR, we recognized net business management fees of $ 5,919 and $ 17,301 for the three and nine months ended September 30, 2023, respectively, and $ 6,465 and $ 17,821 for the three and nine months ended September 30, 2022, respectively.

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

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.

INDUSTRIAL LOGISTICS PROPERTIES TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share data)

Pursuant to our property management agreement with RMR, we recognized aggregate property management and construction supervision fees of $ 3,464 and $ 10,286 for the three and nine months ended September 30, 2023, respectively, and $ 3,270 and $ 8,797 for the three and nine months ended September 30, 2022, respectively.

Of these amounts, for the three and nine months ended September 30, 2023, $ 3,293 and $ 9,745 , respectively, were included in other operating expenses in our condensed consolidated statements of comprehensive income (loss) and $ 171 and $ 541 , respectively, were capitalized as building improvements in our condensed consolidated balance sheets.

For the three and nine months ended September 30, 2022, $ 2,976 and $ 8,104 , respectively, were included in other operating expenses in our condensed consolidated statements of comprehensive income (loss) and $ 294 and $ 693 , respectively, were capitalized as buildings and improvements in our condensed consolidated balance sheets.

The amounts capitalized are being depreciated over the estimated useful lives of the related capital assets.

2 unchanged sentences

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.

We reimbursed RMR $ 2,375 and $ 6,216 for these expenses and costs for the three and nine months ended September 30, 2023, respectively, and $ 1,847 and $ 5,155 for the three and nine months ended September 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).

1 unchanged sentence

We have two separate joint venture arrangements, our consolidated joint venture and the unconsolidated joint venture.

See Notes 2, 4, 5, 8 and 9 for further information about these joint ventures.

RMR provides management services to both of these joint ventures.

We are not obligated to pay management fees to RMR under our management agreements with RMR for the services it provides to the unconsolidated joint venture.

We are obligated to pay management fees to RMR under our management agreements with RMR for the services it provides regarding our consolidated joint venture;

We are obligated to pay management fees to RMR under our management agreements with RMR for the services it provides to our consolidated joint venture;

however, that joint venture pays management fees directly to RMR, and any such fees paid by our consolidated joint venture are credited against the fees payable by us to RMR.

See Note 2 for further information about our joint ventures.

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

10 unchanged sentences

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

See Note 6 for information relating to the awards of our common shares we made in September 2023 to our officers and certain other employees of RMR and common shares we purchased from our officers and certain other current and former officers and employees of RMR in satisfaction of tax withholding and payment obligations in connection with the vesting of awards of our common shares.

We include amounts recognized as expense for awards of our common shares to our officers and RMR employees in general and administrative expenses in our condensed consolidated statements of comprehensive income (loss).

INDUSTRIAL LOGISTICS PROPERTIES TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share data)

Our Manager, RMR .

4 unchanged sentences

RMR provides management services to each of these joint ventures.

As of September 30, 2023 and December 31, 2022, we owed $ 613 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 sheets.

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

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

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 July 2023, respectively.

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

2 unchanged sentences

We are exposed to certain risks relating to our ongoing business operations, including the impact of changes in interest rates.

The only risk currently managed by us using derivative instruments is a part of our interest rate risk.

The only risk currently managed by us using derivative instruments is our interest rate risk.

We have an interest rate cap agreement to manage our interest rate risk exposure on each of the ILPT Floating Rate Loan and the Floating Rate Loan, both with interest payable at a rate equal to SOFR plus a premium.

3 unchanged sentences

Cash Flow Hedges of Interest Rate Risk

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 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)

We record all derivatives in our condensed consolidated balance sheets 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 at September 30, 2023 and December 31, 2022:

Interest Rate

Balance Sheet

Fair Value at

Underlying Instrument Rate

September 30, 2023 December 31, 2022

Interest rate cap

Other assets Floating Rate Loan

3.40 % $ 1,400,000 $ 12,712 $ 23,337

Interest Rate Cap Other assets ILPT Floating Rate Loan 2 2.25 % $ 1,235,000 $ 45,075

(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 cap

Other assets ILPT Floating Rate Loan 2.25 % $ 1,235,000 38,610 49,796

$ 51,322 $ 73,133

Interest rate caps designated as cash flow hedges involve the receipt of variable amounts from a counterparty if interest rates rise above the strike rate on the contract in exchange for an up-front premium.

For derivatives designated and qualifying as cash flow hedges of interest rate risk, the gain or loss on the derivative is recorded in accumulated other comprehensive income (loss) and subsequently reclassified into interest expense in the same period during which the hedged transaction affects earnings.

For derivatives designated and qualifying as cash flow hedges of interest rate risk, the gain or loss on the derivative is recorded in cumulative other comprehensive income and subsequently reclassified into interest expense in the same period during which the hedged transaction affects earnings.

Gains and losses on the derivative representing hedge components excluded from the assessment of effectiveness are recognized over the life of the hedge on a systematic and rational basis, as documented at hedge inception in accordance with our accounting policy election.

The earnings recognition of excluded components is presented in interest expense.

Amounts reported in accumulated other comprehensive income related to derivatives will be reclassified to interest expense as interest payments are made on our applicable debt.

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

Amounts reported in cumulative other comprehensive income related to derivatives will be reclassified to interest expense as interest payments are made on our applicable debt.

In September 2022, in conjunction with the repayment of the then existing $ 1,385,158 bridge loan facility secured by 109 of our properties, we sold two interest rate cap instruments with an aggregate notional amount of $ 1,385,158 , a strike rate equal to 2.70 % and an original expiration date of March 15, 2023 for $ 7,740 .

As the underlying debt instrument that these interest rate caps were intended to hedge was repaid in its entirety and the related interest expense was no longer probable to occur, these interest rate caps were no longer designated as cash flow hedges and the remaining deferred gain was reclassified from cumulative other comprehensive income as a reduction of loss on early extinguishment of debt.

INDUSTRIAL LOGISTICS PROPERTIES TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share data)

The following table summarizes the activity related to our cash flow hedges within cumulative other comprehensive income for the periods shown:

Three Months Ended September 30, Nine Months Ended September 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 gain on derivative instrument recognized in cumulative other comprehensive (loss) income, net $ 12,021 $ 4,438 $ 3,243 $ 10,070

Amount of gain recognized in cumulative other comprehensive income

$ 3,428 $ 15,047 $ 19,677 $ 24,200

Amount reclassified from cumulative other comprehensive income into interest expense

( 10,063 ) 761 ( 23,069 ) 1,678

Amount reclassified from cumulative other comprehensive income into loss on early extinguishment of debt — ( 6,961 ) — ( 6,961 )

Unrealized (loss) gain on derivative instrument recognized in cumulative other comprehensive loss

$ ( 6,635 ) $ 8,847 $ ( 3,392 ) $ 18,917

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