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Item 1. Financial Statements

2024-07-30 compared with 2024-04-30 · 148 added, 114 removed, 317 unchanged (45% 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:

36 unchanged sentences

(amounts in thousands, except per share data)

Three Months Ended March 31,

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

2024 2023 2024 2023

Rental income $ 110,621 $ 108,043 $ 222,856 $ 218,301

3 unchanged sentences

General and administrative 7,939 8,131 15,628 16,038

Loss on impairment of real estate — 254 — 254

Total expenses 75,716 76,913 153,165 156,062

Interest and other income 2,852 1,146

Interest income

2,935 1,797 5,787 2,943

Interest expense

1 unchanged sentence

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

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

Loss before income taxes and equity in earnings of unconsolidated joint venture

6 unchanged sentences

Other comprehensive income:

Unrealized loss on derivatives ( 4,846 ) ( 8,778 )

unrealized loss on derivatives attributable to noncontrolling interest

Other comprehensive loss attributable to common shareholders ( 2,958 ) ( 7,018 )

Unrealized (loss) gain on derivatives

( 1,510 ) 12,021 ( 6,356 ) 3,243

unrealized (gain) loss on derivatives attributable to noncontrolling interest ( 468 ) ( 419 ) 1,420 1,341

Other comprehensive (loss) income attributable to common shareholders

( 1,978 ) 11,602 ( 4,936 ) 4,584

Comprehensive loss attributable to common shareholders $ ( 25,153 ) $ ( 14,226 ) $ ( 51,514 ) $ ( 46,053 )

21 unchanged sentences

Balance at March 31, 2024 65,831,530 658 1,016,067 ( 14,207 ) 7,213 ( 366,506 ) 643,225 479,275 1,122,500

Net loss — — — ( 23,175 ) — — ( 23,175 ) ( 10,304 ) ( 33,479 )

Share grants, repurchases and forfeitures 160,979 2 913 — — — 915 — 915

Distributions to common shareholders — — — — — ( 659 ) ( 659 ) — ( 659 )

Other comprehensive (loss) income — — — — ( 1,978 ) — ( 1,978 ) 468 ( 1,510 )

Balance at June 30, 2024 65,992,509 $ 660 $ 1,016,980 $ ( 37,382 ) $ 5,235 $ ( 367,165 ) $ 618,328 $ 469,439 $ 1,087,767

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

4 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

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

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

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

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.

2 unchanged sentences

(dollars in thousands)

Three Months Ended March 31,

Six Months Ended June 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

Net loss $ ( 67,381 ) $ ( 72,126 )

Adjustments to reconcile net loss to net cash (used in) provided by operating activities:

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

Depreciation 63,111 62,464

4 unchanged sentences

Loss on sale of real estate — 974

Loss on impairment of real estate — 254

Loss on early extinguishment of debt — 359

Proceeds from settlement of derivatives ( 34,429 ) ( 24,445 )

9 unchanged sentences

Net cash provided by operating activities

18,839 10,631

CASH FLOWS FROM INVESTING ACTIVITIES:

3 unchanged sentences

Proceeds from sale of real estate — 243

Net cash (used in) provided by investing activities

( 11,770 ) 9,435

Net cash provided by investing activities 4,648 17,387

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from issuance of mortgage notes payable — 91,000

Repayment of mortgage notes payable ( 8,974 ) ( 46,607 )

3 unchanged sentences

Distributions to noncontrolling interest ( 163 ) ( 225 )

Net cash used in financing activities ( 5,465 ) ( 6,223 )

(Decrease) increase in cash and cash equivalents and restricted cash and cash equivalents ( 9,246 ) 4,379

Net cash (used in) provided by financing activities ( 10,641 ) 41,570

Increase in cash and cash equivalents and restricted cash and cash equivalents 12,846 69,588

Cash and cash equivalents and restricted cash and cash equivalents at beginning of period 245,723 140,780

2 unchanged sentences

Interest paid $ 118,509 $ 142,095

Cash received for income tax refund $ 80 $ —

Income taxes received (paid)

$ 80 $ ( 545 )

NON-CASH INVESTING ACTIVITIES:

2 unchanged sentences

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

As of March 31,

As of June 30,

Cash and cash equivalents $ 146,150 $ 71,695

1 unchanged sentence

112,419 138,673

Total cash and cash equivalents and restricted cash shown in the statements of cash flows $ 236,477 $ 145,159

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

Total cash and cash equivalents and restricted cash

$ 258,569 $ 210,368

(1) Restricted cash and cash equivalents consist of amounts escrowed 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.

25 unchanged sentences

Real Estate Investments

As of March 31, 2024, our portfolio was comprised of 411 properties containing approximately 59,893,000 rentable square feet located in 39 states, including 226 buildings, leasable land parcels and easements containing approximately 16,729,000 rentable square feet that were primarily industrial lands located on the island of Oahu, Hawaii, or our Hawaii Properties, and 185 properties containing approximately 43,164,000 rentable square feet that were industrial and logistics properties located in 38 other states, or our Mainland Properties.

As of March 31, 2024, we also owned a 22 % equity interest in an unconsolidated joint venture.

As of June 30, 2024, our portfolio was comprised of 411 properties containing approximately 59,893,000 rentable square feet located in 39 states, including 226 buildings, leasable land parcels and easements containing approximately 16,729,000 rentable square feet that were primarily industrial lands located on the island of Oahu, Hawaii, or our Hawaii Properties, and 185 properties containing approximately 43,164,000 rentable square feet that were industrial and logistics properties 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 Mountain Industrial REIT LLC, or Mountain JV, or our consolidated joint venture, in which we own a 61 % equity interest.

As of June 30, 2024, we also owned a 22 % equity interest in an unconsolidated joint venture.

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 at certain of our properties of $ 3,373 , and $ 4,931 , during the three months ended March 31, 2024 and 2023, respectively.

Capital expenditures include leasing costs of $ 2,127 and $ 1,562 for the three months ended March 31, 2024 and 2023, respectively.

During the three months ended March 31, 2024, we committed $ 3,471 for expenditures related to tenant improvements and leasing costs for leases executed during the period for approximately 1,981,000 rentable square feet.

Committed, but unspent, tenant related obligations based on existing leases as of March 31, 2024 were $ 5,981 , all of which is expected to be spent during the next 12 months.

INDUSTRIAL LOGISTICS PROPERTIES TRUST

1 unchanged sentence

(dollars in thousands, except per share data)

During the three and six months ended June 30, 2024 and 2023, amounts capitalized at our properties for tenant improvements, leasing costs, building improvements and development, redevelopment and other activities were as follows:

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

2024 2023 2024 2023

Tenant improvements (1)

$ 142 $ 1,221 $ 586 $ 1,699

Leasing costs (1)

184 1,277 2,311 2,839

Building improvements (2)

2,506 1,283 3,308 1,653

Development, redevelopment and other activities (3)

— 3,870 — 6,391

$ 2,832 $ 7,651 $ 6,205 $ 12,582

(1) Tenant improvements and leasing costs include capital expenditures used to improve tenants’ space or amounts paid directly to tenants to improve their space and leasing related costs, such as brokerage commissions and tenant inducements.

(2) Building improvements generally include expenditures to replace obsolete building components and expenditures that extend the useful life of existing assets.

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

During the six months ended June 30, 2024, we committed $ 4,348 for expenditures related to tenant improvements and leasing costs for leases executed during the period for approximately 2,609,000 rentable square feet.

Committed, but unspent, tenant related obligations based on existing leases as of June 30, 2024 were $ 5,646 , all of which is expected to be spent during the next 12 months.

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 own a 61 % equity interest in our consolidated joint venture.

We control this 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 net loss attributable to noncontrolling interest in our condensed consolidated financial statements for the three months ended March 31, 2024 and 2023 of $ 10,514 and $ 10,728 , respectively.

As of March 31, 2024, our consolidated joint venture had total assets of $ 2,991,343 and total liabilities of $ 1,771,327 .

We recognized net loss attributable to noncontrolling interest in our condensed consolidated financial statements for the three months ended June 30, 2024 and 2023 of $ 10,314 and $ 10,676 , respectively, and $ 20,828 and $ 21,404 for the six months ended June 30, 2024 and 2023, respectively.

As of June 30, 2024, our consolidated joint venture had total assets of $ 2,964,265 and total liabilities of $ 1,769,499 .

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.

We recognized net income (loss) attributable to noncontrolling interest in our condensed consolidated financial statements for the three months ended March 31, 2024 and 2023 of $ 15 and ($ 9 ), respectively.

During the three months ended March 31, 2024, the tenancy in common made cash distributions of $ 163 to the unrelated third party investor.

As of March 31, 2024, the tenancy in common had total assets of $ 10,877 and total liabilities of $ 60 .

We recognized net income (loss) attributable to noncontrolling interest in our condensed consolidated financial statements for the three months ended June 30, 2024 and 2023 of $ 10 and $( 76 ), respectively, and $ 25 and $( 85 ) for the six months ended June 30, 2024 and 2023, respectively.

The tenancy in common made cash distributions to the unrelated third party investor of $ 0 and $ 225 during the three months ended June 30, 2024 and 2023, respectively, and cash distributions of $ 163 and $ 225 during the six months ended June 30, 2024 and 2023, respectively.

As of June 30, 2024, the tenancy in common had total assets of $ 10,786 and total liabilities of $ 188 .

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

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).

1 unchanged sentence

Our leases provide our tenants with the contractual right to use and economically benefit from all the physical space specified in their respective leases and are generally classified as operating leases.

INDUSTRIAL LOGISTICS PROPERTIES TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share data)

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 $ 21,175 and $ 21,099 for the three months ended March 31, 2024 and 2023, respectively.

Such payments totaled $ 19,067 and $ 18,291 for the three months ended June 30, 2024 and 2023, respectively, and $ 40,242 and $ 39,390 for the six months ended June 30, 2024 and 2023, respectively.

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

3 unchanged sentences

For leases with a term greater than 12 months under which we are the lessee, we recognize right of use assets and lease liabilities.

The values of our right of use assets and related lease liabilities were $ 4,534 and $ 4,621 , respectively, as of March 31, 2024, and $ 4,646 and $ 4,730 , respectively, as of December 31, 2023.

The values of our right of use assets and related lease liabilities were $ 4,421 and $ 4,512 , respectively, as of June 30, 2024, and $ 4,646 and $ 4,730 , respectively, as of December 31, 2023.

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.

Geographic Concentration

For the three months ended March 31, 2024 and 2023, our Hawaii Properties represented 28.0 % and 27.4 %, respectively, of our rental income.

For the three months ended June 30, 2024 and 2023, our Hawaii Properties represented 27.2 % and 28.1 %, respectively, of our rental income.

For the six months ended June 30, 2024 and 2023, our Hawaii Properties represented 27.6 % and 27.8 %, respectively, of our rental income.

Tenant Concentration

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 amortization of deferred leasing costs.

Subsidiaries of FedEx Corporation, or FedEx, and subsidiaries of Amazon.com Services, Inc., or Amazon, represented 29.0 % and 6.8 % of our annualized rental revenues as of June 30, 2024, respectively, and 29.6 % and 6.8 % as of June 30, 2023, respectively.

INDUSTRIAL LOGISTICS PROPERTIES TRUST

1 unchanged sentence

(dollars in thousands, except per share data)

Tenant Concentration

Subsidiaries of FedEx Corporation, or FedEx, and subsidiaries of Amazon.com Services, Inc., or Amazon, represented 28.9 % and 6.7 % of our annualized rental revenues as of March 31, 2024, respectively, and 30.1 % and 6.9 % as of March 31, 2023, respectively.

Our outstanding indebtedness as of March 31, 2024 is summarized below:

Our outstanding indebtedness as of June 30, 2024 and December 31, 2023 is summarized below:

Properties Principal Interest Carrying Value

1 unchanged sentence

Type Maturity of Collateral

$ 1,235,000 6.18 % Floating 10/09/2024 $ 1,036,749

650,000 4.31 % Fixed 02/07/2029 490,619

700,000 4.42 % Fixed 03/09/2032 501,338

As of June 30, 2024

ILPT 104 $ 1,235,000 6.18 % Floating 10/09/2024 $ 1,030,514

ILPT 186 650,000 4.31 % Fixed 02/07/2029 490,024

ILPT 17 700,000 4.42 % Fixed 03/09/2032 497,758

82 1,400,000 5.81 % Floating 03/09/2025 1,829,100

Mountain JV 4

91,000 6.25 % Fixed 06/10/2030 181,935

Mountain JV 1

11,045 3.67 % Fixed 05/01/2031 28,769

Mountain JV 1

12,601 4.14 % Fixed 07/01/2032 43,193

Mountain JV 1

28,026 4.02 % Fixed 10/01/2033 84,206

Mountain JV 1

39,198 4.13 % Fixed 11/01/2033 129,302

Mountain JV 1

23,989 3.10 % Fixed 06/01/2035 46,063

Mountain JV 1

38,730 2.95 % Fixed 01/01/2036 98,411

Mountain JV 1

43,269 4.27 % Fixed 11/01/2037 109,573

Mountain JV 1

48,620 3.25 % Fixed 01/01/2038 112,694

Mountain JV 4 91,000 6.25 % Fixed 06/10/2030 180,679

Mountain JV 1 10,706 3.67 % Fixed 05/01/2031 28,688

Mountain JV 1 12,283 4.14 % Fixed 07/01/2032 42,876

Mountain JV 1 27,423 4.02 % Fixed 10/01/2033 83,618

Mountain JV 1 38,369 4.13 % Fixed 11/01/2033 128,854

Mountain JV 1 23,542 3.10 % Fixed 06/01/2035 45,732

Mountain JV 1 38,043 2.95 % Fixed 01/01/2036 97,715

Mountain JV 1 42,683 4.27 % Fixed 11/01/2037 109,208

Mountain JV 1 47,921 3.25 % Fixed 01/01/2038 111,911

Total / weighted average 4,316,970 5.35 % $ 4,676,677

1 unchanged sentence

Total indebtedness, net $ 4,306,586

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

INDUSTRIAL LOGISTICS PROPERTIES TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share data)

Our outstanding indebtedness as of December 31, 2023 is summarized below:

Properties Principal Interest Carrying Value

Entity Secured By Balance Rate (1)

Type Maturity of Collateral

As of December 31, 2023

ILPT 104 $ 1,235,000 6.18 % Floating 10/09/2024 $ 1,044,028

15 unchanged sentences

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

INDUSTRIAL LOGISTICS PROPERTIES TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share data)

Our $ 1,235,000 loan, or the ILPT Floating Rate Loan, which is secured by 104 of our properties, 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 under the ILPT Floating Rate Loan was 6.18 %, including the impact of our interest rate cap on SOFR of 2.25 %, as of March 31, 2024 and December 31, 2023, and for the three months ended March 31, 2024 and 2023.

The weighted average interest rate under the ILPT Floating Rate Loan was 6.18 %, including the impact of our interest rate cap on SOFR of 2.25 %, as of June 30, 2024 and December 31, 2023, and for the three and six months ended June 30, 2024 and 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 consolidated joint venture’s $ 1,400,000 loan, or the Mountain Floating Rate Loan, was scheduled to mature in March 2024, subject to three , one year extension options, and required that interest be paid at an annual rate of SOFR plus a premium of 2.77 %.

In March 2024, our consolidated joint venture exercised the first of its three , one year options to extend the maturity date of this loan.

As part of the extension, our consolidated joint venture purchased a one year interest rate cap for $ 26,175 with a SOFR strike rate equal to 3.04 %, which replaced the previous interest rate cap with a SOFR strike rate equal to 3.40 %.

As of March 31, 2024 and December 31, 2023, the interest rate under the Mountain Floating Rate Loan was 5.81 % and 6.17 %, respectively.

The weighted average interest rate under the Mountain Floating Rate Loan was 6.09 % and 6.17 % for the three months ended March 31, 2024 and 2023, respectively, including the impact of our interest rate caps.

As of July 30, 2024, we intend to exercise the first of our three , one year options to extend the maturity date of this loan.

Our consolidated joint venture’s $ 1,400,000 loan, or the Mountain Floating Rate Loan, matures in March 2025, subject to two remaining one year extension options, and requires that interest be paid at an annual rate of SOFR plus a premium of 2.77 %.

In March 2024, in connection with the exercise of its option to extend the maturity date of this loan to March 2025, our consolidated joint venture purchased a one year interest rate cap for $ 26,175 with a SOFR strike rate equal to 3.04 %, which replaced the previous interest rate cap with a SOFR strike rate equal to 3.40 %.

As of June 30, 2024 and December 31, 2023, the interest rate under the Mountain Floating Rate Loan was 5.81 % and 6.17 %, respectively.

The weighted average interest rate under the Mountain Floating Rate Loan was 5.81 % and 5.95 % for the three and six months ended June 30, 2024, respectively, including the impact of our interest rate caps.

The weighted average annual interest rate under the Mountain Floating Rate Loan was 6.17 % for both the three and six months ended June 30, 2023, including the impact of our interest rate caps.

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

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 then 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 early extinguishment of debt of $ 359 in conjunction with the repayment of these mortgage loans.

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.

See Note 10 for further information regarding our interest rate caps.

INDUSTRIAL LOGISTICS PROPERTIES TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share data)

The required principal payments due during the next five years and thereafter under all our outstanding debt as of March 31, 2024 are as follows:

The required principal payments due during the next five years and thereafter under all our outstanding debt as of June 30, 2024 are as follows:

2024 $ 1,244,140

3 unchanged sentences

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

As of March 31, 2024 and December 31, 2023, 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 for our fixed rate mortgage notes payable.

Our fixed rate mortgage notes payable had an aggregate carrying value of $ 1,678,351 and $ 1,682,501 as of March 31, 2024 and December 31, 2023, respectively, and a fair value of $ 1,531,780 and $ 1,553,863 as of March 31, 2024 and December 31, 2023, respectively.

As of June 30, 2024 and December 31, 2023, 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 for our fixed rate mortgage notes payable.

Our fixed rate mortgage notes payable had an aggregate carrying value of $ 1,674,158 and $ 1,682,501 as of June 30, 2024 and December 31, 2023, respectively, and a fair value of $ 1,525,930 and $ 1,553,863 as of June 30, 2024 and December 31, 2023, respectively.

We estimate the fair value of our fixed rate mortgage notes payable using significant unobservable inputs (Level 3), including discounted cash flow analyses and prevailing market interest rates.

The table below presents certain of our assets measured on a recurring basis at fair value as of March 31, 2024 and December 31, 2023, categorized by the level of inputs as defined in the fair value hierarchy under ASC 820, Fair Value Measurement , used in the valuation of each asset:

INDUSTRIAL LOGISTICS PROPERTIES TRUST

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 basis at fair value as of June 30, 2024 and December 31, 2023, categorized by the level of inputs as defined in the fair value hierarchy under ASC 820, Fair Value Measurement , used in the valuation of each asset:

Quoted Prices in Significant Other Significant

2 unchanged sentences

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

As of March 31, 2024

As of June 30, 2024

Investment in unconsolidated joint venture $ 117,451 $ — $ — $ 117,451

Interest rate caps $ 30,929 $ — $ 30,929 $ —

$ 44,700 $ — $ 44,700 $ —

As of December 31, 2023

1 unchanged sentence

Interest rate caps $ 30,576 $ — $ 30,576 $ —

$ 30,576 $ — $ 30,576 $ —

The fair value of our investment in the unconsolidated joint venture is determined by applying our ownership percentage to the net asset value of the entity.

1 unchanged sentence

The fair values of our interest rate cap derivatives are based on prevailing market prices in secondary markets for similar derivative contracts as of the measurement date.

INDUSTRIAL LOGISTICS PROPERTIES TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share data)

The discount rates, exit capitalization rates and holding periods used to determine the fair value of our investment in the unconsolidated joint venture are Level 3 significant unobservable inputs and are shown in the table below:

1 unchanged sentence

Technique Rates Rates Periods

As of March 31, 2024

As of June 30, 2024

Investment in unconsolidated joint venture Discounted cash flow 5.75 % - 8.00 %

5 unchanged sentences

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

Three Months Ended March 31,

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

2024 2023 2024 2023

Beginning balance $ 116,093 $ 127,329 $ 115,360 $ 124,358

2 unchanged sentences

Ending balance $ 117,451 $ 129,082 $ 117,451 $ 129,082

INDUSTRIAL LOGISTICS PROPERTIES TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share data)

Shareholders’ Equity

Common Share Awards

On May 30, 2024, in accordance with our Trustee compensation arrangements, we awarded to each of our seven Trustees 23,316 of our common shares, valued at $ 3.86 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, 2024, we purchased an aggregate of 11,857 of our common shares, valued at a weighted average price of $ 4.12 per common share, from certain former 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.

We withheld and purchased these common shares at their fair market values based upon the trading prices of our common shares at the close of trading on The Nasdaq Stock Market LLC, or Nasdaq, on the applicable purchase dates.

During the six months ended June 30, 2024, we purchased an aggregate of 14,090 of our common shares, valued at a weighted average price of $ 4.14 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.

We withheld and purchased these common shares at their fair market values based upon the trading prices of our common shares at the close of trading on Nasdaq on the applicable purchase dates.

Distributions

During the three months ended March 31, 2024, we declared and paid a regular quarterly distribution to common shareholders as follows:

During the six months ended June 30, 2024, we declared and paid regular quarterly distributions to common shareholders as follows:

Distribution Total

1 unchanged sentence

January 11, 2024 January 22, 2024 February 15, 2024 $ 0.01 $ 658

On April 11, 2024, we declared a regular quarterly distribution to common shareholders of record on April 22, 2024 of $ 0.01 per share, or approximately $ 658 .

We expect to pay this distribution to our shareholders on or about May 16, 2024 using cash on hand.

April 11, 2024 April 22, 2024 May 16, 2024 0.01 659

$ 0.02 $ 1,317

On July 11, 2024, we declared a regular quarterly distribution to common shareholders of record on July 22, 2024 of $ 0.01 per share, or approximately $ 660 .

We expect to pay this distribution to our shareholders on or about August 15, 2024 using cash on hand.

Business and Property Management Agreements with RMR

4 unchanged sentences

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

INDUSTRIAL LOGISTICS PROPERTIES TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share data)

Pursuant to our business management agreement with RMR, we recognized business management fees of $ 5,830 and $ 5,726 for the three months ended March 31, 2024 and 2023, respectively.

Based on our common share total return, as defined in our business management agreement, as of March 31, 2024 and 2023, no incentive fees are included in the business management fees we recognized for the three months ended March 31, 2024 or 2023.

Pursuant to our business management agreement with RMR, we recognized business management fees of $ 5,809 and $ 11,639 for the three and six months ended June 30, 2024, respectively, and $ 5,656 and $ 11,382 for the three and six months ended June 30, 2023, respectively.

Based on our common share total return, as defined in our business management agreement, as of June 30, 2024 and 2023, no incentive fees are included in the business management fees we recognized for the three or six months ended June 30, 2024 or 2023.

The actual amount of annual incentive fees for 2024, 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, 2024, and will be payable in January 2025.

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 $ 3,403 and $ 3,452 for the three months ended March 31, 2024 and 2023, respectively.

Of these amounts, for the three months ended March 31, 2024 and 2023, $ 3,330 and $ 3,319 , respectively, were included in other operating expenses in our condensed consolidated statements of comprehensive income (loss) and $ 73 and $ 133 , 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 $ 3,231 and $ 6,634 for the three and six months ended June 30, 2024, respectively, and $ 3,370 and $ 6,822 for the three and six months ended June 30, 2023, respectively.

Of these amounts, for the three and six months ended June 30, 2024, $ 3,116 and $ 6,446 , respectively, were included in other operating expenses in our condensed consolidated financial statements and $ 115 and $ 188 , respectively, were capitalized as building improvements in our condensed consolidated balance sheets.

For the three and six months ended June 30, 2023, $ 3,133 and $ 6,452 , respectively, were included in other operating expenses in our condensed consolidated statements of comprehensive income (loss) and $ 237 and $ 370 , 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.

INDUSTRIAL LOGISTICS PROPERTIES TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share data)

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

1 unchanged sentence

Our property level operating expenses are generally incorporated into the rents charged to our tenants, including certain payroll and related costs incurred by RMR.

We reimbursed RMR $ 1,687 and $ 1,841 for these expenses and costs for the three months ended March 31, 2024 and 2023, respectively.

We reimbursed RMR $ 1,647 and $ 3,334 for these expenses and costs for the three and six months ended June 30, 2024, respectively, and $ 2,000 and $ 3,841 for the three and six months ended June 30, 2023, 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).

16 unchanged sentences

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

Yael Duffy, our President and Chief Operating Officer, is also the president and chief operating officer of Office Properties Income Trust, one of the public companies managed by RMR.

Yael Duffy, our President and Chief Operating Officer, is also the president and chief operating officer of Office Properties Income Trust, one of the other public companies managed by RMR.

Other officers of RMR, including Mr.

3 unchanged sentences

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

INDUSTRIAL LOGISTICS PROPERTIES TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share data)

Joint Ventures.

2 unchanged sentences

See Note 3 for further information regarding our joint ventures.

As of March 31, 2024 and December 31, 2023, we owed $ 652 and $ 680 , respectively, to the unconsolidated joint venture for rents that we collected on behalf of that joint venture.

As of June 30, 2024 and December 31, 2023, we owed $ 443 and $ 680 , 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.

For further information about these and other such relationships and certain other related person transactions, see our 2023 Annual Report.

INDUSTRIAL LOGISTICS PROPERTIES TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share data)

Derivatives and Hedging Activities

7 unchanged sentences

See Notes 5 and 6 for further information regarding the debt our interest rate caps are related to and the fair value of our interest rate caps.

The following table summarizes the terms of our outstanding interest rate cap agreements as of March 31, 2024 and December 31, 2023:

Balance Sheet Underlying Current Strike Notional Fair Value at

Line Item Instrument Maturity

Rate Amount March 31, 2024 December 31, 2023

Other assets Mountain Floating Rate Loan

The following table summarizes the terms of our outstanding interest rate cap agreements as of June 30, 2024 and December 31, 2023:

Sheet Underlying Maturity Strike Notional Fair Value at

Line Item Instrument Date Rate Amount June 30, 2024 December 31, 2023

Other assets ILPT Floating Rate Loan 10/15/2024

2.25 % $ 1,235,000 $ 10,943 $ 25,060

1 unchanged sentence

3.40 % $ 1,400,000 — 5,516

Other assets ILPT Floating Rate Loan 10/15/2024

Other assets Mountain Floating Rate Loan

3.04 % $ 1,400,000 19,986 —

6 unchanged sentences

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

Three Months Ended March 31,

Unrealized gain (loss) on derivatives recognized in cumulative other comprehensive income

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

2024 2023 2024 2023

Unrealized gain on derivatives recognized in cumulative other comprehensive income $ 3,926 $ 20,025 $ 8,600 $ 16,249

Realized gain on derivatives reclassified from cumulative other comprehensive income into interest expense

( 5,436 ) ( 8,004 ) ( 14,956 ) ( 13,006 )

Unrealized loss on derivatives recognized in cumulative other comprehensive income

$ ( 4,846 ) $ ( 8,778 )

Unrealized (loss) gain on derivatives recognized in cumulative other comprehensive income $ ( 1,510 ) $ 12,021 $ ( 6,356 ) $ 3,243

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