What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2024-07-30 compared with 2024-04-30 · 190 added, 93 removed, 207 unchanged (58% of the section changed)

3 unchanged sentences

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

As of March 31, 2024, our portfolio was comprised of 411 properties containing approximately 59,893,000 rentable square feet located in 39 states with 99.0% occupancy leased to 301 different tenants.

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

Our portfolio as of March 31, 2024 is summarized below (square feet in thousands):

As of June 30, 2024, our portfolio was comprised of 411 properties containing approximately 59,893,000 rentable square feet located in 39 states with 95.4% occupancy leased to 300 different tenants.

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

Our portfolio as of June 30, 2024 is summarized below (square feet in thousands):

Number of Rentable Remaining

Ownership Properties States Square Feet Occupancy Lease Term (1)

Hawaii Properties 100% 226 Hawaii

Mainland Properties

ILPT 100% 90 34 States

22,119 98.9% 4.8

Consolidated joint venture properties 61% 94 27 States

Hawaii Properties ILPT 100% 226 Hawaii

16,729 86.1% 13.2

Wholly owned Mainland Properties

100% 90 34 States

Mainland Properties

Mountain JV 61% 94 27 States

20,981 99.0% 6.6

Other 67% 1 New Jersey

Mainland Properties

Tenancy in common 67% 1 New Jersey

64 100.0% 4.2

Total / weighted average 411 59,893 95.4% 7.9

(1) Based on annualized rental revenues as of March 31, 2024.

During the three months ended March 31, 2024, our rental income and net operating income, or NOI, increased compared to the 2023 period primarily due to leasing activity and rent resets at our properties.

(1) Based on annualized rental revenues as of June 30, 2024.

During the three and six months ended June 30, 2024, our rental income and net operating income, or NOI, increased compared to the 2023 period primarily due to leasing activity and rent resets at our properties.

Long-term e-commerce trends and supply chain resiliency have resulted in high occupancy and increases in rents.

4 unchanged sentences

Property Operations

Occupancy data for our properties as of March 31, 2024 and 2023 were as follows:

Occupancy data for our properties as of June 30, 2024 and 2023 were as follows:

All Properties Comparable Properties

as of March 31,

as of March 31, (1)

as of June 30,

as of June 30, (1)

2024 2023 2024 2023

4 unchanged sentences

95.4 % 99.1 % 95.4 % 99.1 %

(1) Consists of properties that we owned continuously since January 1, 2023.

(1) Consists of properties that we owned continuously since April 1, 2023.

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

(3) Leased square feet is pursuant to existing leases as of March 31, 2024, and includes space being fitted out for occupancy, if any, and space which is leased but is not occupied, if any.

(3) Leased square feet is pursuant to existing leases as of June 30, 2024, and includes space being fitted out for occupancy, if any, and space which is leased but is not occupied, if any.

The average effective rental rates per square foot represents total rental income divided by the average rentable square feet leased during the periods specified for our properties.

For the three months ended March 31, 2024 and 2023, the average effective rental rates per square foot of our properties were as follows:

Three Months Ended March 31,

For the three and six months ended June 30, 2024 and 2023, the average effective rental rates per square foot of our properties were as follows:

Three Months Ended June 30, (1)

Six Months Ended June 30, (2)

2024 2023 2024 2023

All properties $ 7.76 $ 7.30 $ 7.67 $ 7.38

1 unchanged sentence

$ 7.76 $ 7.30 $ 7.67 $ 7.38

(1) Consists of properties that we owned continuously since April 1, 2023.

(2) Consists of properties that we owned continuously since January 1, 2023.

During the three months ended March 31, 2024, we entered into new and renewal leases as summarized in the following table:

Three Months Ended March 31, 2024

During the three and six months ended June 30, 2024, we entered into new and renewal leases as summarized in the following table (excluding the impact of rent resets):

Three Months Ended June 30, 2024

New Leases Renewals Totals

8 unchanged sentences

$ 0.55 $ 0.09 $ 0.21

Six Months Ended June 30, 2024

New Leases Renewals Totals

Square feet leased during the period (in thousands) 163 2,340 2,503

Weighted average rental rate change (by rentable square feet) 46.0 % 28.7 % 30.7 %

Weighted average lease term by square feet (years) 17.2 5.6 6.4

Total leasing costs and concession commitments (1)

$ 1,304 $ 3,044 $ 4,348

Total leasing costs and concession commitments per square foot (1)

$ 7.99 $ 1.30 $ 1.74

Total leasing costs and concession commitments per square foot per year (1)

$ 0.46 $ 0.23 $ 0.27

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

During the three months ended March 31, 2024, we completed rent resets for approximately 106,000 square feet of land at our Hawaii Properties at rental rates that were approximately 27.5% higher than prior rental rates.

As of March 31, 2024, our remaining lease expirations by year were as follows (square feet in thousands):

During the six months ended June 30, 2024, we completed rent resets for approximately 106,000 square feet of land at our Hawaii Properties at rental rates that were approximately 27.5% higher than prior rental rates.

There were no rent resets during the three months ended June 30, 2024.

As of June 30, 2024, our remaining lease expirations by year were as follows (square feet in thousands):

% of Total Cumulative

2 unchanged sentences

of Square Feet Square Feet Square Feet Revenues Revenues Rental Revenues

Period/Year Leases Expiring (1)

Leases Expiring (1)

17 1,342 2.3 % 2.3 % $ 13,798 3.1 % 3.1 %

6 unchanged sentences

Weighted average remaining lease term (in years) 7.1 7.9

(1) Leased square feet is pursuant to existing leases as of March 31, 2024, and includes space being fitted out for occupancy, if any, and space which is leased but is not occupied, if any.

(2) Annualized rental revenues are as of March 31, 2024.

As of March 31, 2024, subsidiaries of FedEx and Amazon leased 21.7% and 7.7% of our total leased square feet, respectively, and represented 28.9% and 6.7% of our total annualized rental revenues, respectively.

(1) Leased square feet is pursuant to existing leases as of June 30, 2024, and includes space being fitted out for occupancy, if any, and space which is leased but is not occupied, if any.

(2) Annualized rental revenues are as of June 30, 2024.

As of June 30, 2024, subsidiaries of FedEx and Amazon leased 22.4% and 7.9% of our total leased square feet, respectively, and represented 29.0% and 6.8% of our total annualized rental revenues, respectively.

Mainland Properties.

As of March 31, 2024, occupancy at our Mainland Properties was 99.0% and represented 72.0% of our annualized rental revenues.

As of June 30, 2024, occupancy at our Mainland Properties was 98.9% and represented 72.4% of our annualized rental revenues.

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

3 unchanged sentences

Hawaii Properties.

As of March 31, 2024, occupancy at our Hawaii Properties was 99.0% and represented 28.0% of our annualized rental revenues.

As of March 31, 2024, certain of our Hawaii Properties are lands leased for rents that periodically reset based on fair market values, generally every 10 years.

As of June 30, 2024, occupancy at our Hawaii Properties was 86.1% and represented 27.6% of our annualized rental revenues.

As of June 30, 2024, certain of our Hawaii Properties are lands leased for rents that periodically reset based on fair market values, generally every 10 years.

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

3 unchanged sentences

Due to the limited availability of land suitable for industrial uses that might compete with our Hawaii Properties, we believe that our Hawaii Properties offer the potential for future rent growth as a result of periodic rent resets, lease extensions and new leasing.

The following table provides the annualized rental revenues scheduled to reset at our Hawaii Properties as of March 31, 2024:

The following table provides the annualized rental revenues scheduled to reset at our Hawaii Properties as of June 30, 2024:

Rental Revenues

2 unchanged sentences

Total $ 22,744

As of March 31, 2024, $24,430, or 5.5%, of our annualized rental revenues are included in leases scheduled to expire by March 31, 2025 and 1.0% of our rentable square feet are currently vacant.

As of June 30, 2024, $22,564, or 5.1%, of our annualized rental revenues are included in leases scheduled to expire by June 30, 2025 and 4.6% of our rentable square feet are currently vacant.

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

3 unchanged sentences

Tenant Review Process.

Our manager, RMR, employs a tenant review process for us.

Our manager, RMR, conducts a tenant review process for us.

RMR assesses tenants on an individual basis based on various applicable credit criteria.

2 unchanged sentences

RESULTS OF OPERATIONS

Three Months Ended March 31, 2024 Compared to Three Months Ended March 31, 2023 (dollars and share amounts in thousands, except per share data)

Three Months Ended June 30, 2024 Compared to Three Months Ended June 30, 2023 (dollars and share amounts in thousands, except per share data)

Comparable Non-Comparable

Properties Results Properties Results Consolidated Results

Three Months Ended March 31, (1)

Three Months Ended March 31, (2)

Three Months Ended March 31,

Three Months Ended June 30, (1)

Three Months Ended June 30, (2)

Three Months Ended June 30,

2024 2023 Change Change 2024 2023 Change 2024 2023 Change Change

9 unchanged sentences

General and administrative 7,939 8,131 (192) (2.4)%

Loss on impairment of real estate — 254 (254) (100.0)%

Total other expenses 51,360 53,294 (1,934) (3.6)%

Interest and other income 2,852 1,146 1,706 148.9%

Interest income

2,935 1,797 1,138 63.3%

Interest expense (73,631) (71,846) (1,785) 2.5%

Loss on sale of real estate — (974) 974 (100.0)%

Loss on early extinguishment of debt — (359) 359 (100.0)%

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

8 unchanged sentences

Net loss attributable to common shareholders $ (0.35) $ (0.40) $ 0.05 (12.5)%

(1) Consists of properties that we owned continuously since April 1, 2023.

(2) Consists of two properties we disposed of during the period from April 1, 2023 to June 30, 2024.

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

References to changes in the income and expense categories below relate to the comparison of results for the three months ended June 30, 2024 compared to the three months ended June 30, 2023.

Rental income.

Rental income increased primarily due to increases from our leasing activity and rent resets.

Other operating expenses .

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

Depreciation and amortization.

The decrease in depreciation and amortization primarily reflects certain leasing related assets becoming fully amortized after July 1, 2023, partially offset by an increase in depreciation of improvements made to certain of our properties after July 1, 2023.

General and administrative.

The decrease in general and administrative expenses is primarily due to decreases in legal and other professional fees and franchise taxes, partially offset by increases in our equity based compensation and in our business management fees during the 2024 period.

Loss on impairment of real estate.

During the 2023 period, we recognized a loss on impairment of real estate on one property that was classified as held for sale.

Interest income.

The increase in interest income is primarily due to higher interest rates and average cash balances during the 2024 period as compared to the 2023 period.

Interest expense.

In March 2024, our consolidated joint venture exercised the first of its three, one year options to extend the maturity date of the Mountain Floating Rate Loan and purchased a one year interest rate cap for $26,175 and reduced the weighted average interest rate from 6.17% to 5.81%.

The increase in interest expense is primarily due to increased amortization related to the cost of the interest rate cap, partially offset by decreased weighted average interest costs and amortization of debt issuance costs related to the Mountain Floating Rate Loan.

Loss on early extinguishment of debt.

Loss on early extinguishment of debt primarily relates to prepayment penalties incurred upon the repayment of four mortgage notes aggregating $35,910 in the 2023 period.

Income tax expense.

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

Equity in earnings of unconsolidated joint venture.

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

Six Months Ended June 30, 2024 Compared to Six Months Ended June 30, 2023 (dollars and share amounts in thousands, except per share data)

Comparable Non-Comparable

Properties Results Properties Results Consolidated Results

Six Months Ended June 30, (1)

Six Months Ended June 30, (2)

Six Months Ended June 30,

2024 2023 Change Change 2024 2023 Change 2024 2023 Change Change

Rental income $ 222,856 $ 218,196 $ 4,660 2.1% $ — $ 105 $ (105) $ 222,856 $ 218,301 $ 4,555 2.1%

Operating expenses:

Real estate taxes 31,009 31,555 (546) (1.7)% 1 12 (11) 31,010 31,567 (557) (1.8)%

Other operating expenses 19,497 17,814 1,683 9.4% 32 23 9 19,529 17,837 1,692 9.5%

Total operating expenses 50,506 49,369 1,137 2.3% 33 35 (2) 50,539 49,404 1,135 2.3%

Net operating income (3)

$ 172,350 $ 168,827 $ 3,523 2.1% $ (33) $ 70 $ (103) 172,317 168,897 3,420 2.0%

Other expenses:

Depreciation and amortization 86,998 90,366 (3,368) (3.7)%

General and administrative 15,628 16,038 (410) (2.6)%

Loss on impairment of real estate — 254 (254) (100.0)%

Total other expenses 102,626 106,658 (4,032) (3.8)%

Interest income

5,787 2,943 2,844 96.6%

Interest expense (146,861) (142,617) (4,244) 3.0%

Loss on sale of real estate — (974) 974 (100.0)%

Loss on early extinguishment of debt — (359) 359 (100.0)%

Loss before income taxes and equity in earnings of unconsolidated joint venture (71,383) (78,768) 7,385 (9.4)%

Income tax expense (69) (62) (7) 11.3%

Equity in earnings of unconsolidated joint venture 4,071 6,704 (2,633) (39.3)%

Net loss (67,381) (72,126) 4,745 (6.6)%

Net loss attributable to noncontrolling interest 20,803 21,489 (686) (3.2)%

Net loss attributable to common shareholders $ (46,578) $ (50,637) $ 4,059 (8.0)%

Weighted average common shares outstanding (basic and diluted) 65,591 65,339 252 0.4%

Per common share data (basic and diluted):

Net loss attributable to common shareholders $ (0.71) $ (0.77) $ 0.06 (7.8)%

(1) Consists of properties that we owned continuously since January 1, 2023.

(2) Consists of two properties we disposed of during the period from January 1, 2023 to March 31, 2024.

(2) Consists of two properties and a portion of a land parcel we disposed of during the period from January 1, 2023 to June 30, 2024.

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

References to changes in the income and expense categories below relate to the comparison of results for the three months ended March 31, 2024 compared to the three months ended March 31, 2023.

References to changes in the income and expense categories below relate to the comparison of results for the six months ended June 30, 2024 compared to the six months ended June 30, 2023.

Rental income.

1 unchanged sentence

Real estate taxes.

Real estate taxes decreased primarily due to lower assessed values as a result of successful real estate tax appeals.

Real estate taxes decreased primarily due to lowered assessed values as a result of successful real estate tax appeals.

Other operating expenses .

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

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

Depreciation and amortization.

The decrease in depreciation and amortization primarily reflects certain leasing related assets becoming fully amortized and our disposition related activities after April 1, 2023, partially offset by an increase in depreciation of improvements made to certain of our properties after April 1, 2023.

The decrease in depreciation and amortization primarily reflects certain leasing related assets becoming fully amortized in the 2023 period, partially offset by an increase in depreciation of improvements made to certain of our properties in the 2023 period.

General and administrative.

The decrease in general and administrative expenses is primarily due to decreases in accounting fees and leasing costs, partially offset by an increase in other professional fees in the 2024 period.

Interest and other income.

The increase in interest and other income is primarily due to higher interest rates and average cash balances during the 2024 period as compared to the 2023 period.

The decrease in general and administrative expenses is primarily due to decreases in accounting fees and franchise taxes, partially offset by increases in our equity based compensation and in our business management fees during the 2024 period.

Loss on impairment of real estate.

During the 2023 period, we recognized a loss on impairment of real estate on one property that was classified as held for sale.

Interest income.

The increase in interest income is primarily due to higher interest rates and average cash balances during the 2024 period as compared to the 2023 period.

Interest expense.

The increase in interest expense is primarily due to refinancing activities from our consolidated joint venture in May 2023, resulting in higher debt balances and interest rate and costs related to the purchase of an interest rate cap during the 2024 period.

In March 2024, our consolidated joint venture exercised the first of its three, one year options to extend the maturity date of the Mountain Floating Rate Loan and purchased a one year interest rate cap, reducing the weighted average interest rate from 6.17% to 5.81%, for $26,175.

The increase in interest expense is primarily due to increased amortization related to the cost of the interest rate cap and the $91,000 mortgage loan obtained by our consolidated joint venture in May 2023, partially offset by decreased weighted average interest costs and amortization of debt issuance costs related to the Mountain Floating Rate Loan.

Loss on sale of real estate.

During the 2023 period, we recognized a loss on sale of real estate of $974 as a result of the sale of a portion of a land parcel in Everett, Washington.

During the 2023 period, we recognized a loss on sale of real estate from the sale of a portion of a land parcel in Everett, Washington.

Loss on early extinguishment of debt.

Loss on early extinguishment of debt primarily relates to prepayment penalties incurred upon the repayment of four mortgage notes aggregating $35,910 in the 2023 period.

Income tax expense.

1 unchanged sentence

Equity in earnings of unconsolidated joint venture.

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

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

Non-GAAP Financial Measures (dollars in thousands, except per share data)

11 unchanged sentences

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

The following table presents the reconciliation of net loss to NOI for the three months ended March 31, 2024 and 2023:

Three Months Ended March 31,

The following table presents the reconciliation of net loss to NOI for the three and six months ended June 30, 2024 and 2023:

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

2024 2023 2024 2023

Net loss $ (33,479) $ (36,580) $ (67,381) $ (72,126)

2 unchanged sentences

Loss before income taxes and equity in earnings of unconsolidated joint venture (35,791) (39,278) (71,383) (78,768)

Loss on early extinguishment of debt — 359 — 359

Loss on sale of real estate — — — 974

Interest expense 73,631 71,846 146,861 142,617

Interest and other income (2,852) (1,146)

Interest income

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

Loss on impairment of real estate — 254 — 254

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

1 unchanged sentence

NOI $ 86,265 $ 84,424 $ 172,317 $ 168,897

Hawaii Properties $ 23,433 $ 22,122

Mainland Properties 62,619 62,351

NOI $ 86,052 $ 84,473

Funds From Operations Attributable to Common Shareholders and Normalized Funds From Operations Attributable to Common Shareholders

9 unchanged sentences

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

The following table presents our calculation of FFO attributable to common shareholders and Normalized FFO attributable to common shareholders and reconciliations of net loss attributable to common shareholders to FFO attributable to common shareholders and Normalized FFO attributable to common shareholders for the three months ended March 31, 2024 and 2023:

Three Months Ended March 31,

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

2024 2023 2024 2023

Net loss attributable to common shareholders $ (23,175) $ (25,828) $ (46,578) $ (50,637)

1 unchanged sentence

Loss on sale of real estate — — — 974

Loss on impairment of real estate — 254 — 254

Depreciation and amortization 43,421 44,909 86,998 90,366

1 unchanged sentence

FFO adjustments attributable to noncontrolling interest (10,417) (10,719) (20,877) (21,932)

FFO and Normalized FFO attributable to common shareholders $ 9,450 $ 7,916

FFO attributable to common shareholders 8,965 7,375 18,415 15,291

Loss on early extinguishment of debt — 359 — 359

Normalized FFO adjustments attributable to noncontrolling interest — (140) — (140)

Normalized FFO attributable to common shareholders $ 8,965 $ 7,594 $ 18,415 $ 15,510

Weighted average common shares outstanding (basic and diluted) 65,626 65,369 65,591 65,339

Per common share data (basic and diluted):

FFO and Normalized FFO attributable to common shareholders $ 0.14 $ 0.12

LIQUIDITY AND CAPITAL RESOURCES

Our Operating Liquidity and Resources (dollars in thousands)

FFO attributable to common shareholders $ 0.14 $ 0.11 $ 0.28 $ 0.23

Normalized FFO attributable to common shareholders $ 0.14 $ 0.12 $ 0.28 $ 0.24

LIQUIDITY AND CAPITAL RESOURCES (dollars in thousands)

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

As of March 31, 2024, investment grade rated tenants, subsidiaries of investment grade rated parent entities or our Hawaii land leases represented 76.6% of our annualized rental revenues and only 5.5% of our annualized rental revenues were from leases expiring over the next 12 months.

As of June 30, 2024, investment grade rated tenants, subsidiaries of investment grade rated parent entities or our Hawaii land leases represented approximately 77% of our annualized rental revenues and only 5.1% of our annualized rental revenues were from leases expiring over the next 12 months.

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

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

• collect rents from our tenants when due;

• maintain the occupancy of, and maintain or increase the rental rates at, our properties;

• control our operating cost increases, including interest and other financing costs;

• develop properties to produce cash flows in excess of our costs of capital;

• purchase additional properties that produce cash flows in excess of our costs of acquisition and the cost to our capital and property operating expenses.

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

Three Months Ended March 31,

Six Months Ended June 30,

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

4 unchanged sentences

Cash and cash equivalents and restricted cash and cash equivalents at end of period $ 258,569 $ 210,368

The increase in net cash provided by operating activities for the three months ended March 31, 2024 compared to the 2023 period is primarily due to higher cash flows from our properties and favorable changes in working capital in the 2024 period.

The change in net cash used in investing activities for the 2024 period compared to net cash provided by investing activities for the 2023 period is primarily due to costs associated with the purchase of an interest rate cap for $26,175 in the 2024 period.

The decrease in net cash used in financing activities was primarily due to a decrease in principal repayments on our amortizing loans.

The increase in net cash provided by operating activities for the six months ended June 30, 2024 compared to the 2023 period is primarily due to higher cash flows from our properties and favorable changes in working capital in the 2024 period.

The decrease in net cash provided by investing activities for the six months ended June 30, 2024 compared to the 2023 period is primarily due to costs associated with the purchase of an interest rate cap for $26,175 in the 2024 period, partially offset by increased proceeds from the settlement of our interest rate caps and a reduction in our real estate improvements.

The change in net cash used in financing activities for the six months ended June 30, 2024 compared to net cash provided by financing activities for the 2023 period was primarily due to our consolidated joint venture obtaining a $91,000 fixed rate, interest only mortgage loan secured by four properties owned by our consolidated joint venture in the 2023 period.

A portion of the net proceeds was used to repay four then outstanding mortgage loans of our consolidated joint venture with an aggregate outstanding principal balance of $35,910 in the 2023 period.

Our Operating Liquidity and Resources

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

• collect rents from our tenants when due;

• maintain the occupancy of, and maintain or increase the rental rates at, our properties;

• control our operating cost increases, including interest and other financing costs.

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

As of March 31, 2024, we had cash and cash equivalents, excluding restricted cash and cash equivalents, of $128,394.

As of June 30, 2024, we had cash and cash equivalents, excluding restricted cash and cash equivalents, of $146,150.

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

8 unchanged sentences

Real Estate Activities

During the three months ended March 31, 2024 and 2023, amounts capitalized for tenant improvements and leasing costs, building improvements and development and redevelopment activities were as follows:

Three Months Ended March 31,

Tenant improvements and leasing costs (1)

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.

1 unchanged sentence

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

As of March 31, 2024, we had estimated unspent leasing related obligations of $5,981, all of which is expected to be spent during the next 12 months.

As of June 30, 2024, we had estimated unspent leasing related obligations of $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 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.

We recognized net loss attributable to noncontrolling interest of our consolidated joint venture 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 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 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.

Unconsolidated Joint Venture

We own a 22% equity interest in 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).

The unconsolidated joint venture made aggregate cash distributions to us of $990 during the three months ended March 31, 2024 and 2023, respectively.

For further information regarding these joint ventures, see Note 3 to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

The unconsolidated joint venture made aggregate cash distributions to us of $990 for both the three months ended June 30, 2024 and 2023, and $1,980 for both the six months ended June 30, 2024 and 2023.

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 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.

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 of this loan.

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.

The one year options to extend the ILPT Floating Rate Loan and the Mountain Floating Rate Loan require, among other things, that we obtain a replacement interest rate cap, as defined in the applicable agreement.

As of March 31, 2024, we had an aggregate principal amount of $4,321,478 of indebtedness, including the ILPT Floating Rate Loan, the Mountain Floating Rate Loan, the $700,000 mortgage loan and the $650,000 mortgage loan, scheduled to mature between 2024 and 2038.

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 for the six months ended June 30, 2023 in conjunction with the repayment of these mortgage loans.

As of June 30, 2024, we had an aggregate principal amount of $4,316,970 of indebtedness, including the ILPT Floating Rate Loan, the Mountain Floating Rate Loan, our $700,000 mortgage loan and our $650,000 mortgage loan, scheduled to mature between 2024 and 2038.

The agreements and related documents governing the ILPT Floating Rate Loan, the Mountain Floating Rate Loan, our $700,000 mortgage loan and our $650,000 mortgage loan contain customary covenants, provide for acceleration of payment of all amounts due thereunder upon the occurrence and continuation of certain events of default and, in the case of the $650,000 mortgage loan, also require us to maintain a minimum consolidated net worth of at least $250,000 and liquidity of at least $15,000.

As of March 31, 2024, we believe that we were in compliance with all of the covenants and other terms under the agreements governing these loans.

As of June 30, 2024, we believe that we were in compliance with all of the covenants and other terms under the agreements governing these loans.

For further information regarding our indebtedness, see Notes 5 and 6 to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Distributions

During the three months ended March 31, 2024, we paid quarterly cash distributions to our shareholders totaling $658 using cash on hand.

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.

During the six months ended June 30, 2024, we paid quarterly cash distributions to our shareholders totaling $1,317 using cash on hand.

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.

Related Person Transactions

11 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis