What changed in this filing

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Item 1. Business

2025-02-19 compared with 2024-02-20 · 74 added, 87 removed, 741 unchanged (18% of the section changed)

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We own and lease industrial and logistics properties throughout the United States.

As of December 31, 2023, our portfolio was comprised of 411 properties containing approximately 59,951,000 rentable square feet located in 39 states, including 226 buildings, leasable land parcels and easements containing approximately 16,729,000 rentable square feet (all square footage amounts included within this Annual Report on Form 10-K are unaudited) that were primarily industrial lands located on the island of Oahu, Hawaii, or our Hawaii Properties, and 185 properties containing approximately 43,222,000 rentable square feet that were industrial and logistics properties located in 38 other states, or our Mainland Properties.

As of December 31, 2023, we also owned a 22% equity interest in an unconsolidated joint venture, or the unconsolidated joint venture.

As of December 31, 2023, our Mainland Properties represented 72.1% of our annualized rental revenues and our Hawaii Properties represented 27.9% of our annualized rental revenues.

We define the term annualized rental revenues used in this Annual Report on Form 10-K as the annualized contractual base rents from our tenants pursuant to their leases 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.

As of December 31, 2024, our portfolio was comprised of 411 properties containing approximately 59,890,000 rentable square feet located in 39 states with 94.4% occupancy, including properties owned by Mountain Industrial REIT LLC, or Mountain JV, or our consolidated joint venture.

As of December 31, 2024, we also owned a 22% equity interest in The Industrial Fund REIT LLC, or the unconsolidated joint venture.

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

% of Weighted

Rentable Annualized Average

Number of Square Rental Remaining

Ownership Properties Location

Feet Occupancy Revenues Lease Term (1)

Mainland Properties

ILPT 100% 90 34 states

22,119 96.3% 34.0% 5.1

Hawaii Properties ILPT 100% 226 Hawaii

16,729 86.2% 28.0% 13.0

Mainland Properties

Mountain JV 61% 94 27 states

20,978 99.0% 37.7% 6.5

Mainland Properties

Tenancy in common 67% 1 New Jersey

64 100.0% 0.3% 4.9

Total / weighted average 411 59,890 94.4% 100.0% 7.8

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

As of December 31, 2024, our properties located in 38 of the contiguous states, or our Mainland Properties, represented 72.0% of our annualized rental revenues and our properties located primarily on the island of Oahu, Hawaii, or our Hawaii Properties, represented 28.0% of our annualized rental revenues.

We define the term annualized rental revenues used in this Annual Report on Form 10-K 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.

Our principal executive offices are located at Two Newton Place, 255 Washington Street, Suite 300, Newton, Massachusetts 02458-1634, and our telephone number is (617) 219-1460.

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MNR’s portfolio included 124 class A, single tenant, net leased, e-commerce focused industrial properties containing approximately 25,745,000 rentable square feet and two then committed, but not yet then completed, property acquisitions.

In connection with the Merger, we entered into a joint venture arrangement, or our consolidated joint venture, with an institutional investor for 95 of the acquired MNR properties, including the two committed MNR property acquisitions, one of which was subsequently completed.

In connection with the Merger, we entered into our consolidated joint venture with an institutional investor for 95 of the acquired MNR properties, including the two committed MNR property acquisitions, one of which was subsequently completed.

Our consolidated joint venture subsequently terminated the agreement for the other committed MNR property acquisition.

Our Business and Growth Strategies

We own and lease industrial and logistics properties located throughout the United States.

We believe our current properties provide a stable base of increasing income.

We believe our current properties provide a stable base of increasing rents.

We seek to extend or enter new leases as leases approach expiration and selectively develop industrial and logistics properties in the United States.

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Certain of the leases for our Hawaii Properties provide for rents to be reset to fair market value periodically during the lease terms.

Since our predecessors began acquiring our Hawaii Properties in December 2003, our Hawaii Properties have remained over 96% leased, and periodic rent resets, together with lease extensions and new leasing activity following lease expirations at our Hawaii Properties, have resulted in significant rent increases.

Periodic rent resets, together with lease extensions and new leasing activity following lease expirations at our Hawaii Properties, have resulted in significant rent increases.

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.

In addition to the internal rent growth which may result from our rent resets and lease activity at our Hawaii Properties, a majority of the leases at our Mainland Properties and certain leases at our Hawaii Properties include periodic set dollar amount or percentage increases that raise the cash rent payable to us.

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Since the time, in some cases 40 to 50 years ago, certain of our Hawaii Properties’ leases were originally entered into, the characteristics of the neighborhoods in the vicinity of some of those properties have changed.

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however, we may undertake such activities on a selective basis.

Also, we and our predecessors have sometimes built expansions for tenants at our Mainland Properties in return for lease extensions and rent increases, and we may continue such activities on a selective basis.

Additionally, we or our predecessors have sometimes built expansions for tenants at our Mainland Properties in return for lease extensions and rent increases, and we may continue such activities on a selective basis.

Our external growth strategy is defined by our investment, disposition and financing policies as described below.

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Many of our Mainland Properties’ leases require us to maintain the roof, exterior walls, foundation and other structural elements of the buildings at our expense.

however, as we believe our Mainland Properties are well maintained, we do not believe these expenses will be material to us during the remaining lease terms.

Our Mainland Properties are currently 98.9% leased.

However, we believe our Mainland Properties are well maintained, and we do not believe these expenses will be material to us during the remaining lease terms.

Our Mainland Properties were 97.6% leased as of December 31, 2024.

We expect to have opportunities to raise rents or re-lease these properties at higher rental rates as lease expirations at these properties approach.

Also, some of the tenant renewal options at our Mainland Properties provide for rents to be reset to fair market values, and we may be able to raise rents if and when these options are exercised.

Additionally, some of the tenant renewal options at our Mainland Properties provide for rents to be reset to fair market values, and we may be able to raise rents if and when these options are exercised.

We regularly confer with tenants at our Mainland Properties to determine if they are interested in expanding or otherwise improving their leased properties in return for increased rents and extended terms.

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Historically, this process has resulted in significant reset amounts.

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Tenants representing 1% or more of our total annualized rental revenues as of December 31, 2023 were as follows:

Tenants representing 1% or more of our total annualized rental revenues as of December 31, 2024 were as follows (square feet in thousands):

% of Total Annualized

of Leased Leased Rental

Tenant States Properties Sq.

FedEx Corporation / FedEx Ground Package System, Inc.

Various (34 States) 80 12,851 21.7 % 29.7 %

Location Properties Square Feet (2)

Square Feet (2)

FedEx Corporation Various (33 States) 78 12,781 22.6 % 29.1 %

Amazon.com Services, Inc.

/ Amazon.com Services LLC AL, IN, OK, SC, TN, VA 8 4,539 7.7 % 6.7 %

AL, IN, OK, SC, TN, VA 8 4,539 8.0 % 6.8 %

Home Depot U.S.A., Inc.

GA, HI 3 991 1.8 % 2.3 %

UPS Supply Chain Solutions, Inc.

NH, NY 3 794 1.3 % 1.6 %

American Tire Distributors, Inc.

CO, LA, NE, NY, OH 5 722 1.3 % 1.6 %

UPS Supply Chain Solutions, Inc.

NH, NY 3 794 1.4 % 1.5 %

Restoration Hardware, Inc.

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HI 7 629 1.1 % 1.4 %

Par Pacific Holdings Inc.

HI 3 3,148 5.3 % 1.2 %

DHL Group SC 1 945 1.7 % 1.2 %

TD SYNNEX Corporation OH 2 939 1.7 % 1.1 %

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109 24,367 43.2 % 47.5 %

(1) Leased square feet is pursuant to existing leases as of December 31, 2023, and includes space being fitted out for occupancy, if any, and space which is leased but is not occupied.

(1) Includes any applicable subsidiaries of tenant.

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

(3) In October 2024, American Tire Distributors, Inc.

filed for Chapter 11 bankruptcy.

As of February 18, 2025, this tenant has no outstanding rental obligations due to us and has indicated that it does not intend to vacate any of its leases with us but may seek to modify the terms of its existing leases with us.

Our Investment Policies

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Outside of top tier markets, our focus is on newer buildings, high credit quality tenants and longer lease terms.

We target estimated capitalization rates of 6.0% to 7.5% for new investments.

If and as market conditions change, or in certain other instances, our target investments and target estimated capitalization rates may change.

In evaluating potential property acquisitions, we consider various factors, including, but not limited to, the following:

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• the existence of alternative sources, uses or needs for our capital;

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• the tenants’ historic and expected adoption of environmental sustainability in connection with their operations;

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• the terms of any debt that may secure the property;

• the estimated proceeds we may receive by selling the property;

• the potential costs associated with finding replacement tenants, including tenant improvements, leasing commissions and concessions, the cost to operate the property while vacant and required building improvement capital, if any, all as compared to our projected returns from future rents;

• whether the property is leased and, if so, the remaining lease term and likelihood of lease renewal;

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• our evaluation of future rents which may be achieved from the property;

• the estimated proceeds we may receive by selling the property;

• the strategic fit of the property with the rest of our portfolio;

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• the existence of alternative sources, uses or needs for capital;

• the benefits we believe we will achieve from selling equity interests in our joint ventures or contributing additional properties to our existing joint ventures or any new joint venture.

• the benefits we believe we will achieve from selling equity interests in our joint ventures or contributing additional properties to our existing joint ventures or any new joint ventures.

Our Board of Trustees may change our disposition policies at any time without a vote of, or notice to, our shareholders.

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Our Financing Policies

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Because our ability to raise capital will depend, in large part, upon market conditions, we cannot be sure that we will be able to raise sufficient capital to repay our debts or to fund our growth strategies.

For more information regarding our financing sources and activities, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Our Investing and Financing Liquidity and Resources” included in Part II, Item 7 of this Annual Report on Form 10-K and Note 3 to our consolidated financial statements included in Part IV, Item 15 of this Annual Report on Form 10-K.

For further information regarding our financing sources and activities, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Our Investing and Financing Liquidity and Resources” included in Part II, Item 7 of this Annual Report on Form 10-K and Note 5 to our consolidated financial statements included in Part IV, Item 15 of this Annual Report on Form 10-K.

We do not have policies limiting the amount of debt we may incur or the number or amount of mortgages that may be placed on our properties.

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We compete against publicly traded and private REITs, numerous financial institutions, individuals and public and private companies.

Some of our competitors may have greater financial and other resources than us.

Some of our competitors may have greater financial and other resources available to them.

We believe the experience and abilities of our management and our manager, the quality of our properties, the diversity and credit qualities of our tenants and the structure of our leases may afford us some competitive advantages and allow us to operate our business successfully despite the competitive nature of our business.

For more information, see “Risk Factors—Risks Related to Our Business—We face significant competition” included in Part I, Item 1A of this Annual Report on Form 10-K.

The RMR Group Inc., or RMR Inc., is a holding company and substantially all of its business is conducted by its majority owned subsidiary, RMR.

Portnoy, the Chair of our Board of Trustees and one of our Managing Trustees, is the sole trustee, an officer and the controlling shareholder of ABP Trust, which is the controlling shareholder of RMR Inc., chair of the board of directors, a managing director and the president and chief executive officer of RMR Inc.

and an officer and employee of RMR.

Jordan, our other Managing Trustee, also serves as an executive vice president, chief financial officer and treasurer of RMR Inc.

For further information, see “Risk Factors—Risks Related to Our Business—We face significant competition” included in Part I, Item 1A of this Annual Report on Form 10-K.

The RMR Group Inc., or RMR Inc., is a holding company and substantially all of its business is conducted by RMR, the majority owned subsidiary of RMR Inc.

The Chair of our Board of Trustees and one of our Managing Trustees, Adam D.

Portnoy, is the sole trustee, an officer and the controlling shareholder of ABP Trust, which is the controlling shareholder of RMR Inc., the chair of the board of directors, a managing director and the president and chief executive officer of RMR Inc.

and an officer and employee of RMR.

Jordan, our other Managing Trustee, is an executive vice president and the chief financial officer and treasurer of RMR Inc., an officer and employee of RMR and an officer of ABP Trust.

Our day to day operations are conducted by RMR.

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RMR has a principal place of business at Two Newton Place, 255 Washington Street, Suite 300, Newton, Massachusetts 02458-1634, and its telephone number is (617) 796-8390.

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RMR is an alternative asset management company that is focused on commercial real estate and related businesses.

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Jordan, executive vice president, chief financial officer and treasurer;

Leer, executive vice president;

Murray, executive vice president.

Our President and Chief Operating Officer, Yael Duffy, is a senior vice president of RMR and our Chief Financial Officer and Treasurer, Tiffany R.

Sy, is a vice president of RMR.

Sy, and our Vice President, Marc Krohn, are each a vice president of RMR.

Other officers of RMR also serve as officers of other companies to which RMR or its subsidiaries provide management services.

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With respect to our development and redevelopment activities, RMR considers how to best incorporate sustainability goals as part of the overall goal of any development or redevelopment project at our properties.

In 2022, RMR announced its commitment to a goal of net zero emissions by 2050 with a 50% reduction commitment by 2030 from a 2019 baseline as it relates to Scope 1 and 2 emissions for all properties for which it directly manages energy.

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Furthermore, properties that reach specified levels of sustainability and energy efficiency may receive potential environmental designations and certifications, such as Leadership in Energy and Environmental Design, or LEED®, designations and/or “ENERGY STAR” certifications.

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• Building Owners and Managers Association (BOMA) 360:

28 of our properties containing approximately 5.4 million rentable square feet (14.1% and 12.4% of our eligible properties and eligible rentable square feet, respectively).

50 of our properties containing approximately 8.4 million rentable square feet (25.4% and 19.2% of our eligible properties and eligible rentable square feet, respectively), excluding five anticipated certifications containing approximately 1.6 million rentable square feet that have been submitted and not yet awarded.

• ENERGY STAR:

Three of our properties containing approximately 284,000 rentable square feet (1.5% and 0.7% of our eligible properties and eligible rentable square feet, respectively).

Five of our properties containing approximately 687,000 rentable square feet (2.5% and 1.6% of our eligible properties and eligible rentable square feet, respectively).

• Investments in Human Capital.

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RMR is an equal opportunity employer, with all qualified applicants receiving consideration for employment without regard to race, color, religion, sex, sexual orientation, gender identity, national origin, disability or protected veteran status.

For more information, see “Risk Factors—Risks Related to Our Business—Ownership of real estate is subject to environmental risks and liabilities”, “Risk Factors—Risks Related to Our Business—We are subject to risks from adverse weather, natural disasters and adverse impacts from global climate change, and we incur significant costs and invest significant amounts with respect to these matters” included in Part I, Item 1A of this Annual Report on Form 10-K and “Management's Discussion and Analysis of Financial Condition and Results of Operations—Impact of Climate Change” included in Part II, Item 7 of this Annual Report on Form 10-K.

For further information, see “Risk Factors—Risks Related to Our Business—Ownership of real estate is subject to environmental risks and liabilities”, “Risk Factors—Risks Related to Our Business—We are subject to risks from adverse weather, natural disasters and adverse impacts from global climate change, and we incur significant costs and invest significant amounts with respect to these matters” included in Part I, Item 1A of this Annual Report on Form 10-K and “Management's Discussion and Analysis of Financial Condition and Results of Operations—Impact of Climate Change” included in Part II, Item 7 of this Annual Report on Form 10-K.

The leases for our properties generally provide that our tenants are responsible for the costs of insurance for the properties we lease to them and the operations conducted on them, including for casualty, liability, fire, extended coverage and rental or business interruption losses.

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Under some of our leases, some of these costs are required to be paid or reimbursed to us by our tenants.

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Internet Website

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Any material we file with or furnish to the SEC is also maintained on the SEC website, www.sec.gov.

Securityholders may send communications to our Board of Trustees or individual Trustees by writing to the party for whom the communication is intended at c/o Secretary, Industrial Logistics Properties Trust, Two Newton Place, 255 Washington Street, Suite 300, Newton, Massachusetts 02458-1634 or by email at secretary@ilptreit.com.

Security holders may send communications to our Board of Trustees or individual Trustees by writing to the party for whom the communication is intended at c/o Secretary, Industrial Logistics Properties Trust, Two Newton Place, 255 Washington Street, Suite 300, Newton, Massachusetts 02458-1634 or by email at secretary@ilptreit.com.

Our website address is included several times in this Annual Report on Form 10-K as a textual reference only.

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ownership and leasing of properties that include industrial and logistics buildings and leased industrial lands.

For more information, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Part II, Item 7 of this Annual Report on Form 10-K and our consolidated financial statements included in Part IV, Item 15 of this Annual Report on Form 10-K.

For further information, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Part II, Item 7 of this Annual Report on Form 10-K and our consolidated financial statements included in Part IV, Item 15 of this Annual Report on Form 10-K.

MATERIAL UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS

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• a person who owns 10% or more (by vote or value, directly or constructively under the IRC) of any class of our shares;

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shareholder (as defined below) whose investment in our shares is effectively connected with the conduct of a trade or business in the United States;

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In addition, this summary is not exhaustive of all possible tax considerations and does not discuss any estate, gift, state, local or foreign tax considerations.

For all these reasons, we urge you and any holder of or prospective acquirer of our shares to consult with a tax advisor about the federal income tax and other tax consequences of the acquisition, ownership and disposition of our shares.

For all these reasons, we urge you and any holder of or prospective acquiror of our shares to consult with a tax advisor about the federal income tax and other tax consequences of the acquisition, ownership and disposition of our shares.

Our intentions and beliefs described in this summary are based upon our understanding of applicable laws and regulations that are in effect as of February 18, 2025.

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Any entity (or other arrangement) treated as a partnership for federal income tax purposes that is a holder of our shares and the partners in such a partnership (as determined for federal income tax purposes) are urged to consult their own tax advisors about the federal income tax consequences and other tax consequences of the acquisition, ownership and disposition of our shares.

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Taxation as a REIT

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However, even if we continue to qualify for taxation as a REIT, we may still be subject to federal tax in the following circumstances, as described below:

• We will be taxed at regular corporate income tax rates on any undistributed “real estate investment trust taxable income”, determined by including our undistributed ordinary income and net capital gains, if any.

We may elect to retain and pay income tax on our net capital gains.

In addition, if we so elect by making a timely designation to our shareholders, a shareholder would be taxed on its proportionate share of our undistributed capital gain and would generally be expected to receive a credit or refund for its proportionate share of the tax we paid.

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• We will be taxed at regular corporate income tax rates on any undistributed “real estate investment trust taxable income”, including our undistributed ordinary income and net capital gains, if any.

We may elect to retain and pay income tax on our net capital gain, as well as on certain amounts attributable to cancellation of indebtedness income.

• If we have net income from the disposition of “foreclosure property”, as described in Section 856(e) of the IRC, that is held primarily for sale to customers in the ordinary course of a trade or business or other nonqualifying income from foreclosure property, we will be subject to tax on this income at the highest regular corporate income tax rate.

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In such case, MNR would be deemed to have retained its qualification for taxation as a REIT and the relevant penalties or sanctions for remediation would fall upon us in a manner comparable to the above.

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• As discussed below, we are invested in real estate through subsidiaries that we believe qualify for taxation as REITs.

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A shareholder that fails or refuses to comply with the request is required by Treasury regulations to submit a statement with its federal income tax return disclosing its actual ownership of our shares and other information.

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For purposes of condition (6), an “individual” generally includes a natural person, a supplemental unemployment compensation benefit plan, a private foundation, or a portion of a trust permanently set aside or used exclusively for charitable purposes, but does not include a qualified pension plan or profit-sharing trust.

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We have invested and may in the future invest in real estate through one or more entities that are treated as partnerships for federal income tax purposes.

In the case of a REIT that is a partner in a partnership, Treasury regulations under the IRC provide that, for purposes of the REIT qualification requirements regarding income and assets described below, the REIT is generally deemed to own its proportionate share, based on respective capital interests, of the income and assets of the partnership (except that for purposes of the 10% value test, described below, the REIT’s proportionate share of the partnership’s assets is based on its proportionate interest in the equity and specified debt securities issued by the partnership).

In the case of a REIT that is a partner in a partnership, Treasury regulations under the IRC provide that, for purposes of the REIT qualification requirements regarding income and assets described below, the REIT is generally deemed to own its proportionate share, based on respective capital interests (including any preferred equity interest in the partnerships), of the income and assets of the partnership (except that for purposes of the 10% value test, described below, the REIT’s proportionate share of the partnership’s assets is based on its proportionate interest in the equity and specified debt securities issued by the partnership).

In addition, for these purposes, the character of the assets and items of gross income of the partnership generally remains the same in the hands of the REIT.

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In such a situation, the REIT parent’s own qualification and taxation as a REIT could be jeopardized on account of the subsidiary’s failure cascading up to the REIT parent, all as described below under the heading “—Asset Tests”.

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We have joined with our subsidiary REITs in filing protective TRS elections, and we may continue to annually make such elections unless and until our ownership of these subsidiaries falls below 10%.

We have joined with certain of our subsidiary REITs in filing protective TRS elections, and we may continue to annually make such elections unless and until our ownership of these subsidiaries falls below 10%.

Pursuant to these protective TRS elections, we believe that if one of these subsidiaries is not a REIT for some reason, then that subsidiary would instead be considered one of our TRSs, and as such its value would fit within our REIT gross asset tests described below.

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We cannot be sure that arrangements involving our TRSs will not result in the imposition of one or more of these restrictions or sanctions, but we do not believe that we or our TRSs are or will be subject to these impositions.

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Income Tests.

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The portion of rental income treated as attributable to personal property is determined according to the ratio of the fair market value of the personal property to the total fair market value of the real and personal property that is rented.

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• In addition, “rents from real property” includes both charges we receive for services customarily rendered in connection with the rental of comparable real property in the same geographic area, even if the charges are separately stated, as well as charges we receive for services provided by our TRSs when the charges are not separately stated.

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• which is more than 90 days after the day on which the REIT acquired the property and the property is used in a trade or business which is conducted by the REIT, other than through an independent contractor from whom the REIT itself does not derive or receive any income or a TRS.

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Other than sales of foreclosure property, any gain that we realize on the sale of property held as inventory or other property held primarily for sale to customers in the ordinary course of a trade or business, together known as dealer gains, may be treated as income from a prohibited transaction that is subject to a penalty tax at a 100% rate.

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• Not more than 20% of the value of our total assets may be represented by stock or other securities of our TRSs.

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• Not more than 25% of the value of our total assets may be represented by “nonqualified publicly offered REIT debt instruments” as defined in Section 856(c)(5)(L)(ii) of the IRC.

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(1) the sum of 90% of our “real estate investment trust taxable income” and 90% of our net income after tax, if any, from property received in foreclosure, over

(2) the amount by which our noncash income (e.g., imputed rental income or income from transactions inadvertently failing to qualify as like-kind exchanges) exceeds 5% of our “real estate investment trust taxable income.”

(2) the amount by which our noncash income (e.g., cancellation of indebtedness income, imputed rental income or income from transactions inadvertently failing to qualify as like-kind exchanges) exceeds 5% of our “real estate investment trust taxable income.”

For these purposes, our “real estate investment trust taxable income” is as defined under Section 857 of the IRC and is computed without regard to the dividends paid deduction and our net capital gain and will generally be reduced by specified corporate-level income taxes that we pay (e.g., taxes on built-in gains or foreclosure property income).

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The IRC generally limits the deductibility of net interest expense paid or accrued on debt properly allocable to a trade or business to 30% of “adjusted taxable income”, subject to specified exceptions.

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In addition to the other distribution requirements above, to preserve our qualification for taxation as a REIT we are required to timely distribute all C corporation earnings and profits that we inherit from acquired corporations, as described below.

We may elect to retain, rather than distribute, some or all of our net capital gain and pay income tax on such gain.

We may elect to retain, rather than distribute, some or all of our net capital gain and certain of our cancellation of indebtedness income, if any, and pay income tax on such retained amounts.

In addition, if we so elect by making a timely designation to our shareholders, our shareholders would include their proportionate share of such undistributed capital gain in their taxable income, and they would receive a corresponding credit for their share of the federal corporate income tax that we pay thereon.

Our shareholders would then increase the adjusted tax basis of their shares by the difference between (a) the amount of capital gain dividends that we designated and that they included in their taxable income, and (b) the tax that we paid on their behalf with respect to that capital gain.

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Acquisitions of C Corporations

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be required to eliminate any earnings and profits accumulated by MNR for taxable periods that it did not qualify for taxation as a REIT, through a special distribution and/or employing applicable deficiency dividend procedures (including interest payments to the IRS).

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It is unclear whether the IRC provisions that are generally available to remediate REIT compliance failures will be available to us or one of our joint ventures as a successor in respect of any determination that MNR failed to qualify for taxation as a REIT.

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(1) long-term capital gains, if any, recognized on the disposition of our shares;

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(2) our distributions designated as long-term capital gain dividends (except to the extent attributable to real estate depreciation recapture, in which case the distributions are subject to a maximum 25% federal income tax rate);

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In addition, any loss upon a sale or exchange of our shares held for six months or less will generally be treated as a long-term capital loss to the extent of any long-term capital gain dividends we paid on such shares during the holding period.

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shareholders who are individuals, estates or trusts are generally required to pay a 3.8% Medicare tax on their net investment income (including dividends on our shares (without regard to any deduction allowed by Section 199A of the IRC) and gains from the sale or other disposition of our shares), or in the case of estates and trusts on their net investment income that is not distributed, in each case to the extent that their total adjusted income exceeds applicable thresholds.

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however, we cannot be sure that our shares will continue to be so listed in future taxable years or that any class of our shares that we may issue in the future will be so listed.

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Distributions.

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We expect that our shares will not be USRPIs because one or both of the following exemptions will be available at all times.

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First, for so long as a class of our shares is listed on a U.S.

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shareholder has established on a properly executed IRS Form W-9 or substantially similar form that it comes within an enumerated exempt category, distributions or proceeds on our shares paid to it during the calendar year, and the amount of tax withheld, if any, will be reported to it and to the IRS.

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Distributions on our shares to a non-U.S.

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federal income tax consequences discussed above.

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ERISA PLANS, KEOGH PLANS AND INDIVIDUAL RETIREMENT ACCOUNTS

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Fiduciaries considering an investment in our securities should consult their own legal advisors as to whether the ownership of our securities involves a non-exempt prohibited transaction.

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“Plan Assets” Considerations

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The regulation provides that whether a security is “freely transferable” is a factual question to be determined on the basis of all relevant facts and circumstances.

The regulation further provides that, where a security is part of an offering in which the minimum investment is $10,000 or less, some restrictions on transfer ordinarily will not, alone or in combination, affect a finding that these securities are freely transferable.

The restrictions on transfer enumerated in the regulation as not affecting that finding include:

• any restriction on or prohibition against any transfer or assignment that would result in a termination or reclassification for federal or state tax purposes, or would otherwise violate any state or federal law or court order;

• any requirement that advance notice of a transfer or assignment be given to the issuer and any requirement that either the transferor or transferee, or both, execute documentation setting forth representations as to compliance with any restrictions on transfer that are among those enumerated in the regulation as not affecting free transferability, including those described in the preceding clause of this sentence;

• any administrative procedure that establishes an effective date, or an event prior to which a transfer or assignment will not be effective;

• any limitation or restriction on transfer or assignment that is not imposed by the issuer or a person acting on behalf of the issuer.

We believe that the restrictions imposed under our declaration of trust on the transfer of shares do not result in the failure of our shares to be “freely transferable.” Furthermore, we believe that no other facts or circumstances limiting the transferability of our shares exist, other than those that are enumerated under the regulation as not affecting the free transferability of shares.

In addition, we do not expect or intend to impose in the future, or to permit any person to impose on our behalf, any limitations or restrictions on transfer that would not be among the enumerated permissible limitations or restrictions.

Assuming that each class of our shares will be “widely held” and that no other facts and circumstances exist that restrict transferability of these shares, our counsel, Sullivan & Worcester LLP, is of the opinion that our shares will not fail to be “freely transferable” for purposes of the regulation due to the restrictions on transfer of our shares in our declaration of trust and that under the regulation each class of our currently outstanding shares is publicly offered and our assets will not be deemed to be “plan assets” of any ERISA Plan or Non-ERISA Plan that acquires our shares in a public offering.

This opinion is conditioned upon certain assumptions and representations, as discussed above under the heading “Material United States Federal Income Tax Considerations—Taxation as a REIT.”

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The restrictions on transfer enumerated in the regulation as not affecting that finding include any restriction on or prohibition against any transfer or assignment that would result in a termination or reclassification for federal or state tax purposes, or would otherwise violate any state or federal law or court order.

We believe that the restrictions imposed under our declaration of trust and bylaws on the transfer of shares do not result in the failure of our shares to be “freely transferable.” In addition, we do not expect or intend to impose in the future, or to permit any person to impose on our behalf, any limitations or restrictions on transfer that would not be among the enumerated permissible limitations or restrictions in the regulations.

Assuming that each class of our shares will be “widely held” and that no facts and circumstances exist that restrict transferability of these shares, our counsel, Sullivan & Worcester LLP, is of the opinion that our shares will not fail to be “freely transferable” for purposes of the regulation due to the restrictions on transfer of our shares in our declaration of trust and bylaws and that under the regulation each class of our currently outstanding shares is publicly offered and our assets will not be deemed to be “plan assets” of any ERISA Plan or Non-ERISA Plan that acquires our shares in a public offering.

This opinion is conditioned upon certain assumptions and representations, as discussed above under the heading “Material United States Federal Income Tax Considerations—Taxation as a REIT.” Also, the opinion of our counsel is not binding on either the U.S.

Department of Labor or a court, and either could take a position different from that expressed by our counsel.

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-K

Item 1. Business