Industrial Logistics Properties Trust 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following information should be read in conjunction with our condensed consolidated financial statements and accompanying notes included in Part I, Item 1 of this Quarterly Report on Form 10-Q and with our 2024 Annual Report. OVERVIEW (dollars in thousands, except per square foot data) We are a real estate investment trust, or REIT, organized under Maryland law. As of March 31, 2025, our portfolio was comprised of 411 properties containing approximately 59,890,000 rentable square feet located in 39 states with 94.6% occupancy leased to approximately 300 different tenants. As of March 31, 2025, we also owned a 22% equity interest in the unconsolidated joint venture. We believe consumer expectations, growth in the number of households and demand for supply chain resiliency will keep demand for industrial properties strong for the foreseeable future. However, uncertainties surrounding interest rates and inflation in the United States and globally, global geopolitical hostilities and tensions and the impacts of or changes to tariffs and trade policies, have given rise to economic uncertainty and have caused, and may continue to cause, disruptions in the financial markets. For example, there have been significant changes to U.S. and foreign trade policies, treaties and tariffs, which have led to, and may continue to cause, the disruption of global supply chains, additional or increased tariffs and other import-export barriers, sudden fluctuations in commodity prices and costs, greater political instability and the implementation of sanctions and heightened cybersecurity concerns, any or all of which may create long-term macroeconomic challenges, limit liquidity opportunities or lead to higher costs, for us and our tenants. These conditions, if continued, could adversely affect our financial condition and that of our tenants, could adversely impact the ability or willingness of our tenants to renew our leases or pay rent to us, may restrict our access to, and would likely increase our cost of, capital, may impact our ability to sell properties and may cause the values of our properties and of our common shares or other securities to decline. Our portfolio as of March 31, 2025 is summarized below (square feet in thousands): % of Weighted Rentable Annualized Average Ownership Number of Square Rental Remaining Vehicle Ownership Properties Location Feet Occupancy Revenues Lease Term (1) Mainland Properties ILPT 100% 90 34 states 22,119 96.4% 34.2% 5.1 Hawaii Properties ILPT 100% 226 Hawaii 16,729 85.8% 27.7% 13.0 Mainland Properties Mountain JV 61% 94 27 states 20,978 99.8% 37.8% 6.4 Mainland Properties Tenancy in common 67% 1 New Jersey 64 100.0% 0.3% 4.6 Total / weighted average 411 59,890 94.6% 100.0% 7.8 (1) Based on annualized rental revenues as of March 31, 2025. Property Operations Occupancy and average effective rental rate data for our portfolio as of March 31, 2025 and 2024 were as follows (square feet in thousands): As of March 31, 2025 2024 Total properties 411 411 Total rentable square feet (1) 59,890 59,893 Percent leased (2) 94.6 % 99.0 % Average effective rental rates per square feet (3) $ 7.92 $ 7.58 (1) Subject to modest adjustments when space is remeasured or reconfigured for new tenants and when land leases are converted to building leases. (2) Leased square feet is pursuant to existing leases as of March 31, 2025, and includes space being fitted out for occupancy, if any, and space which is leased but is not occupied, if any. (3) Represents total rental income divided by the average rentable square feet leased during the periods specified for our properties. 18 Table of Contents Mainland Properties. We g enerally will seek to renew or extend the terms of leases for our Mainland Properties as their expirations approach. A majority of the leases for our Mainland Properties include periodic set dollar amount or percentage increases that increase the cash rent payable to us. Due to the capital that many of the tenants in our Mainland Properties have invested in these properties and because many of these properties appear to be of strategic importance to the tenants’ businesses, we believe that it is likely that these tenants will renew or extend their leases prior to their expirations. If we are unable to extend or renew our leases, it may be time consuming and expensive to relet some of these properties and the terms of any new leases we enter into may be less favorable to us than the terms of our existing leases for those properties. Hawaii Properties. 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. Lease renewals, lease extensions, new leases and rental rates for our Hawaii Properties in the future will depend on prevailing market conditions when these lease renewals, lease extensions, new leases and rental rates are set. As rent reset dates or lease expirations approach at our Hawaii Properties, we generally negotiate with existing or new tenants for new lease terms. If we are unable to reach an agreement with a tenant on a rent reset, our Hawaii Properties’ leases typically provide that rent is reset based on an appraisal process. 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. During the three months ended March 31, 2025, we entered into new and renewal leases as summarized in the following table, excluding the impact of rent resets (square feet in thousands): New Leases Renewals Totals Square feet leased during the period 437 1,738 2,175 Weighted average rental rate change (by rentable square feet) 22.2 % 17.6 % 18.5 % Weighted average lease term by square feet (years) 5.8 6.2 6.1 Total leasing costs and concession commitments (1) $ 2,850 $ 3,622 $ 6,472 Total leasing costs and concession commitments per square foot (1) $ 6.52 $ 2.08 $ 2.97 Total leasing costs and concession commitments per square foot per year (1) $ 1.13 $ 0.33 $ 0.48 (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, 2025, we completed rent resets for approximately 144,000 square feet of land at our Hawaii Properties at rental rates that were 34.6% higher than prior rental rates. The following table provides the annualized rental revenues scheduled to reset at our Hawaii Properties as of March 31, 2025: Annualized Rental Revenues Scheduled to Reset 2025 $ 596 2026 1,316 2027 805 2028 — 2029 8,517 Thereafter 11,491 Total $ 22,725 19 Table of Contents As of March 31, 2025, our remaining lease expirations by year were as follows (square feet in thousands): Cumulative % of Total Cumulative % of Total % of Total Annualized Annualized % of Total Leased Leased Leased Rental Rental Annualized No. of Square Feet Square Feet Square Feet Revenues Revenues Rental Revenues Year Leases Expiring (1) Expiring (1) Expiring (1) Expiring Expiring Expiring 2025 18 1,145 2.0 % 2.0 % $ 4,940 1.1 % 1.1 % 2026 30 3,167 5.6 % 7.6 % 19,946 4.5 % 5.6 % 2027 43 8,306 14.7 % 22.3 % 51,894 11.7 % 17.3 % 2028 42 6,236 11.0 % 33.3 % 47,005 10.6 % 27.9 % 2029 38 6,879 12.1 % 45.4 % 45,342 10.2 % 38.1 % Thereafter 216 30,947 54.6 % 100.0 % 274,782 61.9 % 100.0 % Total 387 56,680 100.0 % $ 443,909 100.0 % Weighted average remaining lease term (in years) 7.0 7.8 (1) Leased square feet is pursuant to existing leases as of March 31, 2025, and includes space being fitted out for occupancy, if any, and space which is leased but is not occupied, if any. As of March 31, 2025, subsidiaries of FedEx and Amazon leased 22.5% and 8.0% of our total leased square feet, respectively, and represented 28.7% and 6.7% of our total annualized rental revenues, respectively. As of March 31, 2025, $5,478, or 1.2%, of our annualized rental revenues was included in leases scheduled to expire by March 31, 2026 and 5.4% of our rentable square feet was 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. Whenever we extend, renew or enter new leases for our properties, we intend to seek rents that are equal to or higher than our historical rents for the same properties. Despite our prior experience with rent resets, lease extensions and new leases in Hawaii, our ability to increase rents when rents reset, leases are extended or leases expire depends upon market conditions, which are beyond our control. Accordingly, we cannot be sure that the historical increases achieved at our Hawaii Properties will continue in the future. Tenant Review Process. Our manager, RMR, conducts a tenant review process for us. RMR assesses tenants on an individual basis based on various applicable credit criteria. Depending on facts and circumstances, RMR evaluates the creditworthiness of a tenant based on information that is provided by the tenant and, in some cases, information that is publicly available or obtained from third party sources. RMR also may use a third party service to monitor the credit ratings of debt securities of our existing tenants whose debt securities are rated by a nationally recognized credit rating agency. In October 2024, American Tire Distributors, Inc., or ATD, which represented 1.6% of our total annualized rental revenues as of March 31, 2025, filed for Chapter 11 bankruptcy. As of April 29, 2025, this tenant has no outstanding lease obligations due to us and has indicated that it does not intend to vacate any of its leases with us but is seeking to modify the terms of its existing leases with us. As of April 29, 2025, we have not engaged with ATD to modify any of its current leases. ATD has until May 20, 2025 to accept or reject the continuation of these leases. 20 Table of Contents RESULTS OF OPERATIONS Three Months Ended March 31, 2025 Compared to Three Months Ended March 31, 2024 (dollars and share amounts in thousands, except per share data) Three Months Ended March 31, $ % 2025 2024 Change Change Rental income $ 111,905 $ 112,235 $ (330) (0.3)% Operating expenses: Real estate taxes 14,154 15,861 (1,707) (10.8)% Other operating expenses 10,249 10,322 (73) (0.7)% Total operating expenses 24,403 26,183 (1,780) (6.8)% Net operating income (1) 87,502 86,052 1,450 1.7% Other expenses: Depreciation and amortization 41,518 43,577 (2,059) (4.7)% General and administrative 8,238 7,689 549 7.1% Total other expenses 49,756 51,266 (1,510) (2.9)% Interest income 1,968 2,852 (884) (31.0)% Interest expense (69,813) (73,230) 3,417 (4.7)% Loss before income taxes and equity in (losses) earnings of unconsolidated joint venture (30,099) (35,592) 5,493 15.4% Income tax expense (28) (33) 5 (15.2)% Equity in (losses) earnings of unconsolidated joint venture (1,042) 1,723 (2,765) (160.5)% Net loss (31,169) (33,902) 2,733 8.1% Net loss attributable to noncontrolling interest 9,637 10,499 (862) (8.2)% Net loss attributable to common shareholders $ (21,532) $ (23,403) $ 1,871 8.0% Weighted average common shares outstanding (basic and diluted) 65,834 65,556 278 0.4% Net loss per share attributable to common shareholders (basic and diluted) $ (0.33) $ (0.36) $ 0.03 8.3% (1) See our definition of net operating income, or 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, 2025 compared to the three months ended March 31, 2024. Rental income. Rental income decreased primarily due to vacancies at certain of our properties, partially offset by our leasing activity. Real estate taxes . Real estate taxes decreased primarily due to a lowered assessed value as a result of a successful real estate tax appeal at one of our Mainland Properties. Other operating expenses . The decrease in other operating expenses is primarily due to decreases in insurance expenses and professional fees, partially offset by increases in snow removal and electricity expenses at certain of our properties. Depreciation and amortization. The decrease in depreciation and amortization primarily reflects the impact of certain acquired real estate leases fully amortizing since April 1, 2024, partially offset by increased depreciation related to improvements made to certain of our properties since April 1, 2024. 21 Table of Contents General and administrative. The increase in general and administrative expenses is primarily due to accrued incentive management fees of $967 recognized during the three months ended March 31, 2025 as a result of our total shareholder return exceeding the returns for the MSCI U.S. REIT/Industrial REIT Index over the applicable measurement period, partially offset by decreases in professional and legal fees. Interest income. The decrease in interest income is primarily due to lower interest rates and average cash balances during the 2025 period as compared to the 2024 period. Interest expense. The decrease in interest expense is primarily due to decreased amortization of debt issuance and interest rate cap costs related to our floating rate loans. Income tax expense. Income tax expense primarily reflects state income taxes payable in certain jurisdictions. Equity in (losses) earnings of unconsolidated joint venture. Equity in (losses) 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) We present certain “non-GAAP financial measures” within the meaning of the applicable rules of the Securities and Exchange Commission, or the SEC, including NOI, funds from operations, or FFO, attributable to common shareholders and normalized funds from operations, or Normalized FFO, attributable to common shareholders. These measures do not represent cash generated by operating activities in accordance with GAAP and should not be considered as alternatives to net loss or net loss attributable to common shareholders, as indicators of our operating performance or as measures of our liquidity. These measures should be considered in conjunction with net loss and net loss attributable to common shareholders as presented in our condensed consolidated statements of comprehensive income (loss). We consider these non-GAAP measures to be appropriate supplemental measures of operating performance for a REIT, along with net loss and net loss attributable to common shareholders. We believe these measures provide useful information to investors because by excluding the effects of certain historical amounts, such as depreciation and amortization expense, they may facilitate a comparison of our operating performance between periods and with other REITs and, in the case of NOI, reflecting only those income and expense items that are generated and incurred at the property level may help both investors and management to understand the operations of our properties. Net Operating Income We calculate NOI as shown below. We define NOI as income from our rental of real estate less our property operating expenses. The calculation of NOI excludes certain components of net loss in order to provide results that are more closely related to our property level results of operations. NOI excludes depreciation and amortization. We use NOI to evaluate individual and company-wide property level performance. 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, 2025 and 2024: Three Months Ended March 31, 2025 2024 Net loss $ (31,169) $ (33,902) Equity in losses (earnings) of unconsolidated joint venture 1,042 (1,723) Income tax expense 28 33 Loss before income taxes and equity in (losses) earnings of unconsolidated joint venture (30,099) (35,592) Interest expense 69,813 73,230 Interest income (1,968) (2,852) General and administrative 8,238 7,689 Depreciation and amortization 41,518 43,577 NOI $ 87,502 $ 86,052 22 Table of Contents Funds From Operations Attributable to Common Shareholders and Normalized Funds From Operations Attributable to Common Shareholders We calculate FFO attributable to common shareholders and Normalized FFO attributable to common shareholders as shown below. FFO attributable to common shareholders is calculated on the basis defined by The National Association of Real Estate Investment Trusts, which is: (1) net loss attributable to common shareholders calculated in accordance with GAAP, excluding (i) any recovery or loss on impairment of real estate, (ii) any gain or loss on sale of real estate and (iii) equity in earnings or losses of unconsolidated joint venture; (2) plus (i) real estate depreciation and amortization and (ii) our proportionate share of FFO from unconsolidated joint venture properties; (3) minus FFO adjustments attributable to noncontrolling interest; and (4) certain other adjustments currently not applicable to us. In calculating Normalized FFO attributable to common shareholders, we adjust for certain nonrecurring items shown below, including adjustments for such items related to the unconsolidated joint venture, if any, and incentive management fees, if any. FFO attributable to common shareholders and Normalized FFO attributable to common shareholders are among the factors considered by our Board of Trustees when determining the amount of distributions to our shareholders. Other factors include, but are not limited to, requirements to maintain our qualification for taxation as a REIT, the then current and expected needs for and availability of cash to pay our obligations and fund our investments, limitations in the agreements governing our debt, the availability to us of debt and equity capital, our distribution rate as a percentage of the trading price of our common shares, or dividend yield, and our dividend yield compared to the dividend yields of other REITs and our expectation of future capital requirements and operating performance. 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, 2025 and 2024: Three Months Ended March 31, 2025 2024 Net loss attributable to common shareholders $ (21,532) $ (23,403) Equity in losses (earnings) of unconsolidated joint venture 1,042 (1,723) Depreciation and amortization 41,518 43,577 Share of FFO from unconsolidated joint venture 1,505 1,459 FFO adjustments attributable to noncontrolling interest (10,010) (10,460) FFO attributable to common shareholders $ 12,523 $ 9,450 Incentive management fees (1) 967 — Normalized FFO attributable to common shareholders $ 13,490 $ 9,450 Weighted average common shares outstanding (basic and diluted) 65,834 65,556 Per common share data (basic and diluted): Net loss attributable to common shareholders $ (0.33) $ (0.36) FFO attributable to common shareholders $ 0.19 $ 0.14 Normalized FFO attributable to common shareholders $ 0.20 $ 0.14 (1) Incentive management fees are estimated and accrued during the applicable measurement period. Actual incentive management fees will be calculated based on common share total return, as defined in our business management agreement, for the three year period ending December 31 of the applicable calendar year, are included in general and administrative expenses in our condensed consolidated statements of comprehensive income (loss) and will be payable to RMR in January of the following calendar year. LIQUIDITY AND CAPITAL RESOURCES (dollars in thousands, except per share and per square foot data) Our principal sources of funds to meet our operating and capital obligations, pay our debt service obligations and make distributions to our shareholders are rents from tenants at our properties. As of March 31, 2025, investment grade rated tenants, subsidiaries of investment grade rated parent entities or our Hawaii land leases represented 76.1% of our annualized rental revenues and only 1.2% 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 obligations, pay our debt service obligations and make distributions to our shareholders for the next 12 months and for the foreseeable future thereafter. 23 Table of Contents 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, 2025 2024 Cash and cash equivalents and restricted cash and cash equivalents at beginning of period $ 242,480 $ 245,723 Net cash provided by (used in): Operating activities 11,371 7,989 Investing activities (11,689) (11,770) Financing activities (5,460) (5,465) Total (5,778) (9,246) Cash and cash equivalents and restricted cash and cash equivalents at end of period $ 236,702 $ 236,477 The increase in net cash provided by operating activities for the three months ended March 31, 2025 compared to the 2024 period is primarily due to lower cash interest expense, excluding the impact of settlement of our interest rate caps. The change in net cash used in investing activities for the three months ended March 31, 2025 compared to the 2024 period is primarily due to a decrease in proceeds from settlement of interest rate caps and an increase in real estate improvements, partially offset by reduced interest rate cap purchase costs. 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; and • control our operating cost increases, including interest and other financing costs. Our Investing and Financing Liquidity and Resources As of March 31, 2025, we had cash and cash equivalents, excluding restricted cash and cash equivalents, of $107,951. 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. This distribution requirement limits our ability to retain earnings and thereby provide capital for our operations or acquisitions. We may use our cash and cash equivalents on hand, the cash flow from our operations, net proceeds from any sales of assets and net proceeds of any offerings of equity or debt securities to fund our distributions to our shareholders. As our debt approaches maturity or we desire to reduce our leverage or refinance debt, we may explore refinancing alternatives, property sales or sales of equity interests in joint ventures. Such alternatives may include incurring term debt, obtaining financing secured by mortgages on properties we own, issuing new equity or debt securities, obtaining a revolving credit facility, participating or selling equity interests in joint ventures or selling properties. Further, any issuances of our equity securities may be dilutive to our existing shareholders. We may also assume mortgage loans or incur debt in connection with future acquisitions, developments and redevelopments. Although we cannot be sure that we will be successful in completing any particular type of financing, we believe that we will have access to financing, such as debt or equity offerings, to fund capital expenditures, future acquisitions, development, redevelopment and other activities and to pay our obligations. 24 Table of Contents Real Estate Activities During the three months ended March 31, 2025 and 2024, amounts capitalized at our properties for tenant improvements, leasing costs and building improvements were as follows: Three Months Ended March 31, 2025 2024 Tenant improvements (1) $ 3 $ 444 Leasing costs (1) 3,222 2,127 Building improvements (2) 734 802 Total capital expenditures $ 3,959 $ 3,373 (1) Includes 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) Includes expenditures to replace obsolete building components and expenditures that extend the useful life of existing assets. As of March 31, 2025, committed, but unspent, tenant related obligations based on existing leases were $6,786, all of which are expected to be spent during the next 12 months. Joint Ventures 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 also own a 22% equity interest in the unconsolidated joint venture. We account for the unconsolidated joint venture using the equity method of accounting under the fair value option. The unconsolidated joint venture made aggregate cash distributions to us of $990 for each of the three months ended March 31, 2025 and 2024. For further information regarding our consolidated joint venture and the unconsolidated joint venture, see Note 3 to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q. Indebtedness As of March 31, 2025, we had an aggregate principal amount of $4,303,196 of indebtedness, including (1) the ILPT Floating Rate Loan, (2) the Mountain Floating Rate Loan, (3) our $700,000 mortgage loan and (4) our $650,000 mortgage loan, with maturity dates after giving effect to potential exercises of all extension options between 2027 and 2038. The ILPT Floating Rate Loan, which is secured by 104 of our properties, matures in October 2025, subject to two remaining one-year extension options, and requires that interest be paid at an annual rate of SOFR plus a weighted average premium of 3.93%. In October 2024, we exercised the first of our three, one-year extension options for the maturity date of this loan. In connection with the exercise of the extension, we purchased a one-year interest rate cap for $16,975 with a SOFR strike rate equal to 2.78%, which replaced the previous interest rate cap with a SOFR strike rate equal to 2.25%. 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, which is secured by 82 properties, matures in March 2026, subject to one remaining one-year extension option, and requires that interest be paid at an annual rate of SOFR plus a premium of 2.77%. In March 2025, our consolidated joint venture exercised the second of its three, one-year extension options for the maturity date of this loan. In connection with the exercise of the extension, our consolidated joint venture purchased a one-year interest rate cap for $15,010 with a SOFR strike rate equal to 3.10%, which replaced the previous interest rate cap with a SOFR strike rate equal to 3.04%. Subject to the satisfaction of certain conditions, our consolidated joint venture has the option to prepay the Mountain Floating Rate Loan in full or in part at any time at par with no premium. 25 Table of Contents The weighted average interest rates under our floating rate loans for the three months ended March 31, 2025 and 2024 were as follows: Three Months Ended March 31, 2025 2024 ILPT Floating Rate Loan (1) 6.71% 6.18% Mountain Floating Rate Loan (2) 5.82% 6.09% (1) Reflects the impact of interest rate caps, with a current SOFR strike rate equal to 2.78% which replaced the previous strike rate equal to 2.25% in October 2024. (2) Reflects the impact of interest rate caps, with a current SOFR strike rate equal to 3.10% which replaced the previous strike rate equal to 3.04% in March 2025. 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, 2025, 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, 2025, we declared and paid a regular quarterly distribution to common shareholders totaling $661 using cash on hand. On April 10, 2025, we declared a regular quarterly distribution to common shareholders of record on April 22, 2025 of $0.01 per share, or approximately $661. We expect to pay this distribution on or about May 15, 2025 using cash on hand. Related Person Transactions We have relationships and historical and continuing transactions with RMR, RMR Inc. and others related to them. For further information about these and other such relationships and related person transactions, see Notes 8 and 9 to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q, our 2024 Annual Report, our definitive Proxy Statement for our 2025 Annual Meeting of Shareholders and our other filings with the SEC. In addition, see the section captioned “Risk Factors” of our 2024 Annual Report for a description of risks that may arise as a result of these and other related person transactions and relationships. We may engage in additional transactions with related persons, including businesses to which RMR or its subsidiaries provide management services. Critical Accounting Estimates The preparation of our condensed consolidated financial statements in conformity with GAAP requires us to make estimates and assumptions that affect reported amounts. Actual results could differ from those estimates. Significant estimates in the condensed consolidated financial statements include purchase price allocations, useful lives of fixed assets and impairment of real estate and related intangibles. A discussion of our critical accounting estimates is included in our 2024 Annual Report. There have been no significant changes in our critical accounting estimates since the year ended December 31, 2024. 26 Table of Contents