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 June 30, 2025, our portfolio was comprised of 411 properties containing approximately 59,890,000 rentable square feet located in 39 states with 94.3% occupancy, leased to approximately 300 different tenants, including one property classified as held for sale. As of June 30, 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 globally and in the United States, wars or other 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 June 30, 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 95.6% 34.3% 4.9 Hawaii Properties ILPT 100% 226 Hawaii 16,729 85.8% 27.7% 12.8 Mainland Properties Mountain JV 61% 94 27 states 20,978 99.8% 37.7% 6.2 Mainland Properties Tenancy in common 67% 1 New Jersey 64 98.1% 0.3% 4.6 Total / weighted average 411 59,890 94.3% 100.0% 7.6 (1) Based on annualized rental revenues as of June 30, 2025. Property Operations Occupancy data for our portfolio as of June 30, 2025 and 2024 were as follows (square feet in thousands): All Properties Comparable Properties (1) As of June 30, as of June 30, 2025 2024 2025 2024 Total properties 411 411 410 410 Total rentable square feet (2) 59,890 59,893 59,308 59,312 Percent leased (3) 94.3 % 95.4 % 94.3 % 95.3 % (1) Consists of properties that we have owned continuously since April 1, 2024 and excludes one property classified as held for sale as of June 30, 2025. (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 June 30, 2025, and includes space being fitted out for occupancy, if any, and space which is leased but is not occupied, if any. 18 Table of Contents 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 and six months ended June 30, 2025 and 2024, the average effective rental rates per square foot of our properties were as follows: Three Months Ended June 30, Six Months Ended June 30, 2025 2024 2025 2024 All properties $ 7.94 $ 7.76 $ 7.93 $ 7.67 Comparable properties (1) (2) $ 7.97 $ 7.79 $ 7.96 $ 7.69 (1) For the three months ended June 30, 2025 and 2024, consists of properties that we have owned continuously since April 1, 2024 and excludes one property classified as held for sale as of June 30, 2025. (2) For the six months ended June 30, 2025 and 2024, consists of properties that we have owned continuously since January 1, 2024 and excludes one property classified as held for sale as of June 30, 2025. 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. 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. Certain of our Hawaii Properties are lands leased for rents that periodically reset based on fair market values, generally every 10 years. During the three and six months ended June 30, 2025, we entered into new and renewal leases as summarized in the following table, excluding the impact of rent resets (square feet in thousands): Three Months Ended June 30, 2025 New Leases Renewals Totals Square feet leased during the period 44 127 171 Weighted average rental rate change (by rentable square feet) 83.4 % 16.4 % 21.1 % Weighted average lease term by square feet (years) 5.0 5.5 5.4 Total leasing costs and concession commitments (1) $ 9 $ 54 $ 63 Total leasing costs and concession commitments per square foot (1) $ 0.21 $ 0.42 $ 0.37 Total leasing costs and concession commitments per square foot per year (1) $ 0.04 $ 0.08 $ 0.07 Six Months Ended June 30, 2025 New Leases Renewals Totals Square feet leased during the period 481 1,865 2,346 Weighted average rental rate change (by rentable square feet) 24.3 % 17.5 % 18.7 % Weighted average lease term by square feet (years) 5.7 6.2 6.1 Total leasing costs and concession commitments (1) $ 2,859 $ 3,676 $ 6,535 Total leasing costs and concession commitments per square foot (1) $ 5.95 $ 1.97 $ 2.79 Total leasing costs and concession commitments per square foot per year (1) $ 1.04 $ 0.32 $ 0.46 (1) Includes commitments made for leasing expenditures and concessions, such as leasing commissions, tenant improvements or other tenant inducements. During the six months ended June 30, 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. 19 Table of Contents The following table provides the annualized rental revenues scheduled to reset at our Hawaii Properties as of June 30, 2025: Annualized Rental Revenues Scheduled to Reset 2025 $ 596 2026 1,316 2027 805 2028 — 2029 8,536 Thereafter 11,595 Total $ 22,848 As of June 30, 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 9 825 1.5 % 1.5 % $ 3,012 0.7 % 0.7 % 2026 30 3,142 5.6 % 7.1 % 19,548 4.4 % 5.1 % 2027 44 8,312 14.7 % 21.8 % 51,977 11.7 % 16.8 % 2028 44 6,239 11.0 % 32.8 % 47,716 10.8 % 27.6 % 2029 38 6,903 12.2 % 45.0 % 45,344 10.2 % 37.8 % Thereafter 220 31,084 55.0 % 100.0 % 276,121 62.2 % 100.0 % Total 385 56,505 100.0 % $ 443,718 100.0 % Weighted average remaining lease term (in years) 6.8 7.6 (1) Leased square feet is pursuant to existing leases as of June 30, 2025, and includes space being fitted out for occupancy, if any, and space which is leased but is not occupied, if any. As of June 30, 2025, FedEx and Amazon leased 22.6% and 8.1% of our total leased square feet, respectively, and represented 28.8% and 6.7% of our total annualized rental revenues, respectively. As of June 30, 2025, $10,079, or 2.3%, of our annualized rental revenues was included in leases scheduled to expire by June 30, 2026 and 5.7% 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. 20 Table of Contents In October 2024, OldCo Tire Distributors, Inc., formerly known as American Tire Distributors, Inc., or ATD, filed for Chapter 11 bankruptcy. Under ATD’s bankruptcy plan, which became effective on May 20, 2025, ATD will not vacate or modify the terms of any of its existing leases with us. As of June 30, 2025, ATD represented 1.7% of our total annualized rental revenues and had no outstanding lease obligations due to us. RESULTS OF OPERATIONS Three Months Ended June 30, 2025 Compared to Three Months Ended June 30, 2024 (dollars and share amounts in thousands, except per share data) Comparable (1) Non-Comparable Properties Results Properties Results Consolidated Properties Results Three Months Ended Three Months Ended Three Months Ended June 30, June 30, June 30, $ % $ $ % 2025 2024 Change Change 2025 2024 Change 2025 2024 Change Change Rental income $ 111,343 $ 109,864 $ 1,479 1.3% $ 754 $ 757 $ (3) $ 112,097 $ 110,621 $ 1,476 1.3% Operating expenses: Real estate taxes 15,646 15,124 522 3.5% 16 25 (9) 15,662 15,149 513 3.4% Other operating expenses 8,804 9,133 (329) (3.6)% 74 74 — 8,878 9,207 (329) (3.6)% Total operating expenses 24,450 24,257 193 0.8% 90 99 (9) 24,540 24,356 184 0.8% Net operating income (2) $ 86,893 $ 85,607 $ 1,286 1.5% $ 664 $ 658 $ 6 87,557 86,265 1,292 1.5% Other expenses: Depreciation and amortization 41,443 43,421 (1,978) (4.6)% General and administrative 9,662 7,939 1,723 21.7% Total other expenses 51,105 51,360 (255) (0.5)% Interest and other income 2,024 2,935 (911) (31.0)% Interest expense (67,914) (73,631) 5,717 (7.8)% Loss on extinguishment of debt (5,070) — (5,070) n/m Loss before income taxes and equity in earnings of unconsolidated joint venture (34,508) (35,791) 1,283 3.6% Income tax expense (30) (36) 6 (16.7)% Equity in earnings of unconsolidated joint venture 4,144 2,348 1,796 76.5% Net loss (30,394) (33,479) 3,085 9.2% Net loss attributable to noncontrolling interest 9,084 10,304 (1,220) (11.8)% Net loss attributable to common shareholders $ (21,310) $ (23,175) $ 1,865 8.0% Weighted average common shares outstanding (basic and diluted) 65,927 65,626 301 0.5% Net loss per share attributable to common shareholders (basic and diluted) $ (0.32) $ (0.35) $ 0.03 8.6% n/m - not meaningful (1) Consists of properties that we have owned continuously since April 1, 2024 and excludes one property classified as held for sale as of June 30, 2025. (2) 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 June 30, 2025 compared to the three months ended June 30, 2024. Rental income. Rental income increased primarily due to increases from our net leasing activity and rent resets, partially offset by vacancies at certain of our properties. 21 Table of Contents Real estate taxes . Real estate taxes increased primarily due to higher assessed values at certain of our properties. Other operating expenses . The decrease in other operating expenses is primarily due to decreases in professional fees and insurance expenses, partially offset by increases in payroll costs reimbursable to RMR. Depreciation and amortization. The decrease in depreciation and amortization primarily reflects the impact of certain acquired real estate leases fully amortizing since July 1, 2024, partially offset by increased depreciation related to improvements made to certain of our properties since July 1, 2024. General and administrative. The increase in general and administrative expenses is primarily due to an increase in accrued incentive management fees of $1,311 and increases in legal fees during the three months ended June 30, 2025. Interest and other income. The decrease in interest and other 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, partially offset by higher average strike rates on our interest rate caps designated as cash flow hedges compared to the 2024 period. Loss on extinguishment of debt . During the three months ended June 30, 2025, we recognized a loss on extinguishment of debt in connection with the repayment of the ILPT Floating Rate Loan. Income tax expense. Income tax expense 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. 22 Table of Contents Six Months Ended June 30, 2025 Compared to Six Months Ended June 30, 2024 (dollars and share amounts in thousands, except per share data) Comparable (1) Non-Comparable Properties Results Properties Results Consolidated Properties Results Six Months Ended Six Months Ended Six Months Ended June 30, June 30, June 30, $ % $ $ % 2025 2024 Change Change 2025 2024 Change 2025 2024 Change Change Rental income $ 222,485 $ 221,314 $ 1,171 0.5% $ 1,517 $ 1,542 $ (25) $ 224,002 $ 222,856 $ 1,146 0.5% Operating expenses: Real estate taxes 29,774 30,962 (1,188) (3.8)% 42 48 (6) 29,816 31,010 (1,194) (3.9)% Other operating expenses 18,958 19,326 (368) (1.9)% 169 203 (34) 19,127 19,529 (402) (2.1)% Total operating expenses 48,732 50,288 (1,556) (3.1)% 211 251 (40) 48,943 50,539 (1,596) (3.2)% Net operating income (2) $ 173,753 $ 171,026 $ 2,727 1.6% $ 1,306 $ 1,291 $ 15 175,059 172,317 2,742 1.6% Other expenses: Depreciation and amortization 82,961 86,998 (4,037) (4.6)% General and administrative 17,900 15,628 2,272 14.5% Total other expenses 100,861 102,626 (1,765) (1.7)% Interest and other income 3,992 5,787 (1,795) (31.0)% Interest expense (137,727) (146,861) 9,134 (6.2)% Loss on extinguishment of debt (5,070) — (5,070) n/m Loss before income taxes and equity in earnings of unconsolidated joint venture (64,607) (71,383) 6,776 (9.5)% Income tax expense (58) (69) 11 (15.9)% Equity in earnings of unconsolidated joint venture 3,102 4,071 (969) (23.8)% Net loss (61,563) (67,381) 5,818 (8.6)% Net loss attributable to noncontrolling interest 18,721 20,803 (2,082) (10.0)% Net loss attributable to common shareholders $ (42,842) $ (46,578) $ 3,736 (8.0)% Weighted average common shares outstanding (basic and diluted) 65,881 65,591 290 0.4% Net loss per share attributable to common shareholders (basic and diluted) $ (0.65) $ (0.71) $ 0.06 (8.5)% n/m - not meaningful (1) Consists of properties that we have owned continuously since January 1, 2024 and excludes one property classified as held for sale as of June 30, 2025. (2) 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 six months ended June 30, 2025 compared to the six months ended June 30, 2024. Rental income. Rental income increased primarily due to increases from our net leasing activity and rent resets, partially offset by vacancies at certain of our properties. 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. 23 Table of Contents Depreciation and amortization. The decrease in depreciation and amortization primarily reflects the impact of certain acquired real estate leases fully amortizing since July 1, 2024, partially offset by increased depreciation related to improvements made to certain of our properties since July 1, 2024. General and administrative. The increase in general and administrative expenses is primarily due to an increase in accrued incentive management fees of $2,278 during the six months ended June 30, 2025. Interest and other income. The decrease in interest and other 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, partially offset by higher average strike rates on our interest rate caps designated as cash flow hedges compared to the 2024 period. Loss on extinguishment of debt . During the six months ended June 30, 2025, we recognized a loss on extinguishment of debt in connection with the repayment of the ILPT Floating Rate Loan. Income tax expense. Income tax expense 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. 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. 24 Table of Contents The following table presents the reconciliation of net loss to NOI for the three and six months ended June 30, 2025 and 2024: Three Months Ended June 30, Six Months Ended June 30, 2025 2024 2025 2024 Net loss $ (30,394) $ (33,479) $ (61,563) $ (67,381) Equity in earnings of unconsolidated joint venture (4,144) (2,348) (3,102) (4,071) Income tax expense 30 36 58 69 Loss before income taxes and equity in earnings of unconsolidated joint venture (34,508) (35,791) (64,607) (71,383) Loss on extinguishment of debt 5,070 — 5,070 — Interest expense 67,914 73,631 137,727 146,861 Interest and other income (2,024) (2,935) (3,992) (5,787) General and administrative 9,662 7,939 17,900 15,628 Depreciation and amortization 41,443 43,421 82,961 86,998 NOI $ 87,557 $ 86,265 $ 175,059 $ 172,317 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, loss on extinguishment of debt, 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. 25 Table of Contents 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 and six months ended June 30, 2025 and 2024: Three Months Ended June 30, Six Months Ended June 30, 2025 2024 2025 2024 Net loss attributable to common shareholders $ (21,310) $ (23,175) $ (42,842) $ (46,578) Equity in earnings of unconsolidated joint venture (4,144) (2,348) (3,102) (4,071) Depreciation and amortization 41,443 43,421 82,961 86,998 Share of FFO from unconsolidated joint venture 1,475 1,484 2,980 2,943 FFO adjustments attributable to noncontrolling interest (10,037) (10,417) (20,047) (20,877) FFO attributable to common shareholders 7,427 8,965 19,950 18,415 Incentive management fees (1) 1,311 — 2,278 — Loss on extinguishment of debt 5,070 — 5,070 — Normalized FFO attributable to common shareholders $ 13,808 $ 8,965 $ 27,298 $ 18,415 Weighted average common shares outstanding (basic and diluted) 65,927 65,626 65,881 65,591 Per common share data (basic and diluted): Net loss attributable to common shareholders $ (0.32) $ (0.35) $ (0.65) $ (0.71) FFO attributable to common shareholders $ 0.11 $ 0.14 $ 0.30 $ 0.28 Normalized FFO attributable to common shareholders $ 0.21 $ 0.14 $ 0.41 $ 0.28 (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 June 30, 2025, investment grade rated tenants, subsidiaries of investment grade rated parent entities or our Hawaii land leases represented 76.2% of our annualized rental revenues and only 2.3% 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. 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: Six Months Ended June 30, 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 29,780 18,839 Investing activities (5,767) 4,648 Financing activities (107,428) (10,641) Total (83,415) 12,846 Cash and cash equivalents and restricted cash and cash equivalents at end of period $ 159,065 $ 258,569 26 Table of Contents The increase in net cash provided by operating activities for the six months ended June 30, 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) provided by investing activities for the six months ended June 30, 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. The change in net cash used in financing activities for the six months ended June 30, 2025 compared to the 2024 period is primarily due to the repayment of the ILPT Floating Rate Loan, partially offset by the net proceeds received from our $1,160,000 mortgage loan. 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 June 30, 2025, we had cash and cash equivalents, excluding restricted cash and cash equivalents, of $58,559. 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. 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. Disposition Activities As of June 30, 2025, one mainland property, located in Groveport, OH and containing approximately 581,000 rentable square feet, met the held for sale criteria and was classified as held for sale in our condensed consolidated balance sheets. Capital Expenditures During the three and six months ended June 30, 2025 and 2024, amounts capitalized at our properties for tenant improvements, leasing costs and building improvements were as follows: Three Months Ended June 30, Six Months Ended June 30, 2025 2024 2025 2024 Tenant improvements (1) $ 2,393 $ 142 $ 2,396 $ 586 Leasing costs (1) 300 184 3,522 2,311 Building improvements (2) 2,458 2,506 3,192 3,308 Total capital expenditures $ 5,151 $ 2,832 $ 9,110 $ 6,205 (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 June 30, 2025, committed, but unspent, tenant related obligations based on existing leases were $4,819, all of which are expected to be spent during the next 12 months. 27 Table of Contents 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 June 30, 2025 and 2024, and $1,980 for each of the six months ended June 30, 2025 and 2024, respectively. 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 June 30, 2025, we had an aggregate principal amount of $4,223,519 of indebtedness, primarily including (1) our $1,160,000 mortgage 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. In June 2025, we obtained a $1,160,000 fixed rate, interest only mortgage loan secured by 101 of our properties. This mortgage loan matures in July 2030 and requires that interest be paid at an annual rate of 6.40%. Subject to the satisfaction of certain conditions, we have the option to prepay our $1,160,000 mortgage loan in full or in part with a premium prior to January 9, 2030 and at par with no premium on or after January 9, 2030. We used the net proceeds from our $1,160,000 mortgage loan and cash on hand to repay in full the ILPT Floating Rate Loan. The ILPT Floating Rate Loan was secured by 104 of our properties, was scheduled to mature in October 2025 and required that interest be paid at an annual rate of SOFR plus a weighted average premium of 3.93%. At the time of repayment of the ILPT Floating Rate Loan, we believe that we were in compliance with all of the covenants and other terms under the agreement governing such loan. During the three and six months ended June 30, 2025, we recognized a $5,070 loss on extinguishment of debt related to the repayment of the ILPT Floating Rate Loan. The Mountain Floating Rate Loan 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. The weighted average interest rates under our floating rate loans for the three and six months ended June 30, 2025 and 2024 were as follows: Three Months Ended June 30, Six Months Ended June 30, 2025 2024 2025 2024 ILPT Floating Rate Loan (1) 6.71% 6.18% 6.71% 6.18% Mountain Floating Rate Loan (2) 5.87% 5.81% 5.84% 5.95% (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. In June 2025, we repaid in full the ILPT Floating Rate Loan using proceeds from our $1,160,000 mortgage loan and cash on hand. (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 our $1,160,000 mortgage 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 June 30, 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. 28 Table of Contents Distributions During the six months ended June 30, 2025, we declared and paid a regular quarterly distribution to common shareholders totaling $1,323 using cash on hand. On July 10, 2025, we declared a regular quarterly distribution to common shareholders of record on July 21, 2025 of $0.05 per share, or approximately $3,317. We expect to pay this distribution on or about August 14, 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 assumptions used in the evaluation of 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.