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 September 30, 2025, our portfolio was comprised of 411 properties containing approximately 59,890,000 rentable square feet located in 39 states with 94.1% occupancy, leased to approximately 300 different tenants, including three properties classified as held for sale. As of September 30, 2025, we also owned a 22% equity interest in the unconsolidated joint venture. We believe consumer expectations, long-term growth of e-commerce and modernization of 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, the impacts of or changes to tariffs and trade policies and any U.S. government shutdown, 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 September 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 94.8% 33.9% 4.8 Hawaii Properties ILPT 100% 226 Hawaii 16,729 85.8% 27.9% 12.5 Mainland Properties Mountain JV 61% 94 27 states 20,978 100.0% 37.9% 6.0 Mainland Properties Tenancy in common 67% 1 New Jersey 64 98.1% 0.3% 4.4 Total / weighted average 411 59,890 94.1% 100.0% 7.4 (1) Based on annualized rental revenues as of September 30, 2025. Property Operations Occupancy data for our portfolio as of September 30, 2025 and 2024 were as follows (square feet in thousands): All Properties Comparable Properties (1) As of September 30, as of September 30, 2025 2024 2025 2024 Total properties 411 411 408 408 Total rentable square feet 59,890 59,890 59,023 59,023 Percent leased (2) 94.1 % 94.4 % 94.5 % 94.4 % (1) Consists of properties that we have owned continuously since January 1, 2024 and excludes three properties classified as held for sale as of September 30, 2025. (2) Leased square feet is pursuant to existing leases as of September 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 nine months ended September 30, 2025 and 2024, the average effective rental rates per square foot of our properties were as follows: Three Months Ended September 30, Nine Months Ended September 30, 2025 2024 2025 2024 All properties $ 7.88 $ 7.69 $ 7.91 $ 7.68 Comparable properties (1) (2) $ 7.91 $ 7.73 $ 7.93 $ 7.71 (1) For the three months ended September 30, 2025 and 2024, consists of properties that we have owned continuously since July 1, 2024 and excludes three properties classified as held for sale as of September 30, 2025. (2) For the nine months ended September 30, 2025 and 2024, consists of properties that we have owned continuously since January 1, 2024 and excludes three properties classified as held for sale as of September 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 nine months ended September 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 September 30, 2025 New Leases Renewals Totals Square feet leased during the period 193 583 776 Weighted average rental rate change (by rentable square feet) 14.0 % 25.8 % 22.1 % Weighted average lease term by square feet (years) 9.7 7.1 7.8 Total leasing costs and concession commitments (1) $ 2,339 $ 934 $ 3,273 Total leasing costs and concession commitments per square foot (1) $ 12.15 $ 1.60 $ 4.22 Total leasing costs and concession commitments per square foot per year (1) $ 1.26 $ 0.22 $ 0.54 Nine Months Ended September 30, 2025 New Leases Renewals Totals Square feet leased during the period 674 2,448 3,122 Weighted average rental rate change (by rentable square feet) 20.4 % 19.3 % 19.5 % Weighted average lease term by square feet (years) 6.8 6.4 6.5 Total leasing costs and concession commitments (1) $ 5,198 $ 4,610 $ 9,808 Total leasing costs and concession commitments per square foot (1) $ 7.72 $ 1.88 $ 3.14 Total leasing costs and concession commitments per square foot per year (1) $ 1.13 $ 0.29 $ 0.48 (1) Includes commitments made for leasing expenditures and concessions, such as leasing commissions, tenant improvements or other tenant inducements. During the nine months ended September 30, 2025, we completed rent resets for approximately 204,000 square feet of land at our Hawaii Properties at rental rates that were 29.1% 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 September 30, 2025: Annualized Rental Revenues Scheduled to Reset 2025 $ — 2026 1,322 2027 814 2028 — 2029 8,394 Thereafter 11,664 Total $ 22,194 As of September 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 3 265 0.5% 0.5% $ 1,439 0.3% 0.3% 2026 30 3,057 5.4% 5.9% 17,360 3.9% 4.2% 2027 42 8,029 14.2% 20.1% 50,073 11.4% 15.6% 2028 46 6,245 11.1% 31.2% 47,364 10.7% 26.3% 2029 38 6,903 12.2% 43.4% 45,183 10.2% 36.5% Thereafter 227 31,855 56.6% 100.0% 279,559 63.5% 100.0% Total 386 56,354 100.0% $ 440,978 100.0% Weighted average remaining lease term (years) 6.6 7.4 (1) Leased square feet is pursuant to existing leases as of September 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 September 30, 2025, FedEx and Amazon leased 22.7% and 8.1% of our total leased square feet, respectively, and represented 28.3% and 6.8% of our total annualized rental revenues, respectively. As of September 30, 2025, $17,435, or 4.0%, of our annualized rental revenues was included in leases scheduled to expire by September 30, 2026 and 5.9% 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 RESULTS OF OPERATIONS Three Months Ended September 30, 2025 Compared to Three Months Ended September 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 September 30, September 30, September 30, $ % $ $ % 2025 2024 Change Change 2025 2024 Change 2025 2024 Change Change Rental income $ 110,184 $ 107,969 $ 2,215 2.1% $ 752 $ 976 $ (224) $ 110,936 $ 108,945 $ 1,991 1.8% Operating expenses: Real estate taxes 15,139 15,275 (136) (0.9)% 66 64 2 15,205 15,339 (134) (0.9)% Other operating expenses 8,628 8,708 (80) (0.9)% 153 189 (36) 8,781 8,897 (116) (1.3)% Total operating expenses 23,767 23,983 (216) (0.9)% 219 253 (34) 23,986 24,236 (250) (1.0)% Net operating income (2) $ 86,417 $ 83,986 $ 2,431 2.9% $ 533 $ 723 $ (190) 86,950 84,709 2,241 2.6% Other expenses: Depreciation and amortization 41,034 43,205 (2,171) (5.0)% General and administrative 10,586 7,237 3,349 46.3% Loss on impairment of real estate 6,081 — 6,081 n/m Total other expenses 57,701 50,442 7,259 14.4% Interest and other income 1,585 3,134 (1,549) (49.4)% Interest expense (63,470) (73,936) 10,466 (14.2)% Loss before income taxes and equity in earnings of unconsolidated joint venture (32,636) (36,535) 3,899 10.7% Income tax expense (31) (33) 2 (6.1)% Equity in earnings of unconsolidated joint venture 2,236 1,161 1,075 92.6% Net loss (30,431) (35,407) 4,976 14.1% Net loss attributable to noncontrolling interests 8,866 10,417 (1,551) (14.9)% Net loss attributable to common shareholders $ (21,565) $ (24,990) $ 3,425 13.7% Weighted average common shares outstanding (basic and diluted) 66,089 65,769 320 0.5% Net loss per share attributable to common shareholders (basic and diluted) $ (0.33) $ (0.38) $ 0.05 13.2% n/m - not meaningful (1) Consists of properties that we have owned continuously since July 1, 2024 and excludes three properties classified as held for sale as of September 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 September 30, 2025 compared to the three months ended September 30, 2024. Rental income. Rental income increased primarily due to increases from our net leasing activity and rent resets. Real estate taxes . Real estate taxes decreased primarily due to lowered assessed values as a result of successful tax appeals at certain of our properties. Other operating expenses . The decrease in other operating expenses is primarily due to decreases in payroll costs reimbursable to RMR and professional fees, partially offset by increases in electricity expenses at certain of our properties. 21 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 October 1, 2024, partially offset by increased depreciation related to improvements made to certain of our properties since October 1, 2024. General and administrative. The increase in general and administrative expenses is primarily due to accrued incentive management fees of $2,438 at September 30, 2025. Additionally, franchise taxes and legal costs, as well as general and administrative expenses paid in common shares increased during the three months ended September 30, 2025. Loss on impairment of real estate. During the 2025 period, we recognized a loss on impairment of real estate of $6,081 to reduce the carrying value of one held for sale property to its fair value less estimated costs to sell. Interest and other income. The decrease in interest and other income is primarily due to lower average cash balances and interest rates during the 2025 period as compared to the 2024 period. Interest expense. The decrease in interest expense is primarily due to the repayment of the ILPT Floating Rate Loan in June 2025 and the discontinuation of hedge accounting for the related interest rate cap. As a result, no further amortization of the related interest rate cap was recognized during the 2025 period. Additionally, amortization of interest rate cap costs of our consolidated joint venture and debt issuance costs decreased during the 2025 period. 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 Nine Months Ended September 30, 2025 Compared to Nine Months Ended September 30, 2024 (dollars and share amounts in thousands, except per share data) Comparable (1) Non-Comparable Properties Results Properties Results Consolidated Properties Results Nine Months Ended Nine Months Ended Nine Months Ended September 30, September 30, September 30, $ % $ $ % 2025 2024 Change Change 2025 2024 Change 2025 2024 Change Change Rental income $ 331,744 $ 328,856 $ 2,888 0.9% $ 3,194 $ 2,945 $ 249 $ 334,938 $ 331,801 $ 3,137 0.9% Operating expenses: Real estate taxes 44,832 46,169 (1,337) (2.9)% 189 180 9 45,021 46,349 (1,328) (2.9)% Other operating expenses 27,369 27,893 (524) (1.9)% 539 533 6 27,908 28,426 (518) (1.8)% Total operating expenses 72,201 74,062 (1,861) (2.5)% 728 713 15 72,929 74,775 (1,846) (2.5)% Net operating income (2) $ 259,543 $ 254,794 $ 4,749 1.9% $ 2,466 $ 2,232 $ 234 262,009 257,026 4,983 1.9% Other expenses: Depreciation and amortization 123,995 130,203 (6,208) (4.8)% General and administrative 28,486 22,865 5,621 24.6% Loss on impairment of real estate 6,081 — 6,081 n/m Total other expenses 158,562 153,068 5,494 3.6% Interest and other income 5,577 8,921 (3,344) (37.5)% Interest expense (201,197) (220,797) 19,600 (8.9)% Loss on extinguishment of debt (5,070) — (5,070) n/m Loss before income taxes and equity in earnings of unconsolidated joint venture (97,243) (107,918) 10,675 (9.9)% Income tax expense (89) (102) 13 (12.7)% Equity in earnings of unconsolidated joint venture 5,338 5,232 106 2.0% Net loss (91,994) (102,788) 10,794 (10.5)% Net loss attributable to noncontrolling interests 27,587 31,220 (3,633) (11.6)% Net loss attributable to common shareholders $ (64,407) $ (71,568) $ 7,161 (10.0)% Weighted average common shares outstanding (basic and diluted) 65,951 65,651 300 0.5% Net loss per share attributable to common shareholders (basic and diluted) $ (0.98) $ (1.09) $ 0.11 (10.1)% n/m - not meaningful (1) Consists of properties that we have owned continuously since January 1, 2024 and excludes three properties classified as held for sale as of September 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 nine months ended September 30, 2025 compared to the nine months ended September 30, 2024. Rental income. Rental income increased primarily due to increases from our net leasing activity and rent resets, partially offset by a decrease in real estate tax reimbursements and vacancies at certain of our properties. Real estate taxes . Real estate taxes decreased primarily due to lowered assessed values as a result of successful tax appeals at certain of our 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 October 1, 2024, partially offset by increased depreciation related to improvements made to certain of our properties since October 1, 2024. General and administrative. The increase in general and administrative expenses is primarily due to accrued incentive management fees of $4,716 for the 2025 period and an increase in legal fees. Loss on impairment of real estate. During the 2025 period, we recognized a loss on impairment of real estate of $6,081 to reduce the carrying value of one held for sale property to its fair value less estimated costs to sell. Interest and other income. The decrease in interest and other income is primarily due to lower average cash balances and interest rates during the 2025 period as compared to the 2024 period. Interest expense. The decrease in interest expense is primarily due to the repayment of the ILPT Floating Rate Loan in June 2025 and the discontinuation of hedge accounting for the related interest rate cap. As a result, no further amortization of the related interest rate cap was recognized during the 2025 period. Additionally, amortization of interest rate cap costs of our consolidated joint venture and debt issuance costs decreased during the 2025 period. These decreases were partially offset by higher average strike rates on our interest rate cap designated as a cash flow hedge compared to the 2024 period. Loss on extinguishment of debt . During the nine months ended September 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 nine months ended September 30, 2025 and 2024: Three Months Ended Nine Months Ended September 30, September 30, 2025 2024 2025 2024 Net loss $ (30,431) $ (35,407) $ (91,994) $ (102,788) Equity in earnings of unconsolidated joint venture (2,236) (1,161) (5,338) (5,232) Income tax expense 31 33 89 102 Loss before income taxes and equity in earnings of unconsolidated joint venture (32,636) (36,535) (97,243) (107,918) Loss on extinguishment of debt — — 5,070 — Interest expense 63,470 73,936 201,197 220,797 Interest and other income (1,585) (3,134) (5,577) (8,921) Loss on impairment of real estate 6,081 — 6,081 — General and administrative 10,586 7,237 28,486 22,865 Depreciation and amortization 41,034 43,205 123,995 130,203 NOI $ 86,950 $ 84,709 $ 262,009 $ 257,026 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 interests; 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 nine months ended September 30, 2025 and 2024: Three Months Ended Nine Months Ended September 30, September 30, 2025 2024 2025 2024 Net loss attributable to common shareholders $ (21,565) $ (24,990) $ (64,407) $ (71,568) Equity in earnings of unconsolidated joint venture (2,236) (1,161) (5,338) (5,232) Loss on impairment of real estate 6,081 — 6,081 — Depreciation and amortization 41,034 43,205 123,995 130,203 Share of FFO from unconsolidated joint venture 1,623 1,496 4,603 4,439 FFO adjustments attributable to noncontrolling interests (9,990) (10,487) (30,037) (31,364) FFO attributable to common shareholders 14,947 8,063 34,897 26,478 Incentive management fees (1) 2,438 — 4,716 — Loss on extinguishment of debt — — 5,070 — Normalized FFO attributable to common shareholders $ 17,385 $ 8,063 $ 44,683 $ 26,478 Weighted average common shares outstanding (basic and diluted) 66,089 65,769 65,951 65,651 Per common share data (basic and diluted): Net loss attributable to common shareholders $ (0.33) $ (0.38) $ (0.98) $ (1.09) FFO attributable to common shareholders $ 0.23 $ 0.12 $ 0.53 $ 0.40 Normalized FFO attributable to common shareholders $ 0.26 $ 0.12 $ 0.68 $ 0.40 (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 September 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 4.0% 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: Nine Months Ended September 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 52,494 15,426 Investing activities (1,356) 20,048 Financing activities (115,914) (16,266) Total (64,776) 19,208 Cash and cash equivalents and restricted cash and cash equivalents at end of period $ 177,704 $ 264,931 26 Table of Contents The increase in net cash from operating activities for the nine months ended September 30, 2025 compared to the 2024 period is primarily due to lower interest expense, excluding the impact of settlement of our interest rate caps, and higher cash flows and reimbursements from our properties. The decrease in net cash from investing activities for the nine months ended September 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 decrease in net cash from financing activities for the nine months ended September 30, 2025 compared to the 2024 period is primarily due to the repayment of the ILPT Floating Rate Loan and increases in debt issuance costs and distributions to common shareholders, 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 September 30, 2025, we had cash and cash equivalents, excluding restricted cash and cash equivalents, of $83,173. 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 October 28, 2025, we had two properties under agreements or letters of intent to sell for an aggregate sales price of $51,650, excluding closing costs. We may not complete the sales of any or all of the properties we currently plan to sell. Also, we may sell some or all of these properties at amounts that are less than currently expected and/or less than the carrying values of such properties and we may incur losses on any such sales as a result. For further information regarding our held for sale properties and disposition activities, see Note 3 to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q. Capital Expenditures As of September 30, 2025, committed, but unspent, tenant related obligations based on existing leases were $4,988, all of which are expected to be spent during the next 12 months. For further information regarding our capital expenditures, see Note 3 to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q. 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 September 30, 2025 and 2024, and $2,970 for each of the nine months ended September 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 September 30, 2025, we had an aggregate principal amount of $4,218,799 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%. During the nine months ended September 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 the Mountain Floating Rate Loan were 5.87% and 5.85% for three and nine months ended September 30, 2025, respectively, including the impact of our interest rate caps. 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 September 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 and historical weighted average interest rates under our floating rate loans, 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 nine months ended September 30, 2025, we declared and paid regular quarterly distributions to common shareholders totaling $4,640 using cash on hand. On October 9, 2025, we declared a regular quarterly distribution to common shareholders of record on October 27, 2025 of $0.05 per share, or approximately $3,333. We expect to pay this distribution on or about November 13, 2025 using cash on hand. 28 Table of Contents 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.