Industrial Logistics Properties Trust 10-Q

Item 3. Quantitative and Qualitative Disclosures About Market Risk ( dollars in thousands, except per share data ) We are exposed to risks associated with market changes in interest rates. We manage our exposure to this market risk by monitoring available financing alternatives, including fixed rate debt, and employing derivative instruments, including interest rate caps, to limit our exposure to increasing interest rates. Other than as described below, we do not currently expect any significant changes in our exposure to fluctuations in interest rates or in how we manage this exposure in the near future. Floating Rate Debt As of March 31, 2026, our outstanding floating rate debt consisted of the following: Annual Annual Interest Principal Interest Interest Maturity Payments Debt Balance Rate (1) Expense Date Due Mountain Floating Rate Loan $ 1,400,000 6.06% $ 86,018 03/09/2027 Monthly (1) The annual interest rate is the rate stated in the applicable contract, as adjusted by the related interest rate cap. The Mountain Floating Rate Loan requires that interest be paid at an annual rate of SOFR plus a weighted average premium of 2.77%. We are vulnerable to changes in the U.S. dollar based on short term interest rates, specifically SOFR. In conjunction with this borrowing, to hedge our exposure to risks related to changes in SOFR and as required under the loan agreement, our consolidated joint venture purchased an interest rate cap with a current SOFR strike rate equal to 3.29% for the Mountain Floating Rate Loan. In addition, upon refinancing of the Mountain Floating Rate Loan, we are vulnerable to increases in interest rate premiums due to market conditions and our perceived credit risk. The following table presents the approximate impact a one percentage point increase in interest rates would have on our annual floating rate interest expense at March 31, 2026, including the impact of our interest rate cap: Impact of an Increase in Interest Rates Total Interest Annual Annual Outstanding Expense Earnings Per Interest Rate Debt Per Year Share Impact (1) At March 31, 2026 6.06 % $ 1,400,000 $ 86,018 $ (1.30) One percentage point increase (2) 6.06 % $ 1,400,000 $ 86,018 $ (1.30) (1) Based on the diluted weighted average common shares outstanding for the three months ended March 31, 2026. (2) A one percentage point increase in interest rates would not have an impact on annual total interest expense for our floating rate debt because current interest rates exceed the strike rate of the related interest rate cap. However, a one percentage point increase in our annual interest rate of the Mountain Floating Rate Loan debt to 7.06% at March 31, 2026 would result in total floating rate interest expense per year of $100,213 and a decrease in annual earnings per share of $1.51. The foregoing table shows the impact of an immediate one percentage point change in floating interest rates, including the impact of our interest rate caps. Our exposure to fluctuations in floating interest rates will increase or decrease in the future with increases or decreases in the outstanding amounts of any floating rate debt we may incur and the impact, if any, of interest rate caps we may purchase. Generally, if interest rates were to change gradually over time, the impact would be spread over time. 27 Table of Contents Fixed Rate Debt As of March 31, 2026, our outstanding fixed rate debt consisted of the following: Number of Annual Annual Interest Properties Principal Interest Interest Payments Entity Secured By Balance Rate (1) Expense Maturity Due ILPT 186 $ 650,000 4.31% $ 28,015 02/07/2029 Monthly ILPT 101 1,160,000 6.40% 74,240 07/09/2030 Monthly ILPT 17 700,000 4.42% 30,940 03/09/2032 Monthly Mountain JV 4 91,000 6.25% 5,688 06/10/2030 Monthly Mountain JV (2) 1 8,248 3.67% 303 05/01/2031 Monthly Mountain JV (2) 1 9,960 4.14% 412 07/01/2032 Monthly Mountain JV (2) 1 23,032 4.02% 926 10/01/2033 Monthly Mountain JV (2) 1 32,318 4.13% 1,335 11/01/2033 Monthly Mountain JV (2) 1 20,311 3.10% 630 06/01/2035 Monthly Mountain JV (2) 1 33,094 2.95% 976 01/01/2036 Monthly Mountain JV (2) 1 38,399 4.27% 1,640 11/01/2037 Monthly Mountain JV (2) 1 42,867 3.25% 1,393 01/01/2038 Monthly Total / weighted average $ 2,809,229 5.21% $ 146,498 (1) The annual interest rate is the rate stated in the applicable contract. (2) In April 2026, our consolidated joint venture priced a $1,620,000 five year, fixed rate, interest only mortgage loan at 5.71%. This mortgage loan is expected to close on or about May 8, 2026 and expects to use the net proceeds to repay these loans in full. Our $650,000, $1,160,000, $700,000 and $91,000 mortgage notes require interest only payments until maturity. The remaining fixed rate mortgage notes require amortizing payment of principal and interest until maturity. Because our mortgage notes require interest to be paid at a fixed rate, changes in market interest rates during the terms of these mortgage notes will not affect our interest obligations. If these mortgage notes are refinanced at an interest rate which is one percentage point higher or lower than shown above, our annual interest cost would increase or decrease by approximately $27,955. Changes in market interest rates would affect the fair value of our fixed rate debt obligations. Increases in market interest rates decrease the fair value of our fixed rate debt, while decreases in market interest rates increase the fair value of our fixed rate debt. Interest rates continue to remain elevated despite reductions in 2025 by the U.S. Federal Reserve. There are uncertainties surrounding interest rates and they may remain at current levels, decrease or increase. Based on the balances outstanding at March 31, 2026 and assuming no other changes in factors that may affect the fair value of our fixed rate debt obligation, a hypothetical immediate one percentage point change in the interest rates would change the fair value of these obligations by approximately $108,298.