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 2025 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, 2026, our portfolio was comprised of 409 properties containing approximately 59,609,000 rentable square feet located in 39 states with 99.1% occupancy, leased to approximately 300 different tenants. As of June 30, 2026, 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. This continued demand has contributed to favorable market conditions, resulting in positive mark-to-market rents on our lease renewals and new leases. Currently, there are uncertainties in global and U.S. economic conditions driven by fluctuations in interest rates and inflation, wars and other geopolitical hostilities and tensions and changes in trade policies and tariffs, all of which have impacted financial markets and supply chains. While these factors have not had a significant adverse impact on our results of operations, if continued or if they worsen, they could adversely affect our financial condition primarily through our tenants’ financial stability, including their ability or willingness to renew leases, including at increased rental rates, or satisfy lease obligations. Most of our leases require our tenants to be responsible for certain operating expenses, including real estate taxes, insurance and common area maintenance, thereby reducing our exposure to increases in operating expenses resulting from inflation or other factors. Our portfolio as of June 30, 2026 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% 88 33 states 21,838 98.2% 33.7% 5.5 Hawaii Properties ILPT 100% 226 Hawaii 16,729 99.3% 28.8% 14.0 Mainland Properties Mountain JV 61% 94 27 states 20,978 100.0% 37.2% 5.9 Mainland Properties Tenancy in common 67% 1 New Jersey 64 100.0% 0.3% 3.7 Total / weighted average 409 59,609 99.1% 100.0% 8.1 (1) Based on annualized rental revenues as of June 30, 2026. Property Operations Occupancy data for our portfolio as of June 30, 2026 and 2025 were as follows (square feet in thousands): All Properties Comparable Properties (1) as of June 30, as of June 30, 2026 2025 2026 2025 Total properties 409 411 409 409 Total rentable square feet 59,609 59,890 59,609 59,604 Percent leased (2)(3) 99.1 % 94.3 % 99.1 % 94.8 % (1) Consists of properties that we have owned continuously since January 1, 2025. (2) Leased square feet is pursuant to existing leases as of June 30, 2026, and includes space being fitted out for occupancy, if any, and space which is leased but is not occupied, if any. (3) During the three months ended June 30, 2026, we executed new leases for two previously vacant properties in Indiana and Hawaii totaling 2,770 square feet with commencement dates in May and July 2026, respectively. 18 Table of Contents The average effective rental rates per square foot represent 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, 2026 and 2025, the average effective rental rates per square foot of our properties were as follows: Three Months Ended June 30, Six Months Ended June 30, 2026 2025 2026 2025 All properties $ 8.13 $ 7.94 $ 8.24 $ 7.93 Comparable properties (1) $ 8.13 $ 7.97 $ 8.24 $ 7.99 (1) Consists of properties that we have owned continuously since January 1, 2025. Mainland Properties. We generally 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, 2026, 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, 2026 New Leases Renewals Totals Square feet leased during the period 2,979 2,388 5,367 Weighted average rental rate change (by rentable square feet) 74.5 % 16.1 % 35.3 % Weighted average lease term by square feet (years) 42.3 6.9 26.5 Total leasing costs and concession commitments (1) $ 25,110 $ 7,181 $ 32,291 Total leasing costs and concession commitments per square foot (1) $ 8.43 $ 3.01 $ 6.02 Total leasing costs and concession commitments per square foot per year (1) $ 0.20 $ 0.43 $ 0.23 Six Months Ended June 30, 2026 New Leases Renewals Totals Square feet leased during the period 3,114 2,993 6,107 Weighted average rental rate change (by rentable square feet) 71.9 % 16.0 % 33.7 % Weighted average lease term by square feet (years) 41.1 6.2 24.0 Total leasing costs and concession commitments (1) $ 25,727 $ 8,142 $ 33,869 Total leasing costs and concession commitments per square foot (1) $ 8.26 $ 2.72 $ 5.55 Total leasing costs and concession commitments per square foot per year (1) $ 0.20 $ 0.44 $ 0.23 (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, 2026, we completed rent resets for approximately 153,000 square feet of land at our Hawaii Properties at rental rates that were 33.7% 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, 2026: Annualized Rental Revenues Scheduled to Reset 2026 $ 1,656 2027 814 2028 — 2029 8,465 2030 5,900 Thereafter 5,764 Total $ 22,599 As of June 30, 2026, 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 2026 11 1,007 1.7% 1.7% $ 5,024 1.1% 1.1% 2027 41 4,706 8.0% 9.7% 30,469 6.6% 7.7% 2028 47 5,176 8.8% 18.5% 41,300 9.0% 16.7% 2029 37 6,931 11.7% 30.2% 45,518 9.9% 26.6% 2030 34 5,450 9.2% 39.4% 41,076 8.9% 35.5% Thereafter 218 35,826 60.6% 100.0% 295,930 64.5% 100.0% Total 388 59,096 100.0% $ 459,317 100.0% Weighted average remaining lease term (years) 8.6 8.1 (1) Leased square feet is pursuant to existing leases as of June 30, 2026, 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, 2026, FedEx and Amazon leased 22.5% and 7.7% of our total leased square feet, respectively, and represented 27.8% and 7.4% of our total annualized rental revenues, respectively. As of June 30, 2026, $14,211, or 3.1%, of our annualized rental revenues were included in leases scheduled to expire by June 30, 2027 and 0.9% of our rentable square feet were 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 June 30, 2026 Compared to Three Months Ended June 30, 2025 (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, $ % $ $ % 2026 2025 Change Change 2026 2025 Change 2026 2025 Change Change Rental income $ 114,123 $ 111,340 $ 2,783 2.5% $ — $ 757 $ (757) $ 114,123 $ 112,097 $ 2,026 1.8% Operating expenses: Real estate taxes 16,908 15,630 1,278 8.2% — 32 (32) 16,908 15,662 1,246 8.0% Other operating expenses 8,612 8,795 (183) (2.1)% 7 83 (76) 8,619 8,878 (259) (2.9)% Total operating expenses 25,520 24,425 1,095 4.5% 7 115 (108) 25,527 24,540 987 4.0% Net operating income (2) $ 88,603 $ 86,915 $ 1,688 1.9% $ (7) $ 642 $ (649) 88,596 87,557 1,039 1.2% Other expenses: Depreciation and amortization 40,766 41,443 (677) (1.6)% General and administrative 11,998 9,662 2,336 24.2% Total other expenses 52,764 51,105 1,659 3.2% Interest and other income 3,379 2,024 1,355 66.9% Interest expense (61,112) (67,914) 6,802 (10.0)% Loss on extinguishment of debt (3,830) (5,070) 1,240 (24.5)% Loss before income taxes and equity in earnings of unconsolidated joint venture (25,731) (34,508) 8,777 25.4% Income tax expense (59) (30) (29) 96.7% Equity in earnings of unconsolidated joint venture 2,702 4,144 (1,442) (34.8)% Net loss (23,088) (30,394) 7,306 24.0% Net loss attributable to noncontrolling interests 8,625 9,084 (459) (5.1)% Net loss attributable to common shareholders $ (14,463) $ (21,310) $ 6,847 32.1% Weighted average common shares outstanding (basic and diluted) 66,224 65,927 297 0.5% Net loss per share attributable to common shareholders (basic and diluted) $ (0.22) $ (0.32) $ 0.10 31.3% (1) Consists of properties that we have owned continuously since April 1, 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, 2026 compared to the three months ended June 30, 2025. Rental income. Rental income increased primarily due to increases from our net leasing activity and increases in real estate tax reimbursements at certain of our properties, partially offset by a $2,575 bad debt reserve for six of our Hawaii properties. Real estate taxes. Real estate taxes increased primarily due to a refund received during the three months ended June 30, 2025 as a result of a successful real estate tax appeal at one of our Mainland Properties and higher tax rates at certain of our properties during the three months ended June 30, 2026. Other operating expenses . The decrease in other operating expenses is primarily due to decreases in payroll costs reimbursable to RMR during the three months ended June 30, 2026. 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 and the disposition of two properties since April 1, 2025, partially offset by increased depreciation related to improvements made to certain of our properties since April 1, 2025. General and administrative. The increase in general and administrative expenses is primarily due to increases in accrued incentive management fees and trustee and RMR employee share award expenses during the three months ended June 30, 2026 compared to the three months ended June 30, 2025. Interest and other income. The increase in interest and other income is primarily due to the discontinuation of hedge accounting upon repayment of the Mountain Floating Rate Loan during the three months ended June 30, 2026, partially offset by decreases primarily due to lower average cash balances and lower interest rates during the 2026 period as compared to the 2025 period. Interest expense. The decrease in interest expense is primarily due to the discontinuation of hedge accounting for interest rate caps related to the ILPT Floating Rate Loan and the Mountain Floating Rate Loan, resulting in no further amortization of interest rate cap costs and a lower outstanding principal balance compared to the 2025 period. Loss on extinguishment of debt. During the three months ended June 30, 2026, we recognized a loss on extinguishment of debt in connection with the repayment of the Mountain Floating Rate Loan and $204,999 of amortizing fixed rate 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, 2026 Compared to Six Months Ended June 30, 2025 (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, $ % $ $ % 2026 2025 Change Change 2026 2025 Change 2026 2025 Change Change Rental income $ 230,542 $ 223,077 $ 7,465 3.3% $ — $ 925 $ (925) $ 230,542 $ 224,002 $ 6,540 2.9% Operating expenses: Real estate taxes 32,922 29,746 3,176 10.7% — 70 (70) 32,922 29,816 3,106 10.4% Other operating expenses 18,668 18,910 (242) (1.3)% 49 217 (168) 18,717 19,127 (410) (2.1)% Total operating expenses 51,590 48,656 2,934 6.0% 49 287 (238) 51,639 48,943 2,696 5.5% Net operating income (2) $ 178,952 $ 174,421 $ 4,531 2.6% $ (49) $ 638 $ (687) 178,903 175,059 3,844 2.2% Other expenses: Depreciation and amortization 81,567 82,961 (1,394) (1.7)% General and administrative 21,462 17,900 3,562 19.9% Total other expenses 103,029 100,861 2,168 2.1% Interest and other income 4,423 3,992 431 10.8% Interest expense (122,814) (137,727) 14,913 (10.8)% Loss on extinguishment of debt (3,830) (5,070) 1,240 (24.5)% Loss before income taxes and equity in earnings of unconsolidated joint venture (46,347) (64,607) 18,260 28.3% Income tax expense (173) (58) (115) 198.3% Equity in earnings of unconsolidated joint venture 5,573 3,102 2,471 79.7% Net loss (40,947) (61,563) 20,616 33.5% Net loss attributable to noncontrolling interests 17,057 18,721 (1,664) (8.9)% Net loss attributable to common shareholders $ (23,890) $ (42,842) $ 18,952 44.2% Weighted average common shares outstanding (basic and diluted) 66,201 65,881 320 0.5% Net loss per share attributable to common shareholders (basic and diluted) $ (0.36) $ (0.65) $ 0.29 44.6% (1) Consists of properties that we have owned continuously since January 1, 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, 2026 compared to the six months ended June 30, 2025. Rental income. Rental income increased primarily due to increases from our net leasing activity and increases in real estate tax reimbursements at certain of our properties, partially offset by a $2,575 bad debt reserve for six of our Hawaii properties. Real estate taxes . Real estate taxes increased primarily due to a refund received during the six months ended June 30, 2025 as a result of a successful real estate tax appeal at one of our Mainland Properties and higher tax rates at certain of our properties during the six months ended June 30, 2026. Other operating expenses . The decrease in other operating expenses is primarily due to decreases in payroll costs reimbursable to RMR and repairs and maintenance expenses during the six months ended June 30, 2026. Depreciation and amortization. The decrease in depreciation and amortization primarily reflects the impact of certain acquired real estate leases fully amortizing and the disposition of two properties since January 1, 2025, partially offset by increased depreciation related to improvements made to certain of our properties since January 1, 2025. 23 Table of Contents General and administrative. The increase in general and administrative expenses is primarily due to increases in accrued incentive management fees, business management fees and trustee and RMR employee share award expenses during the six months ended June 30, 2026 compared to the six months ended June 30, 2025. Interest and other income. The increase in interest and other income is primarily due to the discontinuation of hedge accounting upon repayment of the Mountain Floating Rate Loan during the six months ended June 30, 2026, partially offset by decreases due to lower average cash balances and lower interest rates during the 2026 period as compared to the 2025 period. Interest expense. The decrease in interest expense is primarily due to the discontinuation of hedge accounting for interest rate caps related to the ILPT Floating Rate Loan and the Mountain Floating Rate Loan, resulting in no further amortization of interest rate cap costs and a lower outstanding principal balance compared to the 2025 period. Loss on extinguishment of debt . During the six months ended June 30, 2026, we recognized a loss on extinguishment of debt in connection with the repayment of the Mountain Floating Rate Loan and $204,999 of amortizing loans. 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, 2026 and 2025: Three Months Ended June 30, Six Months Ended June 30, 2026 2025 2026 2025 Net loss $ (23,088) $ (30,394) $ (40,947) $ (61,563) Equity in earnings of unconsolidated joint venture (2,702) (4,144) (5,573) (3,102) Income tax expense 59 30 173 58 Loss before income taxes and equity in earnings of unconsolidated joint venture (25,731) (34,508) (46,347) (64,607) Loss on extinguishment of debt 3,830 5,070 3,830 5,070 Interest expense 61,112 67,914 122,814 137,727 Interest and other income (3,379) (2,024) (4,423) (3,992) General and administrative 11,998 9,662 21,462 17,900 Depreciation and amortization 40,766 41,443 81,567 82,961 NOI $ 88,596 $ 87,557 $ 178,903 $ 175,059 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 our debt agreements, 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, 2026 and 2025: Three Months Ended June 30, Six Months Ended June 30, 2026 2025 2026 2025 Net loss attributable to common shareholders $ (14,463) $ (21,310) $ (23,890) $ (42,842) Equity in earnings of unconsolidated joint venture (2,702) (4,144) (5,573) (3,102) Depreciation and amortization 40,766 41,443 81,567 82,961 Share of FFO from unconsolidated joint venture 1,926 1,475 3,775 2,980 FFO adjustments attributable to noncontrolling interests (9,890) (10,037) (19,826) (20,047) FFO attributable to common shareholders 15,637 7,427 36,053 19,950 Incentive management fees (1) 2,834 1,311 4,401 2,278 Loss on extinguishment of debt 3,830 5,070 3,830 5,070 Normalized FFO adjustments attributable to noncontrolling interest (1,494) — (1,494) — Normalized FFO attributable to common shareholders $ 20,807 $ 13,808 $ 42,790 $ 27,298 Weighted average common shares outstanding (basic and diluted) 66,224 65,927 66,201 65,881 Per common share data (basic and diluted): Net loss attributable to common shareholders $ (0.22) $ (0.32) $ (0.36) $ (0.65) FFO attributable to common shareholders $ 0.24 $ 0.11 $ 0.54 $ 0.30 Normalized FFO attributable to common shareholders $ 0.31 $ 0.21 $ 0.65 $ 0.41 (1) Incentive management fees are estimated and accrued during the applicable measurement period. Actual incentive management fees are 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 are 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, 2026, investment grade rated tenants, subsidiaries of investment grade rated entities or our Hawaii land leases represented 78.7% of our annualized rental revenues and only 3.1% 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, 2026 2025 Cash and cash equivalents and restricted cash and cash equivalents at beginning of period $ 183,031 $ 242,480 Net cash provided by (used in): Operating activities 37,927 29,780 Investing activities (1,209) (5,767) Financing activities (37,936) (107,428) Total (1,218) (83,415) Cash and cash equivalents and restricted cash and cash equivalents at end of period $ 181,813 $ 159,065 26 Table of Contents The increase in net cash from operating activities for the six months ended June 30, 2026 compared to the 2025 period is primarily due to higher cash flows and reimbursements from our properties and lower interest expense, excluding the impact of settlement of our interest rate caps. The decrease in net cash used in investing activities for the six months ended June 30, 2026 compared to the 2025 period is primarily due to reduced interest rate cap purchase costs, decreased real estate improvements and proceeds from the sale of our consolidated joint venture’s interest rate cap in 2026. These decreases were partially offset by reduced proceeds from the settlement of our interest rate caps. The change in net cash used in financing activities for the six months ended June 30, 2026, is due to proceeds received from our consolidated joint venture’s $1,620,000 fixed rate mortgage loan during the 2026 period compared to the repayment of the ILPT Floating Rate Loan during the 2025 period. Proceeds from the $1,620,000 fixed rate mortgage loan were used to repay the Mountain Floating Rate Loan and $204,999 of our consolidated joint venture’s amortizing debt during the 2026 period. During the 2025 period, our consolidated joint venture used proceeds of $1,160,000 from its fixed rate mortgage loan to repay the ILPT Floating Rate Loan. In addition to these debt transactions during the 2026 and 2025 periods, our distributions to noncontrolling interests and common shareholders increased in 2026. 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 operating cost increases, including interest and other financing costs. Our Investing and Financing Liquidity and Resources As of June 30, 2026, we had cash and cash equivalents, excluding restricted cash and cash equivalents, of $135,326. 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 or obtaining a revolving credit facility. 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. Capital Expenditures As of June 30, 2026, committed, but unspent, tenant related obligations based on existing leases were $12,599, of which $12,115 is 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. 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. Our consolidated joint venture made cash distributions of $38,000 during the three and six months ended June 30, 2026, of which $14,820 was distributed to the unrelated third party investor. The remaining $23,180 distributed to us was reclassified from restricted cash and cash equivalents to cash and cash equivalents in our condensed consolidated balance sheets. 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 $1,188 and $990 for the three months ended June 30, 2026 and 2025, and $2,376 and $1,980 for the six months ended June 30, 2026 and 2025, respectively. 27 Table of Contents 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, 2026, we had an aggregate principal amount of $4,221,000 of indebtedness, primarily including: (1) our $1,160,000 mortgage loan; (2) our $700,000 mortgage loan; (3) our $650,000 mortgage loan; and (4) our consolidated joint venture’s $1,711,000 in aggregate mortgage loans, with maturity dates between 2029 and 2032. 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. In May 2026, our consolidated joint venture obtained a $1,620,000 fixed rate, interest only mortgage loan secured by 90 of its properties. This mortgage loan matures in May 2031 and requires that interest be paid at an annual rate of 5.71%. Subject to a 24 month prepayment lockout period and the satisfaction of certain other conditions, our consolidated joint venture has the option to prepay its $1,620,000 mortgage loan in full or in part with a premium prior to November 2030 and at par with no premium beginning from November 2030. Our consolidated joint venture used the proceeds from this mortgage loan to repay in f ull the Mountain Floating Rate Loan, and $204,999 of its amortizing fixed rate debt. The Mountain Floating Rate Loan was secured by 82 properties, was scheduled to mature in March 2027 and required that interest be paid at an annual rate of SOFR plus a weighted average premium of 2.77%. The amortizing fixed rate debt repaid was secured by eight properties with a weighted average interest rate of 3.66%. In connection with the repayment of the Mountain Floating Rate Loan and $204,999 of amortizing fixed rate debt, we recognized a $3,830 loss on extinguishment of debt. The agreements and related documents governing our $1,160,000 mortgage loan, our $700,000 mortgage loan, our $650,000 mortgage loan and our consolidated joint venture’s $1,620,000 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, 2026, 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 of 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 six months ended June 30, 2026, we declared and paid regular quarterly distributions to common shareholders totaling $6,666 using cash on hand. On July 9, 2026, we declared a regular quarterly distribution to common shareholders of record on July 20, 2026 of $0.10 per share, or approximately $6,675. We expect to pay this distribution on or about August 13, 2026 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 2025 Annual Report, our definitive Proxy Statement for our 2026 Annual Meeting of Shareholders and our other filings with the SEC. In addition, see the section captioned “Risk Factors” of our 2025 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. 28 Table of Contents 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 2025 Annual Report. There have been no significant changes in our critical accounting estimates since the year ended December 31, 2025.