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What changed in Industrial Logistics Properties Trust's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Industrial Logistics Properties Trust's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+299 added−295 removedSource: 10-K (2025-02-19) vs 10-K (2024-02-20)

Top changes in Industrial Logistics Properties Trust's 2024 10-K

299 paragraphs added · 295 removed · 241 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

72 edited+11 added−8 removed291 unchanged
Biggest changeThe restrictions on transfer enumerated in the regulation as not affecting that finding include: • any restriction on or prohibition against any transfer or assignment that would result in a termination or reclassification for federal or state tax purposes, or would otherwise violate any state or federal law or court order; • any requirement that advance notice of a transfer or assignment be given to the issuer and any requirement that either the transferor or transferee, or both, execute documentation setting forth representations as to compliance with any restrictions on transfer that are among those enumerated in the regulation as not affecting free transferability, including those described in the preceding clause of this sentence; • any administrative procedure that establishes an effective date, or an event prior to which a transfer or assignment will not be effective; and • any limitation or restriction on transfer or assignment that is not imposed by the issuer or a person acting on behalf of the issuer.
Biggest changeThe restrictions on transfer enumerated in the regulation as not affecting that finding include any restriction on or prohibition against any transfer or assignment that would result in a termination or reclassification for federal or state tax purposes, or would otherwise violate any state or federal law or court order.
We expect our decision to sell properties, equity interests in our joint ventures or a stake in some of our properties will be based upon the following considerations, among others, which may be relevant to a particular property at a particular time: • the terms of any debt that may secure the property; • whether the property is leased and, if so, the remaining lease term and likelihood of lease renewal; • our ability to identify new tenants if the property has or is likely to develop vacancies; • our evaluation of future rents which may be achieved from the property; • the potential costs associated with finding replacement tenants, including tenant improvements, leasing commissions and concessions, the cost to operate the property while vacant and required building improvement capital, if any, all as compared to our projected returns from future rents; • the estimated proceeds we may receive by selling the property; • the strategic fit of the property with the rest of our portfolio; • our intended use of the proceeds we may realize from the sale of a property; • the tax implications to us and our shareholders; • the existence of alternative sources, uses or needs for capital; and • the benefits we believe we will achieve from selling equity interests in our joint ventures or contributing additional properties to our existing joint ventures or any new joint venture.
We expect our decision to sell properties, equity interests in our joint ventures or a stake in some of our properties will be based upon the following considerations, among others, which may be relevant to a particular property at a particular time: • the terms of any debt that may secure the property; • the estimated proceeds we may receive by selling the property; • the potential costs associated with finding replacement tenants, including tenant improvements, leasing commissions and concessions, the cost to operate the property while vacant and required building improvement capital, if any, all as compared to our projected returns from future rents; • whether the property is leased and, if so, the remaining lease term and likelihood of lease renewal; • our ability to identify new tenants if the property has or is likely to develop vacancies; • our evaluation of future rents which may be achieved from the property; • the strategic fit of the property with the rest of our portfolio; • our intended use of the proceeds we may realize from the sale of a property; • the tax implications to us and our shareholders; • the existence of alternative sources, uses or needs for capital; and • the benefits we believe we will achieve from selling equity interests in our joint ventures or contributing additional properties to our existing joint ventures or any new joint ventures.
In addition, if we so elect by making a timely designation to our shareholders, a shareholder would be taxed on its proportionate share of our undistributed capital gain and would generally be expected to receive a credit or refund for its proportionate share of the tax we paid. 10 Tabl e of Contents • If we have net income from the disposition of “foreclosure property”, as described in Section 856(e) of the IRC, that is held primarily for sale to customers in the ordinary course of a trade or business or other nonqualifying income from foreclosure property, we will be subject to tax on this income at the highest regular corporate income tax rate. • If we have net income from “prohibited transactions”—that is, dispositions at a gain of inventory or property held primarily for sale to customers in the ordinary course of a trade or business other than dispositions of foreclosure property and other than dispositions excepted by statutory safe harbors—we will be subject to tax on this income at a 100% rate. • If we fail to satisfy the 75% gross income test or the 95% gross income test discussed below, due to reasonable cause and not due to willful neglect, but nonetheless maintain our qualification for taxation as a REIT because of specified cure provisions, we will be subject to tax at a 100% rate on the greater of the amount by which we fail the 75% gross income test or the 95% gross income test, with adjustments, multiplied by a fraction intended to reflect our profitability for the taxable year. • If we fail to satisfy any of the REIT asset tests described below (other than a de minimis failure of the 5% or 10% asset tests) due to reasonable cause and not due to willful neglect, but nonetheless maintain our qualification for taxation as a REIT because of specified cure provisions, we will be subject to a tax equal to the greater of $50,000 or the highest regular corporate income tax rate multiplied by the net income generated by the nonqualifying assets that caused us to fail the test. • If we fail to satisfy any provision of the IRC that would result in our failure to qualify for taxation as a REIT (other than violations of the REIT gross income tests or violations of the REIT asset tests described below) due to reasonable cause and not due to willful neglect, we may retain our qualification for taxation as a REIT but will be subject to a penalty of $50,000 for each failure. • If we fail to distribute for any calendar year at least the sum of 85% of our REIT ordinary income for that year, 95% of our REIT capital gain net income for that year and any undistributed taxable income from prior periods, we will be subject to a 4% nondeductible excise tax on the excess of the required distribution over the amounts actually distributed. • If we acquire a REIT asset where our adjusted tax basis in the asset is determined by reference to the adjusted tax basis of the asset in the hands of a C corporation, under specified circumstances we may be subject to federal income taxation on all or part of the built-in gain (calculated as of the date the property ceased being owned by the C corporation) on such asset.
In addition, if we so elect by making a timely designation to our shareholders, a shareholder would be taxed on its proportionate share of our undistributed capital gain and would generally be expected to receive a credit or refund for its proportionate share of the federal corporate income tax we paid on our retained net capital. 10 Table of Contents • If we have net income from the disposition of “foreclosure property”, as described in Section 856(e) of the IRC, that is held primarily for sale to customers in the ordinary course of a trade or business or other nonqualifying income from foreclosure property, we will be subject to tax on this income at the highest regular corporate income tax rate. • If we have net income from “prohibited transactions”—that is, dispositions at a gain of inventory or property held primarily for sale to customers in the ordinary course of a trade or business other than dispositions of foreclosure property and other than dispositions excepted by statutory safe harbors—we will be subject to tax on this income at a 100% rate. • If we fail to satisfy the 75% gross income test or the 95% gross income test discussed below, due to reasonable cause and not due to willful neglect, but nonetheless maintain our qualification for taxation as a REIT because of specified cure provisions, we will be subject to tax at a 100% rate on the greater of the amount by which we fail the 75% gross income test or the 95% gross income test, with adjustments, multiplied by a fraction intended to reflect our profitability for the taxable year. • If we fail to satisfy any of the REIT asset tests described below (other than a de minimis failure of the 5% or 10% asset tests) due to reasonable cause and not due to willful neglect, but nonetheless maintain our qualification for taxation as a REIT because of specified cure provisions, we will be subject to a tax equal to the greater of $50,000 or the highest regular corporate income tax rate multiplied by the net income generated by the nonqualifying assets that caused us to fail the test. • If we fail to satisfy any provision of the IRC that would result in our failure to qualify for taxation as a REIT (other than violations of the REIT gross income tests or violations of the REIT asset tests described below) due to reasonable cause and not due to willful neglect, we may retain our qualification for taxation as a REIT but will be subject to a penalty of $50,000 for each failure. • If we fail to distribute for any calendar year at least the sum of 85% of our REIT ordinary income for that year, 95% of our REIT capital gain net income for that year and any undistributed taxable income from prior periods, we will be subject to a 4% nondeductible excise tax on the excess of the required distribution over the amounts actually distributed. • If we acquire a REIT asset where our adjusted tax basis in the asset is determined by reference to the adjusted tax basis of the asset in the hands of a C corporation, under specified circumstances we may be subject to federal income taxation on all or part of the built-in gain (calculated as of the date the property ceased being owned by the C corporation) on such asset.
In evaluating potential property acquisitions, we consider various factors, including, but not limited to, the following: • the location of the property; • the historical and projected rents received and to be received from the property; • our cost of capital compared to projected returns we may realize by owning the property; • the experience and credit quality of the property’s tenants; • the industries in which the tenants operate; • the remaining term of the leases at the property and other lease terms; • the type of property (e.g., bulk distribution, last-mile distribution, etc.); • the occupancy and demand for similar properties in the same or nearby locations; • the construction quality, physical condition and design of the property, including various environmental sustainability factors; • the expected capital expenditures that may be needed at the property; • the price at which the property may be acquired as compared to the estimated replacement cost of the property; • the price at which the property may be acquired as compared to the prices of comparable properties as evidenced by recent market sales; • the strategic fit of the property with the rest of our portfolio; • the existence of alternative sources, uses or needs for our capital; 3 Tabl e of Contents • the tenants’ historic and expected adoption of environmental sustainability in connection with their operations; and • the tax and regulatory circumstances of the market area in which the property is located.
In evaluating potential property acquisitions, we consider various factors, including, but not limited to, the following: • the location of the property; • the historical and projected rents received and to be received from the property; • our cost of capital compared to projected returns we may realize by owning the property; • the experience and credit quality of the property’s tenants; • the industries in which the tenants operate; • the remaining term of the leases at the property and other lease terms; • the type of property (e.g., bulk distribution, last-mile distribution, etc.); • the occupancy and demand for similar properties in the same or nearby locations; • the construction quality, physical condition and design of the property, including various environmental sustainability factors; • the expected capital expenditures that may be needed at the property; • the price at which the property may be acquired as compared to the estimated replacement cost of the property; • the price at which the property may be acquired as compared to the prices of comparable properties as evidenced by recent market sales; • the strategic fit of the property with the rest of our portfolio; • the existence of alternative sources, uses or needs for our capital; 3 Table of Contents • the tenants’ historic and expected adoption of environmental sustainability in connection with their operations; and • the tax and regulatory circumstances of the market area in which the property is located.
The summary does not discuss all of the particular tax considerations that might be relevant to you if you are subject to special rules under federal income tax law, for example if you are: • a bank, insurance company or other financial institution; • a regulated investment company or REIT; • a subchapter S corporation; • a broker, dealer or trader in securities or foreign currencies; • a person who marks-to-market our shares for U.S. federal income tax purposes; • a U.S. shareholder (as defined below) that has a functional currency other than the U.S. dollar; • a person who acquires or owns our shares in connection with employment or other performance of services; • a person subject to alternative minimum tax; • a person who acquires or owns our shares as part of a straddle, hedging transaction, constructive sale transaction, constructive ownership transaction or conversion transaction, or as part of a “synthetic security” or other integrated financial transaction; • a person who owns 10% or more (by vote or value, directly or constructively under the IRC) of any class of our shares; • a U.S. expatriate; 8 Tabl e of Contents • a non-U.S. shareholder (as defined below) whose investment in our shares is effectively connected with the conduct of a trade or business in the United States; • a nonresident alien individual present in the United States for 183 days or more during an applicable taxable year; • a “qualified shareholder” (as defined in Section 897(k)(3)(A) of the IRC); • a “qualified foreign pension fund” (as defined in Section 897(l)(2) of the IRC) or any entity wholly owned by one or more qualified foreign pension funds; • a non-U.S. shareholder that is a passive foreign investment company or controlled foreign corporation; • a person subject to special tax accounting rules as a result of their use of applicable financial statements (within the meaning of Section 451(b)(3) of the IRC); or • except as specifically described in the following summary, a trust, estate, tax-exempt entity or foreign person.
The summary does not discuss all of the particular tax considerations that might be relevant to you if you are subject to special rules under federal income tax law, for example if you are: • a bank, insurance company or other financial institution; • a regulated investment company or REIT; • a subchapter S corporation; • a broker, dealer or trader in securities or foreign currencies; • a person who marks-to-market our shares for U.S. federal income tax purposes; • a U.S. shareholder (as defined below) that has a functional currency other than the U.S. dollar; • a person who acquires or owns our shares in connection with employment or other performance of services; • a person subject to alternative minimum tax; • a person who acquires or owns our shares as part of a straddle, hedging transaction, constructive sale transaction, constructive ownership transaction or conversion transaction, or as part of a “synthetic security” or other integrated financial transaction; • a person who owns 10% or more (by vote or value, directly or constructively under the IRC) of any class of our shares; • a U.S. expatriate; 8 Table of Contents • a non-U.S. shareholder (as defined below) whose investment in our shares is effectively connected with the conduct of a trade or business in the United States; • a nonresident alien individual present in the United States for 183 days or more during an applicable taxable year; • a “qualified shareholder” (as defined in Section 897(k)(3)(A) of the IRC); • a “qualified foreign pension fund” (as defined in Section 897(l)(2) of the IRC) or any entity wholly owned by one or more qualified foreign pension funds; • a non-U.S. shareholder that is a passive foreign investment company or controlled foreign corporation; • a person subject to special tax accounting rules as a result of their use of applicable financial statements (within the meaning of Section 451(b)(3) of the IRC); or • except as specifically described in the following summary, a trust, estate, tax-exempt entity or foreign person.
However, this grace period terminates and foreclosure property ceases to be foreclosure property on the first day: • on which a lease is entered into for the property that, by its terms, will give rise to income that does not qualify for purposes of the 75% gross income test (disregarding income from foreclosure property), or any nonqualified income under the 75% gross income test is received or accrued by the REIT, directly or indirectly, pursuant to a lease entered into on or after such day; • on which any construction takes place on the property, other than completion of a building or any other improvement where more than 10% of the construction was completed before default became imminent and other than specifically exempted forms of maintenance or deferred maintenance; or • which is more than 90 days after the day on which the REIT acquired the property and the property is used in a trade or business which is conducted by the REIT, other than through an independent contractor from whom the REIT itself does not derive or receive any income or a TRS. 16 Tabl e of Contents Other than sales of foreclosure property, any gain that we realize on the sale of property held as inventory or other property held primarily for sale to customers in the ordinary course of a trade or business, together known as dealer gains, may be treated as income from a prohibited transaction that is subject to a penalty tax at a 100% rate.
However, this grace period terminates and foreclosure property ceases to be foreclosure property on the first day: • on which a lease is entered into for the property that, by its terms, will give rise to income that does not qualify for purposes of the 75% gross income test (disregarding income from foreclosure property), or any nonqualified income under the 75% gross income test is received or accrued by the REIT, directly or indirectly, pursuant to a lease entered into on or after such day; • on which any construction takes place on the property, other than completion of a building or any other improvement where more than 10% of the construction was completed before default became imminent and other than specifically exempted forms of maintenance or deferred maintenance; or • which is more than 90 days after the day on which the REIT acquired the property and the property is used in a trade or business which is conducted by the REIT, other than through an independent contractor from whom the REIT itself does not derive or receive any income or a TRS. 16 Table of Contents Other than sales of foreclosure property, any gain that we realize on the sale of property held as inventory or other property held primarily for sale to customers in the ordinary course of a trade or business, together known as dealer gains, may be treated as income from a prohibited transaction that is subject to a penalty tax at a 100% rate.
The regulation further provides that, where a security is part of an offering in which the minimum investment is $10,000 or less, some restrictions on transfer ordinarily will not, alone or in combination, affect a finding that these securities are freely transferable.
The regulation further provides that, where a security is part of an offering in which the minimum investment is $10,000 or less, some restrictions on transfer ordinarily will not, alone or in combination, affect a finding that the securities are freely transferable.
If MNR is deemed to have lost its qualification for taxation as a REIT prior to the date of our acquisition and no relief is available, we or one of our joint ventures would face the following tax consequences: a. inherit, as successor to MNR, any corporate income tax liabilities of MNR, including penalties and interest; b. be subject to tax on the built-in gain on each asset of MNR existing at the time we acquired MNR if such an asset were disposed of during the five-year period following the date that we acquired MNR; and c. be required to eliminate any earnings and profits accumulated by MNR for taxable periods that it did not qualify for taxation as a REIT, through a special distribution and/or employing applicable deficiency dividend procedures (including interest payments to the IRS). 20 Tabl e of Contents It is unclear whether the IRC provisions that are generally available to remediate REIT compliance failures will be available to us or one of our joint ventures as a successor in respect of any determination that MNR failed to qualify for taxation as a REIT.
If MNR is deemed to have lost its qualification for taxation as a REIT prior to the date of our acquisition and no relief is available, we or one of our joint ventures would face the following tax consequences: a. inherit, as successor to MNR, any corporate income tax liabilities of MNR, including penalties and interest; b. be subject to tax on the built-in gain on each asset of MNR existing at the time we acquired MNR if such an asset were disposed of during the five-year period following the date that we acquired MNR; and c. be required to eliminate any earnings and profits accumulated by MNR for taxable periods that it did not qualify for taxation as a REIT, through a special distribution and/or employing applicable deficiency dividend procedures (including interest payments to the IRS). 20 Table of Contents It is unclear whether the IRC provisions that are generally available to remediate REIT compliance failures will be available to us or one of our joint ventures as a successor in respect of any determination that MNR failed to qualify for taxation as a REIT.
For more information, see “Risk Factors—Risks Related to Our Business—Ownership of real estate is subject to environmental risks and liabilities”, “Risk Factors—Risks Related to Our Business—We are subject to risks from adverse weather, natural disasters and adverse impacts from global climate change, and we incur significant costs and invest significant amounts with respect to these matters” included in Part I, Item 1A of this Annual Report on Form 10-K and “Management's Discussion and Analysis of Financial Condition and Results of Operations—Impact of Climate Change” included in Part II, Item 7 of this Annual Report on Form 10-K.
For further information, see “Risk Factors—Risks Related to Our Business—Ownership of real estate is subject to environmental risks and liabilities”, “Risk Factors—Risks Related to Our Business—We are subject to risks from adverse weather, natural disasters and adverse impacts from global climate change, and we incur significant costs and invest significant amounts with respect to these matters” included in Part I, Item 1A of this Annual Report on Form 10-K and “Management's Discussion and Analysis of Financial Condition and Results of Operations—Impact of Climate Change” included in Part II, Item 7 of this Annual Report on Form 10-K.
Assuming that each class of our shares will be “widely held” and that no other facts and circumstances exist that restrict transferability of these shares, our counsel, Sullivan & Worcester LLP, is of the opinion that our shares will not fail to be “freely transferable” for purposes of the regulation due to the restrictions on transfer of our shares in our declaration of trust and that under the regulation each class of our currently outstanding shares is publicly offered and our assets will not be deemed to be “plan assets” of any ERISA Plan or Non-ERISA Plan that acquires our shares in a public offering.
Assuming that each class of our shares will be “widely held” and that no facts and circumstances exist that restrict transferability of these shares, our counsel, Sullivan & Worcester LLP, is of the opinion that our shares will not fail to be “freely transferable” for purposes of the regulation due to the restrictions on transfer of our shares in our declaration of trust and bylaws and that under the regulation each class of our currently outstanding shares is publicly offered and our assets will not be deemed to be “plan assets” of any ERISA Plan or Non-ERISA Plan that acquires our shares in a public offering.
In order to qualify for taxation as a REIT under the IRC, we are required to make annual distributions other than capital gain dividends to our shareholders in an amount at least equal to the excess of: (1) the sum of 90% of our “real estate investment trust taxable income” and 90% of our net income after tax, if any, from property received in foreclosure, over (2) the amount by which our noncash income (e.g., imputed rental income or income from transactions inadvertently failing to qualify as like-kind exchanges) exceeds 5% of our “real estate investment trust taxable income.” For these purposes, our “real estate investment trust taxable income” is as defined under Section 857 of the IRC and is computed without regard to the dividends paid deduction and our net capital gain and will generally be reduced by specified corporate-level income taxes that we pay (e.g., taxes on built-in gains or foreclosure property income). 18 Tabl e of Contents The IRC generally limits the deductibility of net interest expense paid or accrued on debt properly allocable to a trade or business to 30% of “adjusted taxable income”, subject to specified exceptions.
In order to qualify for taxation as a REIT under the IRC, we are required to make annual distributions other than capital gain dividends to our shareholders in an amount at least equal to the excess of: (1) the sum of 90% of our “real estate investment trust taxable income” and 90% of our net income after tax, if any, from property received in foreclosure, over (2) the amount by which our noncash income (e.g., cancellation of indebtedness income, imputed rental income or income from transactions inadvertently failing to qualify as like-kind exchanges) exceeds 5% of our “real estate investment trust taxable income.” For these purposes, our “real estate investment trust taxable income” is as defined under Section 857 of the IRC and is computed without regard to the dividends paid deduction and our net capital gain and will generally be reduced by specified corporate-level income taxes that we pay (e.g., taxes on built-in gains or foreclosure property income). 18 Table of Contents The IRC generally limits the deductibility of net interest expense paid or accrued on debt properly allocable to a trade or business to 30% of “adjusted taxable income”, subject to specified exceptions.
In addition, any loss upon a sale or exchange of our shares held for six months or less will generally be treated as a long-term capital loss to the extent of any long-term capital gain dividends we paid on such shares during the holding period. 22 Tabl e of Contents U.S. shareholders who are individuals, estates or trusts are generally required to pay a 3.8% Medicare tax on their net investment income (including dividends on our shares (without regard to any deduction allowed by Section 199A of the IRC) and gains from the sale or other disposition of our shares), or in the case of estates and trusts on their net investment income that is not distributed, in each case to the extent that their total adjusted income exceeds applicable thresholds.
In addition, any loss upon a sale or exchange of our shares held for six months or less will generally be treated as a long-term capital loss to the extent of any long-term capital gain dividends we paid on such shares during the holding period. 22 Table of Contents U.S. shareholders who are individuals, estates or trusts are generally required to pay a 3.8% Medicare tax on their net investment income (including dividends on our shares (without regard to any deduction allowed by Section 199A of the IRC) and gains from the sale or other disposition of our shares), or in the case of estates and trusts on their net investment income that is not distributed, in each case to the extent that their total adjusted income exceeds applicable thresholds.
To summarize, the preferential federal income tax rates for long-term capital gains and for qualified dividends generally apply to: (1) long-term capital gains, if any, recognized on the disposition of our shares; 21 Tabl e of Contents (2) our distributions designated as long-term capital gain dividends (except to the extent attributable to real estate depreciation recapture, in which case the distributions are subject to a maximum 25% federal income tax rate); (3) our dividends attributable to dividend income, if any, received by us from C corporations such as TRSs; (4) our dividends attributable to earnings and profits that we inherit from C corporations; and (5) our dividends to the extent attributable to income upon which we have paid federal corporate income tax (such as taxes on foreclosure property income or on built-in gains), net of the corporate income taxes thereon.
To summarize, the preferential federal income tax rates for long-term capital gains and for qualified dividends generally apply to: (1) long-term capital gains, if any, recognized on the disposition of our shares; 21 Table of Contents (2) our distributions designated as long-term capital gain dividends (except to the extent attributable to real estate depreciation recapture, in which case the distributions are subject to a maximum 25% federal income tax rate); (3) our dividends attributable to dividend income, if any, received by us from C corporations such as TRSs; (4) our dividends attributable to earnings and profits that we inherit from C corporations; and (5) our dividends to the extent attributable to income upon which we have paid federal corporate income tax (such as taxes on foreclosure property income or on built-in gains), net of the corporate income taxes thereon.
However, even if we continue to qualify for taxation as a REIT, we may still be subject to federal tax in the following circumstances, as described below: • We will be taxed at regular corporate income tax rates on any undistributed “real estate investment trust taxable income”, determined by including our undistributed ordinary income and net capital gains, if any.
However, even if we continue to qualify for taxation as a REIT, we may still be subject to federal tax in the following circumstances, as described below: • We will be taxed at regular corporate income tax rates on any undistributed “real estate investment trust taxable income”, including our undistributed ordinary income and net capital gains, if any.
A shareholder that fails or refuses to comply with the request is required by Treasury regulations to submit a statement with its federal income tax return disclosing its actual ownership of our shares and other information. 12 Tabl e of Contents For purposes of condition (6), an “individual” generally includes a natural person, a supplemental unemployment compensation benefit plan, a private foundation, or a portion of a trust permanently set aside or used exclusively for charitable purposes, but does not include a qualified pension plan or profit-sharing trust.
A shareholder that fails or refuses to comply with the request is required by Treasury regulations to submit a statement with its federal income tax return disclosing its actual ownership of our shares and other information. 12 Table of Contents For purposes of condition (6), an “individual” generally includes a natural person, a supplemental unemployment compensation benefit plan, a private foundation, or a portion of a trust permanently set aside or used exclusively for charitable purposes, but does not include a qualified pension plan or profit-sharing trust.
Our counsel, Sullivan & Worcester LLP, is of the opinion that we have been organized and have qualified for taxation as a REIT under the IRC for our 2018 through 2023 taxable years, and that our current and anticipated investments and plan of operation will enable us to continue to meet the requirements for qualification and taxation as a REIT under the IRC.
Our counsel, Sullivan & Worcester LLP, is of the opinion that we have been organized and have qualified for taxation as a REIT under the IRC for our 2018 through 2024 taxable years, and that our current and anticipated investments and plan of operation will enable us to continue to meet the requirements for qualification and taxation as a REIT under the IRC.
Any entity (or other arrangement) treated as a partnership for federal income tax purposes that is a holder of our shares and the partners in such a partnership (as determined for federal income tax purposes) are urged to consult their own tax advisors about the federal income tax consequences and other tax consequences of the acquisition, ownership and disposition of our shares. 9 Tabl e of Contents Taxation as a REIT We have elected to be taxed as a REIT under Sections 856 through 860 of the IRC, commencing with our 2018 taxable year.
Any entity (or other arrangement) treated as a partnership for federal income tax purposes that is a holder of our shares and the partners in such a partnership (as determined for federal income tax purposes) are urged to consult their own tax advisors about the federal income tax consequences and other tax consequences of the acquisition, ownership and disposition of our shares. 9 Table of Contents Taxation as a REIT We have elected to be taxed as a REIT under Sections 856 through 860 of the IRC, commencing with our 2018 taxable year.
The portion of rental income treated as attributable to personal property is determined according to the ratio of the fair market value of the personal property to the total fair market value of the real and personal property that is rented. 15 Tabl e of Contents • In addition, “rents from real property” includes both charges we receive for services customarily rendered in connection with the rental of comparable real property in the same geographic area, even if the charges are separately stated, as well as charges we receive for services provided by our TRSs when the charges are not separately stated.
The portion of rental income treated as attributable to personal property is determined according to the ratio of the fair market value of the personal property to the total fair market value of the real and personal property that is rented. 15 Table of Contents • In addition, “rents from real property” includes both charges we receive for services customarily rendered in connection with the rental of comparable real property in the same geographic area, even if the charges are separately stated, as well as charges we receive for services provided by our TRSs when the charges are not separately stated.
Our Board of Trustees may change our disposition policies at any time without a vote of, or notice to, our shareholders. 4 Tabl e of Contents Our Financing Policies To qualify for taxation as a REIT under the Internal Revenue Code of 1986, as amended, or the IRC, we generally are required to distribute annually at least 90% of our REIT taxable income, subject to specified adjustments and excluding any net capital gain.
Our Board of Trustees may change our disposition policies at any time without a vote of, or notice to, our shareholders. 4 Table of Contents Our Financing Policies To qualify for taxation as a REIT under the Internal Revenue Code of 1986, as amended, or the IRC, we generally are required to distribute annually at least 90% of our REIT taxable income, subject to specified adjustments and excluding any net capital gain.
Our shareholders would then increase the adjusted tax basis of their shares by the difference between (a) the amount of capital gain dividends that we designated and that they included in their taxable income, and (b) the tax that we paid on their behalf with respect to that capital gain. 19 Tabl e of Contents Acquisitions of C Corporations We may in the future engage in transactions where we acquire all of the outstanding stock of a C corporation.
Our shareholders would then increase the adjusted tax basis of their shares by the difference between (a) the amount of capital gain dividends that we designated and that they included in their taxable income, and (b) the tax that we paid on their behalf with respect to that capital gain. 19 Table of Contents Acquisitions of C Corporations We may in the future engage in transactions where we acquire all of the outstanding stock of a C corporation.
Unless the U.S. shareholder has established on a properly executed IRS Form W-9 or substantially similar form that it comes within an enumerated exempt category, distributions or proceeds on our shares paid to it during the calendar year, and the amount of tax withheld, if any, will be reported to it and to the IRS. 25 Tabl e of Contents Distributions on our shares to a non-U.S. shareholder during each calendar year and the amount of tax withheld, if any, will generally be reported to the non-U.S. shareholder and to the IRS.
Unless the U.S. shareholder has established on a properly executed IRS Form W-9 or substantially similar form that it comes within an enumerated exempt category, distributions or proceeds on our shares paid to it during the calendar year, and the amount of tax withheld, if any, will be reported to it and to the IRS. 25 Table of Contents Distributions on our shares to a non-U.S. shareholder during each calendar year and the amount of tax withheld, if any, will generally be reported to the non-U.S. shareholder and to the IRS.
We expect that our shares will not be USRPIs because one or both of the following exemptions will be available at all times. 24 Tabl e of Contents First, for so long as a class of our shares is listed on a U.S. national securities exchange, a non-U.S. shareholder’s gain on the sale of those shares will not be subject to U.S. federal income taxation as a sale of a USRPI.
We expect that our shares will not be USRPIs because one or both of the following exemptions will be available at all times. 24 Table of Contents First, for so long as a class of our shares is listed on a U.S. national securities exchange, a non-U.S. shareholder’s gain on the sale of those shares will not be subject to U.S. federal income taxation as a sale of a USRPI.
Our stock and other securities in a TRS are exempted from these 5% and 10% asset tests. • Not more than 20% of the value of our total assets may be represented by stock or other securities of our TRSs. 17 Tabl e of Contents • Not more than 25% of the value of our total assets may be represented by “nonqualified publicly offered REIT debt instruments” as defined in Section 856(c)(5)(L)(ii) of the IRC.
Our stock and other securities in a TRS are exempted from these 5% and 10% asset tests. • Not more than 20% of the value of our total assets may be represented by stock or other securities of our TRSs. 17 Table of Contents • Not more than 25% of the value of our total assets may be represented by “nonqualified publicly offered REIT debt instruments” as defined in Section 856(c)(5)(L)(ii) of the IRC.
In such case, MNR would be deemed to have retained its qualification for taxation as a REIT and the relevant penalties or sanctions for remediation would fall upon us in a manner comparable to the above. 11 Tabl e of Contents • As discussed below, we are invested in real estate through subsidiaries that we believe qualify for taxation as REITs.
In such case, MNR would be deemed to have retained its qualification for taxation as a REIT and the relevant penalties or sanctions for remediation would fall upon us in a manner comparable to the above. 11 Table of Contents • As discussed below, we are invested in real estate through subsidiaries that we believe qualify for taxation as REITs.
We define the term annualized rental revenues used in this Annual Report on Form 10-K as the annualized contractual base rents from our tenants pursuant to their leases as of the measurement date, including straight line rent adjustments and estimated recurring expense reimbursements to be paid to us, and excluding lease value amortization.
We define the term annualized rental revenues used in this Annual Report on Form 10-K as the annualized contractual base rents from our tenants pursuant to our lease agreements as of the measurement date, including straight line rent adjustments and estimated recurring expense reimbursements to be paid to us, and excluding lease value amortization.
For more information, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Part II, Item 7 of this Annual Report on Form 10-K and our consolidated financial statements included in Part IV, Item 15 of this Annual Report on Form 10-K.
For further information, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Part II, Item 7 of this Annual Report on Form 10-K and our consolidated financial statements included in Part IV, Item 15 of this Annual Report on Form 10-K.
For all these reasons, we urge you and any holder of or prospective acquirer of our shares to consult with a tax advisor about the federal income tax and other tax consequences of the acquisition, ownership and disposition of our shares.
For all these reasons, we urge you and any holder of or prospective acquiror of our shares to consult with a tax advisor about the federal income tax and other tax consequences of the acquisition, ownership and disposition of our shares.
Each class of our outstanding shares has been registered under the Exchange Act within the necessary time frame to satisfy the foregoing condition. The regulation provides that a security is “widely held” only if it is part of a class of securities that is owned by 100 or more investors independent of the issuer and of one another.
Each class of our outstanding shares has been registered under the Exchange Act within the necessary time frame to satisfy the foregoing condition. 27 Table of Contents The regulation provides that a security is “widely held” only if it is part of a class of securities that is owned by 100 or more investors independent of the issuer and of one another.
As of December 31, 2023, our Board of Trustees was comprised of seven Trustees, of which five were independent trustees, two, or approximately 28.6%, were female and one, or approximately 14.3%, was a member of under-represented communities.
As of December 31, 2024, our Board of Trustees was comprised of seven Trustees, of which five were independent trustees, two, or approximately 28.6%, were female and one, or approximately 14.3%, was a member of under-represented communities.
In such a situation, the REIT parent’s own qualification and taxation as a REIT could be jeopardized on account of the subsidiary’s failure cascading up to the REIT parent, all as described below under the heading “—Asset Tests”. 13 Tabl e of Contents We have joined with our subsidiary REITs in filing protective TRS elections, and we may continue to annually make such elections unless and until our ownership of these subsidiaries falls below 10%.
In such a situation, the REIT parent’s own qualification and taxation as a REIT could be jeopardized on account of the subsidiary’s failure cascading up to the REIT parent, all as described below under the heading “—Asset Tests”. 13 Table of Contents We have joined with certain of our subsidiary REITs in filing protective TRS elections, and we may continue to annually make such elections unless and until our ownership of these subsidiaries falls below 10%.
RMR has a principal place of business at Two Newton Place, 255 Washington Street, Suite 300, Newton, Massachusetts 02458-1634, and its telephone number is (617) 796-8390. 5 Tabl e of Contents RMR is an alternative asset management company that is focused on commercial real estate and related businesses.
RMR has a principal place of business at Two Newton Place, 255 Washington Street, Suite 300, Newton, Massachusetts 02458-1634, and its telephone number is (617) 796-8390. 5 Table of Contents RMR is an alternative asset management company that is focused on commercial real estate and related businesses.
Securityholders may send communications to our Board of Trustees or individual Trustees by writing to the party for whom the communication is intended at c/o Secretary, Industrial Logistics Properties Trust, Two Newton Place, 255 Washington Street, Suite 300, Newton, Massachusetts 02458-1634 or by email at secretary@ilptreit.com.
Security holders may send communications to our Board of Trustees or individual Trustees by writing to the party for whom the communication is intended at c/o Secretary, Industrial Logistics Properties Trust, Two Newton Place, 255 Washington Street, Suite 300, Newton, Massachusetts 02458-1634 or by email at secretary@ilptreit.com.
Also, we and our predecessors have sometimes built expansions for tenants at our Mainland Properties in return for lease extensions and rent increases, and we may continue such activities on a selective basis. Our external growth strategy is defined by our investment, disposition and financing policies as described below.
Additionally, we or our predecessors have sometimes built expansions for tenants at our Mainland Properties in return for lease extensions and rent increases, and we may continue such activities on a selective basis. Our external growth strategy is defined by our investment, disposition and financing policies as described below.
In the case of a REIT that is a partner in a partnership, Treasury regulations under the IRC provide that, for purposes of the REIT qualification requirements regarding income and assets described below, the REIT is generally deemed to own its proportionate share, based on respective capital interests, of the income and assets of the partnership (except that for purposes of the 10% value test, described below, the REIT’s proportionate share of the partnership’s assets is based on its proportionate interest in the equity and specified debt securities issued by the partnership).
In the case of a REIT that is a partner in a partnership, Treasury regulations under the IRC provide that, for purposes of the REIT qualification requirements regarding income and assets described below, the REIT is generally deemed to own its proportionate share, based on respective capital interests (including any preferred equity interest in the partnerships), of the income and assets of the partnership (except that for purposes of the 10% value test, described below, the REIT’s proportionate share of the partnership’s assets is based on its proportionate interest in the equity and specified debt securities issued by the partnership).
Each class of our shares has been listed on a U.S. national securities exchange; however, we cannot be sure that our shares will continue to be so listed in future taxable years or that any class of our shares that we may issue in the future will be so listed. 23 Tabl e of Contents Distributions.
Each class of our shares has been listed on a U.S. national securities exchange; however, we cannot be sure that our shares will continue to be so listed in future taxable years or that any class of our shares that we may issue in the future will be so listed. 23 Table of Contents Distributions.
For more information, see “Risk Factors—Risks Related to Our Business—We face significant competition” included in Part I, Item 1A of this Annual Report on Form 10-K. Our Manager The RMR Group Inc., or RMR Inc., is a holding company and substantially all of its business is conducted by its majority owned subsidiary, RMR. Adam D.
For further information, see “Risk Factors—Risks Related to Our Business—We face significant competition” included in Part I, Item 1A of this Annual Report on Form 10-K. Our Manager The RMR Group Inc., or RMR Inc., is a holding company and substantially all of its business is conducted by RMR, the majority owned subsidiary of RMR Inc.
In connection with the Merger, we entered into a joint venture arrangement, or our consolidated joint venture, with an institutional investor for 95 of the acquired MNR properties, including the two committed MNR property acquisitions, one of which was subsequently completed. Our consolidated joint venture subsequently terminated the agreement for the other committed MNR property acquisition.
In connection with the Merger, we entered into our consolidated joint venture with an institutional investor for 95 of the acquired MNR properties, including the two committed MNR property acquisitions, one of which was subsequently completed. Our consolidated joint venture subsequently terminated the agreement for the other committed MNR property acquisition.
RMR or its subsidiaries also act as a manager to other publicly traded real estate companies, privately held real estate funds and real estate related operating businesses. In addition, RMR provides management services to our joint ventures. As of February 16, 2024, the executive officers of RMR are: Adam D. Portnoy, president and chief executive officer; Christopher J.
RMR or its subsidiaries also act as a manager to other publicly traded real estate companies, privately held real estate funds and real estate related operating businesses. In addition, RMR provides management services to our joint ventures. As of February 18, 2025, the executive officers of RMR are: Adam D. Portnoy, president and chief executive officer; Christopher J.
We cannot be sure that arrangements involving our TRSs will not result in the imposition of one or more of these restrictions or sanctions, but we do not believe that we or our TRSs are or will be subject to these impositions. 14 Tabl e of Contents Income Tests.
We cannot be sure that arrangements involving our TRSs will not result in the imposition of one or more of these restrictions or sanctions, but we do not believe that we or our TRSs are or will be subject to these impositions. 14 Table of Contents Income Tests.
Segment Information As of December 31, 2023, we had one operating segment: ownership and leasing of properties that include industrial and logistics buildings and leased industrial lands.
Segment Information As of December 31, 2024, we had one operating segment: ownership and leasing of properties that include industrial and logistics buildings and leased industrial lands.
For more information regarding our financing sources and activities, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Our Investing and Financing Liquidity and Resources” included in Part II, Item 7 of this Annual Report on Form 10-K and Note 3 to our consolidated financial statements included in Part IV, Item 15 of this Annual Report on Form 10-K.
For further information regarding our financing sources and activities, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Our Investing and Financing Liquidity and Resources” included in Part II, Item 7 of this Annual Report on Form 10-K and Note 5 to our consolidated financial statements included in Part IV, Item 15 of this Annual Report on Form 10-K.
Under some of our leases, some of these costs are required to be paid or reimbursed to us by our tenants. 7 Tabl e of Contents Internet Website Our internet website address is www.ilptreit.com.
Under some of our leases, some of these costs are required to be paid or reimbursed to us by our tenants. 7 Table of Contents Internet Website Our internet website address is www.ilptreit.com.
Many of our Mainland Properties’ leases require us to maintain the roof, exterior walls, foundation and other structural elements of the buildings at our expense; however, as we believe our Mainland Properties are well maintained, we do not believe these expenses will be material to us during the remaining lease terms. Our Mainland Properties are currently 98.9% leased.
Many of our Mainland Properties’ leases require us to maintain the roof, exterior walls, foundation and other structural elements of the buildings at our expense. However, we believe our Mainland Properties are well maintained, and we do not believe these expenses will be material to us during the remaining lease terms.
Our intentions and beliefs described in this summary are based upon our understanding of applicable laws and regulations that are in effect as of February 16, 2024. If new laws or regulations are enacted which impact us directly or indirectly, we may change our intentions or beliefs.
Our intentions and beliefs described in this summary are based upon our understanding of applicable laws and regulations that are in effect as of February 18, 2025. If new laws or regulations are enacted which impact us directly or indirectly, we may change our intentions or beliefs.
Fiduciaries considering an investment in our securities should consult their own legal advisors as to whether the ownership of our securities involves a non-exempt prohibited transaction. 27 Tabl e of Contents “Plan Assets” Considerations The U.S.
Fiduciaries considering an investment in our securities should consult their own legal advisors as to whether the ownership of our securities involves a non-exempt prohibited transaction. “Plan Assets” Considerations The U.S.
Competition Owning and operating real estate is a highly competitive business. We compete against publicly traded and private REITs, numerous financial institutions, individuals and public and private companies. Some of our competitors may have greater financial and other resources than us.
Competition Owning and operating real estate is a highly competitive business. We compete against publicly traded and private REITs, numerous financial institutions, individuals and public and private companies. Some of our competitors may have greater financial and other resources available to them.
Portnoy, the Chair of our Board of Trustees and one of our Managing Trustees, is the sole trustee, an officer and the controlling shareholder of ABP Trust, which is the controlling shareholder of RMR Inc., chair of the board of directors, a managing director and the president and chief executive officer of RMR Inc. and an officer and employee of RMR.
Portnoy, is the sole trustee, an officer and the controlling shareholder of ABP Trust, which is the controlling shareholder of RMR Inc., the chair of the board of directors, a managing director and the president and chief executive officer of RMR Inc. and an officer and employee of RMR. Matthew P.
These tax consequences may not be comparable to the U.S. federal income tax consequences discussed above. 26 Tabl e of Contents ERISA PLANS, KEOGH PLANS AND INDIVIDUAL RETIREMENT ACCOUNTS General Fiduciary Obligations The Employee Retirement Income Security Act of 1974, as amended, or ERISA, the IRC and similar provisions to those described below under applicable foreign or state law, individually and collectively, impose certain duties on persons who are fiduciaries of any employee benefit plan subject to Title I of ERISA, or an ERISA Plan, or an individual retirement account or annuity, or an IRA, a Roth IRA, a tax-favored account (such as an Archer MSA, Coverdell education savings account or health savings account), a Keogh plan or other qualified retirement plan not subject to Title I of ERISA, each a Non-ERISA Plan.
ERISA PLANS, KEOGH PLANS AND INDIVIDUAL RETIREMENT ACCOUNTS General Fiduciary Obligations The Employee Retirement Income Security Act of 1974, as amended, or ERISA, the IRC and similar provisions to those described below under applicable foreign or state law, individually and collectively, impose certain duties on persons who are fiduciaries of any employee benefit plan subject to Title I of ERISA, or an ERISA Plan, or an individual retirement account or annuity, or an IRA, a Roth IRA, a tax-favored account (such as an Archer MSA, Coverdell education savings account or health savings account), a Keogh plan or other qualified retirement plan not subject to Title I of ERISA, each a Non-ERISA Plan.
RMR’s Sustainability Report may be accessed on the RMR Inc. website at www.rmrgroup.com/corporate-sustainability/default.aspx. The information on or accessible through RMR Inc.’s website is not incorporated by reference into this Annual Report on Form 10-K. We believe corporate sustainability is a strategic part of our focus on operational practices, enhancing our competitive position, development and redevelopment efforts and economic performance.
The information on or accessible through RMR Inc.’s website is not incorporated by reference into this Annual Report on Form 10-K. We believe corporate sustainability is a strategic part of our focus on operational practices, enhancing our competitive position, development and redevelopment efforts and economic performance.
We may elect to retain, rather than distribute, some or all of our net capital gain and pay income tax on such gain.
We may elect to retain, rather than distribute, some or all of our net capital gain and certain of our cancellation of indebtedness income, if any, and pay income tax on such retained amounts.
Government’s “green lease” policies permit government tenants to require LEED® designation in selecting new premises or renewing leases at existing premises and the General Services Administration gives preference to properties for lease that have received an ENERGY STAR certification. Our property manager, RMR, is a member of the ENERGY STAR program.
Department of Energy which is focused on promoting energy efficient products and properties. The U.S. Government’s “green lease” policies permit government tenants to require LEED® designation in selecting new premises or renewing leases at existing premises and the General Services Administration gives preference to properties for lease that have received an ENERGY STAR certification.
We expect to have opportunities to raise rents or re-lease these properties at higher rental rates as lease expirations at these properties approach. Also, some of the tenant renewal options at our Mainland Properties provide for rents to be reset to fair market values, and we may be able to raise rents if and when these options are exercised.
Additionally, some of the tenant renewal options at our Mainland Properties provide for rents to be reset to fair market values, and we may be able to raise rents if and when these options are exercised.
We and our shareholders may also be subject to taxation by state, local or other jurisdictions, including those in which we or our shareholders transact business or reside.
We and our shareholders may also be subject to taxation by state, local or other jurisdictions, including those in which we or our shareholders transact business or reside. These tax consequences may not be comparable to the U.S. federal income tax consequences discussed above.
In addition, we do not expect or intend to impose in the future, or to permit any person to impose on our behalf, any limitations or restrictions on transfer that would not be among the enumerated permissible limitations or restrictions.
We believe that the restrictions imposed under our declaration of trust and bylaws on the transfer of shares do not result in the failure of our shares to be “freely transferable.” In addition, we do not expect or intend to impose in the future, or to permit any person to impose on our behalf, any limitations or restrictions on transfer that would not be among the enumerated permissible limitations or restrictions in the regulations.
Fiduciaries of an ERISA Plan must consider whether: • their investment in our shares or other securities satisfies the diversification requirements of ERISA; • the investment is prudent in light of possible limitations on the marketability of our shares; • they have authority to acquire our shares or other securities under the applicable governing instrument and Title I of ERISA; and • the investment is otherwise consistent with their fiduciary responsibilities.
Under ERISA and the IRC, any person who exercises any discretionary authority or control over the administration of, or the management or disposition of the assets of, an ERISA Plan or Non-ERISA Plan, or who renders investment advice for a fee or other compensation to an ERISA Plan or Non-ERISA Plan, is generally considered to be a fiduciary of the ERISA Plan or Non-ERISA Plan. 26 Table of Contents Fiduciaries of an ERISA Plan must consider whether: • their investment in our shares or other securities satisfies the diversification requirements of ERISA; • the investment is prudent in light of possible limitations on the marketability of our shares; • they have authority to acquire our shares or other securities under the applicable governing instrument and Title I of ERISA; and • the investment is otherwise consistent with their fiduciary responsibilities.
In addition to the internal rent growth which may result from our rent resets and lease activity at our Hawaii Properties, a majority of the leases at our Mainland Properties and certain leases at our Hawaii Properties include periodic set dollar amount or percentage increases that raise the cash rent payable to us. 1 Tabl e of Contents Since the time, in some cases 40 to 50 years ago, certain of our Hawaii Properties’ leases were originally entered into, the characteristics of the neighborhoods in the vicinity of some of those properties have changed.
In addition to the internal rent growth which may result from our rent resets and lease activity at our Hawaii Properties, a majority of the leases at our Mainland Properties and certain leases at our Hawaii Properties include periodic set dollar amount or percentage increases that raise the cash rent payable to us.
As of December 31, 2023, our LEED designations and ENERGY STAR certifications were as follows: • LEED : Four of our properties containing approximately 1.3 million rentable square feet (2.0% and 3.0% of our eligible properties and eligible rentable square feet, respectively). • Building Owners and Managers Association (BOMA) 360: 28 of our properties containing approximately 5.4 million rentable square feet (14.1% and 12.4% of our eligible properties and eligible rentable square feet, respectively). • ENERGY STAR: Three of our properties containing approximately 284,000 rentable square feet (1.5% and 0.7% of our eligible properties and eligible rentable square feet, respectively). • Investments in Human Capital.
As of December 31, 2024, our LEED designations and ENERGY STAR certifications were as follows: • LEED ®: Four of our properties containing approximately 1.3 million rentable square feet (2.0% and 3.0% of our eligible properties and eligible rentable square feet, respectively). 6 Table of Contents • Building Owners and Managers Association (BOMA) 360: 50 of our properties containing approximately 8.4 million rentable square feet (25.4% and 19.2% of our eligible properties and eligible rentable square feet, respectively), excluding five anticipated certifications containing approximately 1.6 million rentable square feet that have been submitted and not yet awarded. • ENERGY STAR: Five of our properties containing approximately 687,000 rentable square feet (2.5% and 1.6% of our eligible properties and eligible rentable square feet, respectively). • Investments in Human Capital.
Bilotto, executive vice president; Jennifer B. Clark, executive vice president, general counsel and secretary; Matthew P. Jordan, executive vice president, chief financial officer and treasurer; and John G. Murray, executive vice president. Our President and Chief Operating Officer, Yael Duffy, is a senior vice president of RMR and our Chief Financial Officer and Treasurer, Tiffany R.
Bilotto, executive vice president; Jennifer B. Clark, executive vice president, general counsel and secretary; Matthew P. Jordan, executive vice president, chief financial officer and treasurer; Jeffrey C. Leer, executive vice president; and John G. Murray, executive vice president.
We may elect to retain and pay income tax on our net capital gains.
We may elect to retain and pay income tax on our net capital gain, as well as on certain amounts attributable to cancellation of indebtedness income.
Historically, this process has resulted in significant reset amounts. 2 Tabl e of Contents Tenants representing 1% or more of our total annualized rental revenues as of December 31, 2023 were as follows: % of Total % of Total Annualized No. of Leased Leased Rental Tenant States Properties Sq. Ft. (1) Sq. Ft.
Historically, this process has resulted in significant reset amounts. 2 Table of Contents Tenants representing 1% or more of our total annualized rental revenues as of December 31, 2024 were as follows (square feet in thousands): % of Total % of Total Annualized No. of Leased Leased Rental Tenant (1) Location Properties Square Feet (2) Square Feet (2) Revenues FedEx Corporation Various (33 States) 78 12,781 22.6 % 29.1 % Amazon.com Services, Inc.
Matthew P. Jordan, our other Managing Trustee, also serves as an executive vice president, chief financial officer and treasurer of RMR Inc. and an officer and employee of RMR. Our day to day operations are conducted by RMR. RMR originates and presents investment and divestment opportunities to our Board of Trustees and provides management and administrative services to us.
Jordan, our other Managing Trustee, is an executive vice president and the chief financial officer and treasurer of RMR Inc., an officer and employee of RMR and an officer of ABP Trust. Our day to day operations are conducted by RMR.
This opinion is conditioned upon certain assumptions and representations, as discussed above under the heading “Material United States Federal Income Tax Considerations—Taxation as a REIT.” 28 Tabl e of Contents
This opinion is conditioned upon certain assumptions and representations, as discussed above under the heading “Material United States Federal Income Tax Considerations—Taxation as a REIT.” Also, the opinion of our counsel is not binding on either the U.S. Department of Labor or a court, and either could take a position different from that expressed by our counsel.
GA 1 832 1.4 % 1.0 % 112 26,605 44.9 % 47.8 % (1) Leased square feet is pursuant to existing leases as of December 31, 2023, and includes space being fitted out for occupancy, if any, and space which is leased but is not occupied.
(2) Leased square feet is pursuant to existing leases as of December 31, 2024, and includes space being fitted out for occupancy, if any, and space which is leased but is not occupied, if any. (3) In October 2024, American Tire Distributors, Inc. filed for Chapter 11 bankruptcy.
Our Business and Growth Strategies We own and lease industrial and logistics properties located throughout the United States. We believe our current properties provide a stable base of increasing income. We seek to extend or enter new leases as leases approach expiration and selectively develop industrial and logistics properties in the United States.
We seek to extend or enter new leases as leases approach expiration and selectively develop industrial and logistics properties in the United States. 1 Table of Contents Our internal growth strategy is to increase rents and corresponding cash flows we receive from our current properties .
Sy, is a vice president of RMR. Other officers of RMR also serve as officers of other companies to which RMR or its subsidiaries provide management services. Employees We have no employees. Services which would otherwise be provided to us by employees are provided by RMR and by our Managing Trustees and officers.
Our President and Chief Operating Officer, Yael Duffy, is a senior vice president of RMR and our Chief Financial Officer and Treasurer, Tiffany R. Sy, and our Vice President, Marc Krohn, are each a vice president of RMR. Other officers of RMR also serve as officers of other companies to which RMR or its subsidiaries provide management services.
Our Investment Policies Our target investments include all industrial and logistics buildings in top tier markets. Outside of top tier markets, our focus is on newer buildings, high credit quality tenants and longer lease terms. We target estimated capitalization rates of 6.0% to 7.5% for new investments.
Outside of top tier markets, our focus is on newer buildings, high credit quality tenants and longer lease terms.
LEED designations are administered by the U.S. Green Building Council. The ENERGY STAR program is a joint program of the U.S. Environmental Protection Agency and the U.S. Department of Energy which is focused on promoting energy efficient products and properties. The U.S.
Furthermore, properties that reach specified levels of sustainability and energy efficiency may receive potential environmental designations and certifications, such as Leadership in Energy and Environmental Design, or LEED®, designations and/or “ENERGY STAR” certifications. LEED® designations are administered by the U.S. Green Building Council. The ENERGY STAR program is a joint program of the U.S. Environmental Protection Agency and the U.S.
In such circumstances, we have engaged in redevelopment activities to change the character of certain properties in order to increase rents.
Since the time, in some cases 40 to 50 years ago, certain of our Hawaii Properties’ leases were originally entered into, the characteristics of the neighborhoods in the vicinity of some of those properties have changed. In such circumstances, we have engaged in redevelopment activities to change the character of certain properties in order to increase rents.
As of December 31, 2023, we also owned a 22% equity interest in an unconsolidated joint venture, or the unconsolidated joint venture. As of December 31, 2023, our Mainland Properties represented 72.1% of our annualized rental revenues and our Hawaii Properties represented 27.9% of our annualized rental revenues.
As of December 31, 2024, we also owned a 22% equity interest in The Industrial Fund REIT LLC, or the unconsolidated joint venture.
Since our predecessors began acquiring our Hawaii Properties in December 2003, our Hawaii Properties have remained over 96% leased, and periodic rent resets, together with lease extensions and new leasing activity following lease expirations at our Hawaii Properties, have resulted in significant rent increases.
Certain of the leases for our Hawaii Properties provide for rents to be reset to fair market value periodically during the lease terms. Periodic rent resets, together with lease extensions and new leasing activity following lease expirations at our Hawaii Properties, have resulted in significant rent increases.
As of December 31, 2023, RMR had over 1,100 full time employees located at its headquarters and regional offices throughout the United States. Corporate Sustainability Our manager, RMR, periodically publishes its Sustainability Report, which summarizes the environmental, social and governance, or ESG, initiatives employed by RMR and its client companies, including us.
Corporate Sustainability Our manager, RMR, periodically publishes its Sustainability Report, which summarizes the environmental, social and governance, or ESG, initiatives employed by RMR and its client companies, including us. RMR’s Sustainability Report may be accessed on the RMR Inc. website at www.rmrgroup.com/corporate-sustainability/default.aspx.
NH, NY 3 794 1.3 % 1.6 % American Tire Distributors, Inc. CO, LA, NE, NY, OH 5 722 1.2 % 1.5 % Restoration Hardware, Inc. MD 1 1,195 2.0 % 1.5 % Servco Pacific, Inc. HI 7 629 1.1 % 1.4 % Par Pacific Holdings Inc.
AL, IN, OK, SC, TN, VA 8 4,539 8.0 % 6.8 % Home Depot U.S.A., Inc. GA, HI 3 991 1.8 % 2.3 % American Tire Distributors, Inc. (3) CO, LA, NE, NY, OH 5 722 1.3 % 1.6 % UPS Supply Chain Solutions, Inc. NH, NY 3 794 1.4 % 1.5 % Restoration Hardware, Inc.
Removed
As of December 31, 2023, our portfolio was comprised of 411 properties containing approximately 59,951,000 rentable square feet located in 39 states, including 226 buildings, leasable land parcels and easements containing approximately 16,729,000 rentable square feet (all square footage amounts included within this Annual Report on Form 10-K are unaudited) that were primarily industrial lands located on the island of Oahu, Hawaii, or our Hawaii Properties, and 185 properties containing approximately 43,222,000 rentable square feet that were industrial and logistics properties located in 38 other states, or our Mainland Properties.
Added
As of December 31, 2024, our portfolio was comprised of 411 properties containing approximately 59,890,000 rentable square feet located in 39 states with 94.4% occupancy, including properties owned by Mountain Industrial REIT LLC, or Mountain JV, or our consolidated joint venture.
Removed
Our internal growth strategy is to increase rents and corresponding cash flows we receive from our current properties . Certain of the leases for our Hawaii Properties provide for rents to be reset to fair market value periodically during the lease terms.
Added
Our portfolio as of December 31, 2024 is summarized below (square feet in thousands): % of Weighted Rentable Annualized Average Ownership Number of Square Rental Remaining Vehicle Ownership Properties Location Feet Occupancy Revenues Lease Term (1) Mainland Properties ILPT 100% 90 34 states 22,119 96.3% 34.0% 5.1 Hawaii Properties ILPT 100% 226 Hawaii 16,729 86.2% 28.0% 13.0 Mainland Properties Mountain JV 61% 94 27 states 20,978 99.0% 37.7% 6.5 Mainland Properties Tenancy in common 67% 1 New Jersey 64 100.0% 0.3% 4.9 Total / weighted average 411 59,890 94.4% 100.0% 7.8 (1) Based on annualized rental revenues as of December 31, 2024.
Removed
(1) Revenues FedEx Corporation / FedEx Ground Package System, Inc. Various (34 States) 80 12,851 21.7 % 29.7 % Amazon.com Services, Inc. / Amazon.com Services LLC AL, IN, OK, SC, TN, VA 8 4,539 7.7 % 6.7 % Home Depot U.S.A., Inc. GA, HI 2 956 1.6 % 2.1 % UPS Supply Chain Solutions, Inc.
Added
As of December 31, 2024, our properties located in 38 of the contiguous states, or our Mainland Properties, represented 72.0% of our annualized rental revenues and our properties located primarily on the island of Oahu, Hawaii, or our Hawaii Properties, represented 28.0% of our annualized rental revenues.
Removed
HI 3 3,148 5.3 % 1.2 % TD SYNNEX Corporation OH 2 939 1.6 % 1.1 % Berkshire Hathaway Inc.
Added
Our Business and Growth Strategies We believe our current properties provide a stable base of increasing rents.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThe following is a summary of the principal risk factors described in this section: • we have a substantial amount of debt and we are subject to risks related to our debt, including our ability to refinance maturing debt and the cost of any such refinanced debt and our ability to reduce our debt leverage, which may remain at or above current levels for an indefinite period, covenants and conditions contained in our debt agreements which may restrict our operations by increasing our interest expense and limiting our ability to make investments in our properties, sell properties securing our debt and pay distributions to our shareholders and other limitations on our ability to access capital at reasonable costs or at all; • our potential future development or redevelopment projects or sales or acquisitions may not be successful or may not be executed on the terms or within the timing we expect as a result of limitations in our debt agreements on our ability to sell properties securing our debt, ongoing market and economic conditions, including capital market disruptions, high interest rates, prolonged high inflation, competition, or otherwise; • we may be unable to renew our leases when they expire or lease our properties to new tenants without decreasing rents or incurring significant costs or at all; • our concentration of investments in industrial and logistics properties leased to single tenants and our concentration of properties leased to certain companies may result in us being adversely affected by economic downturns or a possible recession and subject us to greater risks of loss than if our properties had more industry sector and tenant diversity; • unfavorable market and commercial real estate industry conditions due to, among other things, high interest rates, prolonged high inflation, labor market challenges, supply chain disruptions, volatility in the public equity and debt markets, pandemics, geopolitical instability and tensions (such as the ongoing wars in Ukraine and the Middle East), economic downturns or a possible recession, changes in real estate utilization and other conditions beyond our control, may have a material adverse effect on our and our tenants’ results of operations and financial conditions, and our tenants may be unable to satisfy their lease obligations to us; • we are subject to risks related to our qualification for taxation as a REIT, including REIT distribution requirements; • our distributions to our shareholders may remain at $0.01 per share for an indefinite period or be eliminated and the form of payment could change; • our existing and any future joint ventures may limit our flexibility with jointly owned investments and we may not realize the benefits we expect from these arrangements or our joint ventures could require us to provide additional capital; • ownership of real estate is subject to environmental risks and liabilities, as well as risks from adverse weather, natural disasters and adverse impacts from global climate change; • insurance may not adequately cover our losses, and insurance costs may continue to increase; • we are subject to risks related to our dependence upon RMR to implement our business strategies and manage our day to day operations; • we are subject to risks related to the security of RMR’s information technology; • our management structure and agreements with RMR and our relationships with our related parties, including our Managing Trustees, RMR and others affiliated with them, may create conflicts of interest; • sustainability initiatives, requirements and market expectations may impose additional costs and expose us to new risks; • we may change our operational, financing and investment policies without shareholder approval; and 29 Tabl e of Contents • provisions in our declaration of trust, bylaws and other agreements, as well as certain provisions of Maryland law, may deter, delay or prevent a change in our control or unsolicited acquisition proposals, limit our rights and the rights of our shareholders to take action against our Trustees and officers or limit our shareholders’ ability to obtain a favorable judicial forum for certain disputes.
Biggest changeCovenants and conditions contained in our debt agreements may restrict our operations by increasing our interest expense and limiting our ability to make investments in our properties, sell properties securing our debt and pay distributions to our shareholders and other limitations on our ability to access capital at reasonable costs or at all; • we may be unable to renew our leases when they expire or lease our properties to new tenants without decreasing rents or incurring significant costs or at all; • our concentration of investments in industrial and logistics properties leased to single tenants and our concentration of properties leased to certain companies may result in us being adversely affected by economic downturns or a possible recession and subject us to greater risks of loss than if our properties had more industry sector and tenant diversity; • unfavorable market and commercial real estate industry conditions due to, among other things, uncertainties surrounding interest rates and inflation, supply chain disruptions, volatility in the public equity and debt markets, pandemics, geopolitical instability and tensions, economic downturns or a possible recession, labor market conditions, changes in real estate utilization and other conditions beyond our control, may have a material adverse effect on our and our tenants’ results of operations and financial conditions, and our tenants may be unable to satisfy their lease obligations to us; • our existing and any future joint ventures may limit our flexibility with jointly owned investments and we may not realize the benefits we expect from these arrangements or our joint ventures could require us to provide additional capital; 28 Table of Contents • property sales or acquisitions may not be successful or may not be executed on the terms or within the timing we expect as a result of limitations in our debt agreements on our ability to sell properties securing our debt, ongoing market and economic conditions, including capital market disruptions, uncertainties surrounding interest rates and inflation, competition, or otherwise; • we are subject to risks related to our qualification for taxation as a REIT, including REIT distribution requirements; • our distributions to our shareholders may remain at $0.01 per share for an indefinite period or be eliminated and the form of payment could change; • ownership of real estate is subject to environmental risks and liabilities, as well as risks from adverse weather, natural disasters and adverse impacts from global climate change; • insurance may not adequately cover our losses, and insurance costs may increase; • we are subject to risks related to our dependence upon RMR to implement our business strategies and manage our day to day operations; • we are subject to risks related to the security of RMR’s information technology and RMR’s use of artificial intelligence; • our management structure and agreements with RMR and our relationships with our related parties, including our Managing Trustees, RMR and others affiliated with them, may create conflicts of interest; • sustainability initiatives, requirements and market expectations may impose additional costs and expose us to new risks; • we may change our operational, financing and investment policies without shareholder approval; and • provisions in our declaration of trust, bylaws and other agreements, as well as certain provisions of Maryland law, may deter, delay or prevent a change in our control or unsolicited acquisition proposals, limit our rights and the rights of our shareholders to take action against our Trustees and officers or limit our shareholders’ ability to obtain a favorable judicial forum for certain disputes.
In addition, decreased demand for industrial and logistics space, as well as current economic conditions and volatility in the commercial real estate markets, generally, may cause delays in leasing these properties or possible loss of tenancies and negatively impact our ability to generate cash flows from these properties that meet or exceed our cost of investment.
In addition, decreased demand for industrial and logistics space, as well as current economic conditions and volatility in the commercial real estate markets, generally, may cause delays in leasing these properties or possible loss of tenancies and may negatively impact our ability to generate cash flows from these properties that meet or exceed our cost of investment.
For example: • notwithstanding pre-acquisition due diligence, we could acquire a property that contains undisclosed defects in design or construction or unknown liabilities, including those related to undisclosed environmental contamination, or our analyses and assumptions for the properties may prove to be incorrect; • an acquired property may be located in a new market where we may face risks associated with investing in an unfamiliar market; • the market in which an acquired property is located may experience unexpected changes that adversely affect the property’s value; and • property operating costs for our acquired properties may be higher than anticipated and our acquired properties may not yield expected returns.
For example: • an acquired property may be located in a new market where we may face risks associated with investing in an unfamiliar market; • the market in which an acquired property is located may experience unexpected changes that adversely affect the property’s value; • property operating costs for our acquired properties may be higher than anticipated and our acquired properties may not yield expected returns; and • notwithstanding pre-acquisition due diligence, we could acquire a property that contains undisclosed defects in design or construction or unknown liabilities, including those related to undisclosed environmental contamination, or our analyses and assumptions for the properties may prove to be incorrect.
If we or our third party vendors experience material security or other failures, inadequacies or interruptions in our or their information technology and systems, we could incur material costs and losses and our operations could be disrupted.
If we or our third party vendors experience material security or other failures, inadequacies or interruptions in our or their information technology systems, we could incur material costs and losses and our operations could be disrupted.
Portnoy, is the sole trustee, an officer and the controlling shareholder of ABP Trust, which is the controlling shareholder of RMR Inc., chair of the board of directors, a managing director and the president and chief executive officer of RMR Inc. and an officer and employee of RMR.
Portnoy, is the sole trustee, an officer and the controlling shareholder of ABP Trust, which is the controlling shareholder of RMR Inc., the chair of the board of directors, a managing director and the president and chief executive officer of RMR Inc. and an officer and employee of RMR.
Because of the capital many of our single tenants have invested in the properties they lease from us and because many of these properties appear to be of strategic importance to such tenants’ businesses, we believe that it is likely that most of these tenants will renew or extend their leases prior to when they expire.
Due to the capital many of our single tenants have invested in the properties they lease from us and because many of these properties appear to be of strategic importance to such tenants’ businesses, we believe that it is likely that most of these tenants will renew or extend their leases prior to when they expire.
High interest rates have significantly increased our borrowing costs with respect to our floating rate debt, including the costs of any required interest rate caps, which adversely affects our cash flows, our ability to pay principal and interest on our debt, our cost of refinancing our fixed rate debts when they become due and our ability to pay distributions to our shareholders.
High interest rates have significantly increased our borrowing costs with respect to our floating rate debt, including the costs of any required interest rate caps, which adversely affects our cash flows, our ability to pay principal and interest on our debt, our cost of refinancing our debts when they become due and our ability to pay distributions to our shareholders.
Certain of our debt agreements require lender approval to sell the properties securing the debt, which approval is subject to us meeting certain financial thresholds that are difficult to achieve in light of current market conditions, among other things. These requirements therefore restrict our ability to sell properties and reduce our leverage.
Certain of our debt agreements require lender approval to sell the properties securing the debt; approval is subject to us meeting certain financial thresholds that are difficult to achieve in light of current market conditions, among other things. These requirements therefore restrict our ability to sell properties and reduce our leverage.
Additionally, provisions contained in our declaration of trust and bylaws or under Maryland law may have a similar impact, including, for example, provisions relating to: • limitations on shareholder voting rights with respect to certain actions that are not approved by our Board of Trustees; • the authority of our Board of Trustees, and not our shareholders, to adopt, amend or repeal our bylaws and to fill vacancies on our Board of Trustees; • shareholder voting standards which require a supermajority of shares for approval of certain actions; • the fact that only our Board of Trustees, or, if there are no Trustees, our officers, may call shareholder meetings and that shareholders are not entitled to act without a meeting; • required qualifications for an individual to serve as a Trustee and a requirement that certain of our Trustees be “Managing Trustees” and other Trustees be “Independent Trustees”, as defined in our governing documents; • limitations on the ability of our shareholders to propose nominees for election as Trustees and propose other business to be considered at a meeting of our shareholders; • limitations on the ability of our shareholders to remove our Trustees; 41 Tabl e of Contents • the authority of our Board of Trustees to create and issue new classes or series of shares (including shares with voting rights and other rights and privileges that may deter a change in control) and issue additional common shares; • restrictions on business combinations between us and an interested shareholder that have not first been approved by our Board of Trustees (including a majority of Trustees not related to the interested shareholder); and • the authority of our Board of Trustees, without shareholder approval, to implement certain takeover defenses.
Additionally, provisions contained in our declaration of trust and bylaws or under Maryland law may have a similar impact, including, for example, provisions relating to: • limitations on shareholder voting rights with respect to certain actions that are not approved by our Board of Trustees; 41 Table of Contents • the authority of our Board of Trustees, and not our shareholders, to adopt, amend or repeal our bylaws and to fill vacancies on our Board of Trustees; • shareholder voting standards which require a supermajority of shares for approval of certain actions; • the fact that only our Board of Trustees, or, if there are no Trustees, our officers, may call shareholder meetings and that shareholders are not entitled to act without a meeting; • required qualifications for an individual to serve as a Trustee and a requirement that certain of our Trustees be “Managing Trustees” and other Trustees be “Independent Trustees”, as defined in our governing documents; • limitations on the ability of our shareholders to propose nominees for election as Trustees and propose other business to be considered at a meeting of our shareholders; • limitations on the ability of our shareholders to remove our Trustees; • the authority of our Board of Trustees to create and issue new classes or series of shares (including shares with voting rights and other rights and privileges that may deter a change in control) and issue additional common shares; • restrictions on business combinations between us and an interested shareholder that have not first been approved by our Board of Trustees (including a majority of Trustees not related to the interested shareholder); and • the authority of our Board of Trustees, without shareholder approval, to implement certain takeover defenses.
Some of our competitors may have greater financial and other resources than us, and may be able to accept more risk than we can prudently manage, including risks with respect to the creditworthiness of tenants and guarantors and the extent of leverage used in their capital structure.
Some of our competitors may have greater financial resources than us, and may be able to accept more risk than we can prudently manage, including risks with respect to the creditworthiness of tenants and guarantors and the extent of leverage used in their capital structure.
If the development of new industrial and logistics properties exceeds the increase in demand for these properties, our existing properties may be unable to successfully compete for tenants with newer developed buildings and our income and the values of our properties may decline.
If the development of new industrial and logistics properties exceeds the increase in demand, our existing properties may be unable to successfully compete for tenants with newer developed buildings and our income and the values of our properties may decline.
When we renew our leases with current tenants or lease to new tenants, we may experience rent decreases, and we may have to spend substantial amounts for tenant improvements, leasing commissions or other tenant inducements.
When we renew our leases with current tenants or lease to new tenants, we may experience rent decreases, or we may have to spend substantial amounts for tenant improvements, leasing commissions or other tenant inducements.
For example, Oahu’s remote location on a volcanic island makes our properties there vulnerable to certain risks from natural disasters, such as tsunamis, hurricanes, flooding, volcanic eruptions and earthquakes, as well as possible sea rise as a result of climate change, which could cause damage to our properties, affect our Hawaii tenants’ abilities to pay rent to us and cause the values of our properties and our securities to decline.
Oahu’s remote location on a volcanic island makes our properties there vulnerable to certain risks from natural disasters, such as tsunamis, hurricanes, flooding, volcanic eruptions and earthquakes, as well as possible sea rise as a result of climate change, which could cause damage to our properties, affect our Hawaii tenants’ abilities to pay rent to us and cause the values of our properties and our securities to decline.
Our participation in joint ventures is subject to risks, including the following: • we share approval rights over major decisions affecting the ownership or operation of the joint ventures and any property owned by the joint ventures; • we may need to contribute additional capital in order to preserve, maintain or grow the joint ventures and their investments; • joint venture investors may have economic or other business interests or goals that are inconsistent with our business interests or goals, which could affect our ability to lease, relet or operate properties owned by the joint ventures; • our ability to sell our interest in, or sell additional properties to, the joint ventures, or the joint ventures’ ability to sell additional interests of, or properties owned by, the joint ventures when we so desire are subject to the approval rights of the other joint venture investors under the terms of the agreements governing the joint ventures; 35 Tabl e of Contents • joint venture investors may be subject to different laws or regulations than us, or may be structured differently than us for tax purposes, which could create conflicts of interest and/or affect our ability to maintain our qualification for taxation as a REIT; and • disagreements with joint venture investors could result in litigation or arbitration that could be expensive and distracting to management and could delay important decisions.
Our participation in joint ventures is subject to risks, including the following: • we share approval rights over major decisions affecting the ownership or operation of the joint ventures and any property owned by the joint ventures; • we may need to contribute additional capital in order to preserve, maintain or grow the joint ventures and their investments; • joint venture investors may have economic or other business interests or goals that are inconsistent with our business interests or goals, which could affect our ability to lease, relet or operate properties owned by the joint ventures; • our ability to sell our interest in, or sell additional properties to, the joint ventures, or the joint ventures’ ability to sell additional interests of, or properties owned by, the joint ventures when we so desire are subject to the approval rights of the other joint venture investors under the terms of the agreements governing the joint ventures; • joint venture investors may be subject to different laws or regulations than us, or may be structured differently than us for tax purposes, which could create conflicts of interest and/or affect our ability to maintain our qualification for taxation as a REIT; and • disagreements with joint venture investors could result in litigation or arbitration that could be expensive and distracting to management and could delay important decisions.
In addition, we may elect to change or abandon our strategy and forego or abandon property or other asset sales. Insurance may not adequately cover our losses, and insurance costs may continue to increase.
In addition, we may elect to change or abandon our strategy and forego or abandon property or other asset sales. Insurance may not adequately cover our losses, and insurance costs may increase.
In particular, these factors could arise from weaknesses in or a lack of established markets for the properties we may identify for sale, the availability of financing to potential purchasers on reasonable terms, changes in the financial condition of prospective purchasers for and the tenants of the properties, the terms of leases with tenants at certain of the properties, the characteristics, quality and prospects of the properties, the number of prospective purchasers, the number of competing properties in the market, unfavorable local, national or international economic conditions, such as high inflation, high interest rates, labor market challenges, supply chain challenges and economic downturns or a possible recession, and changes in laws, regulations or fiscal policies of jurisdictions in which the properties are located.
In particular, these factors could arise from weaknesses in or a lack of established markets for the properties we may identify for sale, the availability of financing to potential purchasers on reasonable terms, changes in the financial condition of prospective purchasers for and the tenants of the properties, the terms of leases with tenants at certain of the properties, the characteristics, quality and prospects of the properties, the number of prospective purchasers, the number of competing properties in the market, unfavorable local, national or international economic conditions, such as uncertainties surrounding interest rates and inflation, supply chain challenges, economic downturns or a possible recession and labor market conditions, and changes in laws, regulations or fiscal policies of jurisdictions in which the properties are located.
Also, our tenants may have insufficient financial resources to satisfy their indemnification obligations under our leases or they may resist doing so. Furthermore, such liabilities or obligations may affect the ability of some tenants to pay their rents to us. As of December 31, 2023, we had reserved approximately $6.8 million for potential environmental liabilities arising at our properties.
Also, our tenants may have insufficient financial resources to satisfy their indemnification obligations under our leases or they may resist doing so. Furthermore, such liabilities or obligations may affect the ability of some tenants to pay their rents to us. As of December 31, 2024, we had reserved approximately $6.8 million for potential environmental liabilities arising at our properties.
We believe that the rapid growth in e-commerce sales will continue to result in strong demand and increase the competition for industrial real estate.
We believe that the growth in e-commerce sales will continue to result in strong demand and increase the competition for industrial real estate.
In addition, the ability to collect attorneys’ fees or other damages may be limited in the arbitration proceedings, which may discourage attorneys from agreeing to represent parties wishing to bring such litigation. 42 Tabl e of Contents Our bylaws designate the Circuit Court for Baltimore City, Maryland as the sole and exclusive forum for certain actions and proceedings that may be initiated by our shareholders, which could limit our shareholders’ ability to obtain a favorable judicial forum for disputes with us or our Trustees, officers, manager or other agents.
In addition, the ability to collect attorneys’ fees or other damages may be limited in the arbitration proceedings, which may discourage attorneys from agreeing to represent parties wishing to bring such litigation. 42 Table of Contents Our bylaws designate the Circuit Court for Baltimore City, Maryland as the sole and exclusive forum for certain actions and proceedings that may be initiated by our shareholders, which could limit our shareholders’ ability to obtain a favorable judicial forum for disputes with us or our Trustees, officers, manager or other agents.
Distributions to shareholders generally will not qualify for reduced tax rates applicable to “qualified dividends.” Dividends payable by U.S. corporations to noncorporate shareholders, such as individuals, trusts and estates, are generally eligible for reduced federal income tax rates applicable to “qualified dividends.” Distributions paid by REITs generally are not treated as “qualified dividends” under the IRC and the reduced rates applicable to such dividends do not generally apply.
Dividends payable by U.S. corporations to noncorporate shareholders, such as individuals, trusts and estates, are generally eligible for reduced federal income tax rates applicable to “qualified dividends.” Distributions paid by REITs generally are not treated as “qualified dividends” under the IRC and the reduced rates applicable to such dividends do not generally apply.
The exclusive forum provision of our bylaws may limit a shareholder’s ability to bring a claim in a judicial forum that the shareholder believes is favorable for disputes with us or our Trustees, officers, manager or other agents, which may discourage lawsuits against us and our Trustees, officers, manager or other agents.
The exclusive forum provisions of our bylaws may limit a shareholder’s ability to bring a claim in a judicial forum that the shareholder believes is favorable for disputes with us or our Trustees, officers, manager or other agents, which may discourage lawsuits against us and our Trustees, officers, manager or other agents.
If any of the covenants in these debt agreements are breached and not cured within the applicable cure period, we could be required to repay the debt immediately, even in the absence of a payment default, or be prevented from refinancing maturing debt.
If any of the covenants in these debt agreements are breached and not cured within the applicable cure period, we could be required to repay the debt immediately, even in the absence of a payment default, or be prevented from refinancing maturing debt or issuing new debt.
More favorable rates will nevertheless continue to apply to regular corporate “qualified” dividends, which may cause some investors to perceive that an investment in a REIT is less attractive than an investment in a non-REIT entity that pays dividends, thereby reducing the demand and market price of our common shares. 43 Tabl e of Contents REIT distribution requirements could adversely affect us and our shareholders.
More favorable rates will nevertheless continue to apply to regular corporate “qualified” dividends, which may cause some investors to perceive that an investment in a REIT is less attractive than an investment in a non-REIT entity that pays dividends, thereby reducing the demand and market price of our common shares. 43 Table of Contents REIT distribution requirements could adversely affect us and our shareholders.
Any failure by RMR or other third party vendors to maintain the security, proper function and availability of RMR’s information technology and systems could result in financial losses, interrupt our operations, damage our reputation, cause us to be in default of material contracts and subject us to liability claims or regulatory penalties, any of which could materially and adversely affect our business and the value of our securities.
Any failure by RMR or other third party vendors to maintain the security, proper function and availability of their respective information technology and systems could result in financial losses, interrupt our operations, damage our reputation, cause us to be in default of material contracts and subject us to liability claims or regulatory penalties, any of which could materially and adversely affect our business and the value of our securities.
During 2022, we reduced our quarterly cash distribution rate on our common shares to $0.01 per common share to enhance our liquidity until our leverage profile otherwise improves, subject to applicable REIT tax requirements; however: • our ability to pay distributions to our shareholders or sustain the rate of distributions may continue to be adversely affected if any of the risks described in this Annual Report on Form 10-K occur, including any negative impact caused by current market and economic conditions, such as high interest rates, prolonged high inflation and economic downturns or a possible recession, on our business, results of operations and liquidity; and • the timing and amount of any distributions will be determined at the discretion of our Board of Trustees and will depend on various factors that our Board of Trustees deems relevant, including, but not limited to, our funds from operations, or FFO, attributable to common shareholders, normalized funds from operations, or Normalized FFO, attributable to common shareholders, requirements to maintain our qualification for taxation as a REIT, 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, our dividend yield compared to the dividend yields of other industrial REITs, our expectation of our future capital requirements and operating performance and our expected needs for and availability of cash to pay our obligations.
During 2022, we reduced our quarterly cash distribution rate on our common shares to $0.01 per common share to enhance our liquidity until our leverage profile otherwise improves, subject to applicable REIT tax requirements; however: • our ability to pay distributions to our shareholders or sustain the rate of distributions may continue to be adversely affected if any of the risks described in this Annual Report on Form 10-K occur, including any negative impact caused by current market and economic conditions, such as uncertainties surrounding interest rates and inflation and economic downturns or a possible recession, on our business, results of operations and liquidity; and • the timing and amount of any distributions will be determined at the discretion of our Board of Trustees and will depend on various factors that our Board of Trustees deems relevant, including, but not limited to, our funds from operations, or FFO, attributable to common shareholders, normalized funds from operations, or Normalized FFO, attributable to common shareholders, 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, our dividend yield compared to the dividend yields of other REITs and our expectation of future capital requirements and operating performance.
If so, our properties may decline in value and our business, operations and financial condition could be adversely impacted. Our quarterly cash distribution rate on our common shares is currently $0.01 per share and future distributions may remain at this level for an indefinite period or be eliminated and the form of payment could change.
If so, our properties may decline in value and our business, operations and financial condition could be adversely impacted. 36 Table of Contents Our quarterly cash distribution rate on our common shares is currently $0.01 per share and future distributions may remain at this level for an indefinite period or be eliminated and the form of payment could change.
Jordan, our other Managing Trustee, is an executive vice president and the chief financial officer and treasurer of RMR Inc. and an officer and employee of RMR, and Yael Duffy, our President and Chief Operating Officer, and Tiffany R. Sy, our Chief Financial Officer and Treasurer, are also officers and employees of RMR. Mr.
Jordan, our other Managing Trustee, is an executive vice president and the chief financial officer and treasurer of RMR Inc. and an officer and employee of RMR, and Yael Duffy, our President and Chief Operating Officer, and Tiffany R. Sy, our Chief Financial Officer and Treasurer, and Marc Krohn, our Vice President, are also officers and employees of RMR. Mr.
Pursuant to RMR’s zero emissions goal, RMR has pledged to reduce its Scope 1 and 2 emissions to net zero by 2050 with a 50% reduction commitment by 2030 from a 2019 baseline.
Pursuant to RMR’s zero emissions goal, RMR has pledged to reduce its Scope 1 and 2 emissions to net zero by 2050 with a 50% reduction commitment by 2029 from a 2019 baseline.
For these reasons, our management agreements with RMR may discourage a change of control of us, including a change of control which might result in payment of a premium for our common shares. We are party to transactions with related parties that may increase the risk of allegations of conflicts of interest.
For these reasons, our management agreements with RMR may discourage a change of control of us, including a change of control which might result in payment of a premium for our common shares. 40 Table of Contents We are party to transactions with related parties that may increase the risk of allegations of conflicts of interest.
The financial capacities of our tenants to pay us rent will depend upon their abilities to successfully operate their businesses, which may be adversely affected by factors over which we and they have no control, including market and economic conditions, such as high interest rates, prolonged high inflation and economic downturns or a possible recession.
The financial capacities of our tenants to pay us rent will depend upon their abilities to successfully operate their businesses, which may be adversely affected by factors over which we and they have no control, including market and economic conditions, such as uncertainties surrounding interest rates and inflation and economic downturns or a possible recession.
For these reasons, among others, we might not realize the anticipated benefits of our acquisitions, and our business plan to acquire additional properties may not succeed or may cause us to experience losses. A significant number of our properties are located on the island of Oahu, Hawaii, and we are exposed to risks as a result of this geographic concentration.
For these reasons, among others, we might not realize the anticipated benefits of our acquisitions, and our growth strategy to acquire additional properties may not succeed or may cause us to experience losses. A significant number of our properties are located on the island of Oahu, Hawaii, and we are exposed to risks as a result of this geographic concentration.
Competition may make it difficult for us to attract and retain tenants and may reduce the rents we are able to charge and the values of our properties. 32 Tabl e of Contents We also face competition for acquisition opportunities from other investors, including publicly traded and private REITs, numerous financial institutions, individuals, foreign investors and other public and private companies.
Competition may make it difficult for us to attract and retain tenants and may reduce the rents we are able to charge and the values of our properties. We also face competition for acquisition opportunities from other investors, including publicly traded and private REITs, numerous financial institutions, individuals, foreign investors and other public and private companies.
In the event RMR is unwilling or unable to continue to provide management services to us, our cost of obtaining substitute services may be greater than the fees we pay RMR under our management agreements, and as a result our expenses may increase. 38 Tabl e of Contents RMR has broad discretion in operating our day to day business.
In the event RMR is unwilling or unable to continue to provide management services to us, our cost of obtaining substitute services may be greater than the fees we pay RMR under our management agreements, and as a result our expenses may increase. RMR has broad discretion in operating our day to day business.
Although we typically will seek to renew or extend the terms of leases for our properties with tenants when they expire, we cannot be sure that we will be successful in doing so.
We may be unable to lease our properties when our leases expire. Although we typically will seek to renew or extend the terms of leases for our properties with tenants when they expire, we cannot be sure that we will be successful in doing so.
If we fail to adequately prepare for such events, our revenues, results of operations and financial condition may be impacted. In addition, we may incur significant costs in preparing for possible future climate change or in response to our tenants’ requests for such investments and we may not realize desirable returns on those investments.
If we fail to adequately prepare for such events, our revenues, results of operations and financial condition may be impacted. In addition, we may incur significant costs in preparing for possible future climate change and we may not realize desirable returns on those investments.
In addition, we may incur significant costs in attempting to comply with regulatory requirements, ESG policies or third party expectations or demands. Risks Related to Our Relationships with RMR We are dependent upon RMR to manage our business and implement our growth strategy. We have no employees.
In addition, we may incur significant costs in attempting to comply with regulatory requirements, ESG policies or third party expectations or demands. 38 Table of Contents Risks Related to Our Relationships with RMR We are dependent upon RMR to manage our business and implement our growth strategy. We have no employees.
REIT distribution requirements and limitations on our ability to access capital at reasonable costs or at all may adversely impact our ability to carry out our business plan. To maintain our qualification for taxation as a REIT under the IRC, we are required to satisfy distribution requirements imposed by the IRC.
REIT distribution requirements and limitations on our ability to access capital at reasonable costs or at all may adversely impact our ability to carry out our growth strategies. To maintain our qualification for taxation as a REIT under the IRC, we are required to satisfy distribution requirements imposed by the IRC.
A significant number of our properties are located on the island of Oahu, Hawaii. This geographic concentration creates risks.
A significant number of our properties are located on the island of Oahu, Hawaii, which creates geographic concentration risks.
Because of competition for acquisitions, we may be unable to acquire desirable properties or we may pay higher prices for, and realize lower net cash flows than we hope to achieve from, acquisitions.
Due to competition for acquisitions, we may be unable to acquire desirable properties or we may pay higher prices for, and realize lower net cash flows than we hope to achieve from, acquisitions.
However, economic conditions, including prolonged high inflation, may cause our tenants not to renew or extend their leases when they expire, or to seek to renew their leases for less space than they currently occupy. In addition, decreased demand for industrial and logistics space may impair our ability to extend or renew our leases.
However, economic conditions may cause our tenants not to renew or extend their leases when they expire, or to seek to renew their leases for less space than they currently occupy. In addition, decreased demand for industrial and logistics space may impair our ability to extend or renew our leases.
Failure to hedge effectively against interest rate changes may materially adversely affect our financial condition, results of operations and cash flow. We may be unable to grow our business by acquiring additional properties, and we might encounter unanticipated difficulties and expenditures relating to our acquired properties. Our business plan includes the acquisition of additional properties.
Failure to hedge effectively against interest rate changes may materially adversely affect our financial condition, results of operations and cash flow. We may be unable to grow our business by acquiring additional properties, and we might encounter unanticipated difficulties and expenditures relating to our acquired properties. Our growth strategies include the acquisition of additional properties.
Our bylaws currently provide that the Circuit Court for Baltimore City, Maryland will be the sole and exclusive forum for: (1) any derivative action or proceeding brought on our behalf; (2) any action asserting a claim for breach of a fiduciary duty owed by any of our Trustees, officers, manager or other agents to us or our shareholders; (3) any action asserting a claim against us or any of our Trustees, officers, manager or other agents arising pursuant to Maryland law, our declaration of trust or bylaws brought by or on behalf of a shareholder, either on such shareholder’s own behalf, on our behalf or on behalf of any series or class of shares of beneficial interest of ours or by our shareholders against us or any of our Trustees, officers, manager or other agents, including any disputes, claims or controversies relating to the meaning, interpretation, effect, validity, performance or enforcement of our declaration of trust or bylaws; or (4) any action asserting a claim against us or any of our Trustees, officers, manager or other agents that is governed by the internal affairs doctrine of the State of Maryland.
Our bylaws currently provide that other than any action arising under the Securities Act, the Circuit Court for Baltimore City, Maryland will be the sole and exclusive forum for: (1) any Internal Corporate Claim, as such term is defined under the Maryland General Corporation Law; (2) any derivative action or proceeding brought on our behalf; (3) any action asserting a claim for breach of a fiduciary duty owed by any of our Trustees, officers, manager or other agents to us or our shareholders; (4) any action asserting a claim against us or any of our Trustees, officers, manager or other agents arising pursuant to Maryland law, our declaration of trust or bylaws, including any disputes, claims or controversies brought by or on behalf of a shareholder, either on such shareholder’s own behalf, on our behalf or on behalf of any series or class of shares of beneficial interest of ours or by our shareholders against us or any of our Trustees, officers, manager or other agents, including any disputes, claims or controversies relating to the meaning, interpretation, effect, validity, performance or enforcement of our declaration of trust or bylaws; and (5) any action asserting a claim against us or any of our Trustees, officers, manager or other agents that is governed by the internal affairs doctrine of the State of Maryland.
We may incur substantial liabilities and costs for environmental matters. We are subject to risks from adverse weather, natural disasters and adverse impacts from global climate change, and we incur significant costs and invest significant amounts with respect to these matters.
We may incur substantial liabilities and costs for environmental matters. 34 Table of Contents We are subject to risks from adverse weather, natural disasters and adverse impacts from global climate change, and we incur significant costs and invest significant amounts with respect to these matters.
Our business and operations may be adversely affected by market and economic volatility experienced by the U.S. and global economies, the commercial real estate industry and/or the local economies in the markets in which our properties are located.
Our business and operations may be adversely affected by market and economic volatility experienced by the United States and global economies, the commercial real estate industry and/or the local economies in the markets in which our properties are located.
Such events could also adversely impact us or the tenants of our properties if we or they are unable to operate our or their businesses due to damage resulting from such events. Insurance may not adequately cover all losses sustained by us or the tenants of our properties.
Severe weather events and climatic conditions could also adversely impact us and the tenants of our properties if we or they are unable to operate our or their businesses due to damage resulting from such events. Insurance may not adequately cover all losses sustained by us or the tenants of our properties.
However, this provision may also inhibit acquisitions of a significant stake in us and may deter, delay or prevent a change in control of us or unsolicited acquisition proposals that a shareholder may consider favorable.
However, these restrictions may also inhibit acquisitions of a significant stake in us and may deter, delay or prevent a change in control of us or unsolicited acquisition proposals that a shareholder may consider favorable.
Certain proxy advisory firms which have significant influence over the voting by shareholders of public companies have, in the past, recommended, and in the future may recommend, that shareholders withhold votes for the election of our incumbent Trustees, vote against other management proposals or vote for shareholder proposals that we oppose.
The various relationships noted above may precipitate such activities. Certain proxy advisory firms which have significant influence over the voting by shareholders of public companies have, in the past, recommended, and in the future may recommend, that shareholders withhold votes for the election of our incumbent Trustees, vote against other management proposals or vote for shareholder proposals that we oppose.
Further, the operating results and values of our Hawaii Properties are impacted by local market conditions, including economic downturns or a possible recession as a result of current inflationary conditions or otherwise, as well as possible government action that may limit our ability to increase rents. 34 Tabl e of Contents Ownership of real estate is subject to environmental risks and liabilities.
Further, the operating results and values of our Hawaii Properties can be impacted by local market conditions, including economic downturns or a possible recession as a result of inflationary conditions or otherwise, as well as possible government action that may limit our ability to increase rents. Ownership of real estate is subject to environmental risks and liabilities.
In recent years, the global economy, including the U.S. economy, experienced supply chain disruptions due to the COVID-19 pandemic and related factors, and these supply chain challenges reduced the availability of goods and materials, which caused price inflation and increased the time from order to receipt of goods and materials.
In recent years, the global economy, including the U.S. economy, experienced supply chain disruptions, and these supply chain challenges reduced the availability of goods and materials, which caused price inflation and increased the time from order to receipt of goods and materials.
In the past few years, the costs of insurance have increased significantly, and these increased costs have had an adverse effect on us and certain of our tenants. Increased insurance costs may adversely affect our applicable tenants’ abilities to pay us rent or result in downward pressure on rents we can charge under new or renewed leases.
The costs of insurance may increase which may have an adverse effect on us and certain of our tenants. Increased insurance costs may adversely affect our applicable tenants’ abilities to pay us rent or result in downward pressure on rents we can charge under new or renewed leases.
Unfavorable economic and industry conditions may be due to, among other things, high interest rates, prolonged high inflation, labor market challenges, supply chain disruptions, volatility in the public equity and debt markets, pandemics, geopolitical instability and tensions (such as the ongoing wars in Ukraine and the Middle East), economic downturns or a possible recession, changes in real estate utilization and other conditions beyond our control.
Unfavorable economic and industry conditions may be due to, among other things, uncertainties surrounding interest rates and inflation, supply chain disruptions, volatility in the public equity and debt markets, pandemics, geopolitical instability and tensions, economic downturns or a possible recession, labor market conditions, changes in real estate utilization and other conditions beyond our control.
Further, as of December 31, 2023, subsidiaries of FedEx Corporation, or FedEx, and subsidiaries of Amazon.com Services, Inc., or Amazon, leased 21.7% and 7.7% of our total leased square feet, respectively, and represented 29.7% and 6.7% of our total annualized rental revenues, respectively.
Further, as of December 31, 2024, subsidiaries of FedEx Corporation, or FedEx, and subsidiaries of Amazon.com Services, Inc., or Amazon, leased 22.6% and 8.0% of our total leased square feet, respectively, and represented 29.1% and 6.8% of our total annualized rental revenues, respectively.
When interest rates are high, such as they are currently, real estate transaction volumes slow due to increased borrowing costs and property investors often demand higher capitalization rates, which causes property values to decline.
When interest rates are high, such as they are currently, real estate transaction volumes slow due to increased borrowing costs and property investors often demand higher capitalization rates, which causes property values to decline. High interest rates could therefore lower the value of our properties and cause the value of our securities to decline.
Because the earnings we are permitted to retain are limited by the rules governing REIT qualification and taxation, if we are unable to raise reasonably priced capital, we may not be able to carry out our business plan. High interest rates have significantly increased our interest expense and may otherwise materially and negatively affect us.
Because the earnings we are permitted to retain are limited by the rules governing REIT qualification and taxation, if we are unable to raise reasonably priced capital, we may not be able to carry out our growth strategies. 32 Table of Contents We face challenges from uncertainties regarding interest rates, and sustained high interest rates have significantly increased our interest expense and may otherwise materially and negatively affect us.
In addition, the default, financial distress or bankruptcy of a tenant could cause interruptions in the receipt of rental revenue and/or result in a vacancy, which is, in the case of a single tenant property, likely to result in the complete reduction in the operating cash flows generated by the property and may decrease the value of that property. 31 Tabl e of Contents We may be unable to lease our properties when our leases expire.
In addition, the default, financial distress or bankruptcy of a tenant could cause interruptions in the receipt of rental revenue and/or result in a vacancy, which is, in the case of a single tenant property, likely to result in the complete reduction in the operating cash flows generated by the property and may decrease the value of that property.
If we determine that an uninsured loss or a loss in excess of insured limits occurs and if we are not able to recover amounts from our applicable tenants for certain losses, we may have to incur uninsured costs to mitigate such losses or lose all or a portion of the capital invested in a property, as well as the anticipated future revenue from the property. 36 Tabl e of Contents Changes in global supply chain conditions and emerging technologies may result in reduced demand for industrial and logistics properties.
If we determine that an uninsured loss or a loss in excess of insured limits occurs and if we are not able to recover amounts from our applicable tenants for certain losses, we may have to incur uninsured costs to mitigate such losses or lose all or a portion of the capital invested in a property, as well as the anticipated future revenue from the property.
Our ability to make profitable acquisitions is subject to risks, including, but not limited to, risks associated with: • the extent of our debt leverage; • the availability, terms and cost of debt and equity capital; • competition from other investors; and • contingencies in our acquisition agreements.
Our ability to make profitable acquisitions is subject to risks, including, but not limited to, risks associated with: • our liquidity; • the extent of our debt leverage; • the availability, terms and cost of debt and equity capital; • competition from other investors; and • contingencies in our acquisition agreements. 33 Table of Contents These risks may limit our ability to grow our business by acquiring additional properties.
In addition, if we lose or revoke our qualification for taxation as a REIT under the IRC for a taxable year, we will generally be prevented from requalifying for taxation as a REIT for the next four taxable years.
In addition, if we lose or revoke our qualification for taxation as a REIT under the IRC for a taxable year, we will generally be prevented from requalifying for taxation as a REIT for the next four taxable years. Distributions to shareholders generally will not qualify for reduced tax rates applicable to “qualified dividends”.
Unresolved Staff Comments None. 44 Tabl e of Contents
Unresolved Staff Comments None. 44 Table of Contents
In addition, some of our Hawaii Properties require the rents to be reset periodically based on fair market values, which could result in rental increases or decreases. When we reset rents at our Hawaii Properties, our rents may decrease. Further, with respect to certain long-term leases, the contracted rent adjustments may not keep pace with inflation.
In addition, some of our Hawaii Properties require the rents to be reset periodically based on fair market values, which could result in rental increases or decreases. When we reset rents at our Hawaii Properties, our rents may decrease.
High interest rates may materially and negatively affect us in several ways, including: • one of the factors that investors typically consider important in deciding whether to buy or sell our common shares is the distribution rate on our common shares relative to prevailing interest rates, and our quarterly cash distribution rate on our common shares is currently $0.01 per common share in order to enhance our liquidity until our leverage profile otherwise improves.
Interest rates remain high compared to historical levels, and high interest rates may materially and negatively affect us in several ways, including: • one of the factors that investors typically consider important in deciding whether to buy or sell our common shares is the distribution rate on our common shares relative to prevailing interest rates.
Moreover, any such challenge could result in substantial costs and a diversion of our management’s attention, could have a material adverse effect on our reputation, business and growth and could adversely affect our ability to realize the benefits expected from the transactions, whether or not the allegations have merit or are substantiated. 40 Tabl e of Contents We may be at an increased risk for dissident shareholder activities due to perceived conflicts of interest arising from our management structure and relationships.
Moreover, any such challenge could result in substantial costs and a diversion of our management’s attention, could have a material adverse effect on our reputation, business and growth and could adversely affect our ability to realize the benefits expected from the transactions, whether or not the allegations have merit or are substantiated.
In our management agreements with RMR, we acknowledge that RMR may engage in other activities or businesses and act as the manager to any other person or entity (including other REITs) even though such person or entity has investment policies and objectives similar to our policies and objectives and we are not entitled to preferential treatment in receiving information, recommendations and other services from RMR.
Conflicts of interest or the perception of conflicts of interest could have a material adverse impact on our reputation, business and the market price of our common shares and other securities and we may be subject to increased risk of litigation as a result. 39 Table of Contents In our management agreements with RMR, we acknowledge that RMR may engage in other activities or businesses and act as the manager to any other person or entity (including other REITs) even though such person or entity has investment policies and objectives similar to our policies and objectives and we are not entitled to preferential treatment in receiving information, recommendations and other services from RMR.
We cannot be sure that our Code of Conduct or our governance guidelines, or other procedural protections we adopt will be sufficient to enable us to identify, adequately address or mitigate actual or alleged conflicts of interest or ensure that our transactions with related persons are made on terms that are at least as favorable to us as those that would have been obtained with an unrelated person. 39 Tabl e of Contents Our management agreements with RMR were not negotiated on an arm’s length basis and their fee and expense structure may not create proper incentives for RMR, which may increase the risk of an investment in our common shares.
We cannot be sure that our Code of Conduct or our governance guidelines, or other procedural protections we adopt will be sufficient to enable us to identify, adequately address or mitigate actual or alleged conflicts of interest or ensure that our transactions with related persons are made on terms that are at least as favorable to us as those that would have been obtained with an unrelated person.
We may not succeed in selling properties or other assets we may identify for sale and any proceeds we may receive from sales we do complete may be less than expected, and we may incur losses with respect to any such sales.
Further, these, similar, enhanced or additional risks, including possible mandatory capital contribution requirements, may apply to any future additional or amended joint ventures. 35 Table of Contents We may not succeed in selling properties or other assets we may identify for sale and any proceeds we may receive from sales we do complete may be less than expected, and we may incur losses with respect to any such sales.
Companies with business dealings with related persons and entities may more often be the target of dissident shareholder trustee nominations, dissident shareholder proposals and shareholder litigation alleging conflicts of interest in their business dealings. The various relationships noted above may precipitate such activities.
We may be at an increased risk for dissident shareholder activities due to perceived conflicts of interest arising from our management structure and relationships. Companies with business dealings with related persons and entities may more often be the target of dissident shareholder trustee nominations, dissident shareholder proposals and shareholder litigation alleging conflicts of interest in their business dealings.
These risks may limit our ability to grow our business by acquiring additional properties. In addition, we might encounter unanticipated difficulties and expenditures relating to our acquired properties.
In addition, we might encounter unanticipated difficulties and expenditures relating to our acquired properties.
In addition, RMR’s data security, data privacy, investor reporting and business continuity processes could be impacted by a third party’s inability to perform in a remote work environment or by the failure of, or attack on, their information systems and technology.
In addition, RMR’s data security, data privacy, investor reporting and business continuity processes could be impacted by a third party’s inability to perform in a remote work environment or by the failure of, or attack on, their information systems and technology. 37 Table of Contents The SEC has adopted rules requiring public companies to disclose material cybersecurity incidents on Form 8-K and periodic disclosure of a registrant’s cybersecurity risk management, strategy and governance in annual reports.
We are subject to numerous risks associated with our debt, including the risk that our cash flows could be insufficient for us to make required payments and risks associated with high interest rates for an extended period of time.
As of December 31, 2024, our consolidated principal amount of debt was approximately $4.3 billion and our ratio of consolidated net debt to total gross assets (total assets plus accumulated depreciation) was 68.6%. 29 Table of Contents We are subject to numerous risks associated with our debt, including the risk that our cash flows could be insufficient for us to make required payments and risks associated with high interest rates for an extended period of time.
In response to significant and prolonged increases in inflation, the U.S. Federal Reserve has raised interest rates multiple times since the beginning of 2022, which has significantly increased our interest expense. Although the U.S.
In response to significant increases in inflation, the U.S. Federal Reserve raised interest rates multiple times during 2022 and 2023, which has significantly increased our interest expense. The U.S. Federal Reserve cut interest rates three times in late 2024, and it may further reduce interest rates, increase interest rates or maintain current interest rates.
However, these measures may not prevent the systems’ improper functioning or a compromise in security, such as in the event of a cyberattack or the improper disclosure of personally identifiable information. 37 Tabl e of Contents Security breaches, computer viruses, attacks by hackers, online fraud schemes and similar breaches have created and can create significant system disruptions, shutdowns, fraudulent transfer of assets or unauthorized disclosure of confidential information.
Security breaches, computer viruses, attacks by hackers, online fraud schemes and similar breaches have created and can create significant system disruptions, shutdowns, fraudulent transfer of assets or unauthorized disclosure of confidential information.
RMR takes various actions, and incurs significant costs, to maintain and protect the operation and security of information technology and systems, including the data maintained in those systems.
RMR takes various actions, and incurs significant costs, to maintain and protect the operation and security of information technology and systems, including the data maintained in those systems. However, these measures may not prevent the systems’ improper functioning or a compromise in security, such as in the event of a cyberattack or the improper disclosure of personally identifiable information.
Current conditions have negatively impacted our ability to pay distributions to our shareholders and these or other conditions may continue to have similar impacts in the future and on our results of operations and financial condition.
Unfavorable market conditions have negatively impacted our ability to pay distributions to our shareholders and these or other conditions may continue to have similar impacts in the future and on our results of operations and financial condition. 30 Table of Contents Our business depends upon our tenants satisfying their lease obligations, which depends, to a large degree, on our tenants’ abilities to successfully operate their businesses.
We are exposed to risks associated with property development, redevelopment and repositioning that could adversely affect us, including our financial condition and results of operations. We may seek to develop, redevelop or reposition certain of our properties, which could subject us to certain associated risks.
We may seek to develop, redevelop or reposition certain of our properties, which could subject us to certain associated risks.
In the future, we may obtain additional debt financing, and the covenants and conditions applicable to that debt may be more restrictive than the covenants and conditions that are contained in our existing debt agreements. 30 Tabl e of Contents Secured debt exposes us to the possibility of foreclosure, which could result in the loss of our investment in certain of our subsidiaries or in a property or group of properties or other assets that secure that debt.
Secured debt exposes us to the possibility of foreclosure, which could result in the loss of our investment in certain of our subsidiaries or in a property or group of properties or other assets that secure that debt. Our debt is secured by most of the properties that we or our joint ventures own.
These conditions have increased the costs for materials, other goods and labor, including construction materials, and caused some delays in construction activities, and these conditions may continue and worsen.
It is uncertain whether inflation will decline, remain relatively steady or increase; however, some market forecasts indicate that inflation rates may remain elevated for a prolonged period. These conditions have increased the costs for materials, other goods and labor, including construction materials, and caused some delays in construction activities, and these conditions may continue and worsen.
Any of the foregoing risks could have a material adverse effect on our business, financial condition and results of operations. Further, these, similar, enhanced or additional risks, including possible mandatory capital contribution requirements, may apply to any future additional or amended joint ventures.
Any of the foregoing risks could have a material adverse effect on our business, financial condition and results of operations.
Although most of RMR’s staff returned to its offices during the pandemic, flexible working arrangements have resulted in a higher extent of remote working than it experienced prior to the pandemic.
Although most of RMR’s staff work from its offices for a majority of the work week, flexible working arrangements have resulted in increased remote working.
High interest rates could therefore lower the value of our properties and cause the value of our securities to decline. 33 Tabl e of Contents Failure to hedge effectively against interest rate changes may adversely affect our results of operations.
Failure to hedge effectively against interest rate changes may adversely affect our results of operations.
Sustainability initiatives, requirements and market expectations may impose additional costs and expose us to new risks. There continues to be increased focus from regulators, investors, tenants and other stakeholders concerning corporate sustainability. The SEC is considering climate change related regulations and certain states have enacted climate focused disclosure laws and we may incur significant costs in compliance with such rules.
Sustainability initiatives, requirements and market expectations may impose additional costs and expose us to new risks. There remains a continued focus from regulators, investors, tenants and other stakeholders concerning corporate sustainability.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeItem 1C. Cybersecurity We rely on the information technology and systems maintained by our manager, RMR, and rely on our manager to identify and manage material risks from cybersecurity threats. RMR takes various actions, and incurs significant costs, to maintain and protect the operation and security of information technology and systems, including the data maintained in those systems.
Biggest changeItem 1C. Cybersecurity We rely on the information technology and systems maintained by our manager, RMR, and rely on our manager to identify, assess and manage material risks from cybersecurity threats. RMR takes various actions, and incurs significant costs, to maintain and protect the operation and security of information technology and systems, including the data maintained in those systems.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeAs of December 31, 2023, our Mainland Properties included 94 properties that we own in a consolidated joint venture in which we own 61% equity interest. 45 Tabl e of Contents The following table provides certain information about our properties as of December 31, 2023 (dollars in thousands): Undepreciated Depreciated Number of Carrying Carrying State Properties Value (1) Value (1) Encumbrances (2) Alabama 4 $ 126,874 $ 119,402 $ 93,008 Arizona 1 31,518 29,050 23,500 Arkansas 1 4,385 3,608 4,240 Colorado 7 78,754 70,195 88,170 Connecticut 3 21,843 17,573 19,533 Florida 15 360,722 340,803 296,191 Georgia 8 393,931 375,536 201,780 Hawaii 226 637,049 609,808 862,930 Idaho 1 5,216 4,181 5,480 Illinois 11 130,537 122,071 92,705 Indiana 9 348,421 322,604 236,897 Iowa 4 30,062 20,744 31,269 Kansas 5 137,102 129,552 97,695 Kentucky 4 113,026 105,756 89,435 Louisiana 3 44,185 39,763 31,096 Maryland 2 106,799 89,562 108,690 Michigan 5 166,479 151,206 98,240 Minnesota 3 32,316 28,374 33,296 Mississippi 4 91,442 86,122 51,164 Missouri 7 70,723 65,012 53,421 Nebraska 2 17,959 15,581 19,130 Nevada 2 36,648 30,466 43,330 New Hampshire 1 49,213 43,356 72,550 New Jersey 4 215,046 196,859 134,599 New York 5 79,030 71,738 70,203 North Carolina 5 173,978 165,331 109,765 North Dakota 1 3,923 3,204 3,180 Ohio 20 448,931 407,112 332,539 Oklahoma 6 101,804 96,320 81,451 Pennsylvania 3 54,049 50,877 33,985 South Carolina 10 307,672 274,844 297,620 South Dakota 1 17,402 15,399 18,750 Tennessee 6 184,259 161,921 181,218 Texas 10 293,618 278,574 210,778 Utah 2 22,825 20,740 24,490 Vermont 1 48,563 46,525 40,965 Virginia 6 123,964 105,663 104,689 Washington 1 30,134 28,932 11,380 Wisconsin 2 29,150 27,734 16,582 Total 411 $ 5,169,552 $ 4,772,098 $ 4,325,944 (1) Excludes the value of real estate related intangibles.
Biggest changeProperties As of December 31, 2024, our portfolio was comprised of 411 properties containing approximately 59,890,000 rentable square feet located in 39 states, including 226 buildings, leasable land parcels and easements containing approximately 16,729,000 rentable square feet that were primarily industrial lands located on the island of Oahu, Hawaii and 185 properties containing approximately 43,161,000 rentable square feet that were industrial and logistics properties located in 38 other states in the mainland United States, which included 94 properties in 27 states totaling approximately 20,978,000 rentable square feet, owned by Mountain JV in which we own a 61% equity interest. 45 Table of Contents The following table provides certain information about our properties as of December 31, 2024 (dollars in thousands): Undepreciated Depreciated Number of Carrying Carrying State Properties Value (1) Value (1) Encumbrances (2) Alabama 4 $ 126,874 $ 115,515 $ 91,728 Arizona 1 31,518 27,714 23,500 Arkansas 1 4,385 3,521 4,240 Colorado 7 78,890 68,337 88,170 Connecticut 3 22,674 17,839 19,533 Florida 15 360,974 331,789 296,191 Georgia 8 394,271 365,681 196,550 Hawaii 226 639,311 609,987 862,930 Idaho 1 5,216 4,040 5,480 Illinois 11 131,059 118,188 92,705 Indiana 9 349,453 313,847 234,539 Iowa 4 30,100 19,858 31,269 Kansas 5 137,186 125,973 97,695 Kentucky 4 113,038 102,360 89,435 Louisiana 3 44,430 38,879 31,096 Maryland 2 107,211 87,382 108,690 Michigan 5 166,479 146,754 98,240 Minnesota 3 32,467 27,657 33,296 Mississippi 4 91,779 83,518 51,164 Missouri 7 71,180 62,982 53,421 Nebraska 2 17,959 15,101 19,130 Nevada 2 36,648 29,545 43,330 New Hampshire 1 49,254 42,155 72,550 New Jersey 4 215,685 193,745 131,264 New York 5 79,464 69,702 70,203 North Carolina 5 174,086 160,661 107,969 North Dakota 1 3,923 3,124 3,180 Ohio 20 449,344 394,842 329,785 Oklahoma 6 101,791 93,685 81,451 Pennsylvania 3 54,202 49,164 33,985 South Carolina 10 308,514 267,471 297,620 South Dakota 1 17,402 14,975 18,750 Tennessee 6 184,401 156,382 181,218 Texas 10 294,149 270,663 210,778 Utah 2 22,825 20,208 24,490 Vermont 1 48,563 45,423 40,965 Virginia 6 124,314 102,502 104,689 Washington 1 30,216 28,363 10,019 Wisconsin 2 29,150 26,967 16,581 Total 411 $ 5,180,385 $ 4,656,499 $ 4,307,829 (1) Excludes the value of real estate related intangibles.
For more information regarding our mortgages and our joint ventures, see Notes 3 and 5 to our consolidated financial statements included in Part IV, Item 15 of this Annual Report on Form 10-K. 46 Tabl e of Contents
For further information regarding our joint ventures and our mortgages, see Notes 3 and 5 to our consolidated financial statements included in Part IV, Item 15 of this Annual Report on Form 10-K. 46 Table of Contents
Removed
Properties As of December 31, 2023, our portfolio was comprised of 411 properties containing approximately 59,951,000 rentable square feet located in 39 states, including 226 buildings, leasable land parcels and easements containing approximately 16,729,000 rentable square feet located on the island of Oahu, Hawaii and 185 properties containing approximately 43,222,000 rentable square feet located in 38 other states in the mainland United States.
Removed
Most of our Hawaii Properties are lands leased to industrial and commercial tenants, many of which own buildings and operate their businesses on our lands.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeMine Safety Disclosures Not applicable. 47 Tabl e of Contents PART II
Biggest changeMine Safety Disclosures Not applicable. 47 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeHowever, the timing, amount and form of future distributions will be determined at the discretion of our Board of Trustees and will depend upon various factors that our Board of Trustees deems relevant, including, but not limited to, our FFO attributable to common shareholders, our Normalized FFO attributable to common shareholders, requirements to maintain our qualification for taxation as a REIT, limitations in our debt agreements, the availability to us of debt and equity capital, our dividend yield, our dividend yield compared to the dividend yields of other industrial REITs, our expectation of our future capital requirements and operating performance and our expected needs for and availability of cash to pay our obligations.
Biggest changeHowever, the timing, amount and form of future distributions will be determined at the discretion of our Board of Trustees and will depend upon various factors that our Board of Trustees deems relevant, including, but not limited to, our FFO and Normalized FFO attributable to common shareholders, 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, our availability of debt and equity capital, our dividend yield and our dividend yield compared to the dividend yields of other REITs and our expectation of future capital requirements and operating performance.
The following table provides information about our purchases of our equity securities during the quarter ended December 31, 2023: Maximum Total Number of Approximate Dollar Shares Purchased Value of Shares that Number of Average as Part of Publicly May Yet Be Purchased Shares Price Paid Announced Plans Under the Plans or Calendar Month Purchased (1) per Share of Programs Programs December 1, 2023 - December 31, 2023 436 $ 3.92 — $ — Total 436 $ 3.92 — $ — (1) These common share withholdings and purchases were made to satisfy tax withholding and payment obligations of a former employee of RMR in connection with the vesting of prior awards of our common shares.
The following table provides information about our purchases of our equity securities during the quarter ended December 31, 2024: Maximum Total Number of Approximate Dollar Shares Purchased Value of Shares that Number of Average as Part of Publicly May Yet Be Purchased Shares Price Paid Announced Plans Under the Plans or Calendar Month Purchased (1) per Share of Programs Programs December 1, 2024 - December 31, 2024 114 $ 3.62 — $ — Total 114 $ 3.62 — $ — (1) These common share withholdings and purchases were made to satisfy tax withholding and payment obligations of certain former employees of RMR in connection with the vesting of prior awards of our common shares.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our common shares are traded on Nasdaq (symbol: ILPT). As of February 15, 2024, there were 1,711 shareholders of record of our common shares, although there is a larger number of beneficial owners. Issuer purchases of equity securities.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our common shares are traded on Nasdaq (symbol: ILPT). As of February 14, 2025, there were 1,596 shareholders of record of our common shares, although there is a larger number of beneficial owners. Issuer purchases of equity securities.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeFor further information regarding our disposition activities, see elsewhere in this Annual Report on Form 10-K, including “Business—Our Company”, “Business—Our Investment Policies” and “Business—Our Disposition Policies” included in Part I, Item 1 of this Annual Report on Form 10-K, “Liquidity and Capital Resources—Our Investing and Financing Liquidity and Resources” below and Note 3 to our consolidated financial statements included in Part IV, Item 15 of this Annual Report on Form 10-K. 51 Tabl e of Contents RESULTS OF OPERATIONS Year Ended December 31, 2023 Compared to Year Ended December 31, 2022 (dollars and share amounts in thousands, except per share data) Comparable Non-Comparable Properties Results Properties Results Consolidated Results Year Ended December 31, (1) Year Ended December 31, (2) Year Ended December 31, $ % $ $ % 2023 2022 Change Change 2023 2022 Change 2023 2022 Change Change Rental income $ 226,921 $ 217,528 $ 9,393 4.3 % $ 210,417 $ 170,623 $ 39,794 $ 437,338 $ 388,151 $ 49,187 12.7 % Operating expenses: Real estate taxes 31,743 29,958 1,785 6.0 % 28,310 20,666 7,644 60,053 50,624 9,429 18.6 % Other operating expenses 20,445 18,439 2,006 10.9 % 17,747 12,416 5,331 38,192 30,855 7,337 23.8 % Total operating expenses 52,188 48,397 3,791 7.8 % 46,057 33,082 12,975 98,245 81,479 16,766 20.6 % Net operating income (3) $ 174,733 $ 169,131 $ 5,602 3.3 % $ 164,360 $ 137,541 $ 26,819 339,093 306,672 32,421 10.6 % Other expenses: Depreciation and amortization 178,728 160,982 17,746 11.0 % General and administrative 31,164 32,877 (1,713) (5.2) % Acquisition and other transaction related costs 287 586 (299) (51.0) % Loss on impairment of real estate 156 100,747 (100,591) (99.8) % Total other expenses 210,335 295,192 (84,857) (28.7) % Interest and other income 7,911 2,663 5,248 197.1 % Interest expense (288,537) (280,051) (8,486) 3.0 % Gain (loss) on sale of real estate 1,710 (10) 1,720 n/m Loss on equity securities — (5,758) 5,758 (100.0) % Loss on early extinguishment of debt (359) (22,198) 21,839 (98.4) % Loss before income taxes and equity in earnings of unconsolidated joint venture (150,517) (293,874) 143,357 (48.8) % Income tax expense (104) (45) (59) 131.1 % Equity in earnings of unconsolidated joint venture 902 7,078 (6,176) (87.3) % Net loss (149,719) (286,841) 137,122 (47.8) % Net loss attributable to noncontrolling interest 41,730 60,118 (18,388) (30.6) % Net loss attributable to common shareholders $ (107,989) $ (226,723) $118,734 (52.4) % Weighted average common shares outstanding (basic and diluted) 65,430 65,248 182 0.3 % Per common share data (basic and diluted): Net loss attributable to common shareholders $ (1.65) $ (3.47) $ 1.82 (52.4) % n/m - not meaningful (1) Consists of properties that we owned continuously since January 1, 2022.
Biggest changeFor further information regarding our disposition activities, see elsewhere in this Annual Report on Form 10-K, including “Business—Our Company”, “Business—Our Investment Policies” and “Business—Our Disposition Policies” included in Part I, Item 1 of this Annual Report on Form 10-K, “Liquidity and Capital Resources—Our Investing and Financing Liquidity and Resources” below and Note 3 to our consolidated financial statements included in Part IV, Item 15 of this Annual Report on Form 10-K. 51 Table of Contents RESULTS OF OPERATIONS Year Ended December 31, 2024 Compared to Year Ended December 31, 2023 (dollars and share amounts in thousands, except per share data) Comparable Non-Comparable Properties Results Properties Results Consolidated Results Year Ended December 31, (1) Year Ended December 31, (2) Year Ended December 31, $ % $ $ % 2024 2023 Change Change 2024 2023 Change 2024 2023 Change Change Rental income $ 442,322 $ 437,233 $ 5,089 1.2 % $ — $ 105 $ (105) $ 442,322 $ 437,338 $ 4,984 1.1 % Operating expenses: Real estate taxes 62,561 60,022 2,539 4.2 % 2 31 (29) 62,563 60,053 2,510 4.2 % Other operating expenses 38,513 38,151 362 0.9 % 34 41 (7) 38,547 38,192 355 0.9 % Total operating expenses 101,074 98,173 2,901 3.0 % 36 72 (36) 101,110 98,245 2,865 2.9 % NOI (3) $ 341,248 $ 339,060 $ 2,188 0.6 % $ (36) $ 33 $ (69) 341,212 339,093 2,119 0.6 % Other expenses: Depreciation and amortization 171,987 178,728 (6,741) (3.8) % General and administrative 30,454 31,164 (710) (2.3) % Acquisition and other transaction related costs — 287 (287) (100.0) % Loss on impairment of real estate — 156 (156) (100.0) % Total other expenses 202,441 210,335 (7,894) (3.8) % Interest income 11,427 7,911 3,516 44.4 % Interest expense (292,536) (288,537) (3,999) 1.4 % Gain on sale of real estate — 1,710 (1,710) (100.0) % Loss on early extinguishment of debt — (359) 359 (100.0) % Loss before income taxes and equity in earnings of unconsolidated joint venture (142,338) (150,517) 8,179 (5.4) % Income tax expense (162) (104) (58) 55.8 % Equity in earnings of unconsolidated joint venture 5,332 902 4,430 n/m Net loss (137,168) (149,719) 12,551 (8.4) % Net loss attributable to noncontrolling interest 41,499 41,730 (231) (0.6) % Net loss attributable to common shareholders $ (95,669) $ (107,989) $ 12,320 (11.4) % Weighted average common shares outstanding (basic and diluted) 65,697 65,430 267 0.4 % Net loss per share attributable to common shareholders (basic and diluted) $ (1.46) $ (1.65) $ 0.19 (11.5) % n/m - not meaningful (1) Consists of properties that we owned continuously since January 1, 2023.
These measures do not represent cash generated by operating activities in accordance with GAAP and should not be considered 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 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.
We believe that these sources of funds will be sufficient to meet our operating and capital expenses, pay debt service obligations and make distributions to our shareholders for the next 12 months and for the foreseeable future thereafter.
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.
For more information about the risks that may arise as a result of these and other related person transactions and relationships, see elsewhere in this Annual Report on Form 10-K, including “Warning Concerning Forward-Looking Statements”, Part I, Item 1, “Business” and Part I, Item 1A, “Risk Factors.” We may engage in additional transactions with related persons, including businesses to which RMR or its subsidiaries provide management services.
For further information about the risks that may arise as a result of these and other related person transactions and relationships, see elsewhere in this Annual Report on Form 10-K, including “Warning Concerning Forward-Looking Statements”, Part I, Item 1, “Business” and Part I, Item 1A, “Risk Factors.” We may engage in additional transactions with related persons, including businesses to which RMR or its subsidiaries provide management services.
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 leases we may enter may be less favorable to us than the terms of our existing leases for those properties. Hawaii Properties.
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.
For a comparison of consolidated results for the year ended December 31, 2022 to the year ended December 31, 2021, see Part II, Item 7, “Management's Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended December 31, 2022. Rental income.
For a comparison of consolidated results for the year ended December 31, 2023 to the year ended December 31, 2022, see Part II, Item 7, “Management's Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended December 31, 2023. Rental income.
In 2023, we received gross proceeds of $25,460, excluding closing costs, and recognized a net gain on sale of real estate of $1,710 as a result of the sale of two properties and a portion of a land parcel.
Real Estate Activities In 2023, we received gross proceeds of $25,460, excluding closing costs of $1,160, and recognized a net gain on sale of real estate of $1,710 as a result of the sale of two properties and a portion of a land parcel.
For more information about these and other such relationships and related person transactions, see Notes 9 and 10 to our consolidated financial statements included in Part IV, Item 15 of this Annual Report on Form 10-K, our other filings with the SEC, including our definitive Proxy Statement for our 2024 Annual Meeting of Shareholders, or our definitive Proxy Statement, to be filed with the SEC within 120 days after the fiscal year ended December 31, 2023.
For further information about these and other such relationships and related person transactions, see Notes 9 and 10 to our consolidated financial statements included in Part IV, Item 15 of this Annual Report on Form 10-K, our other filings with the SEC, including our definitive Proxy Statement for our 2025 Annual Meeting of Shareholders, or our definitive Proxy Statement, to be filed with the SEC within 120 days after the fiscal year ended December 31, 2024.
In calculating Normalized FFO attributable to common shareholders, we adjust for certain non-recurring items shown below, including adjustments for such items related to the unconsolidated joint venture, 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.
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. 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.
If we misjudge or estimate incorrectly or if future tenant operations, market or industry factors differ from our expectations, we may record an impairment charge that is inappropriate or fail to record a charge when we should have done so, or the amount of any such charges may be inaccurate.
If we misjudge or estimate incorrectly or if future tenant operations, market or industry factors differ from our expectations, we may record an impairment that is inappropriate or fail to record an impairment when we should have done so, or the amount of any such impairment may be inaccurate.
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 loss on impairment of real estate, any gain or loss on sale of real estate, equity in earnings of unconsolidated joint venture and loss on equity securities; (2) plus real estate depreciation and amortization of our properties and 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.
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 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.
We expect to fund any future property acquisitions, developments and redevelopments with proceeds we may receive in connection with any additional properties we may sell to our joint ventures, equity contributions from any third party investors in our joint ventures or any future joint ventures, and net proceeds from offerings of equity or debt securities.
We expect to fund any future property acquisitions, developments and redevelopments with proceeds we may receive in connection with any additional properties we may sell to our joint ventures, equity contributions from any third party investors in our joint ventures or any future joint ventures, net proceeds from offerings of equity or debt securities and cash on hand.
Despite our and our predecessors’ 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.
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.
Other factors include, but are not limited to, requirements to maintain our qualification for taxation as a REIT, limitations in the agreements governing our debt, the availability to us of debt and equity capital, our dividend yield, our dividend yield compared to the dividend yields of other industrial REITs, our expectation of our future capital requirements and operating performance and our expected needs for and availability of cash to pay our obligations.
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 dividend yield and our dividend yield compared to the dividend yields of other REITs and our expectation of future capital requirements and operating performance.
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.
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. 53 Table of Contents Net Operating Income We calculate NOI as shown below.
Equity in earnings of unconsolidated joint venture is the change in the fair value of our investment in the unconsolidated joint venture. 53 Tabl e of Contents Non-GAAP Financial Measures (dollars in thousands, except per share data) We present certain “non-GAAP financial measures” within the meaning of the applicable SEC rules, including NOI, FFO attributable to common shareholders and Normalized FFO attributable to common shareholders.
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 SEC rules including, NOI, FFO attributable to common shareholders and Normalized FFO attributable to common shareholders.
However, we cannot be sure that our mitigation efforts will be sufficient or that future storms, rising sea levels or other changes that may occur due to future climate change could not have a material adverse effect on our financial results. 60 Tabl e of Contents
However, we cannot be sure that our mitigation efforts will be sufficient or that future storms, rising sea levels or other changes that may occur due to future climate change could not have a material adverse effect on our financial results.
The unconsolidated joint venture made aggregate cash distributions to us of $9,900 and $25,742 during the years ended December 31, 2023 and 2022, respectively. For more information regarding these joint ventures, see Note 3 to our consolidated financial statements included in Part IV, Item 15 of this Annual Report on Form 10-K.
The unconsolidated joint venture made aggregate cash distributions to us of $3,960 and $9,900 for the years ended December 31, 2024 and 2023, respectively. For further information regarding these joint ventures, see Note 3 to our consolidated financial statements included in Part IV, Item 15 of this Annual Report on Form 10-K.
As of December 31, 2023, investment grade rated tenants, subsidiaries of investment grade rated parent entities or our Hawaii land leases represented 76.9% of our annualized rental revenues and only 5.6% of our annualized rental revenues were from leases expiring over the next 12 months.
As of December 31, 2024, investment grade rated tenants, subsidiaries of investment grade rated parent entities or our Hawaii land leases represented 76.7% of our annualized rental revenues and only 3.4% of our annualized rental revenues were from leases expiring over the next 12 months.
The ILPT Floating Rate Loan matures in October 2024, subject to three, one year extension options, and requires that interest be paid at an annual rate of the secured overnight financing rate, or SOFR, plus a weighted average premium of 3.93%.
The ILPT Floating Rate Loan is secured by 104 of our properties, matures in October 2025, subject to two remaining one year extension options, and requires that interest be paid at an annual rate of secured overnight financing rate, or SOFR, plus a weighted average premium of 3.93%.
During the 2023 period, we recognized a gain on sale of real estate of $1,710 as a result of the sale of two properties in Asheville, NC and Mesquite, TX, and we also recognized a loss on sale of real estate of $974 as a result of the sale of a portion of a land parcel in Everett, WA.
During 2023, we recognized a gain on sale of real estate of $2,684 as a result of the sale of two properties in Asheville, NC and Mesquite, TX, partially offset by a loss on sale of real estate of $974 as a result of the sale of a portion of a land parcel in Everett, WA.
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.
Such alternatives may include incurring term debt, obtaining financing secured by mortgages on properties we own, issuing new equity or debt securities, obtaining a revolving credit facility, participating or selling equity interests in joint ventures or selling properties. Further, any issuances of our equity securities may be dilutive to our existing shareholders.
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; • control our operating cost increases, including interest and other financing costs; • develop properties to produce cash flows in excess of our costs of capital; and • purchase additional properties that produce cash flows in excess of our costs of acquisition and the cost to our capital and property operating expenses.
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.
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.
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.
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 offerings of equity or debt securities to fund our distributions to our shareholders. 56 Tabl e of Contents In February 2022, we completed our acquisition of MNR.
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 offerings of equity or debt securities to fund our distributions to our shareholders.
The agreements and related documents governing the ILPT Floating Rate Loan, the Floating Rate Loan, the $700,000 mortgage loan and the $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.
We recognized a loss on early extinguishment of debt of $359 in conjunction with the repayment of these mortgage loans. 57 Table of Contents The agreements and related documents governing the ILPT Floating Rate Loan, the Mountain Floating Rate Loan, our $700,000 mortgage loan and our $650,000 mortgage loan contain customary covenants, provide for acceleration of payment of all amounts due thereunder upon the occurrence and continuation of certain events of default and, in the case of the $650,000 mortgage loan, also require us to maintain a minimum consolidated net worth of at least $250,000 and liquidity of at least $15,000.
A portion of the net proceeds from this mortgage loan was used to repay four outstanding mortgage loans of our consolidated joint venture with an aggregate outstanding principal balance of $35,910 and a weighted average interest rate of 3.70%.
This mortgage loan matures in June 2030 and requires that interest be paid at an annual rate of 6.25%. A portion of the net proceeds from this mortgage loan was used to repay four then outstanding mortgage loans of our consolidated joint venture with an aggregate outstanding principal balance of $35,910 and a weighted average interest rate of 3.70%.
Our most critical accounting estimates involve our investments in real property. These estimates affect our: • allocation of purchase prices between various asset categories, including allocations to above and below market leases and the related impact on the recognition of rental income and depreciation and amortization expenses; and • assessment of the carrying values and impairments of long lived assets.
These estimates affect our: • allocation of purchase prices for property acquisitions between various asset categories, including allocations to above and below market leases and the related impact on the recognition of rental income and depreciation and amortization expenses; and • assessment of the carrying values and impairments of our properties.
Long-term e-commerce trends and supply chain resiliency have resulted in high occupancy and increases in rents. We believe customer service expectations, growth in the number of households and demand for supply chain resiliency will keep demand for industrial properties strong for the foreseeable future.
We believe customer service expectations, growth in the number of households and demand for supply chain resiliency will keep demand for industrial properties strong for the foreseeable future.
During the years ended December 31, 2023 and 2022, amounts capitalized for tenant improvements, leasing costs, building improvements and development and redevelopment activities were as follows: Year Ended December 31, 2023 2022 Tenant improvements and leasing costs (1) $ 8,398 $ 12,659 Building improvements (2) 6,779 3,999 Development, redevelopment and other activities (3) 8,086 13,673 $ 23,263 $ 30,331 (1) Tenant improvements and leasing costs include 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.
During the years ended December 31, 2024 and 2023, amounts capitalized at our properties for tenant improvements, leasing costs, building improvements and development, redevelopment and other activities were as follows: Year Ended December 31, 2024 2023 Tenant improvements (1) $ 1,935 $ 3,316 Leasing costs (1) 6,271 5,082 Building improvements (2) 8,993 6,779 Development, redevelopment and other activities (3) — 8,086 $ 17,199 $ 23,263 (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.
Subject to the satisfaction of certain conditions, we have the option to prepay up to $280,000 of the Floating Rate Loan at par with no premium, and to prepay the balance of the Floating Rate Loan at any time, subject to a premium.
Subject to the satisfaction of certain conditions, we have the option to prepay the ILPT Floating Rate Loan in full or in part at any time at par with no premium.
We base purchase price allocations and the determination of useful lives on our estimates and, under some circumstances, studies from independent real estate appraisers to provide market information and evaluations that are relevant to our purchase price allocations and determinations of useful lives; however, our management is ultimately responsible for the purchase price allocations and determination of useful lives. 59 Tabl e of Contents We compute depreciation expense using the straight line method over estimated useful lives of up to 40 years for buildings and improvements, and up to seven years for personal property.
We base purchase price allocations and the determination of useful lives on our estimates and, under some circumstances, studies from independent real estate appraisers to provide market information and evaluations that are relevant to our purchase price allocations and determinations of useful lives; however, our management is ultimately responsible for the purchase price allocations and determination of useful lives.
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. 58 Tabl e of Contents During the year ended December 31, 2023, we paid quarterly cash distributions to our shareholders totaling $2,627 using cash on hand.
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.
Other real estate companies and REITs may calculate FFO attributable to common shareholders and Normalized FFO attributable to common shareholders differently than we do.
Other real estate companies and REITs may calculate NOI differently than we do.
In general, 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.
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.
Purchase price allocations require us to make certain assumptions and estimates. Incorrect assumptions and estimates may result in inaccurate charges to rental income and depreciation and amortization over future periods. We periodically evaluate our properties for impairment.
Incorrect assumptions and estimates may result in inaccurate rental income and depreciation and amortization over future periods. 58 Table of Contents We periodically evaluate our properties for impairment.
During the year ended December 31, 2023, we entered into new and renewal leases as summarized in the following table: Year Ended December 31, 2023 New Leases Renewals Totals Square feet leased during the period (in thousands) 870 4,112 4,982 Weighted average rental rate change (by rentable square feet) 33.9 % 17.6 % 19.9 % Weighted average lease term by square feet (years) 8.9 7.2 7.5 Total leasing costs and concession commitments (1) $ 4,748 $ 6,175 $ 10,923 Total leasing costs and concession commitments per square foot (1) $ 5.46 $ 1.50 $ 2.19 Total leasing costs and concession commitments per square foot per year (1) $ 0.61 $ 0.21 $ 0.29 (1) Includes commitments made for leasing expenditures and concessions, such as leasing commissions, tenant improvements or other tenant inducements.
During the year ended December 31, 2024, we entered into new and renewal leases as summarized in the following table, excluding the impact of rent resets (square feet in thousands): 49 Table of Contents Year Ended December 31, 2024 New Leases Renewals Totals Square feet leased during the period 328 5,663 5,991 Weighted average rental rate change (by rentable square feet) 40.0 % 16.0 % 18.0 % Weighted average lease term by square feet (years) 18.4 6.1 6.8 Total leasing costs and concession commitments (1) $ 2,932 $ 6,343 $ 9,275 Total leasing costs and concession commitments per square foot (1) $ 8.96 $ 1.12 $ 1.55 Total leasing costs and concession commitments per square foot per year (1) $ 0.49 $ 0.18 $ 0.23 (1) Includes commitments made for leasing expenditures and concessions, such as leasing commissions, tenant improvements or other tenant inducements.
For further information regarding disposition activities, see Note 3 to our consolidated financial statements included in Part IV, Item 15 of this Annual Report on Form 10-K. Consolidated Joint Venture We own a 61% equity interest in Mountain Industrial REIT LLC, which owns 94 properties in 27 states totaling approximately 20,981,000 rentable square feet.
For further information regarding real estate activities, see Note 3 to our consolidated financial statements included in Part IV, Item 15 of this Annual Report on Form 10-K. Joint Ventures We own a 61% equity interest in our consolidated joint venture.
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 years ended December 31, 2023 and 2022.
Other real estate companies and REITs may calculate FFO attributable to common shareholders and Normalized FFO attributable to common shareholders differently than we do. 54 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 years ended December 31, 2024 and 2023.
General and administrative. The decrease in general and administrative expenses is primarily due to decreases in business management fees and legal fees, partially offset by increases in accounting and professional fees in the 2023 period. Acquisition and other transaction related costs.
The decrease in general and administrative expenses is primarily due to refunds of franchise and transfer taxes and professional fees, partially offset by increases in our trustee share awards and in our business management fees during 2024. Acquisition and other transaction related costs.
We control our consolidated joint venture and therefore account for the properties owned by this joint venture on a consolidated basis in our consolidated financial statements.
We control this consolidated joint venture and therefore account for the properties owned by this joint venture on a consolidated basis in our 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.
On January 11, 2024, we declared a regular quarterly distribution to common shareholders of record on January 22, 2024 in the amount of $0.01 per share, or approximately $658, and we paid this distribution on February 15, 2024 using cash on hand.
On January 16, 2025, we declared a regular quarterly distribution to common shareholders of record on January 27, 2025 of $0.01 per share, or approximately $661, and we expect to pay this distribution on or about February 20, 2025 using cash on hand.
For acquired real estate, we record building, land and improvements, and, if applicable, the value of in-place leases, the fair market value of above or below market leases and tenant relationships at their relative fair value.
We allocate the cost of each property acquired to various property components and each component generally has a different useful life. We record building, land and improvements, and, if applicable, the value of in-place leases, the fair market value of above or below market leases and tenant relationships at their relative fair value.
A majority of the leases at our Mainland Properties include periodic set dollar amount or percentage increases that raise the cash rent payable to us.
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.
However, inflationary pressures and high interest rates in the United States and globally, and global geopolitical hostilities and tensions, have given rise to economic uncertainty and have caused disruptions in the financial markets. These conditions have increased our cost of capital and negatively impacted our ability to reduce our leverage.
However, uncertainties surrounding interest rates and inflation in the United States and globally, and global geopolitical hostilities and tensions, have given rise to economic uncertainty and have caused disruptions in the financial markets.
The following table presents the reconciliation of net loss to NOI for the years ended December 31, 2023 and 2022: Year Ended December 31, 2023 2022 Net loss $ (149,719) $ (286,841) Equity in earnings of unconsolidated joint venture (902) (7,078) Income tax expense 104 45 Loss before income taxes and equity in earnings of unconsolidated joint venture (150,517) (293,874) Loss on early extinguishment of debt 359 22,198 Loss on equity securities — 5,758 (Gain) loss on sale of real estate (1,710) 10 Interest expense 288,537 280,051 Interest and other income (7,911) (2,663) Loss on impairment of real estate 156 100,747 Acquisition and other transaction related costs (1) 287 586 General and administrative 31,164 32,877 Depreciation and amortization 178,728 160,982 NOI $ 339,093 $ 306,672 NOI: Hawaii Properties $ 89,634 $ 85,145 Mainland Properties 249,459 221,527 NOI $ 339,093 $ 306,672 (1) Acquisition and other transaction related costs consist of costs related to potential acquisition and disposition activities that were not completed. 54 Tabl e of Contents Funds From Operations Attributable to Common Shareholders and Normalized Funds From Operations Attributable to Common Shareholders We calculate FFO attributable to common shareholders and Normalized FFO attributable to common shareholders as shown below.
The following table presents the reconciliation of net loss to NOI for the years ended December 31, 2024 and 2023: Year Ended December 31, 2024 2023 Net loss $ (137,168) $ (149,719) Equity in earnings of unconsolidated joint venture (5,332) (902) Income tax expense 162 104 Loss before income taxes and equity in earnings of unconsolidated joint venture (142,338) (150,517) Loss on early extinguishment of debt — 359 Gain on sale of real estate — (1,710) Interest expense 292,536 288,537 Interest income (11,427) (7,911) Loss on impairment of real estate — 156 Acquisition and other transaction related costs — 287 General and administrative 30,454 31,164 Depreciation and amortization 171,987 178,728 NOI $ 341,212 $ 339,093 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.
For further information regarding indebtedness, see Notes 5 and 11 to our consolidated financial statements included in Part IV, Item 15 of this Annual Report on Form 10-K.
As of December 31, 2024, 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 interest rate caps, see Notes 5 and 11 to our consolidated financial statements included in Part IV, Item 15 of this Annual Report on Form 10-K.
The following is a summary of our sources and uses of cash flows for the periods presented, as reflected in our consolidated statements of cash flows: Year Ended December 31, 2023 2022 Cash and cash equivalents and restricted cash at beginning of period $ 140,780 $ 29,397 Net cash provided by (used in): Operating activities 6,059 83,251 Investing activities 67,740 (3,445,869) Financing activities 31,144 3,474,001 Cash and cash equivalents and restricted cash at end of period $ 245,723 $ 140,780 The decrease in net cash provided by operating activities for the year ended December 31, 2023 compared to the prior year is primarily due to higher interest expense paid in the 2023 period, partially offset by higher cash flows from the properties we acquired pursuant to the Merger in 2022.
The following is a summary of our sources and uses of cash flows for the periods presented, as reflected in our consolidated statements of cash flows included in Part IV, Item 15 of this Annual Report on Form 10-K: Year Ended December 31, 2024 2023 Cash and cash equivalents and restricted cash and cash equivalents at beginning of period $ 245,723 $ 140,780 Net cash provided by (used in): Operating activities 1,963 6,059 Investing activities 16,420 67,740 Financing activities (21,626) 31,144 Total (3,243) 104,943 Cash and cash equivalents and restricted cash and cash equivalents at end of period $ 242,480 $ 245,723 55 Table of Contents The decrease in net cash provided by operating activities for the year ended December 31, 2024 compared to 2023 is primarily due to the timing of payables in 2024, partially offset by higher cash flows from our properties.
We may also assume mortgage loans or incur debt in connection with future acquisitions, developments and redevelopments. When the maturities of our debt approach or we desire to reduce our leverage or refinance maturing debt, we intend to explore refinancing alternatives, property sales or sales of equity interests in joint ventures.
When our debt approaches maturity or we desire to reduce our leverage or refinance debt, we intend to explore refinancing alternatives, property sales or sales of equity interests in joint ventures.
We recognized a loss on impairment of real estate on one property that was classified as held for sale and subsequently reclassified to held and used during the 2023 period and we recognized a loss on impairment of real estate on 25 properties acquired in the Merger during the 2022 period. Interest and other income.
During 2023, we recognized a loss on impairment of real estate on one property that was classified as held for sale. Interest income. The increase in interest income is primarily due to higher average cash balances during 2024, as compared to 2023. Interest expense.
Revenues from our Hawaii Properties have generally increased under our or our predecessors’ ownership as rents under the leases for those properties have been reset or renewed.
Certain of our Hawaii Properties are lands leased for rents that periodically reset based on fair market values, generally every 10 years. Revenues from our Hawaii Properties have generally increased as rents under the leases for those properties have been reset or renewed.
Our Investing and Financing Liquidity and Resources (dollars in thousands, except per share and per square foot data) As of December 31, 2023, we had cash and cash equivalents, excluding restricted cash, of $112,341.
Our Investing and Financing Liquidity and Resources As of December 31, 2024, we had cash and cash equivalents, excluding restricted cash and cash equivalents, of $131,706.
We do not depreciate the allocated cost of land. We amortize capitalized above market lease values as a reduction to rental income over the terms of the respective leases. We amortize capitalized below market lease values as an increase to rental income over the terms of the respective leases.
We amortize below market lease values as an increase to rental income over the terms of the respective leases. We amortize the value of acquired in-place leases, exclusive of the value of above market and below market acquired in-place leases, to depreciation and amortization over the periods of the respective leases.
(3) See our definition of NOI and our reconciliation of net loss to NOI below under the heading "Non-GAAP Financial Measures." 52 Tabl e of Contents References to changes in the income and expense categories below relate to the comparison of results for the year ended December 31, 2023 to the year ended December 31, 2022.
References to changes in the income and expense categories below relate to the comparison of results for the year ended December 31, 2024 to the year ended December 31, 2023.
Year Ended December 31, 2023 2022 Net loss attributable to common shareholders $ (107,989) $ (226,723) Equity in earnings of unconsolidated joint venture (902) (7,078) Loss on equity securities — 5,758 (Gain) loss on sale of real estate (1,710) 10 Loss on impairment of real estate 156 100,747 Depreciation and amortization 178,728 160,982 Share of FFO from unconsolidated joint venture 5,783 6,406 FFO adjustments attributable to noncontrolling interest (43,031) (38,695) FFO attributable to common shareholders 31,035 1,407 Loss on early extinguishment of debt 359 22,198 Acquisition, transaction related and certain other financing costs (1) 287 80,992 Normalized FFO adjustments attributable to noncontrolling interest (140) (28,379) Normalized FFO attributable to common shareholders $ 31,541 $ 76,218 Weighted average common shares outstanding (basic and diluted) 65,430 65,248 Per common share data (basic and diluted): FFO attributable to common shareholders $ 0.47 $ 0.02 Normalized FFO attributable to common shareholders $ 0.48 $ 1.17 (1) Acquisition, transaction related and certain other financing costs consist of costs related to potential acquisition and disposition activities that were not completed.
Year Ended December 31, 2024 2023 Net loss attributable to common shareholders $ (95,669) $ (107,989) Equity in earnings of unconsolidated joint venture (5,332) (902) Gain on sale of real estate — (1,710) Loss on impairment of real estate — 156 Depreciation and amortization 171,987 178,728 Share of FFO from unconsolidated joint venture 5,879 5,783 FFO adjustments attributable to noncontrolling interest (41,510) (43,031) FFO attributable to common shareholders 35,355 31,035 Loss on early extinguishment of debt — 359 Acquisition and other transaction related costs — 287 Normalized FFO adjustments attributable to noncontrolling interest — (140) Normalized FFO attributable to common shareholders $ 35,355 $ 31,541 Weighted average common shares outstanding (basic and diluted) 65,697 65,430 Per common share data (basic and diluted): Net loss attributable to common shareholders $ (1.46) $ (1.65) FFO attributable to common shareholders $ 0.54 $ 0.47 Normalized FFO attributable to common shareholders $ 0.54 $ 0.48 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.
Subject to the satisfaction of certain conditions, we have the option to prepay the ILPT Floating Rate Loan in full or in part at any time at par with no premium. 57 Tabl e of Contents The Floating Rate Loan matures in March 2024, subject to three, one year extension options, and requires that interest be paid at an annual rate of SOFR plus a premium of 2.77%.
The Mountain Floating Rate Loan is secured by 82 properties, matures in March 2025, subject to two remaining one year extension options, and requires that interest be paid at an annual rate of SOFR plus a premium of 2.77%.
(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 December 31, 2023, and includes space being fitted out for occupancy, if any, and space which is leased but is not occupied.
(2) Leased square feet is pursuant to existing leases as of December 31, 2024, and includes space being fitted out for occupancy, if any, and space which is leased but is not occupied, if any. (3) Represents total rental income divided by the average rentable square feet leased during the periods specified for our properties. Mainland Properties.
The increase in rental income is primarily a result of the Merger and leasing activity, including rent resets, at certain of our comparable properties in the 2023 period. Real estate taxes. The increase in real estate taxes primarily reflects the Merger. Real estate taxes at certain of our comparable properties increased due to higher assessed values. Other operating expenses .
Real estate taxes increased primarily due to higher assessed values at certain of our properties and the expiration of a payment in lieu of taxes program at one of our Mainland Properties, partially offset by an abatement at one of our Mainland Properties in 2023. Other operating expenses .
During the year ended December 31, 2023, we completed rent resets for approximately 420,000 square feet of land at our Hawaii Properties at rental rates that were 29.6% higher than prior rental rates. 49 Tabl e of Contents As of December 31, 2023, our lease expirations by year were as follows (square feet in thousands): % of Total Cumulative % of Total Cumulative % Annualized % of Total Leased Leased of Total Annualized Rental Annualized No. of Square Feet Square Feet Square Feet Rental Revenues Revenues Rental Revenues Year Leases Expiring (1) Expiring (1) Expiring (1) Expiring (2) Expiring (2) Expiring (2) 2024 40 5,070 8.6% 8.6% $ 24,239 5.6% 5.6% 2025 36 5,015 8.5% 17.1% 28,846 6.6% 12.2% 2026 31 4,128 7.0% 24.1% 28,571 6.6% 18.8% 2027 38 8,738 14.7% 38.8% 52,823 12.2% 31.0% 2028 42 6,165 10.4% 49.2% 45,765 10.5% 41.5% Thereafter 204 30,133 50.8% 100.0% 254,255 58.5% 100.0% Total 391 59,249 100.0% $ 434,499 100.0% Weighted average remaining lease term (in years) 7.0 8.1 (1) Leased square feet is pursuant to existing leases as of December 31, 2023 and includes space being fitted out for occupancy, if any, and space which is leased but is not occupied.
The following table provides the annualized rental revenues scheduled to reset at our Hawaii Properties as of December 31, 2024: Annualized Rental Revenues Scheduled to Reset 2025 $ 1,010 2026 1,316 2027 805 2028 — 2029 8,517 Thereafter 11,225 Total $ 22,873 As of December 31, 2024, our lease expirations by year were as follows (square feet in thousands): % of Total Cumulative % of Total Cumulative % Annualized % of Total Leased Leased of Total Annualized Rental Annualized No. of Square Feet Square Feet Square Feet Rental Revenues Revenues Rental Revenues Year Leases Expiring (1) Expiring (1) Expiring (1) Expiring Expiring Expiring 2025 30 2,801 5.0 % 5.0 % $ 15,005 3.4 % 3.4 % 2026 30 3,504 6.2 % 11.2 % 23,185 5.3 % 8.7 % 2027 43 8,306 14.7 % 25.9 % 51,780 11.8 % 20.5 % 2028 41 6,220 11.0 % 36.9 % 46,815 10.7 % 31.2 % 2029 38 6,879 12.2 % 49.1 % 45,380 10.3 % 41.5 % Thereafter 206 28,847 50.9 % 100.0 % 256,889 58.5 % 100.0 % Total 388 56,557 100.0 % $ 439,054 100.0 % Weighted average remaining lease term (in years) 7.0 7.8 (1) Leased square feet is pursuant to existing leases as of December 31, 2024 and includes space being fitted out for occupancy, if any, and space which is leased but is not occupied, if any.
Income tax expense primarily reflects state income taxes payable in certain jurisdictions. Equity in earnings of unconsolidated joint venture.
Loss on early extinguishment of debt. Loss on early extinguishment of debt relates to prepayment penalties incurred by our consolidated joint venture related to refinancing activities in 2023. Income tax expense. Income tax expense reflects state income taxes payable in certain jurisdictions. Equity in earnings of unconsolidated joint venture.
The increase in other operating expenses is primarily due to the Merger. Additionally, increases in management fees and insurance and repairs and maintenance costs were partially offset by a decrease in snow removal expenses at certain of our comparable properties during the 2023 period. Depreciation and amortization. The increase in depreciation and amortization primarily reflects the impact of the Merger.
Other operating expenses increased primarily due to increases in insurance and utility costs at certain of our properties, partially offset by decreased expense reimbursements to RMR as compared to 2023. Depreciation and amortization.
(2) Building improvements generally include expenditures to replace obsolete building components and expenditures that extend the useful life of existing assets. (3) Development, redevelopment and other activities generally include capital expenditure projects that reposition a property or result in new sources of revenues.
(2) Includes expenditures to replace obsolete building components and expenditures that extend the useful life of existing assets.
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. 50 Tabl e of Contents The following table provides the annualized rental revenues scheduled to reset by year at our Hawaii Properties as of December 31, 2023: Annualized Rental Revenues Scheduled to Reset 2024 $ 814 2025 989 2026 1,315 2027 795 2028 — Thereafter 18,525 Total $ 22,438 As of December 31, 2023, $24,239, or 5.6%, of our annualized rental revenues are included in leases scheduled to expire by December 31, 2024 and 1.2% of our rentable square feet are currently vacant.
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.
In May 2023, our consolidated joint venture obtained a $91,000 fixed rate, interest only mortgage loan secured by four properties owned by our consolidated joint venture. This mortgage loan matures in June 2030 and requires that interest be paid at an annual rate of 6.25%.
(2) Reflects the impact of interest rate caps with a current SOFR strike rate equal to 3.04%, which replaced the previous strike rate equal to 3.40% in March 2024. In May 2023, our consolidated joint venture obtained a $91,000 fixed rate, interest only mortgage loan secured by four properties owned by our consolidated joint venture.
Property Operations Occupancy data for our properties as of December 31, 2023 and 2022 were as follows: All Properties Comparable Properties as of December 31, as of December 31, (1) 2023 2022 2023 2022 Total properties 411 413 286 286 Total rentable square feet (in thousands) (2) 59,951 59,983 33,980 33,980 Percent leased (3) 98.8 % 99.1 % 98.7 % 99.1 % (1) Consists of properties that we owned continuously since January 1, 2022.
Property Operations Occupancy and rental rate data for our portfolio as of December 31, 2024 and 2023 were as follows (square feet in thousands): As of December 31, 2024 2023 Total properties 411 411 Total rentable square feet (1) 59,890 59,951 Percent leased (2) 94.4 % 98.8 % Average effective rental rates per square feet (3) $ 7.71 $ 7.39 (1) Subject to modest adjustments when space is remeasured or reconfigured for new tenants and when land leases are converted to building leases.
As of December 31, 2023, we had estimated unspent leasing related obligations of $5,947, all of which is expected to be spent during the next 12 months. Related Person Transactions We have relationships and historical and continuing transactions with RMR, RMR Inc. and others related to them.
Related Person Transactions We have relationships and historical and continuing transactions with RMR, RMR Inc. and others related to them.
(2) Annualized rental revenues are as of December 31, 2023. As of December 31, 2023, FedEx and Amazon leased 21.7% and 7.7% of our total leased square feet, respectively, and represented 29.7% and 6.7% of our total annualized rental revenues, respectively. Mainland Properties.
As of December 31, 2024, subsidiaries of FedEx and Amazon leased 22.6% and 8.0% of our total leased square feet, respectively, and represented 29.1% and 6.8% of our total annualized rental revenues, respectively. 50 Table of Contents As of December 31, 2024, $15,005, or 3.4%, of our annualized rental revenues are included in leases scheduled to expire by December 31, 2025 and 5.6% of our rentable square feet are currently vacant.
The weighted average interest rate payable under the ILPT Floating Rate Loan was 6.18%, including the impact of our interest rate cap of 2.25%, as of December 31, 2023 and 2022, and for the year ended December 31, 2023 and the period from September 22, 2022 (the date we entered into the applicable loan agreements) to December 31, 2022.
The weighted average interest rates under our floating rate loans for the years ended December 31, 2024 and 2023 were as follow: Year Ended December 31, 2024 2023 ILPT Floating Rate Loan (1) 6.26% 6.18% Mountain Floating Rate Loan (2) 5.88% 6.17% (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.
Indebtedness Our principal debt obligations as of December 31, 2023 were: (1) a $1,235,000 loan, or the ILPT Floating Rate Loan, secured by 104 of our properties; (2) a $1,400,000 loan, or the Floating Rate Loan, secured by 82 properties owned by our consolidated joint venture; (3) $700,000 outstanding principal amount of a mortgage loan, or the Fixed Rate Loan, secured by 17 of our properties; (4) $650,000 outstanding principal amount of a mortgage loan secured by 186 of our Hawaii Properties; and (5) $340,944 aggregate principal amount of mortgage loans secured by 12 properties owned by our consolidated joint venture.
Indebtedness As of December 31, 2024, we had an aggregate principal amount of $4,307,829 of indebtedness, including (1) our $1,235,000 loan, or the ILPT Floating Rate Loan, (2) our consolidated joint venture’s $1,400,000 loan, or 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.
We amortize the value of acquired in-place leases exclusive of the value of above market and below market acquired in-place leases to depreciation and amortization over the periods of the respective leases. If a lease is terminated prior to its stated expiration, all unamortized amounts relating to that lease are written off.
If a lease is terminated prior to its stated expiration, all unamortized amounts relating to that lease are amortized in full at that time. Purchase price allocations require us to make certain assumptions and estimates.
As of February 20, 2024, our consolidated joint venture intends to exercise its first option to extend the maturity of this loan. The one year options to extend the ILPT Floating Rate Loan and the Floating Rate Loan require, among other things, that we obtain a replacement interest rate cap, as defined in the applicable agreement.
In February 2025, our consolidated joint venture provided notice to exercise the second extension option for the maturity of the Mountain Floating Rate Loan and in connection therewith purchased a one year interest rate cap for $15,010 with a SOFR strike rate equal to 3.10%.
Removed
As of December 31, 2023, our portfolio was comprised of 411 properties containing approximately 59,951,000 rentable square feet located in 39 states, including 226 buildings, leasable land parcels and easements containing approximately 16,729,000 rentable square feet located on the island of Oahu, Hawaii, and 185 properties containing approximately 43,222,000 rentable square feet located in 38 other states.
Added
As of December 31, 2024, our portfolio was comprised of 411 properties containing approximately 59,890,000 rentable square feet located in 39 states with 94.4% occupancy leased to over 300 different tenants. As of December 31, 2024, we also owned a 22% equity interest in the unconsolidated joint venture.
Removed
As of December 31, 2023, our properties were approximately 98.8% leased to 303 tenants with a weighted average remaining lease term (by annualized rental revenues) of approximately 8.1 years.
Added
These conditions have increased our cost of capital and negatively impacted our ability to reduce leverage, and 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. 48 Table of Contents Our portfolio as of December 31, 2024 is summarized below (square feet in thousands): % of Weighted Rentable Annualized Average Ownership Number of Square Rental Remaining Vehicle Ownership Properties Location Feet Occupancy Revenues Lease Term (1) Mainland Properties ILPT 100% 90 34 states 22,119 96.3% 34.0% 5.1 Hawaii Properties ILPT 100% 226 Hawaii 16,729 86.2% 28.0% 13.0 Mainland Properties Mountain JV 61% 94 27 states 20,978 99.0% 37.7% 6.5 Mainland Properties Tenancy in common 67% 1 New Jersey 64 100.0% 0.3% 4.9 Total / weighted average 411 59,890 94.4% 100.0% 7.8 (1) Based on annualized rental revenues as of December 31, 2024.
Removed
As of December 31, 2023, our properties included 94 properties in which we owned a 61% equity interest located in 27 states containing approximately 20,981,000 rentable square feet that were 99.2% leased with an average remaining lease term (based on annualized rental revenues) of approximately 7.1 years.
Added
During the year ended December 31, 2024, we completed rent resets for approximately 106,000 square feet of land at our Hawaii Properties at rental rates that were 27.5% higher than prior rental rates.
Removed
As of December 31, 2023, we also owned a 22% equity interest in the unconsolidated joint venture. 48 Tabl e of Contents During 2023, our rental income and net operating income, or NOI, increased as compared to the prior year as a result of the Merger completed in February 2022 and from leasing activity and rent resets at our properties.
Added
(2) Consists of two properties we disposed since January 1, 2023. (3) 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".
Removed
An economic recession, or continued or intensified disruptions in the financial markets, 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.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

10 edited+4 added−4 removed5 unchanged
Biggest changeOur 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. 61 Tabl e of Contents Fixed Rate Debt At December 31, 2023, our outstanding fixed rate debt consisted of the following mortgage notes: Annual Annual Interest Principal Interest Interest Payments Debt Balance Rate (1) Expense Maturity Due Mortgage notes (186 Hawaii Properties) $ 650,000 4.31 % $ 28,015 2029 Monthly Mortgage notes (17 Mainland Properties) 700,000 4.42 % 30,940 2032 Monthly Mortgage note (2) 91,000 6.25 % 5,688 2030 Monthly Mortgage note (3) 11,380 3.67 % 418 2031 Monthly Mortgage note (3) 12,916 4.14 % 535 2032 Monthly Mortgage note (3) 28,622 4.02 % 1,151 2033 Monthly Mortgage note (3) 40,019 4.13 % 1,653 2033 Monthly Mortgage note (3) 24,433 3.10 % 757 2035 Monthly Mortgage note (3) 39,411 2.95 % 1,163 2036 Monthly Mortgage note (3) 43,850 4.27 % 1,872 2037 Monthly Mortgage note (3) 49,313 3.25 % 1,603 2038 Monthly $ 1,690,944 $ 73,795 (1) The annual interest rate is the rate stated in the applicable contract.
Biggest changeGenerally, if interest rates were to change gradually over time, the impact would be spread over time. 60 Table of Contents Fixed Rate Debt At December 31, 2024, our outstanding fixed rate debt consisted of the following mortgage notes: 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 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 1 10,020 3.67% 368 05/01/2031 Monthly Mountain JV 1 11,636 4.14% 482 07/01/2032 Monthly Mountain JV 1 26,200 4.02% 1,053 10/01/2033 Monthly Mountain JV 1 36,684 4.13% 1,515 11/01/2033 Monthly Mountain JV 1 22,637 3.10% 702 06/01/2035 Monthly Mountain JV 1 36,655 2.95% 1,081 01/01/2036 Monthly Mountain JV 1 41,491 4.27% 1,772 11/01/2037 Monthly Mountain JV 1 46,506 3.25% 1,511 01/01/2038 Monthly Total / weighted average $ 1,672,829 4.37% $ 73,127 (1) The annual interest rate is the rate stated in the applicable contract.
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 $16,909. Changes in market interest rates would affect the fair value of our fixed rate debt 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 $16,728. Changes in market interest rates would affect the fair value of our fixed rate debt obligations.
Based on the balances outstanding at December 31, 2023 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 $87,358. Item 8.
Based on the balances outstanding at December 31, 2024 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 $78,250. Item 8.
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 December 31, 2023, excluding the impact of our interest rate caps: Impact of an Increase in Interest Rates Total Interest Annual Interest Rate Outstanding Expense Earnings Per Per Year Debt Per Year Share Impact (1) At December 31, 2023 6.17 % $ 2,635,000 $ 164,963 $ (2.52) One percentage point increase 7.17 % $ 2,635,000 $ 191,679 $ (2.92) (1) Based on the diluted weighted average common shares outstanding for the year ended December 31, 2023.
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 December 31, 2024, including the impact of our interest rate caps: Impact of an Increase in Interest Rates Weighted Total Interest Annual Average Outstanding Expense Earnings Per Interest Rate Debt Per Year Share Impact (1) At December 31, 2024 6.32 % $ 2,635,000 $ 166,489 $ (2.53) One percentage point increase (2) 6.32 % $ 2,635,000 $ 166,489 $ (2.53) (1) Based on the diluted weighted average common shares outstanding for the year ended December 31, 2024.
The ILPT Floating Rate Loan matures on October 9, 2024, subject to three, one year extension options, and requires that interest be paid at an annual rate of SOFR plus a weighted average premium of 3.93%.
The ILPT Floating Rate Loan has two remaining one year extension options and requires that interest be paid at an annual rate of SOFR plus a weighted average premium of 3.93%. The Mountain Floating Rate Loan has two remaining one year extension options and requires that interest be paid at an annual rate of SOFR plus a premium of 2.77%.
The foregoing table shows the impact of an immediate one percentage point change in floating interest rates, excluding the impact of our interest rate caps. If interest rates were to change gradually over time, the impact would be spread over time.
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.
In conjunction with these borrowings, to hedge our exposure to risks related to changes in SOFR rates, we purchased interest rate caps with a SOFR strike rate equal to 2.25% for the ILPT Floating Rate Loan and 3.40% for the Floating Rate Loan.
In conjunction with these borrowings, to hedge our exposure to risks related to changes in SOFR and as required under the applicable loan agreements, we purchased an interest rate cap with a current SOFR strike rate equal to 2.78% for the ILPT Floating Rate Loan and our consolidated joint venture purchased an interest rate cap with a current SOFR strike rate equal to 3.04% for the Mountain Floating Rate Loan.
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. In response to significant and prolonged increases in inflation, the U.S. Federal Reserve has raised interest rates multiple times since the beginning of 2022. Although the U.S.
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 recent reductions by the U.S. Federal Reserve. There are uncertainties surrounding interest rates and they may remain at current levels, decrease or increase.
Floating Rate Debt At December 31, 2023, our outstanding floating rate debt consisted of the following: Annual Annual Interest Principal Interest Interest Payments Debt Balance Rate (1) Expense Maturity Due ILPT Floating Rate Loan $ 1,235,000 6.18 % $ 77,383 2024 Monthly Floating Rate Loan 1,400,000 6.17 % 87,580 2024 Monthly $ 2,635,000 $ 164,963 (1) The annual interest rate is the rate stated in the applicable contract, as adjusted by our interest rate caps.
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. 59 Table of Contents Floating Rate Debt As of December 31, 2024, our outstanding floating rate debt consisted of the following: Annual Annual Interest Principal Interest Interest Payments Debt Balance Rate (1) Expense Maturity Due ILPT Floating Rate Loan $ 1,235,000 6.71% $ 84,019 10/09/2025 Monthly Mountain Floating Rate Loan 1,400,000 5.81% 82,470 03/09/2025 Monthly Total / weighted average $ 2,635,000 6.32% $ 166,489 (1) The annual interest rate is the rate stated in the applicable contract, as adjusted by our interest rate caps.
The Floating Rate Loan matures on March 9, 2024, subject to three, one year extension options, and requires that interest be paid at an annual rate of SOFR plus a premium of 2.77%. We are vulnerable to changes in the U.S. dollar based on short term rates, specifically SOFR.
We are vulnerable to changes in the U.S. dollar based on short term interest rates, specifically SOFR.
Removed
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.
Added
In February 2025, our consolidated joint venture provided notice to exercise the second extension option for the maturity of the Mountain Floating Rate Loan and in connection therewith purchased a one year interest rate cap for $15,010 with a SOFR strike rate equal to 3.10%.
Removed
At December 31, 2023, our aggregate floating rate debt was $2,635,000, consisting of the $1,235,000 outstanding principal amount of the ILPT Floating Rate Loan and the $1,400,000 outstanding principal amount of the Floating Rate Loan.
Added
(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 rates of our interest rate caps.
Removed
(2) Our consolidated joint venture, in which we own a 61% equity interest, obtained this mortgage loan, which is secured by four properties. (3) Our consolidated joint venture, in which we own a 61% equity interest, assumed these former MNR mortgage loans, which are secured by eight properties in aggregate.
Added
However, a one percentage point increase in our weighted average interest rate percentage of our floating rate loan debt at December 31, 2024 would result in a weighted average interest rate of 7.32%, total floating rate interest expense per year of $195,517 and a decrease in annual earnings per share of $2.98.
Removed
Federal Reserve has indicated that it may lower interest rates in 2024, we cannot be sure that it will do so, and interest rates may remain at the current high levels or continue to increase.
Added
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.

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