UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~March 31, 2018~~

June 30, 2020

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 001-38342

INDUSTRIAL LOGISTICS PROPERTIES TRUST

(Exact Name of Registrant as Specified in Its Charter)



Maryland		82-2809631
(State or Other Jurisdiction of Incorporation or Organization)		(IRS Employer Identification No.)

~~617-219-1460~~617-219-1460

(Registrant’s Telephone Number, Including Area Code)

Securities Registered Pursuant to Section 12(b) of the Act:



Title of Each Class	Trading Symbol(s)	Name Of Each Exchange On Which Registered
Common Shares of Beneficial Interest	ILPT	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer ☐	☒		Accelerated filer ☐
		☐
Non-accelerated filer ☒	☐		Smaller reporting company ☐
~~(Do not check if a smaller reporting company)~~
		☐
Emerging growth company ☒	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided in Section 13(a) of the Exchange Act. ☒☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Number of registrant’s common shares of beneficial interest, $.01 par value per share, outstanding as of ~~April 26, 2018: 65,005,000~~July 27, 2020: 65,209,564

Table of Contents

INDUSTRIAL LOGISTICS PROPERTIES TRUST

FORM 10-Q

~~March 31, 2018~~June 30, 2020

INDEX



		Page
PART I	Financial Information	3

Item 1.	Financial Statements (unaudited)	3

	Condensed Consolidated Balance Sheets — ~~March 31, 2018~~June 30, 2020 and December 31, ~~2017~~2019	3

	Condensed Consolidated Statements of Comprehensive Income — Three and Six Months Ended ~~March 31, 2018~~June 30, 2020 and ~~2017~~2019	4

	Condensed Consolidated Statements of ~~Cash Flows~~Shareholders’ Equity — Three and Six Months Ended ~~March 31, 2018~~June 30, 2020 and ~~2017~~2019	5

	~~Notes to~~ Condensed Consolidated ~~Financial~~ Statements of Cash Flows — Six Months Ended June 30, 2020 and 2019	6

~~Item 2.~~	~~Management’s Discussion and Analysis of Financial Condition and Results of Operations~~	11

~~Item 3.~~	~~Quantitative and Qualitative Disclosures About Market Risk~~	20

~~Item 4.~~	~~Controls and Procedures~~	217

	~~Warning Concerning Forward Looking~~Notes to Condensed Consolidated Financial Statements	229

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	33

Item 4.	Controls and Procedures	35

	~~Statement~~Warning Concerning ~~Limited Liability~~Forward-Looking Statements	25

~~PART II~~	~~Other Information~~	25

~~Item 1A.~~	~~Risk Factors~~	25

~~Item 6.~~	~~Exhibits~~	2636

	~~Signatures~~Statement Concerning Limited Liability	2739

PART II	Other Information	40

Item 1A.	Risk Factors	40

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	42

Item 6.	Exhibits	43

	Signatures	44

References in this Quarterly Report on Form 10-Q to the Company, we, us or our include Industrial Logistics Properties Trust and its consolidated subsidiaries unless otherwise expressly stated or the context indicates otherwise.

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PART I Financial Information

Item 1. Financial Statements

INDUSTRIAL LOGISTICS PROPERTIES TRUST

CONDENSED CONSOLIDATED BALANCE SHEETS

(dollars in thousands, except per share data)

(unaudited)


	March 31,			December 31,			June 30,			December 31,
	2018			2017			2020			2019
ASSETS
Real estate properties:
Land	$	642,706		$	642,706		$	759,009		$	747,794
Buildings and improvements	701,433			700,896			1,644,996			1,588,170
	1,344,139			1,343,602
Total real estate properties, gross							2,404,005			2,335,964
Accumulated depreciation	(79,092		)	(74,614		)	(153,979		)	(131,468		)
	1,265,047			1,268,988
Total real estate properties, net							2,250,026			2,204,496
Acquired real estate leases, net	76,475			79,103			130,153			138,596
Cash and cash equivalents	19,847			—			33,256			28,415
Rents receivable, including straight line rents of $51,371 and $50,177, respectively, net of allowance for doubtful accounts of $659 and $1,241, respectively	52,787			51,672
Restricted cash							13,703			6,135
Rents receivable, including straight line rents of $62,399 and $58,336, respectively							67,292			62,782
Deferred leasing costs, net							6,161			6,581
Debt issuance costs, net	5,538			1,724			2,215			2,954
Deferred leasing costs, net	5,065			5,254
Due from related persons	4,133			—			1,023			1,504
Other assets, net	4,343			4,942			1,771			3,438
Total assets	$	1,433,235		$	1,411,683		$	2,505,600		$	2,454,901

LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES AND EQUITY
Revolving credit facility	$	302,000		$	750,000		$	320,000		$	310,000
Mortgage note payable, net	49,369			49,427
Mortgage notes payable, net							1,048,226			1,096,608
Assumed real estate lease obligations, net	19,861			20,384			16,353			17,508
Accounts payable and other liabilities	11,056			11,082			18,002			16,475
Rents collected in advance	8,426			5,794			7,495			9,442
Security deposits	5,730			5,674			6,597			6,680
Due to related persons	3,965			7,114			2,316			2,498
Total liabilities	400,407			849,475			1,418,989			1,459,211

Commitments and contingencies

Shareholders' equity:
Common shares of beneficial interest, $.01 par value: 100,000,000 shares authorized; 65,005,000 and 45,000,000 shares issued and outstanding, respectively	650			450
Equity:
Equity attributable to common shareholders:
Common shares of beneficial interest, $.01 par value: 100,000,000 shares authorized; 65,209,564 and 65,180,628 shares issued and outstanding, respectively							652			652
Additional paid in capital	997,677			546,489			1,007,223			999,302
Cumulative net income	34,501			15,269			169,822			142,155
Total shareholders' equity	1,032,828			562,208
Total liabilities and shareholders' equity	$	1,433,235		$	1,411,683
Cumulative common distributions							(189,440		)	(146,419		)
Total equity attributable to common shareholders							988,257			995,690
Noncontrolling interest:
Total equity attributable to noncontrolling interest							98,354			—
Total equity							1,086,611			995,690
Total liabilities and equity							$	2,505,600		$	2,454,901

~~See~~The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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INDUSTRIAL LOGISTICS PROPERTIES TRUST

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(amounts in thousands, except per share data)

(unaudited)


	Three Months Ended March 31,						Three Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2020			2019			2020			2019

REVENUES:
Rental income	$	34,809		$	33,870		$	65,110		$	60,090		$	129,388		$	106,077
Tenant reimbursements and other income	5,796			5,570
Total revenues	40,605			39,440

EXPENSES:
Expenses:
Real estate taxes	4,585			4,339			8,932			7,495			17,743			13,060
Other operating expenses	3,545			2,732			5,041			4,198			10,222			7,584
Depreciation and amortization	6,873			6,811			18,525			16,709			36,815			26,320
General and administrative	2,574			4,636			4,846			4,856			9,677			8,656
Total expenses	17,577			18,518			37,344			33,258			74,457			55,620

Operating income	23,028			20,922
Interest income							2			138			113			499
Interest expense (including net amortization of debt issuance costs, premiums and discounts of $642, $494, $1,229 and $897, respectively)							(13,205		)	(13,924		)	(27,724		)	(21,520		)
Gain on early extinguishment of debt							120			—			120			—
Income before income tax expense and equity in earnings of an investee							14,683			13,046			27,440			29,436
Income tax expense							(126		)	(60		)	(189		)	(68		)
Equity in earnings of an investee							—			130			—			534
Net income							14,557			13,116			27,251			29,902
Net loss attributable to noncontrolling interest							264			—			416			—
Net income attributable to common shareholders							14,821			13,116			27,667			29,902

Interest income	13			—
Interest expense (including net amortization of debt issuance costs and premiums of $311 and ($73), respectively)	(3,802		)	(555		)
Income before income tax expense	19,239			20,367
Income tax expense	(7		)	(11		)
Net income	$	19,232		$	20,356
Other comprehensive income:
Equity in unrealized gains of an investee							—			71			—			137
Other comprehensive income							—			71			—			137
Comprehensive income attributable to common shareholders							$	14,821		$	13,187		$	27,667		$	30,039

Weighted average common shares outstanding - basic and diluted	61,445			45,000
Weighted average common shares outstanding - basic							65,089			65,039			65,082			65,035
Weighted average common shares outstanding - diluted							65,091			65,043			65,087			65,042

Net income per common share—basic and diluted	$	0.31		$	0.45
Per common share data (basic and diluted):
Net income attributable to common shareholders							$	0.23		$	0.20		$	0.42		$	0.46

~~See~~The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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INDUSTRIAL LOGISTICS PROPERTIES TRUST

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(dollars in thousands)

(unaudited)



													Total Equity			Total Equity
	Number of				Additional			Cumulative		Cumulative			Attributable to			Attributable to
	Common		Common		Paid In			Net		Common			Common			Noncontrolling			Total
	Shares		Shares		Capital			Income		Distributions			Shareholders			Interest			Equity
Balance at December 31, 2019	65,180,628		$	652	$	999,302		$	142,155	$	(146,419	)	$	995,690		$	—		$	995,690
Net income (loss)	—		—		—			12,846		—			12,846			(152		)	12,694
Share grants	6,000		—		326			—		—			326			—			326
Share repurchases	(951	)	—		(18		)	—		—			(18		)	—			(18		)
Distributions to common shareholders	—		—		—			—		(21,510		)	(21,510		)	—			(21,510		)
Contributions from noncontrolling interest	—		—		6,972			—		—			6,972			100,668			107,640
Balance at March 31, 2020	65,185,677		652		1,006,582			155,001		(167,929		)	994,306			100,516			1,094,822
Net income (loss)	—		—		—			14,821		—			14,821			(264		)	14,557
Share grants	24,500		—		654			—		—			654			—			654
Share repurchases	(613	)	—		(13		)	—		—			(13		)	—			(13		)
Distributions to common shareholders	—		—		—			—		(21,511		)	(21,511		)	—			(21,511		)
Distributions to noncontrolling interest	—		—		—			—		—			—			(1,898		)	(1,898		)
Balance at June 30, 2020	65,209,564		$	652	$	1,007,223		$	169,822	$	(189,440	)	$	988,257		$	98,354		$	1,086,611

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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INDUSTRIAL LOGISTICS PROPERTIES TRUST

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(dollars in thousands)

(unaudited)



										Cumulative
	Number of				Additional			Cumulative		Other		Cumulative
	Common		Common		Paid In			Net		Comprehensive		Common			Total
	Shares		Shares		Capital			Income		Income		Distributions			Equity
Balance at December 31, 2018	65,074,791		$	651	$	998,447		$	89,657	$	—	$	(60,482	)	$	1,028,273
Net income	—		—		—			16,786		—		—			16,786
Equity in unrealized gains of investee	—		—		—			—		66		—			66
Share grants	—		—		73			—		—		—			73
Distributions to common shareholders	—		—		—			—		—		(21,474		)	(21,474		)
Balance at March 31, 2019	65,074,791		651		998,520			106,443		66		(81,956		)	1,023,724
Net income	—		—		—			13,116		—		—			13,116
Equity in unrealized gains of investee	—		—		—			—		71		—			71
Share grants	15,000		—		345			—		—		—			345
Share repurchases	(1,362	)	—		(28		)	—		—		—			(28		)
Share forfeitures	(240	)	—		(1		)	—		—		—			(1		)
Distributions to common shareholders	—		—		—			—		—		(21,475		)	(21,475		)
Balance at June 30, 2019	65,088,189		$	651	$	998,836		$	119,559	$	137	$	(103,431	)	$	1,015,752

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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INDUSTRIAL LOGISTICS PROPERTIES TRUST

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(dollars in thousands)

(unaudited)



	Six Months Ended June 30,
	2020			2019
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	27,251		$	29,902
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	22,789			16,197
Net amortization of debt issuance costs, premiums and discounts	1,229			897
Amortization of acquired real estate leases and assumed real estate lease obligations	13,025			8,854
Amortization of deferred leasing costs	610			460
Straight line rental income	(4,063		)	(2,981		)
Gain on early extinguishment of debt	(120		)	—
Other non-cash expenses	980			417
Equity in earnings of an investee	—			(534		)
Change in assets and liabilities:
Rents receivable	(447		)	128
Deferred leasing costs	(273		)	(261		)
Due from related persons	481			564
Other assets	1,380			1,620
Accounts payable and other liabilities	2,269			5,077
Rents collected in advance	(1,947		)	2,322
Security deposits	(83		)	384
Due to related persons	(182		)	1,486
Net cash provided by operating activities	62,899			64,532

CASH FLOWS FROM INVESTING ACTIVITIES:
Real estate acquisitions and deposits	(71,628		)	(852,152		)
Real estate improvements	(3,089		)	(3,144		)
Distributions in excess of earnings from Affiliates Insurance Company	287			—
Net cash used in investing activities	(74,430		)	(855,296		)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of mortgage notes payable	—			650,000
Borrowings under revolving credit facility	180,000			653,000
Repayments of revolving credit facility	(170,000		)	(458,000		)
Repayment of mortgage note payable	(48,750		)	—
Payment of debt issuance costs	—			(5,517		)
Distributions to common shareholders	(43,021		)	(42,949		)
Proceeds from noncontrolling interest, net	107,640			—
Distributions to noncontrolling interest	(1,898		)	—
Repurchase of common shares	(31		)	(28		)
Net cash provided by financing activities	23,940			796,506

Increase in cash, cash equivalents and restricted cash	12,409			5,742
Cash, cash equivalents and restricted cash at beginning of period	34,550			9,608
Cash, cash equivalents and restricted cash at end of period	$	46,959		$	15,350

SUPPLEMENTAL DISCLOSURES:
Interest paid	$	26,914		$	17,663
Income taxes paid	$	199		$	64

NON-CASH INVESTING ACTIVITIES:
Real estate acquired by assumption of mortgage note payable	$	—		$	(56,980	)

NON-CASH FINANCING ACTIVITIES:
Assumption of mortgage note payable	$	—		$	56,980

Table of Contents

Three Months Ended March 31,
2018 2017
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 19,232
$ 20,356
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation 4,478
4,407
Net amortization of debt issuance costs and premiums 311
(73 )
Amortization of acquired real estate leases and assumed real estate lease obligations 2,105
2,110
Amortization of deferred leasing costs 194
203
Provision for losses on rents receivable 400
23
Straight line rental income (1,194 ) (1,470 )
Other non-cash expenses 104
—
Change in assets and liabilities:
Rents receivable (321 ) 698
Deferred leasing costs (9 ) (322 )
Due from related persons (4,133 ) —
Other assets 599
(3,419 )
Accounts payable and other liabilities 788
207
Rents collected in advance 2,632
1,252
Security deposits 56
24
Due to related persons (3,149 ) —
Net cash provided by operating activities 22,093
23,996

CASH FLOWS FROM INVESTING ACTIVITIES:
Real estate acquisitions —
(277 )
Real estate improvements (1,347 ) (1,244 )
Net cash used in investing activities (1,347 ) (1,521 )

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common shares, net 444,309
—
Borrowings under revolving credit facility 7,000
—
Repayment of mortgage notes payable —
(8 )
Repayments of revolving credit facility (455,000 ) —
Payment of debt issuance costs (4,183 ) —
Contributions 16,162
17,910
Distributions (9,187 ) (40,377 )
Net cash used in financing activities (899 ) (22,475 )

Increase in cash and cash equivalents 19,847
—
Cash and cash equivalents at beginning of period —
—
Cash and cash equivalents at end of period $ 19,847
$ —

SUPPLEMENTAL DISCLOSURES:
Interest paid $ 3,196
$ 628



SUPPLEMENTAL DISCLOSURE OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH:
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the condensed consolidated balance sheets to the amounts shown in the condensed consolidated statements of cash flows:
Cash and cash equivalents	$	33,256	$	15,350
Restricted cash	13,703		—
Total cash, cash equivalents and restricted cash shown in the statements of cash flows	$	46,959	$	15,350

~~See~~The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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INDUSTRIAL LOGISTICS PROPERTIES TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share data)

Note 1. ~~Organization and~~ Basis of Presentation

Industrial Logistics Properties Trust, or, collectively with its consolidated subsidiaries, we, us or our, is a real estate investment trust, or REIT, formed under Maryland law in 2017 as a wholly owned subsidiary of Select Income REIT, or SIR. On January 17, 2018, we completed an initial public offering and listing on The Nasdaq Stock Market LLC, or Nasdaq, of 20,000,000 of our common shares, or our IPO.

The accompanying condensed consolidated financial statements of Industrial Logistics Properties Trust and its consolidated subsidiaries, or we, us or our, are unaudited. Certain information and disclosures required by U.S. generally accepted accounting principles, or GAAP, for complete financial statements have been condensed or omitted. We believe the disclosures made are adequate to make the information presented not misleading. However, the accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes contained in our Annual Report on Form 10-K for the year ended December 31, ~~2017,~~2019, or our 2019 Annual Report. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair statement of results for the interim period have been included. All intercompany transactions and balances with or among our consolidated subsidiaries have been eliminated. Our operating results for interim periods are not necessarily indicative of the results that may be expected for the full year. Because of the significant changes resulting from our IPO on January 17, 2018, the financial results reported may not be indicative of our expected future results. For periods prior to January 17, 2018, our historical operating information and financial positionReclassifications have been ~~derived from~~made to the prior year’s condensed consolidated financial statements ~~of SIR.~~

to conform to the current year’s presentation.

The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect reported amounts. Actual results could differ from those estimates. Significant estimates in the condensed consolidated financial statements include ~~the allowance for doubtful accounts,~~ purchase price allocations, useful lives of fixed assets, impairments of real estate and related intangibles.

In February and March 2020, we entered into agreements related to a joint venture for 12 of our properties located in the mainland United States. We have determined that this joint venture is a variable interest entity, or VIE, as defined under the Consolidation Topic of the Financial Accounting Standards Board, or FASB, Accounting Standards Codification. We concluded that we must consolidate this VIE because we are the entity with the power to direct the activities that most significantly impact the VIE’s economic performance and we have the obligation to absorb losses of, and the ~~assessments~~right to receive benefits from, the VIE that could be significant to the VIE, and therefore are the primary beneficiary of the ~~carrying values~~VIE. The assets of this VIE were $660,958 as of June 30, 2020 and ~~impairments~~consist primarily of ~~long lived assets.~~

the real estate owned by the joint venture. The liabilities of this VIE were $408,181 as of June 30, 2020 and consist primarily of mortgage debts secured by the properties owned by the joint venture. The joint venture investor's interest in this consolidated entity is reflected as noncontrolling interest in our condensed consolidated financial statements. See Note 11 for further information about this joint venture.

Note 2. Recent Accounting Pronouncements

~~On January 1, 2018, we adopted the Financial Accounting Standards Board, or FASB, Accounting Standards Update, or ASU, No. 2014-09 (and related clarifying guidance issued by the FASB),~~ ~~Revenue From Contracts With Customers~~, which outlines a comprehensive model for entities to use in accounting for revenue arising from contracts with customers. ASU No. 2014-09 states that “an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.” A substantial portion of our revenue consists of rental income from leasing arrangements, which is specifically excluded from ASU No. 2014-09. We have adopted ASU No. 2014-09 using the modified retrospective approach. The adoption of ASU No. 2014-09 did not have a material impact on the amount or timing of our revenue recognition in our condensed consolidated financial statements.

~~In February 2016, the FASB issued ASU No. 2016-02,~~ ~~Leases~~, which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e., lessees and lessors). ASU No. 2016-02 requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase of the leased asset by the lessee. This classification will determine whether the lease expense is recognized based on an effective interest method or on a straight line basis over the term of the lease. A lessee is also required to record a right of use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases today. The new standard requires lessors to account for leases using an approach that is substantially equivalent to existing guidance for sales type leases, direct financing leases and operating leases. ASU No. 2016-02 is effective for reporting periods beginning after December 15, 2018, with early adoption permitted. We are currently assessing the potential impact the adoption of ASU No. 2016-02 will have in our condensed consolidated financial statements.

In June 2016, the FASB issued ~~ASU~~Accounting Standards Update No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which requires that entities use a new forward looking “expected loss” model that generally will result in the earlier recognition of allowance for credit losses. The measurement of expected credit losses is based upon historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. ~~ASU No. 2016-13 is~~We adopted this standard which was effective ~~for fiscal years beginning after December 15, 2019, including interim periods~~

~~within those fiscal years. We are currently assessing~~as of January 1, 2020 using the ~~potential~~modified retrospective approach. The implementation of this standard did not have a material impact ~~the adoption of ASU No. 2016-13 will have~~ in our condensed consolidated financial statements. ~~We currently expect to adopt the standard using the modified retrospective approach.~~

Note 3. Real Estate Properties

As of ~~March 31, 2018,~~June 30, 2020, we owned ~~266~~301 properties with a total of approximately ~~28,540,000~~43,759,000 rentable square feet, including 226 buildings, leasable land parcels and easements with a total of approximately ~~16,834,000~~16,756,000 rentable square feet ~~that are~~of primarily industrial lands located on the island of Oahu, HI, or our Hawaii Properties, and ~~40 buildings~~75 properties with a total of approximately ~~11,706,000~~27,003,000 rentable square feet ~~that are~~of industrial ~~and logistics~~ properties located in 2430 other states, or our Mainland ~~Properties.~~Properties, including 12 properties with approximately 9,227,000 rentable square feet owned by a joint venture in which we own a 61% equity interest.

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INDUSTRIAL LOGISTICS PROPERTIES TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except per share data)

We operate in ~~one~~1 business segment: ownership and leasing of properties that include industrial and logistics buildings and leased industrial lands. For the three months ended ~~March 31, 2018~~June 30, 2020 and ~~2017,~~2019, approximately ~~60.7%~~41.3% and ~~59.8%~~42.2%, respectively, of our ~~total revenues were~~rental income was from our Hawaii Properties. For the six months ended June 30, 2020 and 2019, approximately 41.2% and 47.9%, respectively, of our rental income was from our Hawaii Properties. In addition, ~~two subsidiaries~~a subsidiary of Amazon.com, Inc., which ~~are tenants~~is a tenant at certain of our Mainland Properties, accounted for ~~$4,267,~~$10,399, or ~~10.5%~~16.0%, and ~~$4,145,~~$8,700, or ~~10.2%~~14.5%, of our ~~total revenues~~rental income for the three months ended ~~March 31, 2018~~June 30, 2020 and ~~2017,~~2019, respectively, and $20,061, or 15.5%, and $13,565, or 12.8%, of our rental income for the six months ended June 30, 2020 and 2019, respectively.

During the ~~three~~six months ended ~~March 31, 2018,~~June 30, 2020, we completed the acquisition of an industrial property containing 820,384 rentable square feet for a purchase price of $71,628, including acquisition related costs of $147. This acquisition was accounted for as an asset acquisition. We allocated the purchase price for this acquisition based on the estimated fair value of the acquired assets as follows:



		Number	Rentable					Buildings		Acquired
		of	Square	Purchase				and		Real Estate
Date	Market Area	Properties	Feet	Price		Land		Improvements		Leases
February 2020	Phoenix, AZ	1	820,384	$	71,628	$	11,214	$	54,676	$	5,738
		1	820,384	$	71,628	$	11,214	$	54,676	$	5,738

During the six months ended June 30, 2020, we committed ~~$68~~$687 for expenditures related to tenant improvements and leasing costs for ~~approximately 296,000 square feet of~~ leases executed during the ~~period.~~

period for approximately 363,000 square feet. Committed but unspent tenant related obligations based on existing leases as of ~~March 31, 2018~~June 30, 2020 were ~~$243.~~

$561.

Certain of our industrial lands in Hawaii may require environmental remediation, especially if the use of those lands is changed; however, we do not have any present plans to change the use of those ~~lands or to undertake this environmental remediation.~~lands. As of both ~~March 31, 2018~~June 30, 2020 and December 31, ~~2017,~~2019, accrued environmental remediation costs of ~~$7,002~~$6,940 were included in accounts payable and other liabilities in our condensed consolidated balance sheets. These accrued environmental remediation costs relate to maintenance of our properties for current uses, and, because of the indeterminable timing of the remediation, these amounts have not been discounted to present value. In general, we do not have any insurance designated to limit any losses that we may incur as a result of known or unknown environmental conditions which are not caused by an insured event, such as fire or flood, although some of our tenants may maintain such insurance that may benefit us. Although we do not believe that there are environmental conditions at any of our properties that will have a material adverse effect on us, we cannot be sure that such conditions are not present at our properties or that costs we incur to remediate ~~any~~ contamination will not have a material adverse effect on our business or financial condition. Charges for environmental remediation costs, if any, are included in other operating expenses in our condensed consolidated statements of comprehensive income.

Note 4. Leases

We are a lessor of industrial and logistics properties. Our leases provide our tenants with the contractual right to use and economically benefit from all the physical space specified in the leases; therefore, we have determined to evaluate our leases as lease arrangements.

Our leases provide for base rent payments and in addition may include variable payments. Rental income from operating leases, including any payments derived by index or market-based indices, is recognized on a straight line basis over the lease term when we have determined that the collectability of substantially all of the lease payments is probable. Some of our leases have options to extend or terminate the lease exercisable at the option of our tenants, which are considered when determining the lease term. We do not include in our measurement of our lease receivables certain variable payments, including payments determined by changes in the index or market-based indices after the inception of the lease, certain tenant reimbursements and other income until the specific events that trigger the variable payments have occurred. Such payments totaled $11,640 and $9,483 for the three months ended June 30, 2020 and 2019, respectively, of which tenant reimbursements totaled $11,395 and $9,483, respectively, and $23,160 and $17,764 for the six months ended June 30, 2020 and 2019, respectively, of which tenant reimbursements totaled $22,670 and $16,602, respectively.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except per share data)

We increased rental income to record revenue on a straight line basis by $2,096 and $2,002 for the three months ended June 30, 2020 and 2019, respectively, and $4,063 and $2,981 for the six months ended June 30, 2020 and 2019, respectively. Rents receivable include $62,399 and $58,336 of straight line rents at June 30, 2020 and December 31, 2019, respectively.

Certain of our tenants have requested relief from their obligations to pay rent due to us in response to the current economic conditions resulting from the COVID-19 pandemic. As of July 27, 2020, we granted requests for certain of our tenants to defer rent payments totaling $2,799. These tenants will be obligated to pay, in most cases, the deferred rents in 12 equal monthly installments commencing in September 2020. We have elected to use the FASB relief package regarding the application of lease accounting guidance to lease concessions provided as a result of the COVID-19 pandemic. The FASB relief package provides entities with the option to account for lease concessions resulting from the COVID-19 pandemic outside of the existing lease modification guidance if the resulting cash flows from the modified lease are substantially the same as the original lease. Because the deferred rents referenced above will be repaid over a 12-month period, the cash flows from the respective leases are substantially the same as before the rent deferrals. These deferred amounts did not impact our results for the three and six months ended June 30, 2020 and as of June 30, 2020, we recognized an increase in our accounts receivable related to these deferred amounts of $2,317.

Note 4.5. Indebtedness

~~Our~~As of June 30, 2020, our outstanding indebtedness consisted of the following:



										Net Book
										Value
	Principal Balance as of									of Collateral
	June 30,			December 31,			Interest			At June 30,
	2020 ⁽¹⁾			2019 ⁽¹⁾			Rate		Maturity	2020
Unsecured revolving credit facility ⁽²⁾	$	320,000		$	310,000		1.59	%	Dec 2021	$	—
Mortgage note payable (secured by one property in Florida)⁽³⁾	56,980			56,980			4.22	%	Oct 2023	104,893
Mortgage note payable (secured by 186 properties in Hawaii)	650,000			650,000			4.31	%	Feb 2029	491,937
Mortgage note payable (secured by 11 Mainland Properties) ⁽³⁾	350,000			350,000			3.33	%	Nov 2029	493,432
Mortgage note payable (secured by one property in Virginia)	—			48,750			N/A		N/A	N/A
	1,376,980			1,415,730						$	1,090,262
Unamortized debt issuance costs, premiums and discounts	(8,754		)	(9,122		)
	$	1,368,226		$	1,406,608

(1) The principal ~~debt obligations~~balances are the amounts stated in contracts. In accordance with GAAP, our carrying values and recorded interest expense may be different because of market conditions at ~~March 31, 2018 were: (1) $302,000~~the time we assumed certain of ~~outstanding borrowings under~~these debts.

(2) The maturity date of our ~~$750,000 unsecured revolving credit facility; and (2) a mortgage note with an outstanding principal amount of $48,750.~~

~~On December 29, 2017, we obtained a $750,000 secured~~ revolving credit facility ~~which initially had a~~is December 29, 2021 and we have the option to extend the maturity date for 2, six month periods through December 29, 2022.

(3) The properties encumbered by these mortgages are owned by a joint venture in which we own a 61% equity interest.

Table of ~~March 29, 2018. Upon the completion of our IPO, our secured revolving credit facility became~~Contents

INDUSTRIAL LOGISTICS PROPERTIES TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except per share data)

We have a $750,000 unsecured revolving credit facility ~~and the maturity date was extended to December 29, 2021. Following our IPO, borrowings under our revolving credit facility are~~that is available for our general business purposes, including acquisitions. The maturity date of our revolving credit facility is December 29, 2021. We may borrow, repay and reborrow funds under our revolving credit facility until maturity, and no principal repayment is due until maturity. Interest on borrowings under our revolving credit facility is calculated at floating rates based on LIBOR plus a premium that varies based on our leverage ratio. We have the option to extend the maturity date of our revolving credit facility for ~~two~~2, six month periods, subject to payment of extension fees and satisfaction of other conditions. If we later achieve an investment grade credit rating, we will then be able to elect to continue to have the interest premium based on our leverage ratio or we may instead elect to have the interest premium based on our credit rating, or a ratings election. We are also required to pay a commitment fee on the unused portion of our revolving credit facility until and if such time as we make a ratings election, and thereafter we will be required to pay a facility fee in lieu of such commitment fee based on the maximum amount of our revolving credit facility. ~~We may borrow, repay and reborrow funds under our revolving credit facility until maturity, and no principal repayment is due until maturity.~~ The agreement governing our revolving credit facility, or our credit agreement, also includes a feature under which the maximum borrowing availability under our revolving credit facility may be increased to up to $1,500,000 in certain circumstances. ~~In addition, during~~As of June 30, 2020, interest payable on the ~~first quarter of 2018, we completed the syndication of~~amount outstanding under our revolving credit facility ~~with a group of institutional lenders.~~was LIBOR plus 140 basis points and our commitment fee was 25 basis points. As of ~~March 31, 2018~~June 30, 2020 and December 31, ~~2017,~~2019, the interest rate payable on borrowings under our revolving credit facility was ~~3.23%~~1.59% and ~~2.89%~~3.26%, respectively. The weighted average interest rate for borrowings under our revolving credit facility was ~~2.97%~~2.04% and 3.76% for the three months ended ~~March 31, 2018.~~June 30, 2020 and 2019, respectively, and 2.80% and 3.77% for the six months ended June 30, 2020 and June 30, 2019, respectively. As of ~~March 31, 2018~~June 30, 2020 and ~~April 26, 2018,~~July 27, 2020, we

had ~~$302,000 and $292,000, respectively,~~$320,000 outstanding under our revolving credit facility, and ~~$448,000 and $458,000, respectively,~~$430,000 available to borrow under our revolving credit facility.

Our credit agreement provides for acceleration of payment of all amounts due thereunder upon the occurrence and continuation of certain events of default, such as a change of control of us, which includes The RMR Group LLC, or RMR LLC, ceasing to act as our business manager and property manager. Our credit agreement also contains a number of covenants, including covenants that restrict our ability to incur debts or to make distributions in certain circumstances, and generally requires us to maintain certain financial ratios. We believe we were in compliance with the terms and conditions of the covenants under our credit agreement at ~~March 31, 2018.~~June 30, 2020.

~~As of March 31, 2018, the principal amount outstanding under our~~In May 2020, we prepaid at par plus accrued interest a mortgage note ~~was $48,750. This mortgage note was~~ secured by ~~one~~1 of our properties with an outstanding principal balance of approximately $48,750, an annual interest rate of 3.48% and a ~~net book value~~maturity date in November 2020. As a result of ~~$66,166. This~~the prepayment of this mortgage note, ~~is non-recourse, subject~~we recorded a gain on early extinguishment of debt of $120 for the three and six months ended June 30, 2020 to ~~certain limited exceptions, and does not contain any material financial covenants.~~

write off unamortized debt premiums.

Note 5.6. Fair Value of Assets and Liabilities

Our financial instruments include cash and cash equivalents, restricted cash, rents receivable, our revolving credit facility, a mortgage ~~note~~notes payable, accounts payable, rents collected in advance, security deposits and amounts due from or to related persons. At ~~March 31, 2018~~June 30, 2020 and December 31, ~~2017,~~2019, the fair value of our financial instruments approximated their carrying values in our condensed consolidated financial statements, due to their short term nature or ~~variable~~floating interest rates, except as follows:

At March 31, 2018 At December 31, 2017
Carrying Estimated Carrying Estimated

Value ⁽¹⁾
Fair Value
Value ⁽¹⁾
Fair Value
Mortgage note payable $ 49,369
$ 48,527
$ 49,427
$ 48,919



	At June 30, 2020				At December 31, 2019
	Carrying		Estimated		Carrying		Estimated
	Value ⁽¹⁾		Fair Value		Value ⁽¹⁾		Fair Value
Mortgage notes payable	$	1,048,226	$	1,112,956	$	1,096,608	$	1,143,437


(1)	Includes unamortized debt issuance costs, premiums and discounts of ~~$619~~$8,754 and ~~$677~~$9,122 as of ~~March 31, 2018~~June 30, 2020 and December 31, ~~2017,~~2019, respectively.

We estimate the fair value of our mortgage ~~note~~notes payable using discounted cash flow ~~analysis~~analyses and currently prevailing market rates as of the measurement date (Level 3 inputs). Because Level 3 inputs are unobservable, our estimated fair value may differ materially from the actual fair value.

Note 6.7. Shareholders’ Equity

Common Share ~~Issuances:~~

Awards:

On ~~January 17, 2018,~~February 21, 2020, in connection with the election of 2 of our Trustees we ~~issued 20,000,000~~awarded to each such Trustee 3,000 of our common shares, valued at $23.54 per share, the closing price of our common shares on The Nasdaq Stock Market LLC, or Nasdaq, on that day.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in ~~our IPO at a price to the public of $24.00~~thousands, except per ~~common~~ share ~~raising net proceeds of $444,309, after deducting the underwriting discounts and commissions and expenses.~~data)

On ~~March 27, 2018,~~May 28, 2020, in accordance with our Trustee compensation arrangements, we ~~granted 1,000~~awarded to each of our 7 Trustees 3,500 of our common shares, valued at ~~$20.87~~$18.77 per share, the closing price of our common shares on Nasdaq on that ~~day, to each~~day.

Common Share Purchases:

During the six months ended June 30, 2020, we purchased our common shares from certain former officers and employees of RMR LLC in satisfaction of tax withholding and payment obligations in connection with the vesting of awards of our ~~five Trustees~~common shares, valued at the closing price of our common shares on Nasdaq on the purchase dates, as ~~part of their annual compensation.~~follows:



Date Purchased	Number of Shares	Price per Share
1/9/2020	420	$	22.01
3/13/2020	531	$	17.75
6/30/2020	613	$	20.55

Distributions:

During the six months ended June 30, 2020, we declared and paid a regular quarterly distribution to common shareholders as follows:



Record Date	Payment Date	Distribution Per Share	Total Distribution
January 27, 2020	February 20, 2020	$0.33	$21,510
April 16, 2020	May 21, 2020	$0.33	$21,511

On ~~April 19, 2018,~~July 16, 2020, we declared a prorated distribution of $0.27 per common share, or approximately $17,600, for the period from January 17, 2018 (the date we completed our IPO) through March 31, 2018 to shareholders of record on April 30, 2018. This prorated distribution is based upon aregular quarterly distribution of $0.33 per common share, ~~($1.32 per common share per year).~~or approximately $21,500, to shareholders of record on July 27, 2020. We expect to pay this distribution on or about ~~May 14, 2018.~~August 20, 2020.

~~Additional Paid in Capital Adjustments:~~

Until January 17, 2018, we were a wholly owned subsidiary of SIR and SIR managed and controlled our cash management function through a series of commingled centralized accounts. As a result, the cash receipts collected by SIR on our behalf have been accounted for as distributions within shareholders' equity and the cash disbursements paid by SIR on our behalf have been accounted for as contributions within shareholders' equity. During the period from January 1, 2018 to January 16, 2018, we recorded net contributions from SIR of $6,975 as an increase to additional paid in capital.

Note ~~7. Earnings per~~8. Per Common Share Amounts

We calculate basic earnings per common share by dividing net income attributable to common shareholders by the weighted average number of our common shares outstanding during the period. ~~Basic earnings per share equal~~We calculate diluted earnings per share ~~as there are no common share equivalent securities outstanding.~~

~~Note 8. Income Taxes~~

~~Until January 17, 2018, we were a wholly owned subsidiary~~using the more dilutive of ~~SIR, which is taxed as a REIT under~~ the ~~Internal Revenue Code of 1986, as amended,~~two class method or the ~~IRC. Accordingly, until January 17, 2018, we were a qualified REIT subsidiary~~treasury stock method. Unvested share awards and a disregarded entity for federal income tax purposes. We intend to qualify for taxation as a REIT under the IRC for U.S. federal income tax purposes commencing with our taxable year ending December 31, 2018 and to maintain such qualification thereafter. Accordingly, we generally are not, and will not be, subject to U.S. federal income taxes provided that we distribute our taxable income and meet certain other requirements to qualify for taxation as a REIT. We are subject to certain state and local taxes, certain of which amounts are reported as income taxes in our condensed consolidated statements of comprehensive income. We do not currently expect recent amendments to the IRC to have a significant impact on us; however, we will monitor future interpretations of such amendments as they develop, and accordingly, our estimates and disclosures may change.

~~Note 9. Certain Historical Arrangements and Operations Prior to our IPO~~

In connection with our IPO, on September 29, 2017, SIR contributed to us 266 properties with a total of approximately 28,540,000 rentable square feet, or our Initial Properties, consisting of our Hawaii Properties and our Mainland Properties. In connection with our formation and this contribution from SIR, we issued to SIR 45,000,000 of ourpotentially dilutive common shares, and ~~a $750,000 non-interest bearing demand note, or~~ the ~~SIR Note,~~related impact on earnings, are considered when calculating diluted earnings per share. The calculation of basic and ~~we assumed three mortgage notes totaling $63,069,~~diluted earnings per share is as follows:



	Three Months Ended June 30,						Six Months ended June 30,
	2020			2019			2020			2019
Numerators:
Net income attributable to common shareholders	$	14,821		$	13,116		$	27,667		$	29,902
Income attributable to unvested participating securities	(24		)	(8		)	(45		)	(19		)
Net income attributable to common shareholders used in calculating earnings per share	$	14,797		$	13,108		$	27,622		$	29,883

Denominators:
Weighted average common shares outstanding - basic	65,089			65,039			65,082			65,035
Effect of dilutive securities: unvested share awards	2			4			5			7
Weighted average common shares outstanding - diluted	65,091			65,043			65,087			65,042

Net income attributable to common shareholders per common share - basic	$	0.23		$	0.20		$	0.42		$	0.46
Net income attributable to common shareholders per common share - diluted	$	0.23		$	0.20		$	0.42		$	0.46

Table of September 30, 2017, that were secured by three of our Initial Properties. In December 2017, we obtained a $750,000 secured revolving credit facility, and we used the proceeds of an initial borrowing of $750,000 under this credit facility to pay the SIR NoteContents

INDUSTRIAL LOGISTICS PROPERTIES TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in full. Also in December 2017, SIR prepaid on our behalf two of the mortgage notes totaling approximately $14,319 that had encumbered two of our Initial Properties. In connection with our IPO, we reimbursed SIR for approximately $7,271 of costs that SIR incurred in connection with our formation and preparation for our IPO, $1,047 of which was due to SIR and included in due to related persons in our condensed consolidated balance sheet as of March 31, 2018. In addition, SIR collected rents from our tenants for the period subsequent to our IPO of $4,133, which are presented as due from related persons in our condensed consolidated balance sheet as of March 31, 2018. These amounts due to and from SIR were paid in April 2018.thousands, except per share data)

Neither we nor SIR have any employees. As a wholly owned subsidiary of SIR, until the completion of our IPO, we had received services from RMR LLC under SIR’s business and property management agreements with RMR LLC. For periods prior to the completion of our IPO on January 17, 2018, base management fees payable by SIR under SIR’s business management agreement with RMR LLC were calculated based on the historical costs of our Initial Properties and incentive management fees and internal audit costs payable by SIR and allocated to us were based on the percentage of our base management fees compared to the total base management fees paid by SIR. During the period from January 1, 2018 to January 16, 2018, the base management fees payable by SIR and allocated to us were $308. During the three months ended March 31, 2017, the base management fees, internal audit costs and estimated incentive management fees payable by SIR allocated to us were $1,701, $21 and $2,409, respectively. The property management and construction supervision fees payable by SIR under SIR’s property management agreement with RMR LLC that were allocated to us for services to our Initial Properties for the period from January 1, 2018 to January 16, 2018 and for the three months ended March 31, 2017 were $230 and $1,030, respectively. These amounts are included in other operating expenses or have been capitalized, as appropriate, in our condensed consolidated financial statements. For the period from January 1, 2018 to January 16, 2018 and for the three months ended March 31, 2017, the total property management related reimbursements paid under SIR’s business management agreement with RMR LLC for costs incurred by RMR LLC with respect to our Initial Properties were $120 and $632, respectively. These amounts are included in other operating expenses in our condensed consolidated statements of comprehensive income. All these management fees and reimbursements allocated to us for periods prior to January 17, 2018 were paid by SIR and not us.

In connection with our IPO, we entered into two agreements with RMR LLC to provide management services to us. See Notes 10 and 11 for further information regarding our relationships, agreements and transactions with RMR LLC and SIR.

Note ~~10.~~9. Business and Property Management Agreements with RMR LLC

We have no0 employees. The personnel and various services we require to operate our business are provided to us by RMR LLC. We have ~~two~~2 agreements with RMR LLC to provide management services to ~~us, which we entered on January 17, 2018 in connection with the completion of our IPO:~~us: (1) a business management agreement, which relates to our business generally; and (2) a property management agreement, which relates to our property level operations.

Pursuant to our business management agreement with RMR LLC, we recognized net business management fees of ~~$1,482~~$3,277 and $6,584 for the three and six months ended June 30, 2020, respectively, and $3,092 and $5,285 for the three and six months ended June 30, 2019, respectively. The net business management fees we recognized for the three and six months ended June 30, 2020 include $347 and $476, respectively, of management fees related to our subsidiary level management agreement with RMR LLC entered in connection with our joint venture arrangement, which arrangement is further described in Note 11. Based on our common share total return, as defined in our business management agreement, as of June 30, 2020 and 2019, no incentive fees are included in the net business management fees we recognized for the three or six months ended June 30, 2020 or 2019. The actual amount of annual incentive fees for 2020, if any, will be based on our common share total return, as defined in our business management agreement, for the period from January ~~17,~~12, 2018 ~~through March~~to December 31, ~~2018. This amount is included~~2020 and will be payable in 2021. We did 0t incur any incentive fee payable to RMR LLC for the year ended December 31, 2019. We include business management fees in general and administrative expenses in our condensed consolidated statements of comprehensive income.

Pursuant to our property management agreement with RMR LLC, we recognized aggregate property management and construction supervision fees of ~~$967~~$1,860 and $3,783 for the ~~period from January 17, 2018 through March 31, 2018. This amount is~~three and six months ended June 30, 2020, respectively, and $1,922 and $3,269 for the three and six months ended June 30, 2019, respectively. These amounts are included in other operating expenses or ~~has~~have been capitalized, as appropriate, in our condensed consolidated financial statements.

We are generally responsible for all of our operating expenses, including certain expenses incurred or arranged by RMR LLC on our behalf. ~~Our property level operating~~We are generally not responsible for payment of RMR LLC’s employment, office or administrative expenses ~~including certain payroll~~incurred to provide management services to us, except for the employment and related expenses of RMR LLC’s employees assigned to work exclusively or partly at our properties, our share of the wages, benefits and other related costs ~~incurred by~~of RMR LLC, are generally incorporated into rents charged to our tenants. We reimbursed RMR LLC $542 for property management related expenses for the period from January 17, 2018 through March 31, 2018, which amount is included in other operating expenses in our condensed consolidated statements of comprehensive income. In addition, we are responsible forLLC’s centralized accounting personnel, our share of RMR LLC’s costs for providing our internal audit ~~function. The amount recognized~~function, or as ~~expense~~otherwise agreed. Our property level operating expenses are generally incorporated into the rents charged to our tenants, including certain payroll and related costs incurred by RMR LLC. We reimbursed RMR LLC $1,217 and $2,416 for ~~internal audit~~these expenses and costs ~~was $52~~ for the ~~period from January 17, 2018 through March 31, 2018, which amount is~~three and six months ended June 30, 2020, respectively, and $1,026 and $1,929 for the three and six months ended June 30, 2019, respectively. These amounts are included in other operating expenses and general and administrative expenses, as applicable, in our condensed consolidated statements of comprehensive income.

See ~~Notes 9 and 11~~Note 10 for further information regarding our relationships, agreements and transactions with RMR LLC.

Note ~~11.~~10. Related Person Transactions

We have relationships and historical and continuing transactions with RMR LLC, ~~SIR~~The RMR Group Inc., or RMR Inc., and others related to them, including other companies to which RMR LLC or its subsidiaries provide management services and some of which have trustees, directors ~~and~~or officers who are also our Trustees or officers. RMR LLC is a majority owned subsidiary of RMR Inc. The Chair of our Board of Trustees and one of our Managing Trustees, Adam Portnoy, is the sole trustee, an officer and the controlling shareholder of ABP Trust, which is the controlling shareholder of RMR Inc., a managing director and the president and chief executive officer of RMR Inc. and an officer and employee of RMR LLC. John Murray, our other Managing Trustee and our President and Chief Executive Officer, also serves as an executive officer of RMR LLC, and each of our other officers is also an officer and employee of RMR LLC. Some of our Independent Trustees also serve as independent trustees or independent directors of other public companies to which RMR LLC or its subsidiaries provide management services. Adam Portnoy serves as chair of the boards of trustees or boards of directors of several of these public companies and as a managing director or managing trustee of these public companies. Other officers of RMR LLC, including Mr. Murray and certain of our other officers, serve as managing trustees, managing directors or officers of certain of these companies.

Our Manager, RMR LLC. We have ~~two~~2 agreements with RMR LLC to provide management services to us. See Note 109 for further information regarding our management agreements with RMR LLC.

~~SIR. SIR is~~

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INDUSTRIAL LOGISTICS PROPERTIES TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except per share data)

OPI. Office Properties Income Trust, or OPI, owed to us $1,023 and $1,504 as of June 30, 2020 and December 31, 2019, respectively, for rents that it collected on our ~~largest shareholder. As of March 31, 2018, SIR owned 45,000,000~~behalf from certain of our ~~common shares,~~tenants. A predecessor of OPI previously owned those properties and those tenants first became tenants at those properties prior to our ownership. OPI paid these amounts due to us or ~~approximately 69.2% of~~collected on our ~~outstanding common shares. We were SIR’s wholly owned subsidiary until~~behalf in July 2020 and January 2020, respectively.

AIC. Until its dissolution on February 13, 2020, we, ~~completed our IPO on January 17, 2018. Adam D. Portnoy, one of our Managing Trustees, is also a managing trustee of SIR. John C. Popeo, our~~ABP Trust and five other ~~Managing Trustee and our President and Chief Operating Officer, also serves as the chief financial officer and treasurer of SIR.~~companies to which RMR LLC provides management services owned Affiliates Insurance Company, or AIC, an Indiana insurance company, in equal amounts. Certain of our Trustees and certain trustees or directors of the other AIC shareholders served on the board of directors of AIC, until its dissolution.

We and the other AIC shareholders historically participated in a combined property insurance program arranged and insured or reinsured in part by AIC. The policies under that program expired on June 30, 2019, and we and the other AIC shareholders elected not to ~~SIR~~renew the AIC property insurance program; we have instead purchased standalone property insurance coverage with unrelated third party insurance providers.

As of June 30, 2020 and ~~us.~~December 31, 2019, our investment in AIC had a carrying value of $11 and $298, respectively. These amounts are included in other assets in our condensed consolidated balance sheets. In June 2020, we received an additional liquidating distribution of approximately $287 from AIC in connection with its dissolution. We did 0t recognize any income related to our ~~IPO,~~investment in AIC for the three and six months ended June 30, 2020, respectively, and recognized $130 and $534 related to our investment in AIC for the three and six months ended June 30, 2019, respectively, which amounts are presented as equity in earnings of an investee in our condensed consolidated statements of comprehensive income. Our other comprehensive income included our proportionate share of unrealized gains on securities, if any, which were owned by AIC, related to our investment in AIC.

For further information about these and other such relationships and certain other related person transactions, see our 2019 Annual Report.

Note 11. Noncontrolling Interest

In February and March 2020, we entered into agreements related to a joint venture for 12 of our Mainland Properties with an Asian institutional investor. We contributed to the joint venture 11 of these properties in February 2020 and the remaining property in March 2020. We received from the investor $82,035 and $26,231 in February and March 2020, respectively, for a 39% equity interest in the joint venture, and we retained the remaining 61% equity interest. The joint venture assumed $406,980 of then existing mortgage debts on the properties we contributed. We incurred transaction ~~agreement~~costs of $626 in connection with ~~SIR that governs~~the formation of this joint venture.

We recognized a noncontrolling interest in our ~~separation from and relationship with SIR. The transaction agreement provides that, among other things, (1) our current assets and current liabilities,~~condensed consolidated balance sheets of $100,668 as of the ~~time~~completion of ~~closing~~this transaction, which was equal to 39% of our IPO, were settled so that SIR retained all pre-closing current assets and pre-closing current liabilities and we assumed all post-closing current assets and post-closing current liabilities, (2) we will indemnify SIR with respectaggregate carrying value of the total equity of the properties immediately prior to ~~any~~our respective contributions of ~~our liabilities, and SIR will indemnify us with respect to any of SIR’s liabilities, after giving effect~~the properties to the ~~settlement~~joint venture. The difference between usthe net proceeds received from this transaction and ~~SIR of our current assets and current liabilities, and (3) we and SIR will cooperate to enforce~~ the ~~ownership limitations~~noncontrolling interest recognized, which was $6,972, has been reflected as an increase in additional paid in capital in our condensed consolidated balance sheets. The portion of the joint venture's net loss not attributable to us, or $264 and ~~SIR’s respective declaration~~$416 for the three and six months ended June 30, 2020, respectively, is reported as noncontrolling interest in our condensed consolidated statements of ~~trust as may be appropriate~~comprehensive income. During the three and six months ended June 30, 2020, the joint venture made aggregate cash distributions of $1,898 to ~~qualify for and maintain qualification for taxation~~the other joint venture investor, which are reflected as a ~~REIT under~~decrease in total equity attributable to noncontrolling interest in our condensed consolidated balance sheets. As of June 30, 2020, the ~~IRC,~~joint venture held real estate assets with an aggregate net book value of $660,958, including restricted cash of $13,703, and ~~otherwise to ensure each receives the economics~~had liabilities of ~~its assets and liabilities and to file future tax returns, including appropriate allocations~~$408,181.

Table of ~~taxable income, expenses and other tax attributes. See Note 9 for further information regarding our IPO and our relationships, agreements and transactions with SIR.~~Contents

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following information should be read in conjunction with our condensed consolidated financial statements and accompanying notes included in this Quarterly Report on Form 10-Q and with our 2019 Annual Report.

IMPACT OF COVID-19

In March 2020, the World Health Organization declared the outbreak of COVID-19 as a pandemic and, in response to the outbreak, the U.S. Health and Human Services Secretary declared a public health emergency in the United States and many states and municipalities declared public health emergencies. The virus that causes COVID-19 has continued to spread throughout the United States and the world. Various governmental and market responses attempting to contain and mitigate the spread of the virus have negatively impacted, and continue to negatively impact, the global economy, including the U.S. economy. As a result, most market observers believe the global economy and the U.S. economy are in a recession. Our business is focused on industrial and logistics properties. The industrial and logistics sector has fared better than some other industries thus far in response to the COVID-19 pandemic, including other real estate sectors, due to the demand for e-commerce. We believe that demand was initially supported in part by increased demand by businesses and households to stock up on supplies as the implications of the COVID-19 pandemic and resulting governmental and market responses materialized and e-commerce companies have benefited from the closure of certain retail consumer outlets during the second quarter of 2020. States and municipalities across the United States have been allowing certain businesses to re-open and easing certain restrictions they had previously implemented in response to the COVID-19 pandemic, often in stages that are phased in over time. Recently, economic data have indicated that the U.S. economy has increasingly improved since the lowest periods experienced in March and April 2020. However, certain areas of the United States have experienced increased numbers of COVID-19 infections following the re-openings of their economies and easing of restrictions or otherwise and, in some cases, certain states have imposed or re-imposed closings of certain business activities and other restrictions in response. It is unclear whether the increases in the number of COVID-19 infections will continue or amplify or whether any “second wave” of COVID-19 infection outbreaks will occur in the United States or elsewhere and, if so, what the impact of that would be on human health and safety, the economy, our tenants or our business.

We believe that the industrial and logistics sector and many of our tenants are critical to sustaining a resilient supply chain to support essential services and daily consumption across the United States. However, if economic conditions do not continue to improve or if they worsen, including in response to any increase in the number or severity of COVID-19 infections, demand for e-commerce may also decline. If that occurs, our tenants and their businesses may become increasingly negatively impacted, which may result in our tenants seeking assistance from us regarding their rent obligations owed to us, their being unable or unwilling to pay us rent, their ceasing to pay us rent and their ceasing to continue as going concerns.

We are continuing to closely monitor the impact of the COVID-19 pandemic on all aspects of our business, including:

our tenants and their ability to withstand the current, and possible future deteriorating, economic conditions and continue to pay us rent;

our operations, liquidity and capital needs and resources;

conducting financial modeling and sensitivity analyses;

actively communicating with our tenants and other key constituents and stakeholders in order to help assess market conditions, opportunities, best practices and mitigate risks and potential adverse impacts; and

monitoring, with the assistance of counsel and other specialists, possible government relief funding sources and other programs that may be available to us or our tenants to enable us and them to operate through the current economic conditions and enhance our tenants’ ability to pay us rent.

We believe that our current financial resources and our expectations as to the future performance of the industrial and logistics sector and our tenants will enable us to withstand the COVID-19 pandemic and its aftermath. As of July 27, 2020, we had:

$430,000 of availability under our revolving credit facility;

no outstanding debt scheduled to mature during the remainder of 2020 and our next debt maturity being our credit facility in December 2021, which maturity is subject to two six month extensions at our option;

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74.3% of our annualized rental revenues, as of June 30, 2020, derived from investment grade rated tenants, subsidiaries of investment grade rated parent entities or Hawaii land leases; and

only 3.0% of our annualized rental revenues, as of June 30, 2020, scheduled to expire over the next 12 months.

In light of the above resources, expectations and conditions, we believe that we are well positioned to weather the present disruptions facing the real estate industry. However, as a result of the COVID-19 pandemic and its aftermath, certain of our tenants have requested relief from their obligations to pay rent due to us. We evaluate these requests on a tenant by tenant basis. As of July 27, 2020, we granted requests for certain of our tenants to defer rent payments totaling $2,799 with respect to leases that represent, as of June 30, 2020, approximately 8.2% of our annualized rental revenues. As of June 30, 2020, we recognized an increase in our accounts receivable balance related to these deferred rent payments of $2,317. These tenants will be obligated to pay, in most cases, the deferred rents in 12 equal monthly installments commencing in September 2020. For the three months ended June 30, 2020, we collected approximately 97% of our contractual rents due after giving effect to such rent deferrals. These deferred amounts did not negatively impact our financial results, and we did not record any revenue reserves for these amounts, for the three and six months ended June 30, 2020, and will continue to be reflected in our financial results in the applicable future reporting periods, assuming these tenants will pay the deferred rents due to us.

We do not have any employees and the personnel and various services we require to operate our business are provided to us by RMR LLC pursuant to our business and property management agreements with RMR LLC. RMR LLC has implemented enhanced cleaning protocols and social distancing guidelines at its corporate headquarters and its regional offices, as well as business continuity plans to ensure that RMR LLC employees remain safe and able to support us and other companies managed by RMR LLC or its subsidiaries, including providing appropriate information technology such as notebook computers, smart phones, computer applications, information technology security applications and technology support.

All RMR LLC property management and engineering personnel have been trained on COVID-19 precaution procedures. As states and local communities across the United States moved to stay at home orders, RMR LLC worked to reduce and optimize our operating costs at our properties by:

deferring non-emergency work;

implementing energy reduction protocols for lighting and HVAC systems;

reducing non-essential building services and staff; and

reducing the frequency of trash removal.

RMR LLC’s property management teams have also established business continuity plans to ensure operational stability at our properties. RMR LLC regional management offices limit walk-in visitors and maintain maximum office occupancy limits as required by state and local guidelines, including weekly rotations of employees as needed.

As stay at home orders are lifted or loosened across the United States, RMR LLC has implemented additional procedures at our properties based on recommended guidelines from the U.S. Centers for Disease Control and Prevention and other regulatory agencies. For example:

focusing on sanitizing high touch points in common areas and restrooms;

shutting down certain building amenities;

prudently managing the execution or deferment of tenant work orders to limit RMR LLC staff and tenant interactions at our properties;

installing signage throughout our properties with social distancing reminders;

changing certain building HVAC systems and equipment, including adjusting outdoor air control programs to increase the amount of outside air delivered to interior spaces and to adjust control sequences to maintain space relative humidity in order to help minimize the concentration of the virus;

flushing domestic water systems to prepare for re-occupancy;

performing service calls and preventative maintenance after business hours to limit social interactions;

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requiring vendors to follow best practices under COVID-19 pandemic conditions, including providing RMR LLC with documented preventative measures for their employees and requiring staff to wear appropriate personal protective equipment when working at our properties; and

altering cleaning schedules to perform vacuuming at times intended to reduce the potential airborne spread of the virus.

RMR LLC has significantly reduced non-essential work travel and its regional leadership personnel have not been allowed to work in the same locations at the same time. RMR LLC also requires its employees who work at our properties to use personal protective equipment and business continuity bonus payments have been provided to certain essential workers at our properties.

There are extensive uncertainties surrounding the COVID-19 pandemic and its aftermath. These uncertainties include, among others:

the duration and severity of the negative economic impact;

the strength and sustainability of any economic recovery;

the timing and process for how the federal, state and local governments and other market participants may oversee and conduct the return of economic activity when the COVID-19 pandemic abates, such as what continuing restrictions and protective measures may remain in place or be added and what restrictions and protective measures may be lifted or reduced in order to foster a return of increased economic activity in the United States; and

whether, following a recommencing of more normal levels of economic activities, the United States or other countries experience any “second wave” of COVID-19 infection outbreaks and, if so, the responses of governments, businesses and the general public to those events.

As a result of these uncertainties, we are unable to determine what the ultimate impact will be on our, our tenants’ and other stakeholders’ businesses, operations, financial results and financial position. For further information and risks relating to the COVID-19 pandemic on us and our business, see Part II, Item 1A, “Risk Factors” in this Quarterly Report on Form 10-Q.

OVERVIEW

We are a real estate investment trust, or REIT, organized under Maryland law. As of ~~March 31, 2018,~~June 30, 2020, we owned ~~266~~301 properties with approximately ~~28.5~~43.8 million rentable square feet, including 226 buildings, leasable land parcels and easements with approximately 16.8 million rentable square feet located on the island of Oahu, HI, and ~~40 buildings~~75 properties with approximately ~~11.7~~27.0 million rentable square feet located in 2430 other ~~states.~~states, including 12 properties with approximately 9.2 million rentable square feet owned by a joint venture in which we own a 61% equity interest. As of ~~March 31, 2018,~~June 30, 2020, our properties were approximately ~~99.9%~~98.8% leased (based on rentable square feet) to ~~243~~263 different tenants with a weighted average remaining lease term (based on annualized rental revenues) of approximately ~~11.2~~9.1 years. We define the term annualized rental revenues as used in this section as the annualized contractual rents, as of ~~March 31, 2018,~~June 30, 2020, including straight line rent adjustments and excluding lease value amortization, adjusted for tenant concessions including free rent and amounts reimbursed to tenants, plus estimated recurring expense reimbursements from tenants. Unless otherwise noted, the data presented in this section includes the 12 properties owned by a joint venture in which we own a 61% equity interest.

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Property Operations

As of ~~March 31, 2018, 99.9%~~June 30, 2020, 98.8% of our rentable square feet was leased, compared to ~~99.6%~~99.3% of our rentable square feet as of ~~March 31, 2017.~~June 30, 2019. Occupancy data for our properties as of ~~March 31, 2018~~June 30, 2020 and ~~2017~~2019 is as follows (square feet in thousands):


	All Properties⁽¹⁾					All Properties				Comparable Properties ⁽¹⁾
	As of March 31,					As of June 30,				As of June 30,
	2018			2017		2020		2019		2020		2019
Total properties	266			266		301		298		270		270
Total rentable square feet ⁽²⁾	28,540		⁽⁴⁾	28,505		43,759		42,353		29,651		29,457
Percent leased⁽³⁾	99.9	%		99.6	%	98.8	%	99.3	%	98.4	%	99.0	%


(1)	Consists of properties that we owned ~~(including for the period SIR owned our properties prior to our IPO)~~ continuously since January 1, ~~2017. All of our properties have been continuously owned by us and SIR since January 1, 2017.~~2019.


(2)	Subject to modest adjustments when space is ~~re-measured~~remeasured or ~~re-configured~~reconfigured for new tenants and when land leases are converted to building leases.


(3)	Percent leased includes (i) space being fitted out for occupancy pursuant to existing leases as of ~~March 31, 2018,~~June 30, 2020, if any, and (ii) space which is leased but is not occupied or is being offered for sublease by tenants, if any.


~~(4)~~	~~Includes a 35 rentable square foot expansion for a lease that commenced on September 1, 2017.~~

The average effective rental rates per square foot, as defined below, for our properties for the three and six months ended ~~March 31, 2018~~June 30, 2020 and ~~2017~~2019 are as follows:

Three Months Ended March 31,
2018 2017
Average effective rental rates per square foot leased⁽¹⁾
$ 5.69
$ 5.58



	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
Average effective rental rates per square foot leased:⁽¹⁾
All properties	$	6.02	$	5.82	$	6.01	$	5.86
Comparable properties ⁽²⁾	$	6.12	$	5.88	$	6.16	$	5.95


(1)	Average effective rental rates per square foot leased represents annualized ~~total revenues~~rental income during the period specified divided by the average rentable square feet leased during the period specified.


(2)	Comparable properties for the three months ended June 30, 2020 and 2019 consist of 277 buildings, leasable land parcels and easements that we owned continuously since April 1, 2019. Comparable properties for the six months ended June 30, 2020 and 2019 consist of 270 buildings, leasable land parcels and easements that we owned continuously since January 1, 2019.

During the three months ended ~~March 31, 2018,~~June 30, 2020, we entered lease renewals ~~and new leases~~ for approximately ~~296,000~~314,000 square feet at weighted average ~~(per~~(by square ~~foot)~~feet) rental rates that were approximately ~~45.9%~~26.6% higher than prior rates for the same land area or building area (with leasing rate increases for vacant space based upon the most recent rental rate for the same space). ~~Consolidated portfolio occupancy increased from 99.6% as of March 31, 2017 to 99.9% as of March 31, 2018.~~The weighted average (by square feet) lease term for leases that were in effect for the same land area or building area during the prior lease term was 20.1 years for lease renewals. Commitments for tenant improvements, leasing costs and concessions for leases entered during the three months ended ~~March 31, 2018~~June 30, 2020 totaled ~~$68,000,~~$229,000, or ~~$0.01~~approximately $0.04 per square foot per year of the new weighted average lease term. Also, during the three months ended June 30, 2020, we completed rent resets for approximately 1,601,000 square feet of land at our Hawaii Properties at rent rates that were approximately 21.4% higher than the prior rental rates.

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As shown in the table below, approximately ~~1.1%~~0.2% of our total rented square feet and approximately ~~0.8%~~0.3% of our total annualized rental revenues as of ~~March 31, 2018~~June 30, 2020 are included in leases scheduled to expire by December 31, ~~2018.~~ 2020.

As of ~~March 31, 2018,~~June 30, 2020, our lease expirations by year are as follows (dollars and square feet in thousands):


																							% of Total		Cumulative
										% of Total		Cumulative					% of Total		Cumulative %		Annualized		Annualized		% of Total
				% of Total		Cumulative %		Annualized		Annualized		% of Total				Rented	Rented		of Total Rented		Rental		Rental		Annualized
			Rented	Rented		of Total Rented		Rental		Rental		Annualized			Number of	Square Feet	Square Feet		Square Feet		Revenues		Revenues		Rental Revenues
		Number of	Square Feet	Square Feet		Square Feet		Revenues		Revenues		Rental Revenues
Period/Year		Tenants	Expiring ⁽¹⁾	Expiring ⁽¹⁾		Expiring⁽¹⁾		Expiring		Expiring		Expiring
4/1/2018 - 12/31/2018		16	314	1.1	%	1.1	%	$	1,177	0.8	%	0.8	%
2019		16	1,534	5.4	%	6.5	%	4,410		2.8	%	3.6	%
2020		19	848	3.0	%	9.5	%	4,292		2.7	%	6.3	%
Period / Year															Tenants	Expiring ⁽¹⁾	Expiring ⁽¹⁾		Expiring ⁽¹⁾		Expiring		Expiring		Expiring
7/1/2020-12/31/2020															6	72	0.2	%	0.2	%	$	646	0.3	%	0.3	%
2021		20	1,224	4.3	%	13.8	%	7,139		4.6	%	10.9	%		29	2,707	6.3	%	6.5	%	15,203		5.9	%	6.2	%
2022		63	2,762	9.7	%	23.5	%	20,823		13.3	%	24.2	%		64	2,749	6.4	%	12.9	%	21,357		8.3	%	14.5	%
2023		18	1,538	5.4	%	28.9	%	11,665		7.5	%	31.7	%		28	2,536	5.9	%	18.8	%	16,370		6.4	%	20.9	%
2024		12	4,750	16.6	%	45.5	%	15,698		10.0	%	41.7	%		30	10,277	23.8	%	42.6	%	44,151		17.2	%	38.1	%
2025		8	619	2.2	%	47.7	%	3,115		2.0	%	43.7	%		14	2,550	5.9	%	48.5	%	14,551		5.7	%	43.8	%
2026		3	637	2.2	%	49.9	%	3,472		2.2	%	45.9	%		4	951	2.2	%	50.7	%	6,449		2.5	%	46.3	%
2027		12	4,887	17.1	%	67.0	%	23,840		15.2	%	61.1	%		10	5,647	13.1	%	63.8	%	28,143		11.0	%	57.3	%
2028															20	2,888	6.7	%	70.5	%	20,385		8.0	%	65.3	%
2029															9	2,715	6.3	%	76.8	%	14,585		5.7	%	71.0	%
Thereafter		81	9,421	33.0	%	100.0	%	60,877		38.9	%	100.0	%		84	10,124	23.2	%	100.0	%	74,436		29.0	%	100.0	%
Total		268	28,534	100.0	%			$	156,508	100.0	%				298	43,216	100.0	%			$	256,276	100.0	%

Weighted average remaining lease term (in years):	Weighted average remaining lease term (in years):		10.3					11.2						Weighted average remaining lease term (in years):		8.2					9.1


(1)	Rented square feet is pursuant to existing leases as of ~~March 31, 2018,~~June 30, 2020 and includes (i) space being fitted out for occupancy, if any, and (ii) space which is leased but is not occupied or is being offered for sublease by tenants, if any.

The following chart shows the annualized rental revenues as of June 30, 2020 scheduled to reset at our Hawaii Properties:

Scheduled Rent Resets at Hawaii Properties

(dollars in thousands)



	Annualized
	Rental Revenues as of
	June 30, 2020
	Scheduled to Reset
7/1/2020 - 12/31/2020	$	—
2021	2,610
2022	3,857
2023	2,550
2024	2,100
2025 and thereafter	19,138
Total	$	30,255

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We generally receive rents from our tenants monthly in advance. As of ~~March 31, 2018,~~June 30, 2020, tenants representing 1% or more of our total annualized rental revenues were as follows (square feet in thousands):

% of Total
Rented % of Total Annualized Rental
Tenant Property Type
Sq. Ft.⁽¹⁾

Rented Sq. Ft. ⁽¹⁾
Revenues
1. Amazon.com.dedc, LLC / Amazon.com.kydc LLC Mainland Industrial 3,048
10.7 % 10.2 %
2. Restoration Hardware, Inc. Mainland Industrial 1,195
4.2 % 3.8 %
3. Federal Express Corporation / FedEx Ground Package System, Inc. Mainland Industrial 674
2.4 % 3.6 %
4. American Tire Distributors, Inc. Mainland Industrial 722
2.5 % 3.2 %
5. Par Hawaii Refining, LLC Hawaii Land and Easement 3,148
11.0 % 2.8 %
6. Servco Pacific Inc. Hawaii Land and Easement 537
1.9 % 2.3 %
7. Shurtech Brands, LLC Mainland Industrial 645
2.3 % 2.2 %
8. BJ's Wholesale Club, Inc. Mainland Industrial 634
2.2 % 2.2 %
9. Safeway Inc. Hawaii Land and Easement 146
0.5 % 2.1 %
10. Exel Inc. Mainland Industrial 945
3.3 % 2.0 %
11. Trex Company, Inc. Mainland Industrial 646
2.3 % 1.9 %
12. Avnet, Inc. Mainland Industrial 581
2.0 % 1.8 %
13. Manheim Remarketing, Inc. Hawaii Land and Easement 338
1.2 % 1.7 %
14. Warehouse Rentals Inc. Hawaii Land and Easement 278
1.0 % 1.6 %
15. Coca-Cola Bottling of Hawaii, LLC Hawaii Land and Easement 351
1.2 % 1.6 %
16. A.L. Kilgo Company, Inc. Hawaii Land and Easement 310
1.1 % 1.5 %
17. The Net-A-Porter Group LLC Mainland Industrial 167
0.6 % 1.4 %
18. General Mills Operations, LLC Mainland Industrial 158
0.6 % 1.4 %
19. Honolulu Warehouse Co., Ltd. Hawaii Land and Easement 298
1.0 % 1.4 %
20. AES Hawaii, Inc. Hawaii Land and Easement 1,242
4.4 % 1.2 %
21. Bradley Shopping Center Company Hawaii Land and Easement 334
1.2 % 1.1 %
22. Kaiser Foundation Health Plan, Inc. Hawaii Land and Easement 217
0.8 % 1.1 %
23. The Toro Company Mainland Industrial 450
1.6 % 1.1 %
Total 17,064
60.0 % 53.2 %



							% of Total
			No. of	Rented	% of Total		Annualized Rental
Tenant		States	Properties	Sq. Ft. ⁽¹⁾	Rented Sq. Ft. ⁽¹⁾		Revenues
1	Amazon.com Services, Inc.	AZ, FL, IN, SC, TN, VA	7	6,939	16.1	%	15.9	%
2	Federal Express Corporation / FedEx Ground Package System, Inc.	AR, CO, HI, IA, ID, IL, MN, MO, NC, ND, NV, OH, OK, UT	17	952	2.2	%	3.7	%
3	The Procter & Gamble Distributing LLC	OH	1	1,791	4.1	%	3.7	%
4	Restoration Hardware, Inc.	MD	1	1,195	2.8	%	2.4	%
5	American Tire Distributors, Inc.	CO, LA, NE, NY, OH	5	722	1.7	%	2.1	%
6	UPS Supply Chain Solutions Inc.	NH	1	614	1.4	%	1.9	%
7	Par Hawaii Refining, LLC	HI	3	3,148	7.3	%	1.9	%
8	Servco Pacific Inc.	HI	4	537	1.2	%	1.8	%
9	SKF USA Inc.	MO	1	431	1.0	%	1.6	%
10	EF Transit, Inc.	IN	1	535	1.2	%	1.5	%
11	Subaru of America, Inc.	IN	1	963	2.2	%	1.4	%
12	BJ's Wholesale Club, Inc.	NJ	1	634	1.5	%	1.4	%
13	Shurtech Brands, LLC	OH	1	645	1.5	%	1.4	%
14	Safeway Inc.	HI	2	146	0.3	%	1.3	%
15	Manheim Remarketing, Inc.	HI	1	338	0.8	%	1.2	%
16	Exel Inc.	SC	1	945	2.2	%	1.2	%
17	The Toro Company	IA	1	644	1.5	%	1.2	%
18	Trex Company, Inc.	NV, VA	2	646	1.5	%	1.2	%
19	Avnet, Inc.	OH	1	581	1.3	%	1.2	%
20	A.L. Kilgo Company, Inc.	HI	5	310	0.7	%	1.2	%
21	Cummins Inc.	KY	1	604	1.4	%	1.1	%
22	Warehouse Rentals Inc.	HI	5	278	0.6	%	1.0	%
23	Whirlpool Corporation	IN	1	805	1.9	%	1.0	%
24	Coca-Cola Bottling of Hawaii, LLC	HI	4	351	0.8	%	1.0	%
	Total		68	24,754	57.2	%	53.3	%


(1)	Rented square feet is pursuant to existing leases as of ~~March 31, 2018,~~June 30, 2020 and includes (i) space being fitted out for occupancy, if any, and (ii) space which is leased but is not occupied or is being offered for sublease by tenants, if any.

Mainland Properties. As of June 30, 2020, our Mainland Properties represented approximately 59.3% of our annualized rental revenues. We generally will seek to renew or extend the terms of leases at our Mainland Properties ~~when they expire.~~as their expirations approach. Because of the capital many of the tenants in our Mainland Properties have invested in these properties and because many of these properties appear to be of strategic importance to the tenants’ businesses, we believe that it is likely that these tenants will renew or extend their leases ~~when they expire.~~prior to their expirations. However, as noted elsewhere in this Quarterly Report on Form 10-Q, the COVID-19 pandemic has had a substantial adverse impact on the global economy. Depending on the duration and severity of this pandemic and the resulting economic impact, our tenants’ businesses and operations may become significantly negatively impacted, which may result in their failing to pay rent to us or not renewing their leases with us upon expirations. If we are unable to extend or renew our leases, it may be time consuming and expensive to relet some of these properties and the terms of any leases we may enter may be less favorable to us than the terms of our existing leases for those properties.

Hawaii Properties. ~~Approximately 60.3%~~ As of June 30, 2020, our Hawaii Properties represented approximately 40.7% of our annualized rental ~~revenues as of March 31, 2018 were derived from our Hawaii Properties.~~revenues. As of ~~March 31, 2018, a significant portion~~June 30, 2020, certain of our Hawaii Properties are lands leased for rents that ~~are~~ periodically reset based on fair market values, generally every ~~five or~~ ten years. 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. Lease renewals, lease extensions, new leases and rental rates for ~~which available space may be relet at~~ our Hawaii Properties in the future will depend on prevailing market conditions when these lease renewals, lease extensions, new leases and rental rates are set. As rent reset dates or lease expirations approach at our Hawaii Properties, we generally negotiate with existing or new tenants for new lease terms. If we are unable to reach an agreement with a tenant on a rent reset, our Hawaii Properties’ leases typically provide that rent is reset based on an

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appraisal process. Despite our and our ~~predecessors'~~predecessors’ prior experience with rent resets, lease extensions and new leases ~~and rent resets~~ 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.

~~The following chart shows~~ If the ~~annualized rental revenues as of March 31, 2018 scheduled to reset~~tenants at ~~our Hawaii Properties:~~

~~Scheduled Rent Resets at Hawaii Properties~~

~~(dollars in thousands)~~

Annualized
Rental Revenues as of
March 31, 2018
Scheduled to Reset
2018 $ 237
2019 10,903
2020 2,500
2021 and thereafter 19,723
Total $ 33,363

Since the leases at certain of our Hawaii Properties were originally entered, in some cases as long as 40 or 50 years ago, the characteristics of the neighborhoods in the vicinity of some of those properties have changed. In such circumstances, we and our predecessors have sometimes engaged in redevelopment activities to change the character of certain properties in order to increase rents. Because our Hawaii Properties are unable to withstand the economic downturn resulting from the COVID-19 pandemic, they may not seek to renew leases with us and we may be unable to obtain new tenants for those properties for an extended period or at all and the terms of any leases we may enter may be less favorable to us than the terms of our existing leases for our Hawaii Properties.

As of June 30, 2020, $7,668, or 3.0%, of our annualized rental revenues are due to expire through June 30, 2021 and 1.2% of our rentable square feet are currently ~~experiencing strong demand~~vacant. Rental rates for ~~their current uses, we do not currently expect redevelopment efforts in Hawaii to become a major activity of ours~~which available space may be leased in the ~~foreseeable future;~~future will depend on prevailing market conditions when lease extensions, lease renewals or new leases are negotiated. Whenever we extend, renew, or enter new leases for our properties, we intend to seek rents that are equal to or higher than our historical rents for the same properties; however, weour ability to maintain or increase the rents for our current properties will depend in large part upon market conditions, which are beyond our control, and as noted elsewhere in this Quarterly Report on Form 10-Q, the COVID-19 pandemic and its economic impact may ~~undertake such~~adversely impact our future leasing activities and our ability to lease our properties and to receive rents.

Tenant Review Process. Our manager, RMR LLC, employs a tenant review process for us. RMR LLC assesses tenants on an individual basis based on various applicable credit criteria. In general, depending on facts and circumstances, RMR LLC evaluates the creditworthiness of a ~~selective basis.~~

tenant based on information concerning the tenant that is provided by the tenant and, in some cases, information that is publicly available or obtained from third party sources. RMR LLC also often uses a third party service to monitor the credit ratings of debt securities of our existing tenants whose debt securities are rated by a nationally recognized credit rating agency.

Investment Activities (dollars in thousands)

~~Our strategy~~During the six months ended June 30, 2020, we acquired a property with 820,384 rentable square feet for a purchase price of $71,481, excluding acquisition related to property acquisitions and dispositions is materially unchanged from that disclosed in our Annual Report. Our target investments include all industrial and logistics buildings in top tier markets. In addition to top tier markets, our focus is on newer buildings, high credit quality tenants and longer lease terms. We expect to use the extensive nationwide resourcescosts of ~~RMR LLC to locate and acquire properties.~~

$147.

For further information regarding our investment activities, see Note 3 to the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Financing Activities (dollars in thousands)

~~On January 17, 2018,~~In February and March 2020, we ~~completed our IPO, in which we issued 20,000,000~~entered into agreements related to a joint venture for 12 of our ~~common shares~~Mainland Properties. We received proceeds from the investor in an aggregate amount of $108,266, which includes certain costs associated with the formation of the joint venture, for ~~net proceeds of $444,309, after deducting~~a 39% equity interest in the ~~underwriting discounts and commissions and expenses. Upon the completion of our IPO, our secured revolving credit facility converted into a four year unsecured revolving credit facility,~~joint venture and we retained the remaining 61% equity interest in the joint venture. The investment amount is based on an aggregate property valuation of $680,000, less $406,980 of existing mortgage debts on the properties at the time of the investment that the joint venture assumed. In February 2020, we formed the joint venture with 11 of the 12 properties and the investor initially paid us $82,035, and in March 2020, the twelfth property was added to the joint venture and the investor contributed an additional $26,231. We used ~~substantially all of~~ the net proceeds from ~~our IPO~~this transaction to reduce ~~amounts~~ outstanding borrowings under our revolving credit facility. ~~We also reimbursed SIR~~During the three and six months ended June 30, 2020, the joint venture made aggregate cash distributions of $4,867, including $1,898 to the other joint venture investor.

In May 2020, we prepaid at par plus accrued interest a mortgage note secured by one of our properties with an outstanding principal balance of approximately $48,750, an annual interest rate of 3.48% and a maturity date in November 2020. As a result of the prepayment of this mortgage note, we recorded a gain on early extinguishment of debt of $120 for ~~costs that it incurred in connection with our formation~~the three and ~~the preparation for our IPO.~~

six months ended June 30, 2020 to write off unamortized premiums.

For further information regarding our financing activities, see Notes 5 and 11 to the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 and “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Our Investment and Financing Liquidity and Resources” of this Quarterly Report on Form 10-Q.

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RESULTS OF OPERATIONS

Three Months Ended ~~March 31, 2018,~~June 30, 2020, Compared to Three Months Ended ~~March 31, 2017~~June 30, 2019 (dollars and share amounts in thousands, except per share data)

Three Months Ended March 31,
$ %
2018 2017 Change Change
Revenues:
Rental income $ 34,809
$ 33,870
$ 939
2.8 %
Tenant reimbursements and other income 5,796
5,570
226
4.1 %
Total revenues 40,605
39,440
1,165
3.0 %

Operating expenses:
Real estate taxes 4,585
4,339
246
5.7 %
Other operating expenses 3,545
2,732
813
29.8 %
Total operating expenses 8,130
7,071
1,059
15.0 %

Net operating income ⁽¹⁾
32,475
32,369
106
0.3 %

Other expenses:
Depreciation and amortization 6,873
6,811
62
0.9 %
General and administrative 2,574
4,636
(2,062 ) (44.5 )%
Total other expenses 9,447
11,447
(2,000 ) (17.5 )%
Operating income 23,028
20,922
2,106
10.1 %
Interest income 13
—
13
100.0 %
Interest expense (3,802 ) (555 ) (3,247 ) 585.0 %
Income before income tax expense 19,239
20,367
(1,128 ) (5.5 )%
Income tax expense (7 ) (11 ) 4
(36.4 )%
Net income $ 19,232
$ 20,356
$ (1,124 ) (5.5 )%

Weighted average common shares outstanding - basic and diluted 61,445
45,000
16,445
36.5 %

Net income per common share - basic and diluted $ 0.31
$ 0.45
$ (0.14 ) (31.1 )%

Reconciliation of Net Income to Net Operating Income ⁽¹⁾:

Net income $ 19,232
$ 20,356

Income tax expense 7
11

Income before income tax expense 19,239
20,367

Interest expense 3,802
555

Interest income (13 ) —

Operating income 23,028
20,922

General and administrative 2,574
4,636

Depreciation and amortization 6,873
6,811

NOI $ 32,475
$ 32,369

NOI:
Hawaii Properties $ 18,922
$ 18,568

Mainland Properties 13,553
13,801

NOI $ 32,475
$ 32,369

Reconciliation of Net Income to Funds From Operations and Normalized Funds From Operations ⁽²⁾:
Net income $ 19,232
$ 20,356

Plus: depreciation and amortization 6,873
6,811

FFO 26,105
27,167

Plus: estimated business management incentive fees ⁽³⁾
—
2,409

Normalized FFO $ 26,105
$ 29,576

FFO per common share - basic and diluted $ 0.42
$ 0.60

Normalized FFO per common share - basic and diluted $ 0.42
$ 0.66



	Comparable Properties Results ⁽¹⁾								Acquired Properties Results ⁽²⁾						Consolidated Results
	Three Months Ended June 30,								Three Months Ended June 30,						Three Months Ended June 30,
					$		%						$								$			%
	2020		2019		Change		Change		2020		2019		Change		2020			2019			Change			Change

Rental income	$	50,197	$	48,187	$	2,010	4.2	%	$	14,913	$	11,903	$	3,010	$	65,110		$	60,090		$	5,020		8.4	%

Operating expenses:
Real estate taxes	6,889		5,811		1,078		18.6	%	2,043		1,684		359		8,932			7,495			1,437			19.2	%
Other operating expenses	3,819		3,558		261		7.3	%	1,222		640		582		5,041			4,198			843			20.1	%
Total operating expenses	10,708		9,369		1,339		14.3	%	3,265		2,324		941		13,973			11,693			2,280			19.5	%

Net operating income⁽³⁾	$	39,489	$	38,818	$	671	1.7	%	$	11,648	$	9,579	$	2,069	51,137			48,397			2,740			5.7	%

Other expenses:
Depreciation and amortization															18,525			16,709			1,816			10.9	%
General and administrative															4,846			4,856			(10		)	(0.2	%)
Total other expenses															23,371			21,565			1,806			8.4	%
Interest income															2			138			(136		)	(98.6	%)
Interest expense															(13,205		)	(13,924		)	719			(5.2	%)
Gain on early extinguishment of debt															120			—			120			N/M
Income before income tax expense and equity earnings of an investee															14,683			13,046			1,637			12.5	%
Income tax expense															(126		)	(60		)	(66		)	110.0	%
Equity in earnings of an investee															—			130			(130		)	N/M
Net income															14,557			13,116			1,441			11.0	%
Net loss attributable to noncontrolling interest															264			—			264			N/M
Net income attributable to common shareholders															$	14,821		$	13,116		$	1,705		13.0	%

Weighted average common shares outstanding - basic															65,089			65,039			50			0.1	%
Weighted average common shares outstanding - diluted															65,091			65,043			48			0.1	%

Per common share data (basic and diluted):
Net income attributable to common shareholders															$	0.23		$	0.20		$	0.03		15.0	%

N/M - Not Meaningful

(1)

~~The calculation~~Consists of net operating income, or NOI, excludes certain components of net income in order to provide results that are more closely related to our property level results of operations. We calculate NOI as shown above. We define NOI as income from our rental of real estate less our property operating expenses. NOI excludes amortization of capitalized tenant improvement costs277 buildings, leasable land parcels and ~~leasing commissions~~easements that we record as depreciation and amortization. We consider NOI to be an appropriate supplemental measure to net income because it may help both investors and management to understand the operations of our properties. We use NOI to evaluate individual and company wide property level performance, and we believe that NOI provides useful information to investors regarding our results of operations because it reflects only those income and expense items that are generated and incurred at the property level and may facilitate comparisons of our operating performance between periods and with other REITs. NOI does not represent cash generated by operating activities in accordance with GAAP and should not be considered an alternative to net income or operating income as an indicator of our operating performance or as a measure of our liquidity. This measure should be considered in conjunction with net income and operating income as presented in our condensed consolidated statements of comprehensive income. Other real estate companies and REITs may calculate NOI differently than we do.owned continuously since April 1, 2019.

(2)

~~We calculate funds~~Consists of 24 properties that we acquired during the period from operations, or FFO, and normalized funds from operations, or Normalized FFO, as shown above. FFO is calculated on the basis defined by The National Association of Real Estate Investment Trusts, or Nareit, which is net income, calculated in accordance with GAAP, plus real estate depreciation and amortization, as well as certain other adjustments currently not applicableApril 1, 2019 to us. Our calculation of Normalized FFO differs from Nareit’s definition of FFO because we include business management incentive fees, if any, only in the fourth quarter versus the quarter when they are recognized as expense in accordance with GAAP due to their quarterly volatility not necessarily being indicative of our core operating performance and the uncertainty as to whether any such business management incentive fees will be payable when all contingencies for determining such fees are known at the end of the calendar year. We consider FFO and Normalized FFO to be appropriate supplemental measures of operating performance for a REIT, along with net income and operating income. We believe that FFO and Normalized FFO provide useful information to investors because by excluding the effects of certain historical amounts, such as depreciation expense, FFO and Normalized FFO may facilitate a comparison of our operating performance between periods and with other REITs. FFO and Normalized FFO are among the factors considered by our Board of Trustees when determining the amount of distributions to our shareholders. Other factors include, but are not limited to, requirements to qualify for taxation as a REIT, limitations in our credit agreement, the availability to us of debt and equity capital, our expectation of our future capital requirements and operating performance and our expected needs for and availability of cash to pay our obligations. FFO and Normalized FFO do not represent cash generated by operating activities in accordance with GAAP and should not be considered alternatives to net income or operating income as indicators of our operating performance or as measures of our liquidity. These measures should be considered in conjunction with net income and operating income as presented in our condensed consolidated statements of comprehensive income. Other real estate companies and REITs may calculate FFO and Normalized FFO differently than we do.June 30, 2020.

(3)

~~Incentive fees under~~See our definition of NOI and ~~SIR's business management agreements with RMR LLC are payable after the end~~our reconciliation of each calendar year, are calculated based on common share total return, as defined in the respective agreements, and are included in general and administrative expense in our condensed consolidated statements of income. In calculating net income ~~in accordance with GAAP, we recognize estimated business management incentive fee expense, if any, in~~to NOI below under the first, second and third quarters. Although we recognize this expense, if any, in the first, second and third quarters for purposes of calculating net income, we do not include such expense in the calculation of Normalized FFO until the fourth quarter, when the amount of the business management incentive fee expense for the calendar year, if any, is determined. Normalized FFO for the three months ended March 31, 2017 excludes $2,409, which represents the portion of SIR's estimated business management incentive fee allocated to us for the period during which we were SIR's wholly owned subsidiary.heading “Non-GAAP Financial Measures.”

References to changes in the income and expense categories below relate to the comparison of results for the three months ended ~~March 31, 2018,~~June 30, 2020 compared to the three months ended ~~March 31, 2017.~~June 30, 2019. Our acquisition activity reflects our acquisition of 24 properties during the period from April 1, 2019 to June 30, 2020.

Rental income. The increase in rental income ~~was~~is primarily a result of ~~an increase in occupancy during 2017~~our acquisition activity and increases from leasing activity, ~~and~~ rent resets and real estate tax expense reimbursements at certain of our ~~Hawaii Properties.~~comparable properties. Rental income includes non-cash straight line rent adjustments totaling ~~approximately $1,194~~$2,096 for the ~~2018~~2020 period and approximately ~~$1,470~~$2,002 for the ~~2017~~2019 period, and net amortization of acquired real estate leases and assumed real estate lease obligations totaling approximately ~~$102~~$204 for the ~~2018~~2020 period and approximately ~~$96~~$707 for the ~~2017~~2019 period.

~~Tenant reimbursements and other income.~~ The increase in tenant reimbursements and other income primarily reflects increases in real estate tax and other operating expense reimbursements from tenants at certain of our properties, partially offset by insurance proceeds and tenant escalation true-ups recognized in the 2017 period.

Real estate taxes. The increase in real estate taxes primarily reflects higher tax ~~valuation and tax rate increases~~assessments at certain of our ~~properties.~~comparable properties and our acquisition activity.

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Other operating expenses. Other operating expenses primarily include ~~property~~repairs and maintenance, ~~environmental remediation,~~ utilities, insurance, ~~bad debt,~~snow removal, legal and property management fees. The increase in other operating expenses is primarily ~~reflects~~due to our acquisition activity. The increase in other operating expenses at our comparable properties is primarily due to increases in ~~rent reserves~~insurance expense and ~~snow removal~~repairs and maintenance costs during the 2020 period at certain of our ~~properties in the 2018 period, compared to lower than usual amounts for these expenses in the 2017 period.~~comparable properties.

Depreciation and amortization. The increase in depreciation and amortization primarily reflects ~~increased~~our acquisition activity and an increase in depreciation of ~~capital~~ improvements atmade to certain of our ~~properties.~~properties after April 1, 2019, partially offset by certain leasing related assets becoming fully amortized in the 2020 period.

General and administrative. ~~Subsequent to our IPO, general~~ General and administrative expenses primarily include fees paid under our business management agreement with RMR LLC, legal fees, audit fees, Trustee ~~cash~~ fees and expenses and equity compensation expense. ~~Prior to our IPO, general and administrative expenses were primarily allocated to us by SIR based on the historical cost of our~~

~~properties as a percentage of SIR's historical cost of all of its properties.~~ The decrease in general and administrative expenses primarily reflects ~~our allocated portion of estimated business management incentive~~a decrease in professional fees, ~~recognized by SIR in the 2017 period,~~ partially offset by ~~increased costs related to~~an increase in business management fees as a result of our ~~becoming a separate public company.~~acquisition activity in the 2019 and 2020 periods.

Interest income. Interest income represents interest earned on our cash balances.The decrease in interest income is primarily due to a decrease in average investable cash during the 2020 period as compared to the 2019 period.

Interest expense. The ~~increase~~decrease in interest expense ~~primarily~~in the 2020 period reflects a lower average outstanding indebtedness as compared to the ~~change~~2019 period.

Gain on early extinguishment of debt. We recorded a gain on early extinguishment of debt in connection with our ~~capital structure, including our IPO, which resulted in changes in borrowings under our revolving credit facility~~prepayment of a mortgage note during the ~~2018 period, partially offset by the prepayment of certain mortgage notes in December 2017.~~2020 period.

Income tax expense. Income tax expense reflects state income taxes payable in certain jurisdictions ~~despite~~where we are subject to state income taxes.

Equity in earnings of an investee. Equity in earnings of an investee represents our ~~expected status as a REIT for federal income tax purposes.~~proportionate share of earnings from our investment in AIC. The decrease in equity in earnings of an investee is due to the dissolution of AIC in February 2020.

Net income. The ~~decrease~~increase in net income for the ~~2018~~2020 period compared to the ~~2017~~2019 period reflects the changes noted above.

Net loss attributable to noncontrolling interest. Net loss attributable to noncontrolling interest represents the net loss attributable to the 39% equity interest that we do not own in our joint venture for 12 of our Mainland Properties.

Weighted average common shares outstanding - basic and diluted. The increase in weighted average common shares outstanding primarily reflects ~~the issuance of 20,000,000 of our~~ common shares ~~in connection with~~awarded under our ~~IPO.~~equity compensation plan since April 1, 2019.

Net income attributable to common shareholders per common share - basic and diluted. ~~Net~~ The increase in net income attributable to common shareholders per common share reflects the changes to net income attributable to common shareholders and weighted average common shares noted above.

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Six Months Ended June 30, 2020, Compared to Six Months Ended June 30, 2019 (dollars and share amounts in thousands, except per share data)



	Comparable Properties Results ⁽¹⁾								Acquired Properties Results⁽²⁾						Consolidated Results
	Six Months Ended June 30,								Six Months Ended June 30,						Six Months Ended June 30,
					$		%						$								$			%
	2020		2019		Change		Change		2020		2019		Change		2020			2019			Change			Change

Rental income	$	89,906	$	86,839	$	3,067	3.5	%	$	39,482	$	19,238	$	20,244	$	129,388		$	106,077		$	23,311		22.0	%

Operating expenses:
Real estate taxes	12,498		10,446		2,052		19.6	%	5,245		2,614		2,631		17,743			13,060			4,683			35.9	%
Other operating expenses	6,680		6,391		289		4.5	%	3,542		1,193		2,349		10,222			7,584			2,638			34.8	%
Total operating expenses	19,178		16,837		2,341		13.9	%	8,787		3,807		4,980		27,965			20,644			7,321			35.5	%

Net operating income ⁽³⁾	$	70,728	$	70,002	$	726	1.0	%	$	30,695	$	15,431	$	15,264	101,423			85,433			15,990			18.7	%

Other expenses:
Depreciation and amortization															36,815			26,320			10,495			39.9	%
General and administrative															9,677			8,656			1,021			11.8	%
Total other expenses															46,492			34,976			11,516			32.9	%
Interest income															113			499			(386		)	(77.4	%)
Interest expense															(27,724		)	(21,520		)	(6,204		)	28.8	%
Gain on early extinguishment of debt															120			—			120			N/M
Income before income tax expense and equity earnings of an investee															27,440			29,436			(1,996		)	(6.8	%)
Income tax expense															(189		)	(68		)	(121		)	177.9	%
Equity in earnings of an investee															—			534			(534		)	N/M
Net income															27,251			29,902			(2,651		)	(8.9	%)
Net loss attributable to noncontrolling interest															416			—			416			N/M
Net income attributable to common shareholders															$	27,667		$	29,902		$	(2,235	)	(7.5	%)

Weighted average common shares outstanding - basic															65,082			65,035			47			0.1	%
Weighted average common shares outstanding - diluted															65,087			65,042			45			0.1	%

Per common share data (basic and diluted):
Net income attributable to common shareholders															$	0.42		$	0.46		$	(0.04	)	(8.7	%)

N/M - Not Meaningful


(1)	Consists of 270 buildings, leasable land parcels and easements that we owned continuously since January 1, 2019.


(2)	Consists of 31 properties that we acquired during the period from January 1, 2019 to June 30, 2020.


(3)	See our definition of NOI and our reconciliation of net income to NOI below under the heading “Non-GAAP Financial Measures.”

References to changes in the income and expense categories below relate to the comparison of results for the six months ended June 30, 2020, compared to the six months ended June 30, 2019. Our acquisition activity reflects our acquisition of 31 properties during the period from January 1, 2019 to June 30, 2020.

Rental income. The increase in rental income is primarily a result of our acquisition activity and increases from leasing activity and rent resets at certain of our comparable properties. Rental income includes non-cash straight line rent adjustments totaling approximately $4,063 for the 2020 period and approximately $2,981 for the 2019 period, and net amortization of acquired real estate leases and assumed real estate lease obligations totaling approximately $404 for the 2020 period and approximately $820 for the 2019 period.

Real estate taxes. The increase in real estate taxes primarily reflects our acquisition activity and higher tax assessments at certain of our comparable properties.

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Other operating expenses. The increase in other operating expenses is primarily due to our acquisition activity. The increase in other operating expenses at our comparable properties is primarily due to increases in insurance expense, partially offset by a decrease in snow removal expenses during the 2020 period at certain of our comparable properties.

Depreciation and amortization. The increase in depreciation and amortization primarily reflects our acquisition activity and an increase in depreciation of improvements made to certain of our properties after January 1, 2019, partially offset by certain leasing related assets becoming fully amortized in the 2020 period.

General and administrative. The increase in general and administrative expenses primarily reflects an increase in business management fees as a result of our acquisition activity in the 2019 and 2020 periods.

Interest income. The decrease in interest income is primarily due to a decrease in average investable cash during the 2020 period as compared to the 2019 period.

Interest expense. The increase in interest expense in the 2020 period is primarily due to increased net borrowings used to fund our acquisition activity in the 2019 period.

Gain on early extinguishment of debt. We recorded a gain on early extinguishment of debt in connection with our prepayment of a mortgage note during the 2020 period.

Income tax expense. Income tax expense reflects state income taxes payable in certain jurisdictions where we are subject to state income taxes.

Equity in earnings of an investee. Equity in earnings of an investee represents our proportionate share of earnings from our investment in AIC. The decrease in equity in earnings of an investee is due to the dissolution of AIC in February 2020.

Net income. The decrease in net income for the 2020 period compared to the 2019 period reflects the changes noted above.

Weighted average common shares outstanding - basic and diluted. The increase in weighted average common shares outstanding primarily reflects common shares awarded under our equity compensation plan since January 1, 2019.

Net income attributable to common shareholders per common share - basic and diluted. The decrease in net income attributable to common shareholders per common share reflects the changes to net income attributable to common shareholders and weighted average common shares noted above.

Non-GAAP Financial Measures

We present certain “non-GAAP financial measures” within the meaning of applicable rules of the Securities and Exchange Commission, or SEC, including net operating income, or NOI, funds from operations, or FFO, attributable to common shareholders and Normalized FFO attributable to common shareholders. These measures do not represent cash generated by operating activities in accordance with GAAP and should not be considered alternatives to net income or net income attributable to common shareholders as indicators of our operating performance or as measures of our liquidity. These measures should be considered in conjunction with net income and net income attributable to common shareholders as presented in our condensed consolidated statements of comprehensive income. We consider these non-GAAP measures to be appropriate supplemental measures of operating performance for a REIT, along with net income and net income attributable to common shareholders. We believe these measures provide useful information to investors because by excluding the effects of certain historical amounts, such as depreciation and amortization expense, they may facilitate a comparison of our operating performance between periods and with other REITs and, in the case of NOI, reflecting only those income and expense items that are generated and incurred at the property level may help both investors and management to understand the operations of our properties.

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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 income in order to provide results that are more closely related to our property level results of operations. NOI excludes amortization of capitalized tenant improvement costs and leasing commissions that we record as depreciation and amortization expense. We use NOI to evaluate individual and company-wide property level performance. Other real estate companies and REITs may calculate NOI differently than we do.

The following table presents the reconciliation of net income to NOI for the three and six months ended June 30, 2020 and 2019 (dollars in thousands):



	Three Months Ended June 30,						Six Months Ended June 30,
	2020			2019			2020			2019
Reconciliation of Net Income to NOI:
Net income	$	14,557		$	13,116		$	27,251		$	29,902
Equity in earnings of an investee	—			(130		)	—			(534		)
Income tax expense	126			60			189			68
Income before income tax expense and equity earnings of an investee	14,683			13,046			27,440			29,436
Gain on early extinguishment of debt	(120		)	—			(120		)	—
Interest expense	13,205			13,924			27,724			21,520
Interest income	(2		)	(138		)	(113		)	(499		)
General and administrative	4,846			4,856			9,677			8,656
Depreciation and amortization	18,525			16,709			36,815			26,320
NOI	$	51,137		$	48,397		$	101,423		$	85,433

NOI:
Hawaii Properties	$	19,783		$	19,385		$	39,301		$	38,994
Mainland Properties	31,354			29,012			62,122			46,439
NOI	$	51,137		$	48,397		$	101,423		$	85,433

Funds From Operations and Normalized Funds From Operations Attributable to Common Shareholders

We calculate FFO attributable to common shareholders and Normalized FFO attributable to common shareholders as shown below. FFO attributable to common shareholders is calculated on the basis defined by The National Association of Real Estate Investment Trusts, which is net income attributable to common shareholders, calculated in accordance with GAAP, plus real estate depreciation and amortization and minus FFO adjustments attributable to noncontrolling interest, as well as certain other adjustments currently not applicable to us. In calculating Normalized FFO attributable to common shareholders, we adjust for the items shown below, if any, and include business management incentive fees, if any, only in the fourth quarter versus the quarter when they are recognized as an expense in accordance with GAAP due to their quarterly volatility not necessarily being indicative of our core operating performance and the uncertainty as to whether any such business management incentive fees will be payable when all contingencies for determining such fees are known at the end of the calendar year. FFO attributable to common shareholders and Normalized FFO attributable to common shareholders are among the factors considered by our Board of Trustees when determining the amount of distributions to our shareholders. Other factors include, but are not limited to, requirements to maintain our qualification for taxation as a REIT, limitations in the agreements governing our debt, the availability to us of debt and equity capital, our distribution rate as a percentage of the trading price of our common shares, or dividend yield, and our dividend yield compared to the dividend yields of other 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 real estate companies and REITs may calculate FFO attributable to common shareholders and Normalized FFO attributable to common shareholders differently than we do.

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The following table presents our calculation of FFO attributable to common shareholders and Normalized FFO attributable to common shareholders and reconciliations of net income attributable to common shareholders to FFO attributable to common shareholders and Normalized FFO attributable to common shareholders for the three and six months ended June 30, 2020 and 2019 (dollars in thousands, except per share data):



	Three Months Ended June 30,					Six Months Ended June 30,
	2020			2019		2020			2019
Reconciliation of Net Income attributable to common shareholders to FFO attributable to common shareholders and Normalized FFO attributable to common shareholders:
Net income attributable to common shareholders	$	14,821		$	13,116	$	27,667		$	29,902
Depreciation and amortization	18,525			16,709		36,815			26,320
FFO adjustments attributable to noncontrolling interest	(2,657		)	—		(3,634		)	—
FFO attributable to common shareholders	30,689			29,825		60,848			56,222
Gain on early extinguishment of debt	(120		)	—		(120		)	—
Normalized FFO attributable to common shareholders	$	30,569		$	29,825	$	60,728		$	56,222

Per common share data (basic and diluted)
FFO attributable to common shareholders and Normalized FFO attributable to common shareholders	$	0.47		$	0.46	$	0.93		$	0.86

LIQUIDITY AND CAPITAL RESOURCES

Our Operating Liquidity and Resources (dollars in thousands)

Our principal sources of funds to meet our operating and capital expenses, pay debt service obligations and make distributions to our shareholders are rents from tenants at our properties and borrowings under our revolving credit facility. 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.~~thereafter based on our current expectations, including impacts from the COVID-19 pandemic and current economic downturn on us and our tenants and their willingness and ability to pay us rent when due. 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; and

purchase additional properties that produce cash flows in excess of our costs of acquisition capital and property operating expenses.

~~Cash~~We are carefully monitoring the developments of the COVID-19 pandemic and its impact on our tenants and our other stakeholders. With $320,000 of availability under our revolving credit facility as of July 27, 2020, no debt maturities during the remainder of 2020, 74.3% of our annualized rental revenues derived from investment grade rated tenants, subsidiaries of investment grade rated parent entities or our Hawaii land leases and only 3.0% of our annualized rental revenues as of June 30, 2020 from expiring leases over the next 12 months, we believe that we are currently well positioned to weather the present disruptions facing the real estate industry. Further, we are hopeful that our focus on industrial and logistics properties will enable us and our tenants to outperform the broader commercial and real estate industry if the demand for e-commerce continues at levels consistent with the demand since the COVID-19 pandemic materialized in the United States during the first quarter of 2020. However, even if that occurs, we expect that some of our tenants may experience significant downturns with respect to their businesses and liquidity. As a result of the COVID-19 pandemic and its resulting economic harm, certain of our tenants have requested relief from their obligations to pay rent due to us. We evaluate these requests on a tenant by tenant basis. As of July 27, 2020, we have granted requests to certain of our tenants to defer rent payments aggregating $2,799 for leases that represent approximately 8.2% of our annualized rental revenues as of June 30, 2020. These tenants will be obligated to pay, in most cases, the deferred rents in 12 equal monthly installments commencing in September 2020. As of June 30, 2020, we recognized an increase in our accounts receivable balance related to these deferred rent payments of $2,317.

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We expect to receive additional similar requests in the future, particularly if the current economic conditions do not continue to improve or if they worsen for an extended period. We may determine to grant additional relief in the future, which may vary from the type of relief we have granted to date, and could include more substantial relief, if we determine it prudent or appropriate to do so. In addition, if any of our tenants are unable to continue as going concerns as a result of the current economic conditions or otherwise, we will experience a reduction in rents received and we may be unable to find suitable replacement tenants for an extended period or at all and the terms of our leases with those replacement tenants may not be as favorable to us as the terms of our agreements with our existing tenants. Further, we do not know whether there will be any additional government funding programs in response to the COVID-19 pandemic and its aftermath and, if so, whether any of our tenants will qualify for, and receive assistance from any such government programs and, if they do, whether that assistance will be sufficient to enable them to pay rent to us. As a result of the uncertainties surrounding the COVID-19 pandemic and the duration and severity of the current economic downturn, we are unable to determine the ultimate impact on our tenants and their ability and willingness to pay us rent. As a result of the uncertainties surrounding the COVID-19 pandemic, we are unable to currently assess any additional impact this pandemic will have on our future cash flows.

The following is a summary of our sources and uses of cash flows ~~provided by (used in) operating, investing and financing activities were $22,093, ($1,347) and ($899), respectively,~~ for the ~~three months ended March 31, 2018 and $23,996, ($1,521) and ($22,475), respectively, for the three months ended March 31, 2017.~~ periods presented, as reflected in our condensed consolidated statements of cash flows (dollars in thousands):



	Six Months Ended June 30,
	2020			2019
Cash and cash equivalents and restricted cash at beginning of period	$	34,550		$	9,608
Net cash provided by (used in):
Operating activities	62,899			64,532
Investing activities	(74,430		)	(855,296		)
Financing activities	23,940			796,506
Cash and cash equivalents and restricted cash at end of period	$	46,959		$	15,350

The decrease in net cash provided by operating activities for the ~~three~~six months ended ~~March 31, 2018~~June 30, 2020 compared to the same period in the prior year is primarily due to ~~reimbursements~~changes in our working capital, partially offset by an increase in consolidated property NOI due to ~~SIR for the costs it incurred in connection with~~ our ~~formation and the preparation for our IPO.~~property acquisitions since July 1, 2019. Net cash used in investing activities for the ~~three~~six months ended ~~March 31, 2018~~June 30, 2020 decreased primarily due to the acquisitions of 28 properties in the 2019 period as compared to the ~~same period~~acquisition of one property in the ~~prior year was essentially unchanged.~~2020 period. The decrease in net cash ~~used in~~provided by financing activities for the ~~three~~six months ended ~~March 31, 2018~~June 30, 2020 compared to the same period in the prior year is primarily due to net proceeds from our ~~IPO~~mortgage financing and ~~net contributions from SIR related to our property operations prior to the completion of our IPO, partially offset by net activities~~borrowings under our revolving credit ~~facility.~~

facility to fund acquisitions in the 2019 period compared to the proceeds we received from our joint venture transaction in the 2020 period, partially offset by the prepayment of a mortgage note in the 2020 period.

Our Investment and Financing Liquidity and Resources (dollars in thousands, except per share and per square foot data)

Our future ~~acquisitions~~acquisition or development ~~of properties~~activity cannot be accurately projected because ~~they depend~~such activity depends upon available opportunities that come to our attention and upon our ability to successfully acquire, develop and operate ~~such properties.~~properties, financing available to us, our cost of capital, other commitments we have made and alternative uses for the amounts that would be required for the acquisition or development, the extent of our leverage, and the expected impact of the acquisition or development on our debt covenants and certain other financial metrics. Further, the COVID-19 pandemic has resulted in a reduction in investment activity generally and we may be limited in pursuing investments in the current uncertain economic conditions until economic conditions become more stable. We generally do not intend to purchase ~~"turn around"~~“turn around” properties, or properties that do not generate positive cash flows, and, to the extent we conduct construction or redevelopment activities on our properties, we currently intend to conduct those activities primarily to satisfy tenant requirements or on a build to suit basis for existing or new tenants.

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As of ~~March 31, 2018,~~June 30, 2020, we had ~~$19,847 of~~unrestricted cash and cash ~~equivalents.~~equivalents of $33,256. To ~~qualify~~maintain our qualification for taxation as a REIT under the ~~IRC,~~Internal Revenue Code of 1986, as amended, we generally ~~will be~~are required to distribute annually at least 90% of our REIT taxable income, subject to specified adjustments

and excluding any net capital gain. This distribution requirement limits our ability to retain earnings and thereby provide capital for our operations or acquisitions. In order to fund cash needs that may result from timing differences between our receipt of rents and our desire or need to make distributions, to pay operating or capital expenses or to fund any future property acquisitions, development or redevelopment efforts, we maintain a $750,000 unsecured revolving credit facility with a group of lenders. The maturity date of our revolving credit facility is December 29, 2021. We have the option to extend the maturity date of our revolving credit facility for two, six month periods, subject to payment of extension fees and satisfaction of other conditions. We pay interest on borrowings under our revolving credit facility at the rate of LIBOR plus a premium that ~~will vary~~varies based on our leverage ratio. If we later achieve an investment grade credit rating, we will then be able to elect to continue to have the interest premium based on our leverage ratio or we may instead elect to have the interest premium based on our credit rating, or a ratings election. We are required to pay a commitment fee on the unused portion of our revolving credit facility until and if such time as we make a ratings election, and thereafter we will be required to pay a facility fee in lieu of such commitment fee based on the maximum amount of our revolving credit facility. At ~~March 31, 2018,~~June 30, 2020, the interest rate premium on our revolving credit facility was 140 basis points and our commitment fee was 25 ~~basis points. After reporting our leverage as of March 31, 2018, the interest rate premium on our revolving credit facility will decrease to 130~~ basis points. We can borrow, repay and reborrow funds available under our revolving credit facility until maturity, and no principal repayment is due until maturity. As of ~~March 31, 2018,~~June 30, 2020, the annual interest rate payable on borrowings under our revolving credit facility was ~~3.23%~~1.59%. As of ~~March 31, 2018~~June 30, 2020 and ~~April 26, 2018,~~July 27, 2020, we had ~~$302,000 and $292,000, respectively,~~$320,000 outstanding under our revolving credit facility, and ~~$448,000 and $458,000, respectively,~~$430,000 available to borrow under our revolving credit facility.

Our credit agreement includes a feature under which the maximum borrowing availability under the facility may be increased to up to $1,500,000 in certain circumstances.

~~On January 17, 2018, we completed~~As of June 30, 2020, our IPO, in which we issued 20,000,000 of our common shares for net proceeds of $444,309, after deducting the underwriting discounts and commissions and expenses. For further information regarding our IPO and our application of the net proceeds, see Note 9 to the Notes to Condensed Consolidated Financial Statements included in Part 1, Item 1 of this Quarterly Report on Form 10-Q.

~~Our~~ debt ~~maturity~~maturities (other than our revolving credit facility), include mortgage notes with an aggregate principal amount of $1,056,980, as follows:



	Debt Maturity
2023 ⁽¹⁾	56,980
2029 ⁽²⁾	1,000,000
Total	$	1,056,980

(1) The property encumbered by this mortgage is owned by a joint venture in which we own a 61% equity interest.

(2) The properties encumbered by the $350,000 mortgage loan we obtained in October 2019 are owned by a joint venture in which we own a 61% equity interest.

In February and March 2020, we entered into agreements related to the formation of a joint venture for 12 of our Mainland Properties. We received proceeds from the investor in an aggregate amount of $108,266, which includes certain costs associated with the formation of the joint venture, for a 39% equity interest in the joint venture and we retained the remaining 61% equity interest in the joint venture. The investment amount is based on an aggregate property valuation of $680,000, less $406,980 of existing mortgage debts on the properties at the time of the investment that the joint venture assumed. In February 2020, we formed the joint venture with 11 of the 12 properties and the investor initially paid us $82,035, and in March ~~31, 2018~~2020, the twelfth property was ~~$48,750~~added to the joint venture and the investor contributed an additional $26,231. We used the net proceeds from this transaction to reduce outstanding borrowings under our revolving credit facility. We may sell additional properties to the joint venture or sell some of our equity interests in ~~2020.~~

the joint venture to additional investors as a source of financing in the future. In addition, this joint venture may issue additional equity interests to other investors. Further, we may seek to enter new joint ventures; however, the current economic conditions may delay, limit or prevent our ability or willingness to enter additional joint ventures.

We expect to use borrowings under our revolving credit facility and net proceeds from offerings of equity or debt securities to fund any future property acquisitions, development or redevelopment efforts. We may also assume mortgage ~~debt~~notes in connection with future acquisitions. When significant amounts are outstanding under our revolving credit facility or the maturities of our revolving credit facility or our other debt approach, we intend to explore refinancing alternatives. Such alternatives may include incurring term debt, obtaining financing secured by mortgages on properties we own, issuing new equity or debt securities, extending the maturity date of our revolving credit facility, or participating in joint ~~venture arrangements.~~ventures or selling properties. We currently have an effective shelf registration statement that allows us to issue public securities on an expedited basis, but we cannot be sure that there will be purchasers for such securities. 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 ~~and~~or equity offerings, to fund capital expenditures, future acquisitions, development, redevelopment and other activities and to pay our obligations.

~~Although we have no present intention to do so, we also may sell properties that we own or place mortgages on properties that we own to raise capital.~~

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The completion and the costs of any future financings will depend primarily upon our success in operating our business and upon market conditions. In particular, the feasibility and cost of any future debt financings will depend primarily on our then current credit qualities and on market conditions. We have no control over market conditions. Potential lenders in future debt transactions will evaluate our ability to fund required debt service and repay principal balances when they become due by reviewing our financial condition, results of operations, business practices and plans and our ability to maintain our earnings, to stagger our debt maturities and to balance our use of debt and equity capital so that our financial performance and leverage ratios afford us flexibility to withstand any reasonably anticipated adverse changes. We intend to conduct our business activities in a manner ~~that~~which will afford us reasonable access to capital for investment and financing activities. However, as noted elsewhere in this Quarterly Report on Form 10-Q, it is uncertain what the duration and severity of the current economic downturn resulting from the COVID-19 pandemic will be. A protracted and extensive downturn may have various negative consequences, including a decline in financing availability and increased costs for financing. Further, such conditions could also disrupt capital markets and limit our access to financing from public sources, particularly if the global financial markets experience significant disruptions.

During the six months ended June 30, 2020, we paid quarterly cash distributions to our shareholders totaling $43,021 using existing cash balances and borrowings under our revolving credit facility. For more information regarding the distribution we paid in 2020, see Note 7 to the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

During the three and six months ended ~~March 31, 2018~~June 30, 2020 and ~~2017,~~2019, amounts capitalized for tenant improvements, leasing costs, building improvements and development and redevelopment activities were as follows:


	Three Months Ended				Three Months Ended				Six Months Ended
	March 31,				June 30,				June 30,
	2018		2017		2020		2019		2020		2019
Tenant improvements⁽¹⁾	$	69	$	17	$	344	$	—	$	448	$	—
Leasing costs⁽²⁾	5		429		—		238		189		394
Building improvements⁽³⁾	90		309		741		1,834		1,978		1,893
Development, redevelopment and other activities ⁽⁴⁾	378		684		—		2,553		1		2,713
	$	542	$	1,439	$	1,085	$	4,625	$	2,616	$	5,000


(1)	Tenant improvements include capital expenditures used to improve tenants’ space or amounts paid directly to tenants to improve their space.


(2)	Leasing costs include leasing related costs, such as brokerage commissions ~~legal costs~~ and tenant inducements.


(3)	Building improvements generally include ~~(i)~~ expenditures to replace obsolete building components and ~~(ii)~~ expenditures that extend the useful life of existing assets.


(4)	Development, redevelopment and other activities generally include ~~(i) capital expenditures that are identified at the time of a property acquisition and incurred within a short time period after acquiring the property and (ii)~~ capital expenditure projects that (i) reposition a property or (ii) result in new sources of ~~revenues.~~revenue.

As of ~~March 31, 2018,~~June 30, 2020, we had estimated unspent leasing related obligations of ~~$243.~~$561.

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During the three months ended ~~March 31, 2018,~~June 30, 2020, commitments made for expenditures, such as tenant improvements and leasing costs in connection with leasing space, were as follows:


	New Leases		Renewals		Totals		New Leases		Renewals		Totals
Square feet leased during the period (in thousands)	1		295		296		—		314		314
Total leasing costs and concession commitments⁽¹⁾	$	33	$	35	$	68	$	—	$	229	$	229
Total leasing costs and concession commitments per square foot ⁽¹⁾	$	33.00	$	0.12	$	0.23	$	—	$	0.73	$	0.73
Weighted average lease term by square feet (years)	7.0		30.4		30.3		—		20.1		20.1
Total leasing costs and concession commitments per square foot per year ⁽¹⁾	$	4.71	$	0.00	$	0.01	$	—	$	0.04	$	0.04


(1)	Includes commitments made for leasing expenditures and concessions, such as leasing commissions, tenant improvements or other tenant inducements.

Off Balance Sheet Arrangements

As of ~~March 31, 2018,~~June 30, 2020, we had no off balance sheet arrangements that have had or that we expect would be reasonably likely to have a material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources. ~~We had no swaps or hedges as of March 31, 2018.~~

Debt Covenants (dollars in thousands)

Our principal debt obligations at ~~March 31, 2018~~June 30, 2020 were borrowings outstanding under our revolving credit facility, a $650,000 mortgage loan obtained in January 2019 that is secured by 186 of our properties, a $350,000 mortgage loan obtained in October 2019 that is secured by 11 properties that are owned by a joint venture in which we own a 61% equity interest, and a ~~secured~~$56,980 mortgage note ~~assumed in connection with one of our acquisitions. Our mortgage note~~that is ~~non-recourse,~~secured by another property owned by such joint venture, subject to certain ~~limitations,~~limitations. The $650,000 mortgage loan agreement contains certain exceptions to the general non-recourse provisions that obligate us to indemnify the lenders for certain potential environmental losses relating to hazardous materials and ~~does not contain any material financial covenants.~~ violations of environmental law.

Our credit agreement provides for acceleration of payment of all amounts outstanding upon the occurrence and continuation of certain events of default, such as a change of control of us, which includes RMR LLC ceasing to act as our business and property manager. Our credit agreement contains ~~a number of~~ covenants, ~~which~~including those that restrict our ability to incur debts, including debts secured by mortgages on our properties, in excess of calculated amounts, restrict our ability to make distributions to our shareholders in certain circumstances and generally require us to maintain certain financial ratios. As of ~~March 31, 2018,~~June 30, 2020, we believe we were in compliance with all of the ~~terms~~covenants and ~~covenants~~other terms under our credit agreement.

Our credit agreement does not contain provisions for acceleration which could be triggered by our leverage ratio. However, under our credit agreement, our leverage ratio is used to determine the ~~fees~~interest rates for calculating the amount of interest payable on outstanding borrowings and ~~interest rates~~the fees we pay. Accordingly, if our leverage ratio increases above the applicable thresholds, our interest expense and related costs under our credit agreement would increase.

Our revolving credit facility has cross default provisions to other indebtedness that is recourse of $25,000 or more and indebtedness that is non-recourse of $50,000 or more.

The loan agreements governing our mortgage loans contain customary covenants and provide for acceleration of payment of all amounts due thereunder upon the occurrence and continuation of certain events of default. In addition, pursuant to the loan agreement and related documents governing our $650,000 mortgage loan, we are required to maintain a minimum consolidated net worth of at least $250,000 and liquidity of at least $15,000. As of June 30, 2020, we believe we were in compliance with all the covenants and other terms under the agreements governing our mortgage notes.

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Related Person Transactions

We have relationships and historical and continuing transactions with RMR LLC, RMR Inc. and others related to them. For example: we have no employees and the personnel and various services we require to operate our business are provided to us by RMR LLC pursuant to our business and property management agreements with RMR LLC; ~~The RMR Group Inc., or~~ RMR Inc., is the managing member of RMR LLC; ~~and~~ Adam D. 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., a managing director and the president and chief executive officer of RMR Inc. and an officer and employee of RMR LLC; John Murray, our other Managing Trustee and our President and Chief Executive Officer, also serves as an officer and employee of RMR LLC, and each of our other officers is also an officer and employee of RMR LLC. We ~~also~~ have relationships and historical and continuing transactions with other companies to which RMR LLC or its subsidiaries provide management services and some of which ~~may~~ have trustees, directors ~~and~~or officers who are also trustees, directors or officers of us, RMR LLC or RMR Inc.~~, including: SIR, of which we were a wholly owned subsidiary until January 17, 2018~~ and ~~which remains our largest shareholder, owning, at March 31, 2018, approximately 69.2%~~some of our ~~outstanding common shares.~~ Trustees and officers serve as trustees, directors or officers of these companies.

For further information about these and other such relationships and related person transactions, see Notes 9 10 and 1110 to the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q, our 2019 Annual Report, our definitive Proxy Statement for our 2020 Annual Meeting of Shareholders and our other filings with the ~~Securities and Exchange Commission, or~~ SEC. In addition, see the section captioned “Risk Factors” of our 2019 Annual Report for a description of risks that may arise as a result of these and other related person transactions and relationships. Our filings with the SEC and copies of certain of our agreements with these related persons, including our business and property management agreements with RMR LLC and our various agreements with ~~SIR,~~OPI, are available as exhibits to our public filings with the SEC and accessible at the SEC’s website, www.sec.gov. We may engage in additional transactions with related persons, including businesses to which RMR LLC or its subsidiaries provide management services.

Item 3. Quantitative and Qualitative Disclosures About Market Risk(dollars in thousands, except per share data)

We are exposed to risks associated with market changes in interest rates. We manage our exposure to this market risk by monitoring available financing alternatives. Our strategy to manage exposure to changes in interest rates is materially unchanged since December 31, ~~2017.~~2019. 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.

Fixed Rate Debt

At ~~March 31, 2018,~~June 30, 2020, our outstanding fixed rate debt consisted of the following ~~secured~~ mortgage ~~note:~~notes:


			Annual		Annual			Interest			Annual		Annual			Interest
	Principal		Interest		Interest			Payments	Principal		Interest		Interest			Payments
Debt	Balance⁽¹⁾		Rate⁽¹⁾		Expense⁽¹⁾		Maturity	Due	Balance ⁽¹⁾		Rate ⁽¹⁾		Expense ⁽¹⁾		Maturity	Due
Mortgage note (one property in Chester, VA)	$	48,750	3.99	%	$	1,945	2020	Monthly
Mortgage note (one property in Florida) ⁽²⁾									$	56,980	3.60	%	$	2,051	2023	Monthly
Mortgage notes (186 properties in Hawaii)									650,000		4.31	%	28,015		2029	Monthly
Mortgage notes (11 U.S. Mainland Properties) ⁽²⁾									350,000		3.33	%	11,655		2029	Monthly
									$	1,056,980			$	41,721


(1)	The principal balance, annual interest rate and annual interest expense are the amounts stated in the applicable contract. In accordance with GAAP, our carrying ~~value~~values and recorded interest expense may differ from these amounts because of market conditions at the time we assumed or issued this debt.


(2)	The properties encumbered by these mortgages are owned by a joint venture in which we own a 61% equity interest.

~~Our~~These mortgage ~~note requires~~notes require interest only payments until maturity. Because our mortgage ~~note requires~~notes require interest to be paid at a fixed rate, changes in market interest rates during the ~~term~~terms of ~~the~~these mortgage ~~note~~notes will not affect our interest obligations. If ~~this~~these mortgage ~~note is~~notes are refinanced at an interest ~~rate~~rates which ~~is 100 basis points~~are one percentage point higher or lower than shown above, our annual interest cost would increase or decrease by approximately ~~$488.~~$10,570.

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Changes in market interest rates would affect the fair value of our fixed rate debt obligations. Increases in market interest rates decrease the fair value of our fixed rate debt, while decreases in market interest rates increase the fair value of our fixed rate debt. Based on the ~~balance~~balances outstanding at ~~March 31, 2018~~June 30, 2020 and discounted cash flow ~~analysis~~analyses through the maturity ~~date,~~dates, and assuming no other changes in factors that may affect the fair value of our fixed rate debt ~~obligation,~~obligations, a hypothetical immediate ~~100 basis~~one percentage point change in the interest ~~rate~~rates would change the fair value of ~~this obligation~~these obligations by approximately ~~$1,208.~~

$78,147.

Floating Rate Debt

At ~~March 31, 2018,~~June 30, 2020, our floating rate debt consisted of ~~$302,000~~$320,000 outstanding under our revolving credit facility. Our revolving credit facility matures on December 29, 2021 and, subject to the payment of extension fees and satisfaction of other conditions, we have the option to extend the maturity date for two, six month periods. No principal repayments are required under our revolving credit facility prior to maturity, and prepayments may be made at any time without penalty.

Borrowings under our revolving credit facility are in U.S. dollars and require interest to be paid at LIBOR plus a premium that ~~is subject to adjustment~~varies based ~~upon changes to~~on our leverage ratio. Accordingly, we are vulnerable to changes in the U.S. dollar based short term rates, specifically LIBOR. In addition, upon renewal or refinancing of this obligation, we are vulnerable to increases in interest rate premiums due to market conditions or our perceived credit risk. Generally, a change in interest rates would not affect the value of our floating rate debt but would affect our operating results. The following table presents the approximate impact a one percentage point increase in interest rates would have on our annual floating rate interest expense at ~~March 31, 2018:~~

June 30, 2020:


	Impact of an Increase in Interest Rates								Impact of an Increase in Interest Rates
					Total Interest		Annual						Total Interest		Annual
	Interest Rate		Outstanding		Expense		Earnings Per		Interest Rate		Outstanding		Expense		Earnings Per
	Per Year		Debt		Per Year		Share Impact ⁽¹⁾		Per Year		Debt		Per Year		Share Impact ⁽¹⁾
At March 31, 2018	3.23	%	$	302,000	$	9,755	$	0.16
At June 30, 2020									1.59	%	$	320,000	$	5,088	$	(0.08	)
One percentage point increase	4.23	%	$	302,000	$	12,775	$	0.21	2.59	%	$	320,000	$	8,288	$	(0.13	)


(1)	Based on the diluted weighted average common shares outstanding for the ~~three~~six months ended ~~March 31, 2018.~~June 30, 2020.

The following table presents the approximate impact a one percentage point increase in interest rates would have on our annual floating rate interest expense at ~~March 31, 2018~~June 30, 2020 if we were fully drawn on our revolving credit facility:


	Impact of an Increase in Interest Rates								Impact of an Increase in Interest Rates
					Total Interest		Annual						Total Interest		Annual
	Interest Rate		Outstanding		Expense		Earnings Per		Interest Rate		Outstanding		Expense		Earnings Per
	Per Year		Debt		Per Year		Share Impact ⁽¹⁾		Per Year		Debt		Per Year		Share Impact ⁽¹⁾
At March 31, 2018	3.23	%	$	750,000	$	24,225	$	0.39
At June 30, 2020									1.59	%	$	750,000	$	11,925	$	(0.18	)
One percentage point increase	4.23	%	$	750,000	$	31,725	$	0.52	2.59	%	$	750,000	$	19,425	$	(0.30	)


(1)	Based on the diluted weighted average common shares outstanding for the ~~three~~six months ended ~~March 31, 2018.~~June 30, 2020.

The foregoing tables show the impact of an immediate ~~increase~~one percentage point change in floating interest rates. If interest rates were to change gradually over time, the impact would be spread over time. Our exposure to fluctuations in floating interest rates will increase or decrease in the future with increases or decreases in the outstanding amounts of our revolving credit facility and any other floating rate debt.

LIBOR Phase Out

LIBOR is currently expected to be phased out in 2021. We are required to pay interest on borrowings under our revolving credit facility at floating rates based on LIBOR. Future debt that we may incur may also require that we pay interest based upon LIBOR. We currently expect that the determination of interest under our revolving credit facility would be revised as provided under our credit agreement or amended as necessary to provide for an interest rate that approximates the existing interest rate as calculated in accordance with LIBOR. Despite our current expectations, we cannot be sure that, if LIBOR is phased out or transitioned, the changes to the determination of interest under our agreements would approximate the current calculation in accordance with LIBOR. We do not know what standard, if any, will replace LIBOR if it is phased out or transitioned.

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Item 4. Controls andProcedures

As of the end of the period covered by this ~~report,~~Quarterly Report on Form 10-Q, our management carried out an evaluation, under the supervision and with the participation of our President and Chief ~~Operating~~Executive Officer and our Chief Financial Officer and Treasurer, of the effectiveness of our disclosure controls and procedures pursuant to Rules 13a-15 and 15d-15 under the Securities Exchange Act of 1934, as amended. Based upon that evaluation, our President and Chief ~~Operating~~Executive Officer and our Chief Financial Officer and Treasurer concluded that our disclosure controls and procedures are effective.

There have been no changes in our internal control over financial reporting during the quarter ended ~~March 31, 2018~~June 30, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

~~WARNING CONCERNING FORWARD LOOKING STATEMENTS~~

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~~THIS QUARTERLY REPORT ON FORM~~

Warning Concerning Forward-Looking Statements

This Quarterly Report on Form 10-Q ~~CONTAINS STATEMENTS THAT CONSTITUTE FORWARD LOOKING STATEMENTS WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF~~contains statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 ~~AND OTHER SECURITIES LAWS. ALSO, WHENEVER WE USE WORDS SUCH AS “BELIEVE”~~and other securities laws. Also, whenever we use words such as “believe”, ~~“EXPECT”~~“expect”, ~~“ANTICIPATE”~~“anticipate”, ~~“INTEND”~~“intend”, ~~“PLAN”~~“plan”, ~~“ESTIMATE”~~“estimate”, ~~“WILL”~~“will”, “MAY” AND NEGATIVES OR DERIVATIVES OF THESE OR SIMILAR EXPRESSIONS, WE ARE MAKING FORWARD LOOKING STATEMENTS. THESE FORWARD LOOKING STATEMENTS ARE BASED UPON OUR PRESENT INTENT, BELIEFS OR EXPECTATIONS, BUT FORWARD LOOKING STATEMENTS ARE NOT GUARANTEED TO OCCUR AND MAY NOT OCCUR. FORWARD LOOKING STATEMENTS IN THIS REPORT RELATE TO VARIOUS ASPECTS OF OUR BUSINESS, INCLUDING:“may” and negatives or derivatives of these or similar expressions, we are making forward-looking statements. These forward-looking statements are based upon our present intent, beliefs or expectations, but forward-looking statements are not guaranteed to occur and may not occur. Forward-looking statements in this Quarterly Report on Form 10-Q relate to various aspects of our business, including:

~~THE LIKELIHOOD THAT OUR TENANTS WILL PAY RENT OR BE NEGATIVELY AFFECTED BY CYCLICAL ECONOMIC CONDITIONS,~~The duration and severity of the economic downturn resulting from the COVID-19 pandemic and its impact on us and our tenants,

~~THE LIKELIHOOD THAT OUR TENANTS WILL RENEW OR EXTEND THEIR LEASES OR THAT WE WILL BE ABLE TO OBTAIN REPLACEMENT TENANTS,~~Our expectations about our ability and the ability of the industrial and logistics properties real estate sector and our tenants to operate throughout the COVID-19 pandemic and current economic conditions,

~~OUR ACQUISITIONS OF PROPERTIES,~~The likelihood and extent to which our tenants will be negatively impacted by the COVID-19 pandemic and its aftermath and be able and willing to pay us rent,

~~OUR ABILITY TO COMPETE FOR ACQUISITIONS AND TENANCIES EFFECTIVELY,~~The likelihood that our tenants will pay rent or be negatively affected by cyclical economic conditions,

~~THE LIKELIHOOD THAT OUR RENTS WILL INCREASE WHEN WE RENEW OR EXTEND OUR LEASES, WHEN WE ENTER NEW LEASES, OR WHEN OUR RENTS RESET AT OUR HAWAII PROPERTIES,~~The likelihood that our tenants will renew or extend their leases or that we will be able to obtain replacement tenants on terms as favorable to us as the terms of our existing leases,

~~OUR ABILITY TO PAY DISTRIBUTIONS TO OUR SHAREHOLDERS AND TO SUSTAIN THE AMOUNT OF SUCH DISTRIBUTIONS,~~Our acquisitions of properties,

~~THE FUTURE AVAILABILITY OF BORROWINGS UNDER OUR REVOLVING CREDIT FACILITY,~~Our ability to compete for acquisitions and tenancies effectively,

~~OUR POLICIES AND PLANS REGARDING INVESTMENTS, FINANCINGS AND DISPOSITIONS,~~The likelihood that our rents will increase when we renew or extend our leases, when we enter new leases, or when our rents reset at our Hawaii Properties,

~~OUR ABILITY TO RAISE DEBT OR EQUITY CAPITAL,~~Our ability to pay distributions to our shareholders and to sustain the amount of such distributions,

~~OUR ABILITY TO PAY INTEREST ON AND PRINCIPAL OF OUR DEBT,~~The future availability of borrowings under our revolving credit facility,

~~OUR ABILITY TO APPROPRIATELY BALANCE OUR USE OF DEBT AND EQUITY CAPITAL,~~Our policies and plans regarding investments, financings and dispositions,

~~CHANGES IN THE SECURITY OF CASH FLOWS FROM OUR PROPERTIES,~~Our ability to raise debt or equity capital,

~~OUR CREDIT RATINGS,~~Our ability to pay interest on and principal of our debt,

~~OUR EXPECTATION THAT WE BENEFIT FROM OUR RELATIONSHIPS WITH~~Our ability to appropriately balance our use of debt and equity capital,

Our ability to enter into expanded or additional real estate joint ventures or to attract co-venturers and our ability to manage successfully and benefit from any real estate joint ventures we may enter into,

Changes in the security of cash flows from our properties,

Our expectations regarding the impact of the COVID-19 pandemic on our financial condition and operating results,

Our ability to maintain sufficient liquidity for the duration of the COVID-19 pandemic and resulting economic downturn,

Our ability to prudently pursue, and successfully and profitably complete, expansion and renovation projects at our properties and to realize our expected returns on those projects,

Our expectation that we benefit from our relationships with RMR ~~INC.,~~LLC,

~~OUR QUALIFICATION FOR TAXATION AS A~~Our qualification for taxation as a REIT,

~~CHANGES IN FEDERAL OR STATE TAX LAWS,~~Changes in federal or state tax laws,

~~CHANGES IN REAL ESTATE AND ZONING LAWS AND REGULATIONS, AND INTERPRETATIONS OF THOSE LAWS AND REGULATIONS, APPLICABLE TO OUR PROPERTIES,~~The credit qualities of our tenants,

~~THE CREDIT QUALITIES OF OUR TENANTS,~~

~~CHANGES IN ENVIRONMENTAL LAWS OR IN THEIR INTERPRETATIONS OR ENFORCEMENT AS A RESULT OF CLIMATE CHANGE OR OTHERWISE,~~

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~~OUR SALES OF PROPERTIES, AND~~

~~OTHER MATTERS.~~

~~OUR ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE CONTAINED IN OR IMPLIED BY OUR FORWARD LOOKING STATEMENTS AS A RESULT OF VARIOUS FACTORS. FACTORS THAT COULD HAVE A~~Changes in environmental laws or in their interpretations or enforcement as a result of climate change or otherwise, or our incurring environmental remediation costs or other liabilities,

Our sales of properties, and

~~MATERIAL ADVERSE EFFECT ON OUR FORWARD LOOKING STATEMENTS AND UPON OUR BUSINESS, RESULTS OF OPERATIONS, FINANCIAL CONDITION,~~Other matters.

Our actual results may differ materially from those contained in or implied by our forward-looking statements. Forward-looking statements involve known and unknown risks, uncertainties and other factors, some of which are beyond our control. Risks, uncertainties and other factors that could have a material adverse effect on our forward-looking statements and upon our business, results of operations, financial condition, FFO ~~NORMALIZED~~attributable to common shareholders, Normalized FFO attributable to common shareholders, NOI, ~~CASH FLOWS, LIQUIDITY AND PROSPECTS INCLUDE, BUT ARE NOT LIMITED TO:~~cash flows, liquidity and prospects include, but are not limited to:

~~THE IMPACT OF CONDITIONS AND CHANGES IN THE ECONOMY AND THE CAPITAL MARKETS ON US AND OUR TENANTS,~~The impact of conditions in the economy, including the COVID-19 pandemic and its aftermath, and the capital markets on us and our tenants,

~~COMPETITION WITHIN THE REAL ESTATE INDUSTRY, PARTICULARLY IN THOSE MARKETS IN WHICH OUR PROPERTIES ARE LOCATED,~~Competition within the real estate industry, particularly for industrial and logistics properties in those markets in which our properties are located,

~~COMPLIANCE WITH, AND CHANGES TO, FEDERAL, STATE AND LOCAL LAWS AND REGULATIONS, ACCOUNTING RULES, TAX LAWS AND SIMILAR MATTERS,~~Compliance with, and changes to, federal, state and local laws and regulations, accounting rules, tax laws and similar matters,

~~LIMITATIONS IMPOSED ON OUR BUSINESS AND OUR ABILITY TO SATISFY COMPLEX RULES IN ORDER FOR US TO QUALIFY FOR TAXATION AS A~~Limitations imposed on our business and our ability to satisfy complex rules in order for us to maintain our qualification for taxation as a REIT ~~FOR~~for U.S. ~~FEDERAL INCOME TAX PURPOSES,~~federal income tax purposes,

~~ACTUAL AND POTENTIAL CONFLICTS OF INTEREST WITH OUR RELATED PARTIES, INCLUDING OUR MANAGING TRUSTEES,~~Actual and potential conflicts of interest with our related parties, including our managing trustees, RMR LLC and others affiliated with them, and

Acts of terrorism, outbreaks of pandemics, including the COVID-19 pandemic, or other manmade or natural disasters beyond our control.

For example:

Our ability to make future distributions to our shareholders and to make payments of principal and interest on our indebtedness depends upon a number of factors, including our receipt of rent from our tenants, future earnings, the capital costs we incur to lease our properties and our working capital requirements. We may be unable to pay our debt obligations or to increase or maintain our current rate of distributions on our common shares and future distributions may be reduced or eliminated,

Our ability to grow our business and increase our distributions depends in large part upon our ability to buy properties and lease them for rents, less their property operating costs, that exceed our capital costs. We may be unable to identify properties that we want to acquire, and we may fail to reach agreement with the sellers and complete the purchases of any properties we do want to acquire. In addition, any properties we may acquire may not provide us with rents less property operating costs that exceed our capital costs or achieve our expected returns,

Contingencies in our acquisition and sale agreements may not be satisfied and any expected acquisitions and sales may not occur, may be delayed or the terms of such transactions may change,

Rents that we can charge at our properties may decline upon rent resets, lease renewals or lease expirations because of changing market conditions or otherwise,

Leasing for some of our properties depends on a single tenant and we may be adversely affected by the bankruptcy, insolvency, a downturn of business or a lease termination of a single tenant at these properties,

Certain of our Hawaii Properties are lands leased for rents that periodically reset based on then current fair market values. Rental income from our properties in Hawaii have generally increased during our and our predecessors’ ownership as the leases for those properties have been reset, extended or renewed. Although we expect that rents for our Hawaii Properties could increase in the future, subject to the impacts of the COVID-19 pandemic and the resulting economic downturn, we cannot be sure they will increase. Future rents from these properties could decrease or not increase to the extent they have in the past or by the amount we expect, particularly in the current economic conditions,

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It is difficult to accurately estimate leasing related obligations and costs of development and tenant improvement costs. Our leasing related obligations, development projects and tenant improvements may cost more and may take longer to complete than we currently expect and we may incur increasing amounts for these and similar purposes in the future,

Economic conditions in areas where our properties are located may decline in the future, including due to the COVID-19 pandemic and its aftermath. Such circumstances or other conditions may reduce demand for leasing industrial space. If the demand for leasing industrial space is reduced, we may be unable to renew leases with our tenants as leases expire or enter new leases at rental rates as high as expiring rents and our financial results may decline,

E-commerce retail sales may not continue to grow and increase the demand for industrial and logistics real estate as we expect,

Increasing development of industrial and logistics properties may reduce the demand for, and rents from, our properties,

We may not achieve or sustain our targeted capitalization rates for properties we acquire and we may incur losses with respect to those acquisitions,

Our belief that there is a likelihood that tenants may renew or extend our leases prior to their expirations whenever they have made significant investments in the leased properties, or because those properties may be of strategic importance to them, may not be realized,

Some of our tenants may not renew expiring leases, and we may be unable to obtain new tenants to maintain or increase the historical occupancy rates of, or rents from, our properties,

The competitive advantages we believe we have may not in fact exist or provide us with the advantages we expect. We may fail to maintain any of these advantages or our competition may obtain or increase their competitive advantages relative to us,

We intend to conduct our business activities in a manner that will afford us reasonable access to capital for investment and financing activities. However, we may not succeed in this regard and we may not have reasonable access to capital, including due to the COVID-19 pandemic and its aftermath,

Continued availability of borrowings under our revolving credit facility is subject to our satisfying certain financial covenants and other credit facility conditions. However, if challenging market conditions, including due to the COVID-19 pandemic and its aftermath, last for a long period or worsen, our tenants may experience liquidity constraints and as a result may be unable or unwilling to pay rent to us and our ability to operate our business effectively may be challenged. If our operating results and financial condition are significantly negatively impacted by the current economic conditions or otherwise, we may fail to satisfy those covenants and conditions,

Actual costs under our revolving credit facility will be higher than LIBOR plus a premium because of fees and expenses associated with such debt,

We may be unable to repay our debt obligations when they become due,

The maximum borrowing availability under our revolving credit facility may be increased to up to $1.5 billion in certain circumstances. However, increasing the maximum borrowing availability under our revolving credit facility is subject to our obtaining additional commitments from lenders, which may not occur,

We have the option to extend the maturity date of our revolving credit facility upon payment of a fee and meeting other conditions. However, the applicable conditions may not be met,

The premiums used to determine the interest rate payable on our revolving credit facility and the unused fee payable on our revolving credit facility are based on our leverage. Changes in our leverage may cause the interest and fees we pay to increase,

We may not reduce our level of indebtedness or maintain any reduction we may effect and increased leverage may restrict our ability to acquire properties and pursue business opportunities,

We may spend more for capital expenditures than we currently expect or than we have in the past,

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Our existing joint venture and any other joint ventures that we may enter may not be successful,

Our Board of Trustees considers, among other factors, our distribution rate compared to the trading price of our common shares and to the dividend yields of other industrial REITs when setting our distributions to shareholders. This may imply that we will maintain or seek to maintain a specific dividend yield on our common shares. However, the dividend yield is only one of many factors our Board of Trustees considers in its discretion when setting our distributions to shareholders. Further, various market and other factors impact trading prices for our and our competitors’ securities and the corresponding yields on those securities. As a result, the trading prices on our common shares and the yields on our common shares are subject to change and may fluctuate significantly. We do not intend to maintain or to seek to maintain any specific yield on our common shares,

We believe that we are well positioned to weather the present disruptions of the COVID-19 pandemic facing the real estate industry. However, the full extent of the future impact of the COVID-19 pandemic to us is unknown and we may not realize similar or better operating results in the future,

We face minimal lease expirations over the next 12 months and we have granted requests to certain of our tenants to defer rent payments in exchange for increased payments over, in most cases, a 12-month period commencing in September 2020. However, current market and economic conditions may deteriorate and such deterioration may result in an increase in tenant defaults and terminations, and these concessions and assistance given to our tenants may not allow them to continue to be successful during this challenging time,

The business and property management agreements between us and RMR LLC have continuing 20 year terms. However, those agreements permit early termination in certain circumstances. Accordingly, we cannot be sure that these agreements will remain in effect for continuing 20 year terms, and

We believe that our relationships with our related parties, including RMR LLC, RMR ~~INC.~~Inc. and others affiliated with them may benefit us and provide us with competitive advantages in operating and growing our business. However, the advantages we believe we may realize from these relationships may not materialize.

Currently unexpected results could occur due to many different circumstances, some of which are beyond our control, such as the COVID-19 pandemic and its aftermath, acts of terrorism, natural disasters, changes in our tenants’ financial conditions, the market demand for leased space or changes in capital markets or the economy generally.

The information contained elsewhere in this Quarterly Report on Form 10-Q and in our 2019 Annual Report or in our other filings with the SEC, including under the caption “Risk Factors”, ~~SIR, AFFILIATES INSURANCE COMPANY, OR AIC, AND OTHERS AFFILIATED WITH THEM, AND~~or incorporated herein or therein, identifies other important factors that could cause differences from our forward-looking statements. Our filings with the SEC are available on the SEC’s website at www.sec.gov.

~~ACTS OF TERRORISM, OUTBREAKS OF SO CALLED PANDEMICS OR OTHER MANMADE OR NATURAL DISASTERS BEYOND OUR CONTROL.~~You should not place undue reliance upon our forward-looking statements.

~~FOR EXAMPLE:~~

OUR ABILITY TO MAKE FUTURE DISTRIBUTIONS TO OUR SHAREHOLDERS AND TO MAKE PAYMENTS OF PRINCIPAL AND INTEREST ON OUR INDEBTEDNESS DEPENDS UPON A NUMBER OF FACTORS, INCLUDING OUR FUTURE EARNINGS, THE CAPITAL COSTS WE INCUR TO LEASE OUR PROPERTIES AND OUR WORKING CAPITAL REQUIREMENTS. WE MAY BE UNABLE TO PAY OUR DEBT OBLIGATIONS OR TO MAKE OR SUSTAIN DISTRIBUTIONS ON OUR COMMON SHARES AND FUTURE DISTRIBUTIONS MAY BE REDUCED OR ELIMINATED,

OUR ABILITY TO GROW OUR BUSINESS AND INCREASE OUR DISTRIBUTIONS DEPENDS IN LARGE PART UPON OUR ABILITY TO BUY PROPERTIES AND LEASE THEM FOR RENTS, LESS THEIR PROPERTY OPERATING COSTS, THAT EXCEED OUR CAPITAL COSTS. WE MAY BE UNABLE TO IDENTIFY PROPERTIES THAT WE WANT TO ACQUIRE OR TO NEGOTIATE ACCEPTABLE PURCHASE PRICES, ACQUISITION FINANCING OR LEASE TERMS FOR NEW PROPERTIES,

~~CONTINGENCIES IN OUR ACQUISITION AND SALE AGREEMENTS MAY NOT BE SATISFIED AND ANY EXPECTED ACQUISITIONS AND SALES MAY NOT OCCUR, MAY BE DELAYED OR THE TERMS OF SUCH TRANSACTIONS MAY CHANGE,~~

~~RENTS THAT WE CAN CHARGE AT OUR PROPERTIES MAY DECLINE BECAUSE OF CHANGING MARKET CONDITIONS OR OTHERWISE,~~

MOST OF OUR HAWAII PROPERTIES ARE LANDS LEASED FOR RENTS THAT ARE PERIODICALLY RESET BASED ON THEN CURRENT FAIR MARKET VALUES. REVENUES FROM OUR PROPERTIES IN HAWAII HAVE GENERALLY INCREASED DURING OUR AND OUR PREDECESSORS’ OWNERSHIP AS THE LEASES FOR THOSE PROPERTIES HAVE BEEN RESET OR RENEWED. ALTHOUGH WE EXPECT THAT RENTS FOR OUR HAWAII PROPERTIES WILL INCREASE IN THE FUTURE, WE CANNOT BE SURE THEY WILL. FUTURE RENTS FROM THESE PROPERTIES COULD DECREASE OR NOT INCREASE TO THE EXTENT THEY HAVE IN THE PAST,

~~OUR POSSIBLE REDEVELOPMENT OF CERTAIN OF OUR PROPERTIES MAY NOT BE REALIZED OR BE SUCCESSFUL,~~

~~OUR LEASING RELATED OBLIGATIONS MAY COST MORE OR LESS AND MAY TAKE LONGER TO COMPLETE THAN WE EXPECT, AND OUR LEASING RELATED OBLIGATIONS MAY INCREASE IN THE FUTURE,~~

THE UNEMPLOYMENT RATE OR ECONOMIC CONDITIONS IN AREAS WHERE OUR PROPERTIES ARE LOCATED MAY BECOME WORSE IN THE FUTURE. SUCH CIRCUMSTANCES OR OTHER CONDITIONS MAY REDUCE DEMAND FOR LEASING INDUSTRIAL SPACE. IF THE DEMAND FOR LEASING INDUSTRIAL SPACE IS REDUCED, WE MAY BE UNABLE TO RENEW LEASES WITH OUR TENANTS AS LEASES EXPIRE OR ENTER INTO NEW LEASES AT RENTAL RATES AS HIGH AS EXPIRING RENTS AND OUR FINANCIAL RESULTS MAY DECLINE,

~~E-COMMERCE RETAIL SALES MAY NOT CONTINUE TO GROW AND INCREASE THE DEMAND FOR INDUSTRIAL AND LOGISTICS REAL ESTATE AS WE EXPECT,~~

~~INCREASING DEVELOPMENT OF INDUSTRIAL AND LOGISTICS PROPERTIES MAY REDUCE THE DEMAND FOR, AND OUR RENTS FROM, OUR PROPERTIES,~~

OUR BELIEF THAT THERE IS A LIKELIHOOD THAT TENANTS MAY RENEW OR EXTEND OUR LEASES WHEN THEY EXPIRE WHENEVER THEY HAVE MADE SIGNIFICANT INVESTMENTS IN THE LEASED PROPERTIES, OR BECAUSE THOSE PROPERTIES MAY BE OF STRATEGIC IMPORTANCE TO THEM, MAY NOT BE REALIZED,

~~SOME OF OUR TENANTS MAY NOT RENEW EXPIRING LEASES, AND WE MAY BE UNABLE TO OBTAIN NEW TENANTS TO MAINTAIN OR INCREASE THE HISTORICAL OCCUPANCY RATES OF, OR RENTS FROM, OUR PROPERTIES,~~

THE COMPETITIVE ADVANTAGES WE BELIEVE WE HAVE MAY NOT IN FACT PROVIDE US WITH THE ADVANTAGES WE EXPECT. WE MAY FAIL TO MAINTAIN THESE ADVANTAGES OR OUR COMPETITION MAY OBTAIN OR INCREASE THEIR COMPETITIVE ADVANTAGES RELATIVE TO US,

~~OUR INCREASED OPERATING EXPENSES AS A PUBLIC COMPANY MAY BE GREATER THAN WE EXPECT,~~

WE INTEND TO CONDUCT OUR BUSINESS ACTIVITIES IN A MANNER THAT WILL AFFORD US REASONABLE ACCESS TO CAPITAL FOR INVESTMENT AND FINANCING ACTIVITIES. HOWEVER, WE MAY NOT SUCCEED IN THIS REGARD AND WE MAY NOT HAVE REASONABLE ACCESS TO CAPITAL,

~~CONTINUED AVAILABILITY OF BORROWINGS UNDER OUR REVOLVING CREDIT FACILITY IS SUBJECT TO OUR SATISFYING CERTAIN FINANCIAL COVENANTS AND OTHER CREDIT FACILITY CONDITIONS THAT WE MAY BE UNABLE TO SATISFY,~~

~~ACTUAL COSTS UNDER OUR REVOLVING CREDIT FACILITY WILL BE HIGHER THAN LIBOR PLUS A PREMIUM BECAUSE OF FEES AND EXPENSES ASSOCIATED WITH SUCH DEBT,~~

~~WE MAY BE UNABLE TO REPAY OUR DEBT OBLIGATIONS WHEN THEY BECOME DUE,~~

THE MAXIMUM BORROWING AVAILABILITY UNDER OUR REVOLVING CREDIT FACILITY MAY BE INCREASED TO UP TO $1.5 BILLION IN CERTAIN CIRCUMSTANCES; HOWEVER, INCREASING THE MAXIMUM BORROWING AVAILABILITY UNDER OUR REVOLVING CREDIT FACILITY IS SUBJECT TO OUR OBTAINING ADDITIONAL COMMITMENTS FROM LENDERS, WHICH MAY NOT OCCUR,

~~WE HAVE THE OPTION TO EXTEND THE MATURITY DATE OF OUR REVOLVING CREDIT FACILITY UPON PAYMENT OF A FEE AND MEETING OTHER CONDITIONS. HOWEVER, THE APPLICABLE CONDITIONS MAY NOT BE MET,~~

OUR RIGHT TO ELECT TO HAVE INTEREST PAYABLE UNDER OUR REVOLVING CREDIT FACILITY CALCULATED AS LIBOR PLUS A PREMIUM BASED ON OUR CREDIT RATING IS SUBJECT TO OUR OBTAINING AN INVESTMENT GRADE CREDIT RATING, WHICH WE MAY NOT OBTAIN,

THE BUSINESS AND PROPERTY MANAGEMENT AGREEMENTS BETWEEN US AND RMR LLC HAVE CONTINUING 20 YEAR TERMS. HOWEVER, THOSE AGREEMENTS PERMIT EARLY TERMINATION IN CERTAIN CIRCUMSTANCES. ACCORDINGLY, WE CANNOT BE SURE THAT THESE AGREEMENTS WILL REMAIN IN EFFECT FOR CONTINUING 20 YEAR TERMS,

WE BELIEVE THAT OUR RELATIONSHIPS WITH OUR RELATED PARTIES, INCLUDING RMR LLC, RMR INC., SIR, AIC AND OTHERS AFFILIATED WITH THEM MAY BENEFIT US AND PROVIDE US WITH COMPETITIVE ADVANTAGES IN OPERATING AND GROWING OUR BUSINESS. HOWEVER, THE ADVANTAGES WE BELIEVE WE MAY REALIZE FROM THESE RELATIONSHIPS MAY NOT MATERIALIZE, AND

THE PREMIUMS USED TO DETERMINE THE INTEREST RATE PAYABLE ON OUR REVOLVING CREDIT FACILITY AND THE UNUSED FEE PAYABLE ON OUR REVOLVING CREDIT FACILITY ARE BASED ON OUR LEVERAGE. FUTURE CHANGES IN OUR LEVERAGE MAY CAUSE THE INTEREST AND FEES WE PAY TO INCREASE.

CURRENTLY UNEXPECTED RESULTS COULD OCCUR DUE TO MANY DIFFERENT CIRCUMSTANCES, SOME OF WHICH ARE BEYOND OUR CONTROL, SUCH AS ACTS OF TERRORISM, NATURAL DISASTERS, CHANGES IN OUR TENANTS’ FINANCIAL CONDITIONS, THE MARKET DEMAND FOR LEASED SPACE OR CHANGES IN CAPITAL MARKETS OR THE ECONOMY GENERALLY.

THE INFORMATION CONTAINED ELSEWHERE IN THIS QUARTERLY REPORT ON FORM 10-Q AND IN OUR ANNUAL REPORT OR IN OUR OTHER FILINGS WITH THE SEC, INCLUDING UNDER THE CAPTION “RISK FACTORS”, OR INCORPORATED HEREIN OR THEREIN, IDENTIFIES OTHER IMPORTANT FACTORS THAT COULD CAUSE DIFFERENCES FROM OUR FORWARD LOOKING STATEMENTS. OUR FILINGS WITH THE SEC ARE AVAILABLE ON THE SEC’S WEBSITE AT WWW.SEC.GOV.

~~YOU SHOULD NOT PLACE UNDUE RELIANCE UPON OUR FORWARD LOOKING STATEMENTS.~~

~~EXCEPT AS REQUIRED BY LAW, WE DO NOT INTEND TO UPDATE OR CHANGE ANY FORWARD LOOKING STATEMENTS AS A RESULT OF NEW INFORMATION, FUTURE EVENTS OR OTHERWISE.~~

Except as required by law, we do not intend to update or change any forward-looking statements as a result of new information, future events or otherwise.

~~STATEMENT CONCERNING LIMITED LIABILITY~~Statement Concerning Limited Liability

~~THE AMENDED AND RESTATED DECLARATION OF TRUST ESTABLISHING INDUSTRIAL LOGISTICS PROPERTIES TRUST, DATED JANUARY~~

The Amended and Restated Declaration of Trust establishing Industrial Logistics Properties Trust, dated January 11, 2018, AS FILED WITH THE STATE DEPARTMENT OF ASSESSMENTS AND TAXATION OF MARYLAND, PROVIDES THAT NO TRUSTEE, OFFICER, SHAREHOLDER, EMPLOYEE OR AGENT OF INDUSTRIAL LOGISTICS PROPERTIES TRUST SHALL BE HELD TO ANY PERSONAL LIABILITY, JOINTLY OR SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM AGAINST, INDUSTRIAL LOGISTICS PROPERTIES TRUST. ALL PERSONS DEALING WITH INDUSTRIAL LOGISTICS PROPERTIES TRUST IN ANY WAY SHALL LOOK ONLY TO THE ASSETS OF INDUSTRIAL LOGISTICS PROPERTIES TRUST FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY OBLIGATION.

as filed with the State Department of Assessments and Taxation of Maryland, provides that no trustee, officer, shareholder, employee or agent of Industrial Logistics Properties Trust shall be held to any personal liability, jointly or severally, for any obligation of, or claim against, Industrial Logistics Properties Trust. All persons dealing with Industrial Logistics Properties Trust in any way shall look only to the assets of Industrial Logistics Properties Trust for the payment of any sum or the performance of any obligation.

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PART II.Other Information

Item 1A. Risk Factors

~~There have been no~~Our business faces many risks, a number of which are described under the caption “Risk Factors” in our 2019 Annual Report. The COVID-19 pandemic may subject us to additional risks that are described below. The risks described in our 2019 Annual Report and below may not be the only risks we face. Other risks of which we are not yet aware, or that we currently believe are not material, ~~changes to~~may also materially and adversely impact our business operations or financial results. If any of the events or circumstances described in the risk factors ~~from those we previously disclosed~~contained in our 2019 Annual ~~Report.~~Report or described below occurs, our business, financial condition or results of operations could be adversely impacted and the value of an investment in our securities could decline. Investors and prospective investors should consider the risks described in our 2019 Annual Report and below, and the information contained under the caption “Warning Concerning Forward-Looking Statements” and elsewhere in this Quarterly Report on Form 10-Q before deciding whether to invest in our securities.

The COVID-19 pandemic has resulted in a global economic recession that may materially adversely impact our business, operations, financial results and liquidity.

The strain of coronavirus that causes the viral disease known as COVID-19 has been declared a pandemic by the World Health Organization, and the U.S. Health and Human Services Secretary has declared a public health emergency in the United States in response to the outbreak. The COVID-19 pandemic has had a substantial adverse impact on the global economy, including the U.S. economy, and has resulted in a global economic recession.

Although some of our tenants have benefitted to date from the increased reliance on e-commerce and logistics to support retailers and communities with essential services throughout the United States, challenges to the supply chain due to the COVID-19 pandemic, such as widespread illness that negatively impacts the workforce or other supply chain issues, may negatively impact our tenants’ businesses and operations. Further, the demand for e-commerce and logistics may decline, particularly if the current economic conditions do not continue to improve or if they worsen for an extended period. If that occurs, our tenants may become unable or unwilling to pay rent to us and we may be unable to replace any lost revenues we may experience. Further, these conditions could result in declining market rents where our properties are located, which may adversely affect our future rents.

We typically conduct aspects of our leasing activity at our properties. Accordingly, reductions in the ability and willingness of prospective tenants to visit our properties due to the COVID-19 pandemic could reduce rental revenue and ancillary operating revenue produced by our properties. Concerns relating to the outbreak could also cause on-site personnel not to report for work at our properties, which could adversely affect the management of our properties. As of June 30, 2020, leases for 0.3% of our total annualized rental revenues were scheduled to expire during the last six months of 2020 and only leases for an additional 5.9% are scheduled to expire in 2021. In addition, if tenants default on our leases, we may experience increased vacancies and we may be unable to replace those tenancies for an extended period or at all and the terms of any leases we may enter may not be as favorable to us as the terms of our existing leases.

We cannot predict the extent and duration of the COVID-19 pandemic or the severity and duration of its economic impact. Potential consequences of the current unprecedented measures taken in response to the spread of the virus that causes COVID-19, and current market disruptions and volatility affecting us include, but are not limited to:

increased risk of our tenants being unable to weather an extended cessation of normal economic activity and thereby impairing their ability to continue functioning as a going concern;

increased risk of default or bankruptcy of our tenants;

reduced economic demand resulting from mass employee layoffs or furloughs in response to governmental action taken to slow the spread of the virus that causes COVID-19, which could impact the continued viability of our tenants and the demand for industrial and logistics properties;

our inability to execute improvements to our properties due to a construction moratorium or decrease in available construction workers or construction activity, including required inspectors and governmental personnel for permitting and other requirements, and due to our need to maintain our liquidity,

possible significant declines in the value of our properties;

our inability to accurately or reliably value our portfolio;

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our failure to pay interest or principal when due under our outstanding debt, which may result in the acceleration of payment for our outstanding debt and our possible loss of our revolving credit facility;

our inability to comply with certain financial covenants that could result in our defaulting under our debt agreements;

continued sudden and/or severe declines in the market price of our common shares;

our inability to access debt and equity capital on attractive terms, or at all;

our inability to sell properties we may identify for sale due to a general decline in business activity and demand for real estate transactions; and

our inability to grow our existing joint venture or to enter new joint ventures.

Further, the extent and strength of any economic recovery after the COVID-19 pandemic abates, including following any “second wave” or other intensifying of the pandemic, are uncertain and subject to various factors and conditions. Our business, operations and financial position may continue to be negatively impacted after the COVID-19 pandemic abates and may remain at depressed levels compared to prior to the outbreak of the COVID-19 pandemic and those conditions may continue for an extended period.

Future distributions to our shareholders may be reduced or eliminated as a result of the uncertainty and materially adverse impact of the COVID-19 pandemic and the resulting economic downturn and the form of payment could change.

We currently intend to continue to make regular quarterly distributions to our shareholders. However:

our ability to make or sustain the rate of distributions may continue to be adversely affected by the negative impact of the COVID-19 pandemic and its aftermath on our business, results of operations and liquidity;

our making of distributions is subject to compliance with restrictions contained in the agreements governing our debt and may be subject to restrictions in future debt obligations we may incur; during the continuance of any event of default under the agreements governing our debt, we may be limited or in some cases prohibited from making distributions to our shareholders; 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 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 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 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.

For these reasons, among others, our distribution rate may decline or we may cease making distributions to our shareholders.

In order to preserve liquidity, we may elect to pay distributions to our shareholders in part in a form other than cash, such as issuing additional common shares of ours to our shareholders, as permitted by the applicable tax rules.

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Certain of our tenants have requested relief from their obligations to pay us rent in response to the current economic conditions resulting from the COVID-19 pandemic and we expect to receive additional similar requests in the future; we have provided certain limited relief in response to these requests and may determine to grant additional relief in the future if we determine it prudent or appropriate to do so.

The current economic conditions resulting from the COVID-19 pandemic significantly negatively impacted certain of our tenants’ businesses, operations and liquidity, and certain of our tenants have requested relief from their obligations to pay rent due to us. To date, we have granted some relief to our tenants, which principally consists of deferring an aggregate of approximately $2.8 million of rent payments in exchange for increased payments over, in most cases, a 12-month period commencing in September 2020. We expect to receive additional similar requests in the future, and we may determine to grant additional relief in the future, which may vary from the type of relief we have granted to date, and could include more substantial relief, if we determine it prudent or appropriate to do so. If conditions do not sufficiently and sustainably improve for these tenants, they may be unable to pay deferred or other rents owed to us when due or otherwise. In addition, if any of our tenants are unable to continue as going concerns as a result of the current economic conditions or otherwise, we will experience a reduction in rents received and we may be unable to find suitable replacement tenants for an extended period or at all and the terms of our leases with those replacement tenants may not be as favorable to us as the terms of our agreements with our existing tenants.

The COVID-19 pandemic and resulting economic recession may negatively impact our ability and willingness to grow our existing joint venture and to enter new joint ventures.

We currently have a joint venture for 12 of our Mainland Properties. If that joint venture is unable to obtain sufficient funding from its current or other investors, it will be limited in its ability to grow. In addition, our ability to enter new joint ventures may be limited in the current economic environment if investors are not willing to enter those arrangements due to liquidity or other concerns. Moreover, we may elect not to pursue additional joint ventures for our properties if, for example, we believe the valuations that investors place on our properties are below what we believe to be their actual valuations, which can occur in periods of economic instability such as the current economic environment in the United States and globally. If we are unable to grow our existing joint venture or enter new joint ventures, we may be limited in our ability to grow our business, to obtain financing and to pursue opportunities we believe would be beneficial to us.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Issuer purchases of equity securities. The following table provides information about our purchases of our equity securities during the quarter ended June 30, 2020:

Maximum

Total Number of

Approximate Dollar

Shares Purchased

Value of Shares that

Number of

Average

as Part of Publicly

May Yet Be Purchased

Price Paid

Announced Plans

Under the Plans or

Calendar Month

Purchased ⁽¹⁾

per Share

or Programs

Programs

June 2020

613

20.55

—

Total

613

20.55

—

(1) This common share withholding and purchase was made to satisfy tax withholding and payment obligations of a former officer and employee of RMR LLC in connection with the vesting of awards of our common shares. We withheld and purchased these shares at their fair market value based upon the trading price of our common shares at the close of trading on Nasdaq on the purchase date.

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Item 6. Exhibits



Exhibit Number		Description

3.1		Composite Copy of Amended and Restated Declaration of Trust of the Company, dated as of January 11, ~~2018. (Incorporated by reference~~2018, as amended to ~~the Company's Current Report on Form 8-K dated January 11, 2018).~~date. (Filed herewith.)

3.2	Composite Copy of Amended and Restated Declaration of Trust of the Company, dated as of January 11, 2018, as amended to date (marked copy). (Filed herewith.)

3.3	Amended and Restated Bylaws of the Company, adopted ~~January 11, 2018.~~March 25, 2019. (Incorporated by reference to the ~~Company's~~Company’s Current Report on Form 8-K ~~dated January 11, 2018).~~filed on March 26, 2019.)

4.1		Form of Common Share Certificate. (Incorporated by reference to Amendment No. 2 to the Company's Registration Statement on Form S-11, File No. 333-221708.)

~~4.2~~	10.1	~~Registration Rights Agreement, dated January 17, 2018, between the Company and Select Income REIT.~~Summary of Trustee Compensation. (Incorporated by reference to the ~~Company's~~Company’s Current Report on Form 8-K ~~dated January 11, 2018).~~filed on May 29, 2020.)

31.1		Rule 13a-14(a) Certification. (Filed herewith.)

31.2		Rule 13a-14(a) Certification. (Filed herewith.)

32.1		Section 1350 Certification. (Furnished herewith.)

101.INS	XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

~~101.1~~101.SCH		~~The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2018 formatted in~~ XBRL (eXtensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Comprehensive Income, (iii) the Condensed Consolidated Statements of Cash Flows and (iv) related notes to these financial statements, tagged as blocks of text and in detail.Taxonomy Extension Schema Document. (Filed herewith.)

101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document. (Filed herewith.)

101.DEF	XBRL Taxonomy Extension Definition Linkbase Document. (Filed herewith.)

101.LAB	XBRL Taxonomy Extension Label Linkbase Document. (Filed herewith.)

101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document. (Filed herewith.)

104	Cover Page Interactive Data File. (Formatted as Inline XBRL and contained in Exhibit 101.)

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



	INDUSTRIAL LOGISTICS PROPERTIES TRUST


	By:	/s/ John ~~C. Popeo~~G. Murray
		John ~~C. Popeo~~G. Murray
		President and Chief ~~Operating~~Executive Officer
		Dated: ~~April 27, 2018~~July 29, 2020


	By:	/s/ Richard W. Siedel, Jr.
		Richard W. Siedel, Jr.
		Chief Financial Officer and Treasurer
		(principal financial officer and principal accounting officer)
		Dated: ~~April 27, 2018~~July 29, 2020

2744



	At March 31, 2018				At December 31, 2017
	Carrying		Estimated		Carrying		Estimated
	Value ⁽¹⁾		Fair Value		Value ⁽¹⁾		Fair Value
Mortgage note payable	$	49,369	$	48,527	$	49,427	$	48,919



	Annualized
	Rental Revenues as of
	March 31, 2018
	Scheduled to Reset
2018	$	237
2019	10,903
2020	2,500
2021 and thereafter	19,723
Total	$	33,363

Two Newton Place,

255 Washington Street,

Suite 300, ~~Newton, Massachusetts~~

Massachusetts

(Address of Principal Executive Offices)

(Zip Code)