Table of Contents

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, 20182021


OR


☐ 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)

Maryland82-2809631
(State or Other Jurisdiction of Incorporation or
Organization)
(IRS Employer Identification No.)
Two Newton Place,255 Washington Street,Suite 300, Newton, MassachusettsNewton,Massachusetts02458-1634
(Address of Principal Executive Offices)(Zip Code)


617-219-1460
(Registrant’s Telephone Number, Including Area Code)


Securities Registered Pursuant to Section 12(b) of the Act:
Title of Each ClassTrading Symbol(s)Name Of Each Exchange On Which Registered
Common Shares of Beneficial InterestILPTThe 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☐
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
22, 2021: 65,301,088


Table of Contents

INDUSTRIAL LOGISTICS PROPERTIES TRUST
 
FORM 10-Q
 
March 31, 20182021
 
INDEX
 
Page
3
3
3
4
5
56
68
1114
2026
2128
2229
2532
2533
2533
2634
2735
 
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.

2

Table of Contents
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,
 20212020
ASSETS  
Real estate properties:  
Land$709,099 $709,099 
Buildings and improvements1,100,183 1,099,971 
Total real estate properties, gross1,809,282 1,809,070 
Accumulated depreciation(149,003)(141,406)
Total real estate properties, net1,660,279 1,667,664 
Investment in unconsolidated joint venture62,511 60,590 
Acquired real estate leases, net78,394 83,644 
Cash and cash equivalents26,147 22,834 
Rents receivable, including straight line rents of $64,797 and $62,753, respectively70,411 69,511 
Deferred leasing costs, net5,208 4,595 
Debt issuance costs, net1,108 1,477 
Due from related persons1,409 2,665 
Other assets, net3,552 2,765 
Total assets$1,909,019 $1,915,745 
LIABILITIES AND SHAREHOLDERS' EQUITY  
Revolving credit facility$217,000 $221,000 
Mortgage notes payable, net645,715 645,579 
Assumed real estate lease obligations, net14,053 14,630 
Accounts payable and other liabilities14,720 14,716 
Rents collected in advance7,522 7,811 
Security deposits6,569 6,540 
Due to related persons2,224 2,279 
Total liabilities907,803 912,555 
Commitments and contingencies00
Shareholders' Equity:
Common shares of beneficial interest, $.01 par value: 100,000,000 shares authorized; 65,301,088 shares issued and outstanding for both periods presented653 653 
Additional paid in capital1,011,058 1,010,819 
Cumulative net income243,563 224,226 
Cumulative common distributions(254,058)(232,508)
Total shareholders' equity1,001,216 1,003,190 
Total liabilities and shareholders' equity$1,909,019 $1,915,745 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
3
  March 31, December 31,
  2018 2017
ASSETS    
Real estate properties:    
Land $642,706
 $642,706
Buildings and improvements 701,433
 700,896
  1,344,139
 1,343,602
Accumulated depreciation (79,092) (74,614)
  1,265,047
 1,268,988
Acquired real estate leases, net 76,475
 79,103
Cash and cash equivalents 19,847
 —
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
Debt issuance costs, net 5,538
 1,724
Deferred leasing costs, net 5,065
 5,254
Due from related persons 4,133
 —
Other assets, net 4,343
 4,942
Total assets $1,433,235
 $1,411,683
     
LIABILITIES AND SHAREHOLDERS' EQUITY    
Revolving credit facility $302,000
 $750,000
Mortgage note payable, net 49,369
 49,427
Assumed real estate lease obligations, net 19,861
 20,384
Accounts payable and other liabilities 11,056
 11,082
Rents collected in advance 8,426
 5,794
Security deposits 5,730
 5,674
Due to related persons 3,965
 7,114
Total liabilities 400,407
 849,475
     
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
Additional paid in capital 997,677
 546,489
Cumulative net income 34,501
 15,269
Total shareholders' equity 1,032,828
 562,208
Total liabilities and shareholders' equity $1,433,235
 $1,411,683

Table of Contents
See accompanying notes

INDUSTRIAL LOGISTICS PROPERTIES TRUST
 
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(amounts in thousands, except per share data)
(unaudited)
 
 Three Months Ended March 31,
 20212020
Rental income$54,217 $64,278 
Expenses:  
Real estate taxes7,247 8,811 
Other operating expenses4,976 5,181 
Depreciation and amortization12,678 18,290 
General and administrative3,756 4,831 
Total expenses28,657 37,113 
 
Interest income0 111 
Interest expense (including net amortization of debt issuance costs, premiums and discounts of $505 and $586, respectively)(8,741)(14,519)
Income before income tax expense and equity in earnings of investees16,819 12,757 
Income tax expense(63)(63)
Equity in earnings of investees2,581 0 
Net income19,337 12,694 
Net loss attributable to noncontrolling interest0 152 
Net income attributable to common shareholders$19,337 $12,846 
Weighted average common shares outstanding - basic65,139 65,075 
Weighted average common shares outstanding - diluted65,177 65,082 
 
Per common share data (basic and diluted):
Net income attributable to common shareholders$0.30 $0.20 

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



4
  Three Months Ended March 31,
  2018 2017
     
REVENUES:    
Rental income $34,809
 $33,870
Tenant reimbursements and other income 5,796
 5,570
Total revenues 40,605
 39,440
     
EXPENSES:  
  
Real estate taxes 4,585
 4,339
Other operating expenses 3,545
 2,732
Depreciation and amortization 6,873
 6,811
General and administrative 2,574
 4,636
Total expenses 17,577
 18,518
     
Operating income 23,028
 20,922
     
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
     
Weighted average common shares outstanding - basic and diluted 61,445
 45,000
     
Net income per common share—basic and diluted $0.31
 $0.45

Table of Contents
See accompanying notes


INDUSTRIAL LOGISTICS PROPERTIES TRUST
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(dollars in thousands)
(unaudited)
Total EquityTotal Equity
Number ofAdditionalCumulativeAttributable toAttributable to
CommonCommonPaid InCumulativeCommonCommonNoncontrollingTotal
SharesSharesCapitalNet IncomeDistributionsShareholdersInterestEquity
Balance at December 31, 202065,301,088 $653 $1,010,819 $224,226 $(232,508)$1,003,190 $0 $1,003,190 
Net income (loss)— — — 19,337 — 19,337 — 19,337 
Share grants0 — 239 — — 239 — 239 
Distributions to common shareholders— — — — (21,550)(21,550)— (21,550)
Balance at March 31, 202165,301,088 $653 $1,011,058 $243,563 $(254,058)$1,001,216 $0 $1,001,216 
Balance at December 31, 201965,180,628 $652 $999,302 $142,155 $(146,419)$995,690 $0 $995,690 
Net income (loss)— — — 12,846 — 12,846 (152)12,694 
Share grants6,000 — 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, 202065,185,677 $652 $1,006,582 $155,001 $(167,929)$994,306 $100,516 $1,094,822 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
5
Table of Contents
INDUSTRIAL LOGISTICS PROPERTIES TRUST 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
(unaudited)
 Three Months Ended March 31,
20212020
CASH FLOWS FROM OPERATING ACTIVITIES:  
Net income$19,337 $12,694 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation7,617 11,294 
Net amortization of debt issuance costs, premiums and discounts505 586 
Amortization of acquired real estate leases and assumed real estate lease obligations4,673 6,530 
Amortization of deferred leasing costs211 273 
Straight line rental income(2,044)(1,967)
Other non-cash expenses239 326 
Unconsolidated joint venture distributions660 0 
Equity in earnings of investees(2,581)0 
Change in assets and liabilities:
Rents receivable1,144 (775)
Deferred leasing costs(771)(273)
Due from related persons1,256 481 
Other assets(787)(4,420)
Accounts payable and other liabilities508 3,196 
Rents collected in advance(289)1,289 
Security deposits29 12 
Due to related persons(55)199 
Net cash provided by operating activities29,652 29,445 
 
CASH FLOWS FROM INVESTING ACTIVITIES:
Real estate acquisitions and deposits0 (71,628)
Real estate improvements(789)(2,307)
Net cash used in investing activities(789)(73,935)
 
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under revolving credit facility9,000 125,000 
Repayments of revolving credit facility(13,000)(170,000)
Distributions to common shareholders(21,550)(21,510)
Proceeds from noncontrolling interest, net0 107,640 
Repurchase of common shares0 (18)
Net cash (used in) provided by financing activities(25,550)41,112 
 
Increase (decrease) in cash, cash equivalents and restricted cash3,313 (3,378)
Cash, cash equivalents and restricted cash at beginning of period22,834 34,550 
Cash, cash equivalents and restricted cash at end of period$26,147 $31,172 

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



6
  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
Table of Contents

See accompanying notes

INDUSTRIAL LOGISTICS PROPERTIES TRUST
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(dollars in thousands)
(unaudited)


 Three Months Ended March 31,
20212020
SUPPLEMENTAL DISCLOSURES:
Interest paid$8,240 $14,143 

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:
As of March 31,
20212020
Cash and cash equivalents$26,147 $19,870 
Restricted cash0 11,302 
Total cash, cash equivalents and restricted cash shown in the statements of cash flows$26,147 $31,172 

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 the Company, ILPT, 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, 2017,2020, or our 2020 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 position have been derived from the financial statements of SIR.

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, and the assessments of the carrying values and impairments of long lived assets.real estate and related intangibles.

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 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 effective for fiscal years beginning after December 15, 2019, including interim periods

within those fiscal years. We are currently assessing the potential 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 PropertiesInvestments


As of March 31, 2018, we2021, our portfolio was comprised of 289 wholly owned 266 properties with a total ofcontaining approximately 28,540,00034,870,000 rentable square feet, including 226 buildings, leasable land parcels and easements with a total ofcontaining approximately 16,834,00016,756,000 rentable square feet that areof primarily industrial lands located on the island of Oahu, HI,Hawaii, or our Hawaii Properties, and 40 buildings with a total of63 properties containing approximately 11,706,00018,114,000 rentable square feet that areof industrial and logistics properties located in 2430 other states, or our Mainland Properties.

As of March 31, 2021, we also owned a 22% equity interest in an unconsolidated joint venture which owns 12 properties located in 9 states totaling approximately 9,227,000 rentable square feet.
We operate in one1 business segment: ownership and leasing of properties that include industrial and logistics buildings and leased industrial lands. For the three months ended March 31, 20182021 and 2017,2020, approximately 60.7%50.2% and 59.8%41.1%, respectively, of our total revenues wererental income was from our Hawaii Properties. In addition, two subsidiariesa subsidiary of Amazon.com, Inc., which are tenantsis a tenant at certain of our Mainland Properties, accounted for $4,267, or 10.5%, and $4,145,$5,538, or 10.2%, and $9,662, or 15.0%, of our total revenuesrental income for the three months ended March 31, 20182021 and 2017,2020, respectively.

During the three months ended March 31, 2018,2021, we committed $68$3,256 for expenditures related to tenant improvements and leasing related costs for approximately 296,000 square feet of leases executed during the period.

period for approximately 620,000 square feet. Committed but unspent tenant related obligations based on existing leases as of March 31, 20182021 were $243.

$1,704.
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, 20182021 and December 31, 2017,2020, 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.

In March 2021, we entered into an agreement to acquire a newly built property located near the Rickenbacker intermodal terminal and airport in Columbus, Ohio containing approximately 358,000 rentable square feet and net leased to a single tenant for a purchase price of $31,500, excluding acquisition related costs. This acquisition is expected to close during the second quarter of 2021. However, this acquisition is subject to conditions; accordingly, we cannot be sure that we will complete this acquisition, that this acquisition will not be delayed or that the terms will not change.
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INDUSTRIAL LOGISTICS PROPERTIES TRUST 
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(dollars in thousands, except per share data)

Joint Venture Activities
As of March 31, 2021, we have an equity investment in a joint venture that consists of the following:
ILPT Carrying Value of
ILPTInvestment at March 31,Number ofSquare
Joint VentureOwnership2021PropertiesLocationFeet
12 properties22%$62,511 12 NaN states9,226,729 
The following table provides a summary of the mortgage debts of our joint venture:
Principal Balance
at March 31,
Joint Venture
Coupon Rate (1)
Maturity Date
2021 (2)
Mortgage note payable (secured by 1 property in Florida)3.60%10/1/2023$56,980 
Mortgage note payable (secured by 11 other properties in 8 states)3.33%11/7/2029350,000 
Weighted average/total3.37%$406,980 
(1) Includes the effect of mark to market purchase accounting.
(2) Amounts are not adjusted for our minority interest; none of the debt is recourse to us.
During the three months ended March 31, 2020, we entered into agreements related to a joint venture for 12 of our properties in the mainland United States, or our joint venture, with an Asian institutional investor, and contributed those 12 properties to our joint venture. We received an aggregate of $108,266 from that investor for a 39% equity interest in our joint venture and we retained the remaining 61% equity interest in our joint venture. During the three months ended March 31, 2020, we incurred transaction costs of $626 in connection with the formation of this joint venture.
We recognized a 39% noncontrolling interest in our condensed consolidated financial statements for the three months ended March 31, 2020. The portion of our joint venture's net loss not attributable to us, or $152 for the three months ended March 31, 2020, is reported as noncontrolling interest in our condensed consolidated statements of comprehensive income. No distributions were made by our joint venture during the three months ended March 31, 2020.
In November 2020, we sold an additional 39% equity interest from our remaining 61% equity interest to a second unrelated third party institutional investor and retained a 22% equity interest in our joint venture. Effective as of the date of the sale, we deconsolidated our joint venture and, since that time, we account for our joint venture using the equity method of accounting under the fair value option.
During the three months ended March 31, 2021, we recorded the change in the fair value of our investment in our joint venture of $2,581 as equity in earnings of investees in our condensed consolidated statements of comprehensive income. In addition, during the three months ended March 31, 2021, our joint venture made aggregate cash distributions of $660 to us. See Note 5 for more information regarding our joint venture.
Note 3. 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 $9,872 and
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INDUSTRIAL LOGISTICS PROPERTIES TRUST 
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(dollars in thousands, except per share data)

$11,520 for the three months ended March 31, 2021 and 2020, respectively, of which tenant reimbursements totaled $9,627 and $11,275, respectively.
We increased rental income to record revenue on a straight line basis by $2,044 and $1,967 for the three months ended March 31, 2021 and 2020, respectively.
During the year ended December 31, 2020, certain of our tenants requested relief from their obligations to pay rent due to us in response to the economic conditions resulting from the COVID-19 pandemic. In most cases, the tenants granted deferrals were obligated to pay the deferred rents in 12 equal monthly installments beginning in September 2020. As of March 31, 2021 and December 31, 2020, deferred payments totaling $1,725 and $2,630, respectively, are included in rents receivable in our condensed consolidated balance sheets. These deferred amounts did not impact our operating results for the three months ended March 31, 2021.
Note 4. Indebtedness


Our principal debt obligations atAs of March 31, 2018 were: 2021, our outstanding indebtedness consisted of the following:
Net Book
 Value
Principal Balance as of of Collateral
March 31,December 31,InterestAt March 31,
2021 (1)
2020 (1)
RateMaturity2021
Unsecured revolving credit facility (2)
$217,000 $221,000 1.41 %Dec 2021$0 
Mortgage notes payable (secured by 186 properties in Hawaii)650,000 650,000 4.31 %Feb 2029491,336 
867,000 871,000 $491,336 
Unamortized debt issuance costs(4,285)(4,421)
$862,715 $866,579 

(1) $302,000The principal balances are the amounts stated in contracts. In accordance with GAAP, our carrying values and recorded interest expense may be different because of outstanding borrowings undermarket conditions at the time we assumed certain of 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 ais December 29, 2021 and we have the option to extend the maturity date of Marchfor 2, six month periods through December 29, 2018. Upon the completion of our IPO, our secured revolving credit facility became2022.

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 arethat 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, duringAs of March 31, 2021, interest payable on the first quarter of 2018, we completed the syndication ofamount outstanding under our revolving credit facility with a group of institutional lenders.was LIBOR plus 130 basis points and our commitment fee was 25 basis points. As of March 31, 20182021 and December 31, 2017,2020, the interest rate payable on borrowings under our revolving credit facility was 3.23%1.41% and 2.89%1.70%, respectively. The weighted average interest rate for borrowings under our revolving credit facility was 2.97%1.57% and 3.23% for the three months ended March 31, 2018.2021 and 2020, respectively. As of March 31, 20182021 and April 26, 2018,22, 2021, we

had $302,000 and $292,000, respectively,$217,000 outstanding under our revolving credit facility, and $448,000 and $458,000, respectively,$533,000 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, 2018.2021.

10
As
Table of March 31, 2018, the principal amount outstanding under our mortgage note was $48,750. This mortgage note was secured by one of our properties with a net book value of $66,166. This mortgage note is non-recourse, subject to certain limited exceptions, and does not contain any material financial covenants.Contents

INDUSTRIAL LOGISTICS PROPERTIES TRUST 
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(dollars in thousands, except per share data)

Note 5. Fair Value of Assets and Liabilities


Our financial instruments include cash and cash equivalents, restricted cash, rents receivable, our revolving credit facility, a mortgage notenotes payable, accounts payable, rents collected in advance, security deposits and amounts due from or to related persons. At March 31, 20182021 and December 31, 2017,2020, the fair value of our financial instruments approximated their carrying values in our condensed consolidated financial statements, due to their short term nature or variablefloating interest rates, except as follows:
 At March 31, 2021At December 31, 2020
 CarryingEstimatedCarryingEstimated
 
Value (1)
Fair Value
Value (1)
Fair Value
Mortgage notes payable$645,715 $706,152 $645,579 $730,119 
  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
(1)Includes unamortized debt issuance costs of $4,285 and $4,421 as of March 31, 2021 and December 31, 2020, respectively.
(1)Includes unamortized premiums of $619 and $677 as of March 31, 2018 and December 31, 2017, respectively.


We estimate the fair value of our mortgage notenotes payable using discounted cash flow analysisanalyses 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.

The table below presents certain of our assets measured on a recurring basis at fair value at March 31, 2021, categorized by the level of inputs as defined in the fair value hierarchy under GAAP, used in the valuation of each asset:
Quoted Prices inSignificant OtherSignificant
Active Markets forObservableUnobservable
Identical AssetsInputsInputs
 Total(Level 1)(Level 2)(Level 3)
Recurring fair value measurements
Investment in unconsolidated joint venture (1)
$62,511 $0 $0 $62,511 
(1) We own a 22% equity interest in a joint venture that owns 12 properties and is included in investment in unconsolidated joint venture in our condensed consolidated balance sheet, and is reported at fair value, which is based on significant unobservable inputs (Level 3 inputs). The significant unobservable inputs used in the fair value are discount rates of between 4.8% and 7.3%, exit capitalization rates of between 4.4% and 6.8%, holding periods of approximately 10 years and market rents. The assumptions are based on the location, type and nature of each property, and current and anticipated market conditions, which are derived from appraisers, industry publications and our experience. See Note 2 for further information regarding our investment in this joint venture.
Note 6. Shareholders’ Equity

Share Issuances:

On January 17, 2018, we issued 20,000,000 of our common shares in our IPO at a price to the public of $24.00 per common share, raising net proceeds of $444,309, after deducting the underwriting discounts and commissions and expenses.

On March 27, 2018, in accordance with our Trustee compensation arrangements, we granted 1,000 of our common shares, valued at $20.87 per share, the closing price of our common shares on Nasdaq on that day, to each of our five Trustees as part of their annual compensation.


Distributions:

During the three months ended March 31, 2021, we declared and paid a regular quarterly distribution to common shareholders as follows:
Record DatePayment DateDistribution Per ShareTotal Distribution
January 25, 2021February 18, 2021$0.33 $21,550 
On April 19, 2018,15, 2021, 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 $21,550, to shareholders of record on April 26, 2021. We expect to pay this distribution to our shareholders on or about May 14, 2018.20, 2021.

11
Additional Paid
Table of Contents
INDUSTRIAL LOGISTICS PROPERTIES TRUST 
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(dollars in Capital Adjustments:thousands, except per share data)


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 perPer Common Share Amounts


We calculate earnings per common share by dividing net income byThe following table provides a reconciliation of the weighted average number of common shares outstanding duringused in the period. Basic earnings per share equalcalculation of basic and diluted earnings per share as there are no common share equivalent securities outstanding.(in thousands):

 Three Months Ended March 31,
 20212020
Weighted average common shares for basic earnings per share65,139 65,075 
Effect of dilutive securities: unvested share awards38 7 
Weighted average common shares for diluted earnings per share65,177 65,082 

Note 8. Income Taxes

Until January 17, 2018, we were a wholly owned subsidiary of SIR, which is taxed as a REIT under the Internal Revenue Code of 1986, as amended, or the IRC. Accordingly, until January 17, 2018, we were a qualified REIT subsidiary 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 our common shares and a $750,000 non-interest bearing demand note, or the SIR Note, and we assumed three mortgage notes totaling $63,069, as 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 Note 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.

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 10.8. 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 two2 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$2,544 and $3,307 for the period from January 17, 2018 throughthree months ended March 31, 2018. This2021 and 2020, respectively. The net business management fees we recognized for the three months ended March 31, 2020 include $129 of management fees paid to RMR LLC for that period by our joint venture we then owned a majority interest in and whose operating results we reported on a consolidated basis. Beginning in November 2020, our ownership in our joint venture was reduced to a minority interest; as a result, we ceased at that time to consolidate our joint venture’s operating results and, since then, we do not include the management fees it pays to RMR LLC in the management fees we pay to RMR LLC. Our joint venture is further described in Notes 2 and 9. Based on our common share total return, as defined in our business management agreement, as of March 31, 2021 and 2020, 0 incentive fees are included in the net business management fees we recognized for the three months ended March 31, 2021 or 2020. The actual amount is includedof annual incentive fees for 2021, if any, will be based on our common share total return, as defined in our business management agreement, for the three year period ending December 31, 2021, and will be payable in 2022. We did 0t incur any incentive fee payable to RMR LLC for the year ended December 31, 2020. 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$1,594 and $1,923 for the period from January 17, 2018 throughthree months ended March 31, 2018. This amount is included in other operating expenses or has been capitalized, as appropriate, in our condensed consolidated financial statements.

We are generally responsible for all of our operating expenses, including certain expenses incurred by RMR LLC on our behalf. Our property level operating expenses, including certain payroll2021 and related costs incurred by RMR LLC, are generally incorporated into rents charged to our tenants. We reimbursed RMR LLC $542 for property management related expenses2020, respectively. Of these amounts, for the period from January 17, 2018 throughthree months ended March 31, 2018, which amount is included in2021 and 2020, $1,582 and $1,860, respectively, were expensed to other operating expenses in our condensed consolidated statements of comprehensive income. In addition, weincome and $12 and $63, respectively, were capitalized as building improvements in our condensed consolidated balance sheets.
We are generally responsible for all our operating expenses, including certain expenses incurred or arranged by RMR LLC on our behalf. We are generally not responsible for payment of RMR LLC’s employment, office or administrative expenses 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 of RMR LLC’s centralized accounting personnel, our share of RMR LLC’s costs for providing our internal audit function. The amount recognizedfunction, or as expenseotherwise 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 $1,141 and $1,199 for internal auditthese expenses and costs was $52 for the period from January 17, 2018 throughthree months ended March 31, 2018, which amount is2021 and 2020, 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 NotesNote 9 and 11 for further information regarding our relationships, agreements and transactions with RMR LLC.

Note 11.9. Related Person Transactions


We have relationships and historical and continuing transactions with RMR LLC, SIRThe 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 andor officers who are also our Trustees or officers. RMR LLC is a majority owned

12
INDUSTRIAL LOGISTICS PROPERTIES TRUST 
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(dollars in thousands, except per share data)

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 officer and employee 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 two2 agreements with RMR LLC to provide management services to us. See Note 108 for further information regarding our management agreements with RMR LLC.

For further information about these and other such relationships and certain other related person transactions, see our 2020 Annual Report.
SIROur Joint Venture. SIR is our largest shareholder. As of March 31, 2018, SIR owned 45,000,0002021 and December 31, 2020, our joint venture owed to us $1,409 and $2,665, respectively, for post-closing adjustments relating to our sale of some of our common shares, or approximately 69.2% of our outstanding common shares. We were SIR’s wholly owned subsidiary until we completed our IPO on January 17, 2018. Adam D. Portnoy, one of our Managing Trustees, is alsoequity interests to a managing trustee of SIR. John C. Popeo, our other Managing Trustee and our President and Chief Operating Officer, also servessecond third party institutional investor in November 2020. These amounts are presented as the chief financial officer and treasurer of SIR. RMR LLC provides management services to SIR and us. In connection with our IPO, we entered a transaction agreement with SIR that governs our separationdue from and relationship with SIR. The transaction agreement provides that, among other things, (1) our current assets and current liabilities, as of the time of closing 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 respect to any of our liabilities, and SIR will indemnify us with respect to any of SIR’s liabilities, after giving effect to the settlement between us and SIR of our current assets and current liabilities, and (3) we and SIR will cooperate to enforce the ownership limitationsrelated persons in our and SIR’s respective declarationcondensed consolidated balance sheets.
13


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 2020 Annual Report.

OVERVIEW (dollars in thousands, except per share and per square foot data)
 
We are a real estate investment trust, or REIT, organized under Maryland law. As of March 31, 2018, we2021, our portfolio was comprised of 289 wholly owned 266 properties withcontaining approximately 28.534.9 million rentable square feet, including 226 buildings, leasable land parcels and easements withcontaining approximately 16.8 million rentable square feet located on the island of Oahu, HI,Hawaii, and 40 buildings with63 properties containing approximately 11.718.1 million rentable square feet located in 2430 other states. As of March 31, 2018,2021, we also owned a 22% equity interest in an unconsolidated joint venture which owns 12 properties located in nine states containing approximately 9.2 million rentable square feet that were 100% leased with an average (by annualized rental revenues) remaining lease term of 8.0 years. As of March 31, 2021, our consolidated properties were approximately 99.9%98.6% leased (based on rentable square feet) to 243253 different tenants with a weighted average remaining lease term (based on annualized rental revenues) of approximately 11.29.4 years. We define the term annualized rental revenues as used in this section as the annualized contractual rents, as of March 31, 2018,2021, 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.

Property Operations
Our business is focused on industrial and logistics properties. The industrial and logistics sector has fared better than some other industries thus far during the COVID-19 pandemic, including other real estate sectors, due to the demand for e-commerce. Although, to date, the COVID-19 pandemic has not had a significant adverse impact on our business, certain of our tenants requested relief from their obligations to pay rent due to us in response to the economic conditions resulting from the COVID-19 pandemic. As of April 23, 2021, we granted requests to certain of our tenants to defer aggregate rent payments of $3,103 with respect to leases that represent, as of March 31, 2021, approximately 1.5% of our annualized rental revenues. As of March 31, 2018, 99.9%2021, we recognized $1,725 in our accounts receivable related to the remaining deferred amounts. In most cases, these tenants were obligated to pay the deferred rents in 12 equal monthly installments beginning in September 2020. These deferred amounts did not negatively impact our operating results for the three months ended March 31, 2021, and will continue to be reflected in our financial results in the applicable future reporting periods, assuming these tenants continue to pay the deferred rents due to us. Our manager, RMR LLC, has taken various actions in response to the COVID-19 pandemic to address its operating and financial impact on us and to protect the health and safety of our rentable square feet was leased, comparedtenants and other persons who visit our properties. In addition, we are continuing to 99.6%closely monitor the impact of the COVID-19 pandemic on all aspects of our rentable square feetbusiness. See our 2020 Annual Report for further information regarding these actions and monitoring activities.
There are uncertainties surrounding the COVID-19 pandemic and, as a result of March 31, 2017. 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 I, Item 1, “Business—Impact of COVID-19” and Part I, Item 1A, “Risk Factors”, of our 2020 Annual Report.
Property Operations
Occupancy data for our properties as of March 31, 20182021 and 20172020 is as follows (square feet in thousands):
All Properties
Comparable Properties (1)
As of March 31,As of March 31,
2021202020212020
Total properties289 301 287 287 
Total rentable square feet (2)
34,870 43,759 33,404 33,404 
Percent leased (3)
98.6 %98.9 %98.5 %98.5 %
(1)Consists of properties that we owned continuously since January 1, 2020 and excludes 12 properties owned by an unconsolidated joint venture in which we own a 22% equity interest.
(2)Subject to modest adjustments when space is remeasured or 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, 2021, if any, and (ii) space which is leased but is not occupied or is being offered for sublease by tenants, if any.
 
14
  
All Properties (1)
  As of March 31,
     2018 2017
Total properties 266
 266
Total rentable square feet (2)
 28,540
(4) 
28,505
Percent leased (3)
 99.9% 99.6%
(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.
(2)Subject to modest adjustments when space is re-measured or re-configured 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, 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 months ended March 31, 20182021 and 20172020 are as follows:
Three Months Ended March 31,
20212020
Average effective rental rates per square foot leased: (1)
All properties$6.31 $6.02 
Comparable properties (2)
$6.35 $6.11 
  Three Months Ended March 31,
  2018 2017
Average effective rental rates per square foot leased (1)
 $5.69
 $5.58
(1)Average effective rental rates per square foot leased represents annualized rental income during the period specified divided by the average rentable square feet leased during the period specified.
(1)Average effective rental rates per square foot leased represents annualized total revenues during the period specified divided by the average rentable square feet leased during the period specified.
(2)Consists of properties that we owned continuously since January 1, 2020 and excludes 12 properties owned by an unconsolidated joint venture in which we own a 22% equity interest.

During the three months ended March 31, 2018,2021, we entered lease renewalsnew and newrenewal leases for approximately 296,000620,000 square feet at weighted average (per(by square foot)feet) rental rates that were approximately 45.9%16.0% 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 11.7 years. Commitments for tenant improvements, leasing costs and concessions for leases entered during the three months ended March 31, 20182021 totaled $68,000,$3,256, or $0.01approximately $0.45 per square foot per year of the new weighted average lease term.


As shown in the table below, approximately 1.1%0.9% of both our total rentedleased square feet and approximately 0.8% of our total annualized rental revenues as of March 31, 20182021 are included in leases scheduled to expire by December 31, 2018. 2021.
As of March 31, 2018,2021, our lease expirations by year are as follows (dollars and square feet in thousands):
% of TotalCumulative
% of TotalCumulative %AnnualizedAnnualized% of Total
LeasedLeasedof Total LeasedRentalRentalAnnualized
Number ofSquare FeetSquare FeetSquare Feet Revenues RevenuesRental Revenues
Period / YearTenants
Expiring (1)
Expiring (1)
Expiring (1)
ExpiringExpiringExpiring
4/1/2021-12/31/202114 322 0.9 %0.9 %$2,165 1.0 %1.0 %
202260 2,683 7.8 %8.7 %19,499 9.2 %10.2 %
202331 2,575 7.5 %16.2 %16,871 8.0 %18.2 %
202431 6,709 19.5 %35.7 %28,638 13.6 %31.8 %
202515 2,364 6.9 %42.6 %13,156 6.2 %38.0 %
20267 1,028 3.0 %45.6 %7,121 3.4 %41.4 %
202711 4,578 13.3 %58.9 %24,696 11.7 %53.1 %
202820 2,459 7.2 %66.1 %17,881 8.5 %61.6 %
20298 1,697 4.9 %71.0 %5,393 2.6 %64.2 %
20309 1,232 3.6 %74.6 %9,516 4.5 %68.7 %
Thereafter82 8,719 25.4 %100.0 %66,147 31.3 %100.0 %
    Total288 34,366 100.0 %$211,083 100.0 %
Weighted average remaining lease term (in years):8.3 9.4 
(1)Leased square feet is pursuant to existing leases as of March 31, 2021 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.
15
               
            % of Total Cumulative
      % of Total Cumulative % Annualized Annualized % of Total
    Rented Rented of Total Rented Rental Rental Annualized
  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%
2021 20
 1,224
 4.3% 13.8% 7,139
 4.6% 10.9%
2022 63
 2,762
 9.7% 23.5% 20,823
 13.3% 24.2%
2023 18
 1,538
 5.4% 28.9% 11,665
 7.5% 31.7%
2024 12
 4,750
 16.6% 45.5% 15,698
 10.0% 41.7%
2025 8
 619
 2.2% 47.7% 3,115
 2.0% 43.7%
2026 3
 637
 2.2% 49.9% 3,472
 2.2% 45.9%
2027 12
 4,887
 17.1% 67.0% 23,840
 15.2% 61.1%
Thereafter 81
 9,421
 33.0% 100.0% 60,877
 38.9% 100.0%
    Total 268
 28,534
 100.0%   $156,508
 100.0%  
               
Weighted average remaining lease term (in years): 10.3
     11.2
    
(1)Rented square feet is pursuant to existing leases as of March 31, 2018, 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.

We generally receive rents from our tenants monthly in advance. As of March 31, 2018,2021, tenants representing 1% or more of our total annualized rental revenues were as follows (square feet in thousands):
% of Total
No. ofLeased% of TotalAnnualized Rental
TenantStatesProperties
Sq. Ft. (1)
Leased Sq. Ft. (1)
Revenues
1Amazon.com Services, Inc.AZ, SC, TN, VA43,869 11.3 %10.0 %
2Federal Express Corporation / FedEx Ground Package System, Inc.AR, CO, HI, IA, ID, IL, MN, MO, NC, ND, NV, OH, OK, UT17952 2.8 %4.5 %
3Restoration Hardware, Inc.MD11,195 3.5 %2.9 %
4American Tire Distributors, Inc.CO, LA, NE, NY, OH5722 2.1 %2.5 %
5Servco Pacific Inc.HI6590 1.7 %2.4 %
6UPS Supply Chain Solutions Inc.NH1614 1.8 %2.3 %
7Par Hawaii Refining, LLCHI33,148 9.2 %2.3 %
8EF Transit, Inc.IN1535 1.6 %1.9 %
9BJ's Wholesale Club, Inc.NJ1634 1.8 %1.7 %
10Shurtech Brands, LLCOH1645 1.9 %1.6 %
11Coca-Cola Bottling of Hawaii, LLCHI4351 1.0 %1.6 %
12Safeway Inc.HI2146 0.4 %1.6 %
13ELC Distribution Center LLCKS1645 1.9 %1.5 %
14Manheim Remarketing, Inc.HI1338 1.0 %1.5 %
15Exel Inc.SC1945 2.8 %1.4 %
16Avnet, Inc.OH1581 1.7 %1.4 %
17Warehouse Rentals Inc.HI5278 0.8 %1.3 %
18YNAP CorporationNJ1167 0.5 %1.2 %
19ODW Logistics, Inc.OH3760 2.2 %1.1 %
20Honolulu Warehouse Co., Ltd.HI1298 0.9 %1.1 %
21Refresco Beverages US Inc.MO, SC2421 1.2 %1.1 %
22Hellmann Worldwide Logistics Inc.FL1240 0.7 %1.1 %
23AES Hawaii, Inc.HI21,242 3.6 %1.0 %
24General Mills Operations, LLCMI1158 0.5 %1.0 %
Total6619,474 56.9 %50.0 %
        % 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%
(1)Rented square feet is pursuant to existing leases as of March 31, 2018, 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.

(1)Leased square feet is pursuant to existing leases as of March 31, 2021 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 March 31, 2021, our Mainland Properties represented approximately 49.2% of our annualized rental revenues. We generally will seek to renew or extend the terms of leases at our Mainland Properties when they expire. Because ofas their expirations approach. Due to 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. 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 March 31, 2021, our Hawaii Properties represented approximately 50.8% of our annualized rental revenues as of March 31, 2018 were derived from our Hawaii Properties.revenues. As of March 31, 2018, a significant portion2021, 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 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.

16

The following chart shows the annualized rental revenues as of March 31, 20182021 scheduled to reset 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
Annualized
Rental Revenues as of
March 31, 2021
Scheduled to Reset
4/1/2021-12/31/2021$701 
20223,860 
20232,535 
20242,103 
20253,115 
2026 and thereafter17,018 
Total$29,332 

Since the leases at certainAs of March 31, 2021, $2,725, or 1.3%, of our Hawaii Properties were originally entered,annualized rental revenues are included in leases scheduled to expire through March 31, 2022 and 1.4% of our rentable square feet are currently vacant. Rental rates for which available space may be leased in the future will depend on prevailing market conditions when lease extensions, lease renewals or new leases are negotiated. Whenever we extend, renew, or enter new leases for our properties, we intend to seek rents that are equal to or higher than our historical rents for the same properties; however, our ability to maintain or increase the rents for our current properties will depend in large part upon market conditions, which are beyond our control.
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 tenant based on information that is provided by the tenant and, in some cases, information that is publicly available or obtained from third party sources. RMR 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.
Investing and Financing Activities (dollars in thousands)
In March 2021, we entered into an agreement to acquire a newly built property located near the Rickenbacker intermodal terminal and airport in Columbus, Ohio containing approximately 358,000 rentable square feet and net leased to a single tenant for a purchase price of $31,500, excluding acquisition related costs. This acquisition is expected to close during the second quarter of 2021. However, this acquisition is subject to conditions; accordingly, we cannot be sure that we will complete this acquisition, that this acquisition will not be delayed or that the terms will not change.
During the three months ended March 31, 2020, we entered into agreements related to a joint venture for 12 of our properties in the mainland United States with an Asian institutional investor and contributed those 12 properties to our joint venture. We received an aggregate of $108,266 from that investor for a 39% equity interest in our joint venture and we retained the remaining 61% equity interest in our joint venture. As of March 31, 2020, we incurred transaction costs of $626 in connection with the formation of this joint venture.
We recognized a 39% noncontrolling interest in our condensed consolidated financial statements for the three months ended March 31, 2020. The portion of our joint venture's net loss not attributable to us, or $152 for the three months ended March 31, 2020, is reported as longnoncontrolling interest in our condensed consolidated statements of comprehensive income. No distributions were made by our joint venture during the three months ended March 31, 2020.
17
In November 2020, we sold an additional 39% equity interest from our remaining 61% equity interest to a second unrelated third party institutional investor and retained a 22% equity interest in our joint venture. Effective as 40 or 50 years ago, the characteristics of the neighborhoodsdate of the sale, we deconsolidated our joint venture and, since that time, we account for our joint venture using the equity method of accounting under the fair value option.
During the three months ended March 31, 2021, we recorded the change in the vicinityfair value 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 currently experiencing strong demand for their current uses, we do not currently expect redevelopment efforts in Hawaii to become a major activity of ours in the foreseeable future; however, we may undertake such activities on a selective basis.

Investment Activities
Our strategy related to property acquisitions and dispositions is materially unchanged from that disclosedinvestment in our Annual Report. Our target investments include all industrial and logistics buildingsjoint venture of $2,581 in top tier markets.our condensed consolidated statements of comprehensive income. In addition, during the three months ended March 31, 2021, our joint venture made aggregate cash distributions of $660 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 resources of RMR LLC to locate and acquire properties.

us.
For further information regarding our investmentinvesting and financing activities, see Note 3Notes 2 and 5 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, we completed 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. Upon the completion of our IPO, our secured revolving credit facility converted into a four year unsecured revolving credit facility, and we used substantially all of the net proceeds from our IPO to reduce amounts outstanding under our revolving credit facility. We also reimbursed SIR for costs that it incurred in connection with our formation and the preparation for our IPO.

For further information regarding our financing activities, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Our InvestmentInvesting and Financing Liquidity and Resources” of this Quarterly Report on Form 10-Q.

18

RESULTS OF OPERATIONS
 
Three Months Ended March 31, 2018,2021, Compared to Three Months Ended March 31, 20172020 (dollars and share amounts in thousands, except per share data)
Comparable Properties Results (1)
Non-Comparable Properties Results (2)
Consolidated Results
Three Months Ended March 31,Three Months Ended March 31,Three Months Ended March 31,
$%$$%
20212020ChangeChange20212020Change20212020ChangeChange
Rental income$52,181 $50,358 $1,823 3.6 %$2,036 $13,920 $(11,884)$54,217 $64,278 $(10,061)(15.7 %)
Operating expenses:
Real estate taxes7,036 6,996 40 0.6 %211 1,815 (1,604)7,247 8,811 (1,564)(17.8 %)
Other operating
    expenses		4,824 3,808 1,016 26.7 %152 1,373 (1,221)4,976 5,181 (205)(4.0 %)
Total operating
    expenses		11,860 10,804 1,056 9.8 %363 3,188 (2,825)12,223 13,992 (1,769)(12.6 %)
Net operating income (3)
$40,321 $39,554 $767 1.9 %$1,673 $10,732 $(9,059)41,994 50,286 (8,292)(16.5 %)
Other expenses:
Depreciation and amortization12,678 18,290 (5,612)(30.7 %)
General and administrative3,756 4,831 (1,075)(22.3 %)
Total other expenses16,434 23,121 (6,687)(28.9 %)
Interest income— 111 (111)(100.0 %)
Interest expense(8,741)(14,519)5,778 (39.8 %)
Income before income tax expense and equity in earnings of investees16,819 12,757 4,062 31.8 %
Income tax expense(63)(63)— — %
Equity in earnings of investees2,581 — 2,581 N/M
Net income19,337 12,694 6,643 52.3 %
Net loss attributable to noncontrolling interest— 152 (152)(100.0 %)
Net income attributable to common shareholders$19,337 $12,846 $6,491 50.5 %
Weighted average common shares outstanding - basic65,139 65,075 64 0.1 %
Weighted average common shares outstanding - diluted65,177 65,082 95 0.1 %
Per common share data (basic and diluted):
Net income attributable to common shareholders$0.30 $0.20 $0.1 50.0 %
  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 expense7
 11
    
Income before income tax expense19,239
 20,367
    
Interest expense3,802
 555
    
Interest income(13) —
    
Operating income 23,028
 20,922
    
        
General and administrative2,574
 4,636
    
Depreciation and amortization6,873
 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 amortization6,873
 6,811
    
FFO26,105
 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
    


N/M - Not Meaningful



(1)Consists of properties that we owned continuously since January 1, 2020 and excludes 12 properties owned by an unconsolidated joint venture in which we own a 22% equity interest.
(1)The calculation 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 costs and leasing commissions 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.


(2)We calculate funds 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 applicable 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.

(2)Consists of two properties that we acquired during the period from January 1, 2020 to March 31, 2021, one property we sold in 2020 and 12 properties we contributed in the first quarter of 2020 to a joint venture in which we currently own a 22% equity interest. We consolidated our properties owned by the joint venture until November 2020.
(3)Incentive fees under our and SIR's business management agreements with RMR LLC are payable after the end 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 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.


(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 three months ended March 31, 2018,2021 compared to the three months ended March 31, 2017.2020.

Rental income. The increasedecrease in rental income wasis primarily a result of an increaseour acquisition and disposition activities, which includes the contribution of 12 properties to our joint venture that was deconsolidated in occupancy during 2017 andNovember 2020, partially offset by increases from leasing activity and rent resets at certain of our Hawaii Properties.comparable properties. Rental income includes non-cash straight line rent adjustments totaling approximately $1,194$2,044 for the 20182021 period and approximately $1,470$1,967 for the 20172020 period, and net amortization of acquired real estate leases and assumed real estate lease obligations totaling approximately $102$180 for the 20182021 period and approximately $96$200 for the 20172020 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 increasedecrease in real estate taxes primarily reflects tax valuationour acquisition and tax rate increases at certaindisposition activities.
19

Other operating expenses. Other operating expenses primarily include propertyrepairs and maintenance, environmental remediation, utilities, insurance, bad debt,snow removal, legal and property management fees. The increasedecrease in other operating expenses is primarily reflects increasesdue to our acquisition and disposition activities, partially offset by an increase in rent reserves and snow removal and insurance costs in the 2021 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 increasedecrease in depreciation and amortization primarily reflects increased depreciation of capital improvements at our properties.acquisition and disposition activities, partially offset by certain leasing related assets becoming fully amortized in the 2021 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 is primarily reflects our allocated portion of estimateddue to a decrease in business management incentive fees recognized by SIR in the 2017 period, partially offset by increased costs related toas a result of our becoming a separate public company.net disposition of properties since April 1, 2020.

Interest income. Interest income represents interest earned on our cash balances.The decrease in interest income is primarily due to a decrease in the interest rate earned on invested cash during the 2021 period as compared to the 2020 period.

Interest expense. The increasedecrease in interest expense is primarily reflects the change in our capital structure, including our IPO, which resulted in changes in borrowings under our revolving credit facilitydue to lower average outstanding indebtedness during the 20182021 period partially offset byas compared to the prepayment of certain mortgage notes in December 2017.2020 period.

Income tax expense. Income tax expense primarily reflects state income taxes payable in certain jurisdictions despitejurisdictions.
Equity in earnings of investees. Equity in earnings of investees is the change in the fair value of our expected status as a REIT for federal income tax purposes.investment in our joint venture.

Net income. The decreaseincrease in net income for the 20182021 period compared to the 20172020 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 in our joint venture that we did not own during the 2020 period when we owned a 61% equity interest in the venture.
Weighted average common shares outstanding - basic and diluted.outstanding. The increase in weighted average common shares outstanding primarily reflects the issuance of 20,000,000 of our common shares in connection withawarded under our IPO.equity compensation plan since January 1, 2020.

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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Non-GAAP Financial Measures

We present certain “non-GAAP financial measures” within the meaning of the 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.
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 months ended March 31, 2021 and 2020 (dollars in thousands):
Three Months Ended March 31,
20212020
Reconciliation of Net Income to NOI:
Net income$19,337 $12,694 
Equity in earnings of investees(2,581)— 
Income tax expense63 63 
Income before income tax expense and equity earnings of investees16,819 12,757 
Interest expense8,741 14,519 
Interest income— (111)
General and administrative3,756 4,831 
Depreciation and amortization12,678 18,290 
NOI$41,994 $50,286 
NOI:
Hawaii Properties$19,992 $19,517 
Mainland Properties22,002 30,769 
NOI$41,994 $50,286 

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, excluding any gain or loss on sale of real estate and equity in earnings of an unconsolidated joint venture, plus real estate depreciation and amortization of consolidated properties and our proportionate share of FFO of unconsolidated joint venture properties 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 including similar adjustments for our unconsolidated joint venture, if any. FFO attributable to common shareholders and
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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.
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 months ended March 31, 2021 and 2020 (dollars in thousands, except per share data):
Three Months Ended March 31,
20212020
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$19,337 $12,846 
Depreciation and amortization12,678 18,290 
Equity in earnings of unconsolidated joint venture(2,581)— 
Share of FFO from unconsolidated joint venture1,236 — 
FFO adjustments attributable to noncontrolling interest— (977)
FFO attributable to common shareholders and Normalized FFO attributable to common shareholders$30,670 $30,159 
Weighted average common shares outstanding - basic65,139 65,075 
Weighted average common shares outstanding - diluted65,177 65,082 
Per common share data (basic and diluted)
FFO attributable to common shareholders and Normalized FFO attributable to common shareholders$0.47 $0.46 
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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. WeWith $533,000 of availability under our revolving credit facility as of April 22, 2021, 72.3% 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 1.3% of our annualized rental revenues as of March 31, 2021 from expiring leases over the next 12 months, 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. 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.

CashThe 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):
 Three Months Ended March 31,
 20212020
Cash and cash equivalents and restricted cash at beginning of period$22,834 $34,550 
Net cash provided by (used in):
Operating activities29,652 29,445 
Investing activities(789)(73,935)
Financing activities(25,550)41,112 
Cash and cash equivalents and restricted cash at end of period$26,147 $31,172 
The decreaseincrease in net cash provided by operating activities for the three months ended March 31, 20182021 compared to the same2020 period in the prior year is primarily due to reimbursements to SIR for the costs it incurredchanges in connection with our formation and the preparation for our IPO. Networking capital. The decrease in net cash used in investing activities for the three months ended March 31, 20182021 compared to the same2020 period inis primarily due to the prior year was essentially unchanged.acquisition of one property during the 2020 period compared to no property acquisitions during the 2021 period. The decreasechange in net cash used inprovided by financing activities for the three months ended March 31, 2018 compared2021 to net cash provided by financing activities for the same2020 period in the prior year is primarily due to netthe proceeds we received from our IPO and net contributions from SIR related tosale of equity interests in our property operations prior tojoint venture in the completion of our IPO, partially offset by net activities under our revolving credit facility.
2020 period.
Our InvestmentInvesting and Financing Liquidity and Resources (dollars in thousands, except per share and per square foot data)
Our future acquisitionsacquisition or development of propertiesactivity cannot be accurately projected because they dependsuch 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. We generally do not intend to purchase "turn around"“turn around” properties, or properties that do not generate positive cash flows, and, to the extentbut we may 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.properties.

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As of March 31, 2018,2021, we had $19,847 of cash and cash equivalents.equivalents of $26,147. To qualifymaintain our qualification for taxation as a REIT under the IRC,Internal Revenue Code of 1986, as amended, we generally will beare required to distribute annually at least 90% of our REIT taxable income annually, subject to specified adjustments

and excluding any net capital gain. This distribution requirement limits our ability to retain earnings and thereby provide capital for our operations or acquisitions. 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 varyvaries 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, 2018,2021, the interest rate premium on our revolving credit facility was 140130 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, 2018,2021, the annual interest rate payable on borrowings under our revolving credit facility was 3.23%1.41%. As of March 31, 20182021 and April 26, 2018,22, 2021, we had $302,000 and $292,000, respectively,$217,000 outstanding under our revolving credit facility, and $448,000 and $458,000, respectively,$533,000 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.

As of March 31, 2021, our debt maturities (other than our revolving credit facility), consisted of mortgage notes with an aggregate principal amount of $650,000, which is scheduled to mature in 2029.
On January 17, 2018,During the three months ended March 31, 2020, we completed our IPO, in which we issued 20,000,000entered into agreements related to a joint venture for 12 of our common sharesproperties in the mainland United States with an Asian institutional investor and contributed those 12 properties to our joint venture. We received an aggregate of $108,266 from that investor for a 39% equity interest in our joint venture and we retained the remaining 61% equity interest in our joint venture. As of March 31, 2020, we incurred transaction costs of $626 in connection with the formation of this joint venture.
We recognized a 39% noncontrolling interest in our condensed consolidated financial statements for the three months ended March 31, 2020. The portion of our joint venture's net proceedsloss not attributable to us, or $152 for the three months ended March 31, 2020, is reported as noncontrolling interest in our condensed consolidated statements of $444,309, after deductingcomprehensive income. No distributions were made by our joint venture during the underwriting discountsthree months ended March 31, 2020.
In November 2020, we sold an additional 39% equity interest from our remaining 61% equity interest to a second unrelated third party institutional investor and commissionsretained a 22% equity interest in our joint venture. Effective as of the date of the sale, we deconsolidated our joint venture and, expenses. since that time, we account for our joint venture using the equity method of accounting under the fair value option.
During the three months ended March 31, 2021, we recorded the change in the fair value of our investment in our joint venture of $2,581 as equity in earnings of investees in our condensed consolidated statements of comprehensive income. In addition, during the three months ended March 31, 2021, our joint venture made aggregate cash distributions of $660 to us.
For further information regarding our IPOinvesting and our application of the net proceeds,financing activities, see Note 9Notes 2 and 5 to the Notes to Condensed Consolidated Financial Statements included in Part 1,I, Item 1 of this Quarterly Report on Form 10-Q.

Our debt maturity (other than our revolving credit facility) as of March 31, 2018 was $48,750 in 2020.
We expect to use borrowings under our revolving credit facility, payments we may receive for pro rata equity contributions from the other investors in our joint venture in connection with properties we may contribute to our joint venture, equity contributions from the third party investors in our joint venture 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 debtnotes 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. Further, any issuances of our equity securities may be dilutive to our existing shareholders. 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 andor equity offerings, to fund capital expenditures, future acquisitions, development, redevelopment and other activities and to pay our obligations.

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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.
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 thatwhich will afford us reasonable access to capital for investmentinvesting 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 three months ended March 31, 2021, we paid a quarterly cash distribution to our shareholders totaling $21,550 using existing cash balances and borrowings under our revolving credit facility. For more information regarding the distribution we paid in 2021, see Note 6 to the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.
On April 19, 2018,15, 2021, 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 $21,550, to shareholders of record on April 26, 2021. We expect to pay this distribution to our shareholders on or about May 14, 201820, 2021 using existing cash balances and borrowings under our revolving credit facility.


During the three months ended March 31, 20182021 and 2017,2020, amounts capitalized for tenant improvements, leasing costs, building improvements and development and redevelopment activities were as follows:
Three Months Ended
March 31,
20212020
Tenant improvements and leasing costs (1)
$823 $293 
Building improvements (2)
232 1,237 
Development, redevelopment and other activities (3)
— 1 
$1,055 $1,531 
  Three Months Ended
  March 31,
  2018    2017
Tenant improvements (1)
 $69
 $17
Leasing costs (2)
 5
 429
Building improvements (3)
 90
 309
Development, redevelopment and other activities (4)
 378
 684
  $542
 $1,439
(1)Tenant improvements and leasing costs include capital expenditures used to improve tenants’ space or amounts paid directly to tenants to improve their space and leasing related costs, such as brokerage commissions and tenant inducements.


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

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

(3)Development, redevelopment and other activities generally include capital expenditure projects that reposition a property or result in new sources of revenues.
(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 reposition a property or result in new sources of revenues.
 
As of March 31, 2018,2021, we had estimated unspent leasing related obligations of $243.$1,704.
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During the three months ended March 31, 2018,2021, commitments made for expenditures, such as tenant improvements and leasing costs in connection with leasing space, were as follows:
Three Months Ended March 31, 2021
New LeasesRenewalsTotals
Square feet leased during the period (in thousands)273 347 620 
Total leasing costs and concession commitments (1)
$1,964 $1,292 $3,256 
Total leasing costs and concession commitments per square foot (1)
$7.20 $3.72 $5.25 
Weighted average lease term by square feet (years)8.5 14.2 11.7 
Total leasing costs and concession commitments per square foot per year (1)
$0.85 $0.26 $0.45 
 New Leases Renewals Totals
Square feet leased during the period (in thousands)1
 295
 296
Total leasing costs and concession commitments (1)
$33
 $35
 $68
Total leasing costs and concession commitments per square foot (1)
$33.00
 $0.12
 $0.23
Weighted average lease term by square feet (years)7.0
 30.4
 30.3
Total leasing costs and concession commitments per square foot per year (1)
$4.71
 $0.00
 $0.01
(1)Includes commitments made for leasing expenditures and concessions, such as leasing commissions, tenant improvements or other tenant inducements.

(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, 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, 20182021 were borrowings outstanding under our revolving credit facility and a $650,000 non-recourse, mortgage loan that is secured mortgage note assumed in connection with oneby 186 of our acquisitions. Ourproperties. The mortgage note isloan agreement contains certain exceptions to the general non-recourse subjectprovisions that obligate us to indemnify the lenders for certain limitations,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, whichincluding 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, 2018,2021, we believe we were in compliance with all of the termscovenants and covenantsother 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 feesinterest rates for calculating the amount of interest payable on outstanding borrowings and interest ratesthe 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 agreement and related documents governing our mortgage loan contain customary covenants and provide for acceleration of payment of all amounts due thereunder upon the occurrence and continuation of certain events of default and require us to maintain a minimum consolidated net worth of at least $250,000 and liquidity of at least $15,000. As of March 31, 2021, we believe we were in compliance with all the covenants and other terms under this mortgage loan agreement.
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, one of our Managing Trustees, is the sole trustee of ABP Trust, which is the controlling shareholder of RMR Inc. We also have relationships and historical and continuing transactions with other companies to which RMR LLC or its subsidiaries provide management services and which may have trustees, directors and 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% of our outstanding common shares. For further information about these and other such relationships and related person transactions, see Notes 9, 108 and 119 to the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q, our 2020 Annual Report, our definitive Proxy Statement for our 2021 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 2020 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, are available as exhibits to our 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, 2017.2020. 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.

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Fixed Rate Debt
At March 31, 2018,2021, our outstanding fixed rate debt consisted of the following secured mortgage note:notes:
AnnualAnnualInterest
PrincipalInterestInterestPayments
Debt
Balance (1)
Rate (1)
Expense (1)
MaturityDue
Mortgage notes (186 properties in Hawaii)$650,000 4.31 %$28,015 2029Monthly
$650,000  $28,015  
          Annual Annual         Interest
  Principal Interest Interest   Payments
Debt 
Balance (1)
 
Rate (1)
 
Expense (1)
 Maturity Due
Mortgage note (one property in Chester, VA) $48,750
 3.99% $1,945
 2020 Monthly


(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 values and recorded interest expense may differ from these amounts because of market conditions at the time we assumed or issued this debt.
(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 and recorded interest expense may differ from these amounts because of market conditions at the time we assumed this debt.
 
OurThese mortgage note requiresnotes require interest only payments until maturity. Because our mortgage note requiresnotes require interest to be paid at a fixed rate, changes in market interest rates during the termterms of thethese mortgage notenotes will not affect our interest obligations. If thisthese mortgage note isnotes are refinanced at an interest rate which is 100 basis pointsone percentage point higher or lower than shown above, our annual interest cost would increase or decrease by approximately $488.

$6,500.
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 outstanding at March 31, 20182021 and discounted cash flow analysisanalyses through the maturity date, and assuming no other changes in factors that may affect the fair value of our fixed rate debt obligation, a hypothetical immediate 100 basisone percentage point change in the interest raterates would change the fair value of this obligation by approximately $1,208.


$46,008.
Floating Rate Debt


At March 31, 2018,2021, our floating rate debt consisted of $302,000$217,000 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 adjustmentvaries based upon changes toon 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, 2018:2021:

Impact of an Increase in Interest Rates
Total Interest Annual
Interest Rate OutstandingExpenseEarnings Per
Per YearDebtPer Year
Share Impact (1)
At March 31, 20211.41 %$217,000 $3,060 $(0.05)
One percentage point increase2.41 %$217,000 $5,230 $(0.08)
(1)Based on the diluted weighted average common shares outstanding for the three months ended March 31, 2021.
  Impact of an Increase in Interest Rates
            Total Interest     Annual
  Interest Rate  Outstanding Expense Earnings Per
  
Per Year 
 
Debt 
 Per Year 
Share Impact (1)
At March 31, 2018 3.23% $302,000
 $9,755
 $0.16
One percentage point increase 4.23% $302,000
 $12,775
 $0.21
(1)Based on the diluted weighted average common shares outstanding for the three months ended March 31, 2018.


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, 20182021 if we were fully drawn on our revolving credit facility:
Impact of an Increase in Interest Rates
Total Interest Annual
Interest Rate OutstandingExpenseEarnings Per
Per YearDebtPer Year
Share Impact (1)
At March 31, 20211.41 %$750,000 $10,575 $(0.16)
One percentage point increase2.41 %$750,000 $18,075 $(0.28)
(1)Based on the diluted weighted average common shares outstanding for the three months ended March 31, 2021.
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  Impact of an Increase in Interest Rates
      Total Interest  Annual
  Interest Rate  Outstanding Expense Earnings Per
  Per Year Debt Per Year 
Share Impact (1)
At March 31, 2018 3.23% $750,000
 $24,225
 $0.39
One percentage point increase 4.23% $750,000
 $31,725
 $0.52
(1)Based on the diluted weighted average common shares outstanding for the three months ended March 31, 2018.


The foregoing tables show the impact of an immediate increaseone 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 for new contracts by December 31, 2021 and for pre-existing contracts by June 30, 2023. We are required to pay interest on borrowings under our revolving credit facility at floating rates based on LIBOR. Interest we may pay on any 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.
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 OperatingExecutive 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 OperatingExecutive 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, 20182021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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WARNING CONCERNING FORWARD LOOKING STATEMENTSWarning Concerning Forward-Looking Statements


THIS QUARTERLY REPORT ON FORMThis Quarterly Report on Form 10-Q CONTAINS STATEMENTS THAT CONSTITUTE FORWARD LOOKING STATEMENTS WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OFcontains 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,•Our tenants’ ability and willingness to pay their rent obligations to us,
THE LIKELIHOOD THAT OUR TENANTS WILL RENEW OR EXTEND THEIR LEASES OR THAT WE WILL BE ABLE TO OBTAIN REPLACEMENT TENANTS,•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 ACQUISITIONS OF PROPERTIES,•The duration and severity of the economic downturn resulting from the COVID-19 pandemic and its impact on us and our tenants,
OUR ABILITY TO COMPETE FOR ACQUISITIONS AND TENANCIES EFFECTIVELY,•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,
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 belief that the industrial and logistics sector and many of our tenants are critical to sustaining a resilient supply chain and that our business will benefit as a result,
OUR ABILITY TO PAY DISTRIBUTIONS TO OUR SHAREHOLDERS AND TO SUSTAIN THE AMOUNT OF SUCH DISTRIBUTIONS,•Our acquisitions or sales 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 expand our existing or enter into additional real estate joint ventures or to attract co-venturers and benefit from our existing joint venture or any real estate joint ventures we may enter into,
•Whether we may contribute additional properties to our joint venture and receive proceeds from the other investors in our joint venture in connection with those contributions,
•The credit qualities of our tenants,
•Changes in the security of cash flows from our properties,
•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,
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THE CREDIT QUALITIES OF OUR TENANTS,•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, and
CHANGES IN ENVIRONMENTAL LAWS OR IN THEIR INTERPRETATIONS OR ENFORCEMENT AS A RESULT OF CLIMATE CHANGE OR OTHERWISE,•Other matters.
OUR SALES OF PROPERTIES, ANDOur 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 attributable to common shareholders, Normalized FFO attributable to common shareholders, NOI, cash flows, liquidity and prospects include, but are not limited to:
OTHER MATTERS.•The impact of economic conditions and the capital markets on us and our tenants,
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•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,
MATERIAL ADVERSE EFFECT ON OUR FORWARD LOOKING STATEMENTS AND UPON OUR BUSINESS, RESULTS OF OPERATIONS, FINANCIAL CONDITION, FFO, NORMALIZED FFO, NOI, CASH FLOWS, LIQUIDITY AND PROSPECTS INCLUDE, BUT ARE NOT LIMITED TO:•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 U.S. federal income tax purposes,
THE IMPACT OF CONDITIONS AND CHANGES IN THE ECONOMY AND THE CAPITAL MARKETS ON US AND OUR TENANTS,•Actual and potential conflicts of interest with our related parties, including our managing trustees, RMR LLC and others affiliated with them, and
COMPETITION WITHIN THE REAL ESTATE INDUSTRY, PARTICULARLY IN THOSE MARKETS IN WHICH OUR PROPERTIES ARE LOCATED,•Acts of terrorism, outbreaks of pandemics, including COVID-19, or other manmade or natural disasters beyond our control.
COMPLIANCE WITH, AND CHANGES TO, FEDERAL, STATE AND LOCAL LAWS AND REGULATIONS, ACCOUNTING RULES, TAX LAWS AND SIMILAR MATTERS,For example:
LIMITATIONS IMPOSED ON OUR BUSINESS AND OUR ABILITY TO SATISFY COMPLEX RULES IN ORDER FOR US TO QUALIFY FOR TAXATION AS A REIT FOR U.S. FEDERAL INCOME TAX PURPOSES,•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,
ACTUAL AND POTENTIAL CONFLICTS OF INTEREST WITH OUR RELATED PARTIES, INCLUDING OUR MANAGING TRUSTEES,•Our ability to grow our business and increase our distributions depends in large part upon our ability to acquire 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, we might encounter unanticipated difficulties and expenditures relating to any acquired properties, and 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 impact of the COVID-19 pandemic and its 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,
•Any possible development or redevelopment of our properties may not be realized or be successful,
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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. 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, and we may need to make significant expenditures to lease 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 investing 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. However, if challenging market conditions last for a long period or worsen, our tenants may experience liquidity constraints and as a result may be unable 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,
•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,
•Our existing joint venture and any other joint ventures that we may enter may not be successful,
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•Our Board of Trustees considers, among other factors, our dividend yield and our dividend yield compared 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 limited lease expirations in 2021 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 which began 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 2020 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, ANDor 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: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.
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,Statement Concerning Limited Liability
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.

STATEMENT CONCERNING LIMITED LIABILITY
THE AMENDED AND RESTATED DECLARATION OF TRUST ESTABLISHING INDUSTRIAL LOGISTICS PROPERTIES TRUST, DATED JANUARYThe 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 material changes to the risk factors from those we previously disclosedprovided in our 2020 Annual Report.

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Table of Contents
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, 2018.2018, as amended to date. (Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2020.)
3.2
Amended and Restated Bylaws of the Company, adopted March 25, 2019. (Incorporated by reference to the Company's Current Report on Form 8-K dated January 11, 2018).filed on March 26, 2019.)
3.24.1
Amended and Restated Bylaws of the Company, adopted January 11, 2018. (Incorporated by reference to the Company's Current Report on Form 8-K dated January 11, 2018).
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
Registration Rights Agreement, dated January 17, 2018, between the Company and Select Income REIT. (Incorporated by reference to the Company's Current Report on Form 8-K dated January 11, 2018).
31.1
Rule 13a-14(a) Certification. (Filed herewith.)
31.2
Rule 13a-14(a) Certification. (Filed herewith.)
32.1
32.1
Section 1350 Certification. (Furnished herewith.)
101.1101.INSXBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2018 formatted in
101.SCHXBRL (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.CALXBRL Taxonomy Extension Calculation Linkbase Document. (Filed herewith.)
101.DEFXBRL Taxonomy Extension Definition Linkbase Document. (Filed herewith.)
101.LABXBRL Taxonomy Extension Label Linkbase Document. (Filed herewith.)
101.PREXBRL Taxonomy Extension Presentation Linkbase Document. (Filed herewith.)
104Cover Page Interactive Data File. (Formatted as Inline XBRL and contained in Exhibit 101.)


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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. PopeoG. Murray
John C. PopeoG. Murray
President and Chief OperatingExecutive Officer
Dated: April 27, 201826, 2021
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, 201826, 2021



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