Document

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 June 30, 2020

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

Commission File Number 001-38342

INDUSTRIAL LOGISTICS PROPERTIES TRUST

(Exact Name of Registrant as Specified in Its Charter)



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



Two Newton Place,	255 Washington Street,	Suite 300,	Newton,	Massachusetts	02458-1634
(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 Class	Trading Symbol(s)	Name Of Each Exchange On Which Registered
Common Shares of Beneficial Interest	ILPT	The Nasdaq Stock Market LLC

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 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	☐
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 July 27, 2020: 65,209,564

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INDUSTRIAL LOGISTICS PROPERTIES TRUST

FORM 10-Q

June 30, 2020

INDEX



		Page
PART I	Financial Information	3

Item 1.	Financial Statements (unaudited)	3

	Condensed Consolidated Balance Sheets — June 30, 2020 and December 31, 2019	3

	Condensed Consolidated Statements of Comprehensive Income — Three and Six Months Ended June 30, 2020 and 2019	4

	Condensed Consolidated Statements of Shareholders’ Equity — Three and Six Months Ended June 30, 2020 and 2019	5

	Condensed Consolidated Statements of Cash Flows — Six Months Ended June 30, 2020 and 2019	7

	Notes to Condensed Consolidated Financial Statements	9

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

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	33

Item 4.	Controls and Procedures	35

	Warning Concerning Forward-Looking Statements	36

	Statement Concerning Limited Liability	39

PART II	Other Information	40

Item 1A.	Risk Factors	40

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

Item 6.	Exhibits	43

	Signatures	44

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

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PART I Financial Information

Item 1. Financial Statements

INDUSTRIAL LOGISTICS PROPERTIES TRUST

CONDENSED CONSOLIDATED BALANCE SHEETS

(dollars in thousands, except per share data)

(unaudited)



	June 30,			December 31,
	2020			2019
ASSETS
Real estate properties:
Land	$	759,009		$	747,794
Buildings and improvements	1,644,996			1,588,170
Total real estate properties, gross	2,404,005			2,335,964
Accumulated depreciation	(153,979		)	(131,468		)
Total real estate properties, net	2,250,026			2,204,496
Acquired real estate leases, net	130,153			138,596
Cash and cash equivalents	33,256			28,415
Restricted cash	13,703			6,135
Rents receivable, including straight line rents of $62,399 and $58,336, respectively	67,292			62,782
Deferred leasing costs, net	6,161			6,581
Debt issuance costs, net	2,215			2,954
Due from related persons	1,023			1,504
Other assets, net	1,771			3,438
Total assets	$	2,505,600		$	2,454,901

LIABILITIES AND EQUITY
Revolving credit facility	$	320,000		$	310,000
Mortgage notes payable, net	1,048,226			1,096,608
Assumed real estate lease obligations, net	16,353			17,508
Accounts payable and other liabilities	18,002			16,475
Rents collected in advance	7,495			9,442
Security deposits	6,597			6,680
Due to related persons	2,316			2,498
Total liabilities	1,418,989			1,459,211

Commitments and contingencies

Equity:
Equity attributable to common shareholders:
Common shares of beneficial interest, $.01 par value: 100,000,000 shares authorized; 65,209,564 and 65,180,628 shares issued and outstanding, respectively	652			652
Additional paid in capital	1,007,223			999,302
Cumulative net income	169,822			142,155
Cumulative common distributions	(189,440		)	(146,419		)
Total equity attributable to common shareholders	988,257			995,690
Noncontrolling interest:
Total equity attributable to noncontrolling interest	98,354			—
Total equity	1,086,611			995,690
Total liabilities and equity	$	2,505,600		$	2,454,901

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

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INDUSTRIAL LOGISTICS PROPERTIES TRUST

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(amounts in thousands, except per share data)

(unaudited)



	Three Months Ended June 30,						Six Months Ended June 30,
	2020			2019			2020			2019

Rental income	$	65,110		$	60,090		$	129,388		$	106,077

Expenses:
Real estate taxes	8,932			7,495			17,743			13,060
Other operating expenses	5,041			4,198			10,222			7,584
Depreciation and amortization	18,525			16,709			36,815			26,320
General and administrative	4,846			4,856			9,677			8,656
Total expenses	37,344			33,258			74,457			55,620

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

Other comprehensive income:
Equity in unrealized gains of an investee	—			71			—			137
Other comprehensive income	—			71			—			137
Comprehensive income attributable to common shareholders	$	14,821		$	13,187		$	27,667		$	30,039

Weighted average common shares outstanding - basic	65,089			65,039			65,082			65,035
Weighted average common shares outstanding - diluted	65,091			65,043			65,087			65,042

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

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

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INDUSTRIAL LOGISTICS PROPERTIES TRUST

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(dollars in thousands)

(unaudited)



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

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

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INDUSTRIAL LOGISTICS PROPERTIES TRUST

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(dollars in thousands)

(unaudited)



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

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

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INDUSTRIAL LOGISTICS PROPERTIES TRUST

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(dollars in thousands)

(unaudited)



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

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

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

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

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

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

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

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

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. Basis of Presentation

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

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

In February and March 2020, we entered into agreements related to a joint venture for 12 of our properties located in the mainland United States. We have determined that this joint venture is a variable interest entity, or VIE, as defined under the Consolidation Topic of the Financial Accounting Standards Board, or FASB, Accounting Standards Codification. We concluded that we must consolidate this VIE because we are the entity with the power to direct the activities that most significantly impact the VIE’s economic performance and we have the obligation to absorb losses of, and the right to receive benefits from, the VIE that could be significant to the VIE, and therefore are the primary beneficiary of the VIE. The assets of this VIE were $660,958 as of June 30, 2020 and consist primarily of the real estate owned by the joint venture. The liabilities of this VIE were $408,181 as of June 30, 2020 and consist primarily of mortgage debts secured by the properties owned by the joint venture. The joint venture investor's interest in this consolidated entity is reflected as noncontrolling interest in our condensed consolidated financial statements. See Note 11 for further information about this joint venture.

Note 2. Recent Accounting Pronouncements

In June 2016, the FASB issued Accounting Standards Update No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which requires that entities use a new forward looking “expected loss” model that generally will result in the earlier recognition of allowance for credit losses. The measurement of expected credit losses is based upon historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. We adopted this standard which was effective as of January 1, 2020 using the modified retrospective approach. The implementation of this standard did not have a material impact in our condensed consolidated financial statements.

Note 3. Real Estate Properties

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

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INDUSTRIAL LOGISTICS PROPERTIES TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except per share data)

We operate in one business segment: ownership and leasing of properties that include industrial and logistics buildings and leased industrial lands. For the three months ended June 30, 2020 and 2019, approximately 41.3% and 42.2%, respectively, of our rental income was from our Hawaii Properties. For the six months ended June 30, 2020 and 2019, approximately 41.2% and 47.9%, respectively, of our rental income was from our Hawaii Properties. In addition, a subsidiary of Amazon.com, Inc., which is a tenant at certain of our Mainland Properties, accounted for $10,399, or 16.0%, and $8,700, or 14.5%, of our rental income for the three months ended June 30, 2020 and 2019, respectively, and $20,061, or 15.5%, and $13,565, or 12.8%, of our rental income for the six months ended June 30, 2020 and 2019, respectively.

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



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

During the six months ended June 30, 2020, we committed $687 for expenditures related to tenant improvements and leasing costs for leases executed during the period for approximately 363,000 square feet. Committed but unspent tenant related obligations based on existing leases as of June 30, 2020 were $561.

Certain of our industrial lands in Hawaii may require environmental remediation, especially if the use of those lands is changed; however, we do not have any present plans to change the use of those lands. As of both June 30, 2020 and December 31, 2019, accrued environmental remediation costs of $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 contamination will not have a material adverse effect on our business or financial condition. Charges for environmental remediation costs, if any, are included in other operating expenses in our condensed consolidated statements of comprehensive income.

Note 4. Leases

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

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

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INDUSTRIAL LOGISTICS PROPERTIES TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except per share data)

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

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

Note 5. Indebtedness

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



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

(1) The principal balances are the amounts stated in contracts. In accordance with GAAP, our carrying values and recorded interest expense may be different because of market conditions at the time we assumed certain of these debts.

(2) The maturity date of our revolving credit facility is December 29, 2021 and we have the option to extend the maturity date for two, six month periods through December 29, 2022.

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

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INDUSTRIAL LOGISTICS PROPERTIES TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except per share data)

We have a $750,000 unsecured revolving credit facility that is available for our general business purposes, including acquisitions. The maturity date of our revolving credit facility is December 29, 2021. We may borrow, repay and reborrow funds under our revolving credit facility until maturity, and no principal repayment is due until maturity. Interest on borrowings under our revolving credit facility is calculated at floating rates based on LIBOR plus a premium that varies based on our leverage ratio. We have the option to extend the maturity date of our revolving credit facility for two, six month periods, subject to payment of extension fees and satisfaction of other conditions. We are also required to pay a commitment fee on the unused portion of our revolving credit facility. 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. As of June 30, 2020, interest payable on the amount outstanding under our revolving credit facility was LIBOR plus 140 basis points and our commitment fee was 25 basis points. As of June 30, 2020 and December 31, 2019, the interest rate payable on borrowings under our revolving credit facility was 1.59% and 3.26%, respectively. The weighted average interest rate for borrowings under our revolving credit facility was 2.04% and 3.76% for the three months ended June 30, 2020 and 2019, respectively, and 2.80% and 3.77% for the six months ended June 30, 2020 and June 30, 2019, respectively. As of June 30, 2020 and July 27, 2020, we had $320,000 outstanding under our revolving credit facility, and $430,000 available to borrow under our revolving credit facility.

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

In May 2020, we prepaid at par plus accrued interest a mortgage note secured by one of our properties with an outstanding principal balance of approximately $48,750, an annual interest rate of 3.48% and a maturity date in November 2020. As a result of the prepayment of this mortgage note, we recorded a gain on early extinguishment of debt of $120 for the three and six months ended June 30, 2020 to write off unamortized debt premiums.

Note 6. Fair Value of Assets and Liabilities

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



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


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

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

Note 7. Shareholders’ Equity

Common Share Awards:

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

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INDUSTRIAL LOGISTICS PROPERTIES TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except per share data)

On May 28, 2020, in accordance with our Trustee compensation arrangements, we awarded to each of our seven Trustees 3,500 of our common shares, valued at $18.77 per share, the closing price of our common shares on Nasdaq on that day.

Common Share Purchases:

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



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

Distributions:

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



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

On July 16, 2020, we declared a regular quarterly distribution of $0.33 per common share, or approximately $21,500, to shareholders of record on July 27, 2020. We expect to pay this distribution on or about August 20, 2020.

Note 8. Per Common Share Amounts

We calculate basic earnings per common share by dividing net income attributable to common shareholders by the weighted average number of our common shares outstanding during the period. We calculate diluted earnings per share using the more dilutive of the two class method or the treasury stock method. Unvested share awards and other potentially dilutive common shares, and the related impact on earnings, are considered when calculating diluted earnings per share. The calculation of basic and diluted earnings per share is as follows:



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

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

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

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INDUSTRIAL LOGISTICS PROPERTIES TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except per share data)

Note 9. Business and Property Management Agreements with RMR LLC

We have no employees. The personnel and various services we require to operate our business are provided to us by RMR LLC. We have two agreements with RMR LLC to provide management services to 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 $3,277 and $6,584 for the three and six months ended June 30, 2020, respectively, and $3,092 and $5,285 for the three and six months ended June 30, 2019, respectively. The net business management fees we recognized for the three and six months ended June 30, 2020 include $347 and $476, respectively, of management fees related to our subsidiary level management agreement with RMR LLC entered in connection with our joint venture arrangement, which arrangement is further described in Note 11. Based on our common share total return, as defined in our business management agreement, as of June 30, 2020 and 2019, no incentive fees are included in the net business management fees we recognized for the three or six months ended June 30, 2020 or 2019. The actual amount of annual incentive fees for 2020, if any, will be based on our common share total return, as defined in our business management agreement, for the period from January 12, 2018 to December 31, 2020 and will be payable in 2021. We did not incur any incentive fee payable to RMR LLC for the year ended December 31, 2019. We include business management fees in general and administrative expenses in our condensed consolidated statements of comprehensive income.

Pursuant to our property management agreement with RMR LLC, we recognized aggregate property management and construction supervision fees of $1,860 and $3,783 for the three and six months ended June 30, 2020, respectively, and $1,922 and $3,269 for the three and six months ended June 30, 2019, respectively. These amounts are included in other operating expenses or have been capitalized, as appropriate, in our condensed consolidated financial statements.

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, or as otherwise agreed. Our property level operating expenses are generally incorporated into the rents charged to our tenants, including certain payroll and related costs incurred by RMR LLC. We reimbursed RMR LLC $1,217 and $2,416 for these expenses and costs for the three and six months ended June 30, 2020, respectively, and $1,026 and $1,929 for the three and six months ended June 30, 2019, respectively. These amounts are included in other operating expenses and general and administrative expenses, as applicable, in our condensed consolidated statements of comprehensive income.

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

Note 10. Related Person Transactions

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

Our Manager, RMR LLC. We have two agreements with RMR LLC to provide management services to us. See Note 9 for further information regarding our management agreements with RMR LLC.

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INDUSTRIAL LOGISTICS PROPERTIES TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except per share data)

OPI. Office Properties Income Trust, or OPI, owed to us $1,023 and $1,504 as of June 30, 2020 and December 31, 2019, respectively, for rents that it collected on our behalf from certain of our tenants. A predecessor of OPI previously owned those properties and those tenants first became tenants at those properties prior to our ownership. OPI paid these amounts due to us or collected on our behalf in July 2020 and January 2020, respectively.

AIC. Until its dissolution on February 13, 2020, we, ABP Trust and five other companies to which RMR LLC provides management services owned Affiliates Insurance Company, or AIC, an Indiana insurance company, in equal amounts. Certain of our Trustees and certain trustees or directors of the other AIC shareholders served on the board of directors of AIC, until its dissolution.

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

As of June 30, 2020 and December 31, 2019, our investment in AIC had a carrying value of $11 and $298, respectively. These amounts are included in other assets in our condensed consolidated balance sheets. In June 2020, we received an additional liquidating distribution of approximately $287 from AIC in connection with its dissolution. We did not recognize any income related to our investment in AIC for the three and six months ended June 30, 2020, respectively, and recognized $130 and $534 related to our investment in AIC for the three and six months ended June 30, 2019, respectively, which amounts are presented as equity in earnings of an investee in our condensed consolidated statements of comprehensive income. Our other comprehensive income included our proportionate share of unrealized gains on securities, if any, which were owned by AIC, related to our investment in AIC.

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

Note 11. Noncontrolling Interest

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

We recognized a noncontrolling interest in our condensed consolidated balance sheets of $100,668 as of the completion of this transaction, which was equal to 39% of our aggregate carrying value of the total equity of the properties immediately prior to our respective contributions of the properties to the joint venture. The difference between the net proceeds received from this transaction and the noncontrolling interest recognized, which was $6,972, has been reflected as an increase in additional paid in capital in our condensed consolidated balance sheets. The portion of the joint venture's net loss not attributable to us, or $264 and $416 for the three and six months ended June 30, 2020, respectively, is reported as noncontrolling interest in our condensed consolidated statements of comprehensive income. During the three and six months ended June 30, 2020, the joint venture made aggregate cash distributions of $1,898 to the other joint venture investor, which are reflected as a decrease in total equity attributable to noncontrolling interest in our condensed consolidated balance sheets. As of June 30, 2020, the joint venture held real estate assets with an aggregate net book value of $660,958, including restricted cash of $13,703, and had liabilities of $408,181.

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

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

IMPACT OF COVID-19

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

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

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


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


•	our operations, liquidity and capital needs and resources;


•	conducting financial modeling and sensitivity analyses;


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


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

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


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


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

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


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

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

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

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


•	deferring non-emergency work;


•	implementing energy reduction protocols for lighting and HVAC systems;


•	reducing non-essential building services and staff; and


•	reducing the frequency of trash removal.

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

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


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


•	shutting down certain building amenities;


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


•	installing signage throughout our properties with social distancing reminders;


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


•	flushing domestic water systems to prepare for re-occupancy;


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

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


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

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

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


•	the duration and severity of the negative economic impact;


•	the strength and sustainability of any economic recovery;

•

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


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

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

OVERVIEW

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

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Property Operations

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



	All Properties				Comparable Properties ⁽¹⁾
	As of June 30,				As of June 30,
	2020		2019		2020		2019
Total properties	301		298		270		270
Total rentable square feet ⁽²⁾	43,759		42,353		29,651		29,457
Percent leased ⁽³⁾	98.8	%	99.3	%	98.4	%	99.0	%


(1)	Consists of properties that we owned continuously since January 1, 2019.


(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 June 30, 2020, if any, and (ii) space which is leased but is not occupied or is being offered for sublease by tenants, if any.

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



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


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


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

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

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

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

% of Total

Cumulative

% of Total

Cumulative %

Annualized

% of Total

Rented

of Total Rented

Rental

Annualized

Number of

Square Feet

Revenues

Rental Revenues

Period / Year

Tenants

Expiring ⁽¹⁾

Expiring

7/1/2020-12/31/2020

0.2

646

0.3

2021

2,707

6.3