Industrial Logistics Properties Trust (ILPT) risk factors, FY2024 10-K

Risks Related to Our Business

1. 01We have a substantial amount of debt and we are subject to risks related to our debt, including our ability to refinance maturing debt and the cost of any such refinanced debt
2. 02As of December 31, 2024, our consolidated principal amount of debt was approximately $4.3 billion and our ratio of consolidated net debt to total gross assets (total assets plus accumulated depreciation) was 68.6%
3. 03We may fail to comply with the terms of our debt agreements, which could adversely affect our business and prohibit us from paying distributions to our shareholders
4. 04Secured debt exposes us to the possibility of foreclosure, which could result in the loss of our investment in certain of our subsidiaries or in a property or group of properties or other assets that secure that debt
5. 05Unfavorable market and industry conditions may have a material adverse effect on our results of operations, financial condition and ability to pay distributions to our shareholders
6. 06Our business depends upon our tenants satisfying their lease obligations, which depends, to a large degree, on our tenants’ abilities to successfully operate their businesses
7. 07The majority of our properties are industrial and logistics properties leased to single tenants and we have concentrations of properties leased to certain companies, which may subject us to greater risks of loss than if our properties had more industry sector and tenant diversity
8. 08We may be unable to lease our properties when our leases expire
9. 09We may experience declining rents or incur significant costs to renew our leases with current tenants, lease our properties to new tenants or when our rents reset at our properties in Hawaii
10. 10We are exposed to risks associated with property development, redevelopment and repositioning that could adversely affect us, including our financial condition and results of operations
11. 11We face significant competition
12. 12REIT distribution requirements and limitations on our ability to access capital at reasonable costs or at all may adversely impact our ability to carry out our growth strategies
13. 13We face challenges from uncertainties regarding interest rates, and sustained high interest rates have significantly increased our interest expense and may otherwise materially and negatively affect us
14. 14Failure to hedge effectively against interest rate changes may adversely affect our results of operations
15. 15We may be unable to grow our business by acquiring additional properties, and we might encounter unanticipated difficulties and expenditures relating to our acquired properties
16. 16A significant number of our properties are located on the island of Oahu, Hawaii, and we are exposed to risks as a result of this geographic concentration
17. 17Ownership of real estate is subject to environmental risks and liabilities
18. 18We are subject to risks from adverse weather, natural disasters and adverse impacts from global climate change, and we incur significant costs and invest significant amounts with respect to these matters
19. 19Our existing and any future joint ventures may limit our flexibility with jointly owned investments and we may not realize the benefits we expect from these arrangements
20. 20We may not succeed in selling properties or other assets we may identify for sale and any proceeds we may receive from sales we do complete may be less than expected, and we may incur losses with respect to any such sales
21. 21Insurance may not adequately cover our losses, and insurance costs may increase
22. 22Changes in global supply chain conditions and emerging technologies may result in reduced demand for industrial and logistics properties
23. 23Our quarterly cash distribution rate on our common shares is currently $0.01 per share and future distributions may remain at this level for an indefinite period or be eliminated and the form of payment could change
24. 24RMR relies on information technology and systems in providing services to us, and any material failure, inadequacy, interruption or security breach of that technology or those systems could materially harm us
25. 25RMR is incorporating artificial intelligence, or AI, into some of its business workflows and processes, and challenges with properly managing its use could result in reputational harm, competitive harm, legal liability and increased regulatory costs and adversely affect our results of operations
26. 26Sustainability initiatives, requirements and market expectations may impose additional costs and expose us to new risks

Risks Related to Our Relationships with RMR

1. 27We are dependent upon RMR to manage our business and implement our growth strategy
2. 28RMR has broad discretion in operating our day to day business
3. 29Our management structure and agreements and relationships with RMR and RMR’s and its controlling shareholder’s relationships with others may create conflicts of interest, or the perception of such conflicts, and may restrict our investment activities
4. 30Our management agreements with RMR were not negotiated on an arm’s length basis and their fee and expense structure may not create proper incentives for RMR, which may increase the risk of an investment in our common shares
5. 31The termination of our management agreements with RMR may require us to pay a substantial termination fee, including in the case of a termination for unsatisfactory performance, which may limit our ability to end our relationship with RMR
6. 32Our management arrangements with RMR may discourage a change of control of us
7. 33We are party to transactions with related parties that may increase the risk of allegations of conflicts of interest
8. 34We may be at an increased risk for dissident shareholder activities due to perceived conflicts of interest arising from our management structure and relationships

Risks Related to Our Organization and Structure

1. 35We may change our operational, financing and investment policies without shareholder approval, which may increase our risk of default under our debt obligations
2. 36Ownership limitations and certain provisions in our declaration of trust, bylaws and agreements, as well as certain provisions of Maryland law, may deter, delay or prevent a change in our control or unsolicited acquisition proposals
3. 37Our rights and the rights of our shareholders to take action against our Trustees and officers are limited
4. 38Disputes with RMR may be referred to mandatory arbitration proceedings, which follow different procedures than in-court litigation and may be more restrictive to those asserting claims than in-court litigation

Risks Related to Our Taxation

1. 39Our failure to remain qualified for taxation as a REIT under the IRC could have significant adverse consequences
2. 40Distributions to shareholders generally will not qualify for reduced tax rates applicable to “qualified dividends”
3. 41REIT distribution requirements could adversely affect us and our shareholders
4. 42Even if we remain qualified for taxation as a REIT under the IRC, we may face other tax liabilities that reduce our cash flow
5. 43We may incur adverse tax consequences as a result of our acquisition of MNR
6. 44Legislative or other actions affecting REITs could materially and adversely affect us and our shareholders