Industrial Logistics Properties Trust

Note 1. Organization

Industrial Logistics Properties Trust, or, collectively with its consolidated subsidiaries, we, us or our, is a real estate investment trust, or REIT, organized under Maryland law on September 15, 2017.

As of December 31, 2023, our portfolio was comprised of 411 properties containing approximately 59,951,000 rentable square feet located in 39 states, including 226 buildings, leasable land parcels and easements containing approximately 16,729,000 rentable square feet (all square footage amounts included within this Annual Report on Form 10-K are unaudited) that were primarily industrial lands located on the island of Oahu, Hawaii, or our Hawaii Properties, and 185 properties containing approximately 43,222,000 rentable square feet of industrial and logistics properties located in 38 other states, or our Mainland Properties. As of December 31, 2023, we also owned a 22% equity interest in an unconsolidated joint venture, or the unconsolidated joint venture.

Note 2. Summary of Significant Accounting Policies

Basis of Presentation. These consolidated financial statements include the accounts of us and our subsidiaries. All intercompany transactions and balances with or among our consolidated subsidiaries have been eliminated.

Consolidation. We consolidate entities in which we have a controlling financial interest. In determining whether we have a controlling financial interest in a partially owned entity and the requirement to consolidate the accounts of that entity, we consider whether the entity is a variable interest entity, or VIE, in which we are the primary beneficiary or whether the entity is a voting interest entity in which we have a majority of the voting interests of the entity. We are deemed to be the primary beneficiary of a VIE when we have the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and the obligation to absorb losses or receive benefits that could potentially be significant to the VIE. We generally do not control an entity if the approval of all of the partners/members is contractually required with respect to decisions that most significantly impact the performance of the entity. This includes decisions regarding operating and capital budgets and the placement of new or additional financing secured by the assets of the venture, among others.

Use of Estimates. Preparation of these financial statements in conformity with U.S. generally accepted accounting principles, or GAAP, requires us to make estimates and assumptions that may affect the amounts reported in these consolidated financial statements and related notes.

On February 25, 2022, we acquired Monmouth Real Estate Investment Corporation, or MNR, pursuant to the merger of MNR with and into one of our wholly owned subsidiaries, or the Merger, as further described below. In connection with the Merger, we entered into a joint venture arrangement, or our consolidated joint venture, for 95 of the acquired MNR properties, includingtwo then committed, but not yet then completed, property acquisitions, located in the mainland United States, in which we retained a 61% equity interest. We have a controlling financial interest in our consolidated joint venture and as result, account for it on a consolidated basis.

Real Estate Properties. We record properties at cost. Our real estate investments in lands are not depreciated. We calculate depreciation on other real estate investments on a straight line basis over estimated useful lives generally ranging from seven to 40 years. We allocate the purchase prices of our properties to land, building and improvements based on determinations of the fair values of these assets assuming the properties are vacant. We determine the fair value of each property using methods similar to those used by independent appraisers, which may involve estimated cash flows that are based on a number of factors, including capitalization rates and discount rates, among others. In some circumstances, we engage independent real estate appraisal firms to provide market information and evaluations which are relevant to our purchase price allocations and determinations of depreciable useful lives; however, we are ultimately responsible for the purchase price allocations and determinations of useful lives.

We allocate a portion of the purchase price to above market and below market leases based on the present value (using a discount rate which reflects the risks associated with acquired in-place leases at the time each property was acquired by us) of the difference, if any, between (i) the contractual amounts to be paid pursuant to the acquired in-place leases and (ii) our estimates of fair market lease rates for the corresponding leases, measured over a period equal to the terms of the respective leases. The terms of below market leases that include bargain renewal options, if any, are further adjusted if we determine renewal to be probable. We allocate a portion of the purchase price to acquired in-place leases and tenant relationships based upon market estimates of the costs to lease up the property. In determining these allocations, we estimate costs during the expected lease up periods, including carrying costs such as real estate taxes, insurance and other operating income and expenses and costs, and costs including leasing commissions, legal and other related expenses and costs to execute similar leases in current market conditions at the time a property was acquired by us. We allocate this aggregate value, which we refer to as lease origination value, between acquired in-place lease values and tenant relationships based on our evaluation of the specific characteristics of each tenant’s lease. However, we have not separated the value of tenant relationships from the value of acquired in-place leases because such value and related amortization expense is immaterial to our consolidated financial statements. If the value of tenant relationships becomes material in the future, we may separately allocate those amounts and amortize the allocated amount over the estimated life of the relationships.

We amortize lease origination value (included in acquired real estate leases in our consolidated balance sheets) over the terms of the associated leases. Such amortization, which is included in depreciation and amortization expense, totaled $51,065, $53,113 and $17,437 during the years ended December 31, 2023, 2022 and 2021, respectively. We amortize capitalized above market lease values (included in acquired real estate leases in our consolidated balance sheets) and below market lease values (presented as assumed real estate lease obligations in our consolidated balance sheets) as a reduction or increase, respectively, to rental income over the terms of the associated leases. Such amortization resulted in increases in rental income of $1,130, $4,544 and $781 during the years ended December 31, 2023, 2022 and 2021, respectively. If a lease is terminated prior to its stated expiration, we write off the unamortized amounts relating to that lease.

As of December 31, 2023 and 2022, our acquired real estate leases and assumed real estate lease obligations were as follows:

As of December 31, 2023, the weighted average amortization periods for capitalized above market lease values, lease origination value and capitalized below market lease values were 9.7 years,7.6 years and 6.7 years, respectively.

Deferred Leasing Costs. Deferred leasing costs include capitalized brokerage costs and inducements associated with our entering leases. We amortize deferred leasing costs, which are included in depreciation and amortization expense, and inducements, which are included as a reduction to rental income, each on a straight line basis over the terms of the respective leases. Legal costs associated with the execution of our leases are expensed as incurred and included in general and administrative expenses in our consolidated statements of comprehensive income (loss). Deferred leasing costs totaled $26,803 and $22,371 at December 31, 2023 and 2022, respectively, and accumulated amortization of deferred leasing costs totaled $6,156 and $4,366 at December 31, 2023 and 2022, respectively. Deferred leasing costs are included in other assets, net in our consolidated balance sheets.

Debt Issuance Costs. Debt issuance costs include capitalized issuance costs related to borrowings, which are amortized to interest expense over the terms of the respective loans. Debt issuance costs, net of accumulated amortization, for our mortgage notes payable are presented as a direct deduction from the associated debt liability in our consolidated balance sheets. As of December 31, 2023 and 2022, we had debt issuance costs, net of accumulated amortization, of $20,003 and $45,862, respectively, for certain of our mortgage notes payable.

As of December 31, 2021, we had debt issuance costs for our revolving credit facility, which we repaid and terminated in 2022, totaling $6,711 and accumulated amortization of debt issuance costs of $5,907. Debt issuance costs for our revolving credit facility were included in other assets, net in our consolidated balance sheets.

Expected future amortization related to our acquired real estate leases and assumed real estate obligations, deferred leasing costs and debt issuance costs as of December 31, 2023 are shown below:

Impairments. We regularly evaluate whether events or changes in circumstances have occurred that could indicate an impairment in the value of long lived assets. Impairment indicators may include declining tenant occupancy, lack of progress leasing vacant space, tenant bankruptcies, low long-term prospects for improvement in property performance, weak or declining tenant profitability, cash flow or liquidity, our decision to dispose of an asset before the end of its estimated useful life and legislative, market or industry changes that could permanently reduce the value of a property. If there is an indication that the carrying value of an asset is not recoverable, we estimate the projected undiscounted cash flows to determine if an impairment loss should be recognized. The future net undiscounted cash flows are subjective and are based in part on assumptions regarding hold periods, market rents and terminal capitalization rates. If the carrying value exceeds the projected undiscounted cash flows, we determine the amount of any impairment loss by comparing the historical carrying value to the estimated fair value. We estimate fair value through an evaluation of recent financial performance and projected discounted cash flows using standard industry valuation techniques. In addition to consideration of impairment upon the events or changes in circumstances described above, we regularly evaluate the remaining useful lives of our long lived assets. If we change our estimate of the remaining useful lives, we allocate the carrying value of the affected assets over their revised remaining useful lives.

During the year ended December 31, 2023, we recognized a $156 loss on impairment to adjust the carrying value of a property to its estimated fair value. During the year ended December 31, 2022, we recognized a $100,747 loss on impairment for 25 properties we acquired as part of the Merger, to adjust the carrying value of these properties to their estimated fair value.

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 cleanup. As of December 31, 2023 and 2022, accrued environmental remediation costs of $6,775 and $6,940, respectively, were included in accounts payable and other liabilities in our 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, for example, 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 consolidated statements of comprehensive income (loss).

Capitalization Policy. Costs directly related to the development of properties are capitalized. We capitalize development costs, including interest, real estate taxes, insurance and other project costs, incurred during the period of development. Determinations of when a development project commences and capitalization begins, and when a development project is substantially complete and held available for occupancy and capitalization must cease, involve judgments. We begin the capitalization of costs during the pre-construction period, which we consider to begin when activities that are necessary to the development of the property commence. We consider a development project as substantially complete and held available for occupancy upon the completion of tenant improvements, but no later than one year from cessation of major construction activity.

Cash and Cash Equivalents. We consider highly liquid investments with original maturities of three months or less at the date of purchase to be cash equivalents.

Restricted Cash. Restricted cash consists of amounts escrowed for future capital expenditures as required by certain of our mortgaged properties and cash held for the operations of our consolidated joint venture in which we own a 61% equity interest.

Derivative Instruments and Hedging Activities. We account for our derivative instruments at fair value. Accounting for changes in the fair value of a derivative instrument depends on the intended use of the derivative instrument and the designation of the derivative instrument. The change in fair value of the effective portion of the derivative instrument that is not designated as a hedge or that does not meet the hedge accounting criteria is recorded as a gain or loss to operations.

Equity Method Investments. We account for investments under the equity method when the requirements for consolidation are not met, and we have significant influence over the operations of the investee. We own a 22% equity interest in the unconsolidated joint venture, which owns 18 properties. We do not control the activities that are most significant to this joint venture and, as a result, we account for our investment in this joint venture under the equity method of accounting under the fair value option.

Revenue Recognition. 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 their respective leases and are generally classified as operating leases.

Our leases provide for base rent payments and may also 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 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.

Certain of our leases contain non-lease components, such as property level operating expenses and capital expenditures reimbursed by our tenants as well as other required lease payments. We have determined that all our leases qualify for the practical expedient to not separate the lease and non-lease components under the Accounting Standards Codification, or ASC, 842, because the lease components are operating leases and the timing and pattern of recognition of the non-lease components are the same as those of the lease components. Income derived from our leases is recorded in rental income in our consolidated statements of comprehensive income (loss).

Certain tenants under their leases are required to directly pay their obligations for insurance, real estate taxes and certain other expenses to the vendor and/or the municipality. These obligations, which have been assumed by the tenants under the terms of their respective leases, are not reflected in our consolidated financial statements. To the extent any tenant responsible for any such obligations under the applicable lease defaults on such lease or if it is deemed probable that the tenant will fail to pay for such obligations, we would record a liability for such obligations.

Income Taxes. We have elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended, and, accordingly, we generally are not, and will not be, subject to federal income taxes provided we distribute our taxable income and meet certain organization and operating requirements to qualify for taxation as a REIT. We are, however, subject to certain state and local taxes.

Right of Use Assets and Lease Liabilities. We are the lessee forthree of our properties subject to ground leases andone office lease that we assumed as part of our acquisition of MNR. For leases with a term greater than 12 months under which we are the lessee, we are required to record a right of use asset and lease liability. The values of our right of use assets and related lease liabilities were $4,646 and $4,730, respectively, as of December 31, 2023, and $5,084 and $5,149, respectively, as of December 31, 2022. Our right of use assets and related lease liabilities are included inother assets, net andaccounts payable and other liabilities, respectively, in our consolidated balance sheets.

Generally, payments of ground lease obligations are made by our tenants. However, if a tenant does not perform obligations under a ground lease or does not renew any ground lease, we may have to perform obligations under, or renew, the ground lease in order to protect our investment in the affected property.

Net Income (Loss) Per Common Share. We calculate basic earnings per common share by dividing net income (loss) by the weighted average number of common shares outstanding during the period. We calculate diluted net income (loss) 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.

Noncontrolling Interests. Noncontrolling interests represent the share of our consolidated joint venture owned by a third party. We allocate net income (loss) to noncontrolling interests based on the respective ownership interest during the period.

Segment Reporting. We operate inone business segment: ownership and leasing of properties that include industrial and logistics buildings and leased industrial lands.

New Accounting Pronouncements. In November 2023, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires public entities, including those with a single reportable segment, to: (i) provide disclosures of significant segment expenses and other segment items if they are regularly provided to the chief operating decision maker, or the CODM, and included in each reported measure of segment profit or loss; (ii) provide all annual disclosures about a reportable segment’s profit or loss and assets currently required by ASC 280, Segment Reportingin interim periods; and (iii) disclose the CODM’s title and position, as well as an explanation of how the CODM uses the reported measures and other disclosures. ASU 2023-07 does not change how a public entity identifies its operating segments, aggregates those operating segments or applies the quantitative thresholds to determine its reportable segments. ASU 2023-07 is required to be applied retrospectively and is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. We are currently evaluating the impact ASU 2023-07 will have on our consolidated financial statements.

In August 2023, the FASB issued ASU 2023-05, Business Combinations – Joint Venture Formations (Subtopic 805-60): Recognition and Initial Measurement. ASU 2023-05 applies to the formation of a joint venture and requires a joint venture to initially measure all contributions received upon its formation at fair value. This guidance is effective for all joint ventures with a formation date on or after January 1, 2025, with early adoption permitted. Joint ventures formed before the effective date have the option to apply it retrospectively, while those formed after the effective date are required to apply it prospectively. We adopted ASU 2023-05 on October 1, 2023 and will apply the guidance prospectively. We do not expect the adoption to have an impact on our consolidated financial statements.

Note 3. Real Estate Investments

We incurred capital expenditures at certain of our properties of $23,263 and $30,331 during the years ended December 31, 2023 and 2022, respectively. During the year ended December 31, 2023, we committed $10,923 for expenditures related to tenant improvements and leasing costs for leases executed during the period for approximately 4,982,000 rentable square feet. Committed, but unspent, tenant related obligations based on existing leases as of December 31, 2023, were $5,947, all of which is expected to be spent during the next 12 months.

Acquisitions

On February 25, 2022, we completed the acquisition of MNR pursuant to the Agreement and Plan of Merger, dated as of November 5, 2021 and as amended on February 7, 2022, or the Merger Agreement, by and among us, Maple Delaware Merger Sub LLC, a Delaware limited liability company and our wholly owned subsidiary, or Merger Sub, and MNR. At the effective time on February 25, 2022, or the Effective Time, MNR merged with and into Merger Sub, with Merger Sub continuing as the surviving entity, and the separate existence of MNR ceased. MNR’s portfolio included 124 class A, single tenant, net leased, e-commerce focused industrial properties containing approximately 25,745,000 rentable square feet and two then committed, but not yet then completed, property acquisitions. The aggregate value of the consideration paid in the Merger was $3,739,048, including the assumption of $323,432 aggregate principal amount of former MNR mortgage debt, the repayment of $885,269 of MNR debt and the payment of certain transaction fees and expenses, net of MNR’s cash on hand, and excludingtwo then pending property acquisitions for an aggregate purchase price of $78,843, excluding acquisition related costs.

Pursuant to the terms set forth in the Merger Agreement, at the Effective Time, each share of common stock, par value $0.01 per share, of MNR that was issued and outstanding immediately prior to the Effective Time was automatically converted into the right to receive $21.00 per share in cash, or the Common Stock Consideration, and each share of 6.125% Series C Cumulative Redeemable Preferred Stock, par value $0.01 per share, of MNR, that was issued and outstanding immediately prior to the Effective Time was automatically converted into the right to receive an amount in cash equal to $25.00 plus accumulated and unpaid dividends.

At the Effective Time, each MNR stock option and restricted stock award outstanding immediately prior to the Effective Time, whether vested or unvested, became fully vested and converted into the right to receive, in the case of stock options, the difference between the Common Stock Consideration and the exercise price and, in the case of restricted stock awards, the Common Stock Consideration. Any out-of-money stock options were canceled for no consideration.

Immediately following the closing of the Merger, we entered into a joint venture arrangement with an institutional investor for 95 MNR properties in 27 states, includingtwo then committed, but not yet then completed, property acquisitions. The investor acquired a 39% equity interest in the joint venture from us for $589,411, as of the completion of this transaction, and we retained the remaining 61% equity interest in the joint venture. In connection with the transaction, the joint venture assumed $323,432 aggregate principal amount of former MNR mortgage debt secured by 11 properties and entered into a $1,400,000 interest only floating rate CMBS loan secured by 82 properties, or the Floating Rate Loan. The Floating Rate Loan matures in March 2024, subject tothree one year extension options, and requires that interest be paid at an annual rate based on the secured overnight financing rate, or SOFR, plus a premium of 2.77%.

In connection with the closing of the Merger, we entered into a $1,385,158 interest only bridge loan facility secured by 109 of our properties, or the Bridge Loan. We also entered into a $700,000 interest only fixed rate CMBS loan secured by 17 of our properties, or the Fixed Rate Loan.

The Bridge Loan was scheduled to mature in February 2023 and required that interest be paid at an annual rate of SOFR plus a weighted average premium of 2.92%. We repaid the Bridge Loan in full in September 2022. The Fixed Rate Loan matures in March 2032 and requires that interest be paid at a weighted average annual interest rate of 4.42%. The Floating Rate Loan, the Bridge Loan and the Fixed Rate Loan are collectively referred to as the Merger Loans.

We used the proceeds from our sale of the equity interest in our joint venture in which we retained a 61% equity interest to partially fund our acquisition of MNR. We funded our equity interest in that joint venture and the balance of the acquisition of MNR with proceeds from the Bridge Loan and the Fixed Rate Loan.

In connection with the Merger and the Merger Loans, we repaid the outstanding principal balance under our $750,000 unsecured revolving credit facility and then terminated the agreement governing the facility, which was scheduled to expire in June 2022, in accordance with its terms and without penalty.

We accounted for the Merger as an acquisition of assets. The following table summarizes the purchase price allocation for the Merger:

(1)As of the date of acquisition, the weighted average amortization periods for the above market lease values, lease origination value and capitalized below market lease values were 11.1 years,8.5 years and 7.8 years, respectively.

(2)As part of the Merger, we acquired a portfolio of marketable securities and classified them as available for sale. During the year ended December 31, 2022, we sold all of these securities for net proceeds of $140,792, resulting in a $5,758 realized loss on sale of equity securities for the year ended December 31, 2022.

In July 2022, our consolidated joint venture acquired a property located in Augusta, GA containing approximately 226,000 rentable square feet for a purchase price of $38,053, including acquisition related costs of $53. This property was 100% leased to a single tenant with a remaining lease term of 14.9 years at the time of acquisition. This property wasone oftwo committed MNR property acquisitions at the time of the Merger and was acquired directly by our consolidated joint venture. In September 2022, our consolidated joint venture terminated the agreement for the other committed MNR property acquisition.

We allocated the purchase price for this acquisition based on the estimated fair value of the acquired assets as follows:

During the year ended December 31, 2021, we acquired four industrial properties andone parcel of developable land containing 1,644,508 rentable square feet for an aggregate purchase price of $134,730, including acquisition related costs of $1,030, and accounted for as asset acquisitions. We allocated the purchase prices for these acquisitions based on the estimated fair value of the acquired assets and assumed liabilities as follows:

Dispositions

During the year ended December 31, 2023, we soldtwo properties and a portion of a land parcel, containing 489,825 square feet for the aggregate sales price of $25,460, excluding closing costs.

(1)Gross sale price is the gross contract price, excluding closing costs.

In September 2021, we sold a portion of a land parcel located in Rock Hill, SC for $1,400, excluding closing costs, resulting in a net gain on sale of real estate of $940.

Consolidated Joint Venture

We own a 61% equity interest in Mountain Industrial REIT LLC, or Mountain JV, or our consolidated joint venture, which owns 94 properties in 27 states totaling approximately 20,981,000 rentable square feet. We control this consolidated joint venture and therefore account for the properties owned by this joint venture on a consolidated basis in our consolidated financial statements. We recognized net loss attributable to noncontrolling interest in our consolidated financial statements for the year ended December 31, 2023 and the period from February 25, 2022 (inception of our consolidated joint venture) to December 31, 2022 of $41,798 and $60,067, respectively, As of December 31, 2023, our consolidated joint venture had total assets of $3,026,194 and total liabilities of $1,774,380.

Consolidated Tenancy in Common

An unrelated third party owns an approximate 33% tenancy in common interest inone property located in Somerset, NJ with approximately 64,000 rentable square feet, and we own the remaining 67% tenancy in common interest in this property. The portion of this property’s net income (loss) not attributable to us of $68 and ($51) for the year ended December 31, 2023 and the period from February 25, 2022 (the date of acquisition) to December 31, 2022, respectively, is reported as net loss attributable to noncontrolling interest in our consolidated statements of comprehensive income (loss).

Unconsolidated Joint Venture

We own a 22% equity interest in The Industrial Fund REIT LLC, which owns 18 industrial properties located in 12 states totaling approximately 11,726,000 rentable square feet. We account for the unconsolidated joint venture under the equity method of accounting under the fair value option. We recognize changes in the fair value of our investment in the unconsolidated joint venture as equity in earnings of unconsolidated joint venture in our consolidated statements of comprehensive income (loss).

Note 4. Leases

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 $76,572, $63,168 and $38,732 for the years ended December 31, 2023, 2022 and 2021, respectively.

The following table summarizes the future contractual lease payments due from our tenants as of December 31, 2023:

Geographic Concentration

For the years ended December 31, 2023, 2022 and 2021, our Hawaii Properties represented 28.0%,29.7% and 50.6%, respectively, of our rental income.

Tenant Concentration

We define annualized rental revenues as the annualized contractual base rents from our tenants pursuant to our lease agreements as of the measurement date, including straight line rent adjustments and estimated recurring expense reimbursements to be paid to us, and excluding lease value amortization.

Subsidiaries of FedEx Corporation and Amazon.com Services, Inc. represented 29.7% and 6.7% of our annualized rental revenues as of December 31, 2023, respectively, and 29.6% and 6.7% as of December 31, 2022, respectively.

Note 5. Indebtedness

Our outstanding indebtedness as of December 31, 2023 and 2022 is summarized below:

(1)Interest rates reflect the impact of interest rate caps, if any, and exclude the impact of the amortization of debt issuance costs, premiums and discounts.

We had a $750,000 unsecured revolving credit facility that was available for our general business purposes, including acquisitions. The weighted average annual interest rate for borrowings under this revolving credit facility was 1.41%, for the period from January 1, 2022 to February 25, 2022, and 1.44% for the year ended December 31, 2021. In connection with the closing of the Merger, we entered into the Merger Loans, and repaid the outstanding principal balance under this revolving credit facility and then terminated the agreement governing the facility in accordance with its terms and without penalty. During the year ended December 31, 2022, we recorded a $828 loss on early extinguishment of debt to write off unamortized costs related to this facility.

On February 25, 2022, subsidiaries of our consolidated joint venture entered into a loan agreement with a group of institutional lenders, or the Floating Rate Lenders, pursuant to which this joint venture obtained the Floating Rate Loan. Also on February 25, 2022, our consolidated joint venture entered into a guaranty in favor of the Floating Rate Lenders, pursuant to which this joint venture guaranteed certain limited recourse obligations of its subsidiaries with respect to the Floating Rate Loan. The Floating Rate Loan matures in March 2024, subject tothree, one year extension options, and requires that interest be paid at an annual rate of SOFR plus a premium of 2.25%. Effective in March 2022, the Floating Rate Lenders exercised their option to increase the interest rate premium in connection with the securitization of the Floating Rate Loan, resulting in an increase of 51.5 basis points to the premium. We also purchased an interest rate cap through March 2024 with a SOFR strike rate equal to 3.40%. The weighted average annual interest rate payable under the Floating Rate Loan was 6.17% for the year ended December 31, 2023, and was 6.10% for the period from our joint venture’s formation date, February 25, 2022, to December 31, 2022.

Also on February 25, 2022, certain of our subsidiaries entered into a loan agreement with a group of institutional lenders, or the Bridge Lenders, and a mezzanine loan agreement with an institutional lender, or the Bridge Mezz Lender, together pursuant to which we obtained the Bridge Loan. Also on February 25, 2022, we entered into a guaranty in favor of the Bridge Lenders and the Bridge Mezz Lender, pursuant to which we guaranteed certain limited recourse obligations of our subsidiaries with respect to the Bridge Loan. The Bridge Loan was scheduled to mature in February 2023 and required that interest only be paid at an annual rate of SOFR plus a premium of 1.75% under the loan agreement and a premium of 8.0% under the mezzanine loan agreement. We also purchased an interest rate cap with a SOFR strike rate equal to 2.70%. We repaid the Bridge Loan in full on September 22, 2022 with cash on hand and proceeds from our $1,235,000 floating rate loan, which is further described below. During the year ended December 31, 2022, we recorded a $21,370 loss on early extinguishment of debt to write off unamortized costs related to the Bridge Loan and related interest rate cap. The weighted average annual interest rate payable under the Bridge Loan was 4.24% for the period from February 25, 2022 to September 22, 2022.

Also on February 25, 2022, certain of our subsidiaries entered into a loan agreement with a group of institutional lenders, or the Fixed Rate Lenders, and mezzanine loan agreements with a separate group of institutional lenders, or the Fixed Mezz Lenders, pursuant to which we obtained the Fixed Rate Loan. Also on February 25, 2022, we entered into a guaranty in favor of the Fixed Rate Lenders and the Fixed Mezz Lenders, pursuant to which we guaranteed certain limited recourse obligations of our subsidiaries with respect to the Fixed Rate Loan. The interest only Fixed Rate Loan matures in March 2032 and requires that interest be paid at a weighted average annual fixed rate of 4.42%.

We used the aggregate net proceeds from the Merger Loans to partially fund the acquisition of MNR. Principal payments on the Floating Rate Loan and Fixed Rate Loan are not required prior to the end of their respective initial terms, subject to certain conditions set forth in the applicable loan agreement. Subject to the satisfaction of certain conditions, we have the option under the applicable loan agreement: (1) to prepay up to $280,000 of the Floating Rate Loan after March 2023, at par with no premium, and to prepay the balance of the Floating Rate Loan at any time, subject to a premium; and (2) to prepay the Fixed Rate Loan in full or part at any time, subject to a premium, and beginning in September 2031, without a premium.

On September 22, 2022, certain of our subsidiaries entered into a loan agreement with a group of institutional lenders, or the ILPT Floating Rate Lenders, and a mezzanine loan agreement with a separate group of institutional lenders, or the ILPT Floating Rate Mezz Lenders, pursuant to which we obtained the $1,235,000 loan, or the ILPT Floating Rate Loan, secured by 104 of our properties. The ILPT Floating Rate Loan is comprised of a $1,100,000 mortgage loan and a $135,000 mezzanine loan. Also, on September 22, 2022, we entered into a guaranty in favor of the ILPT Floating Rate Lenders and the ILPT Floating Rate Mezz Lenders, pursuant to which we guaranteed certain limited recourse obligations of our subsidiaries with respect to the ILPT Floating Rate Loan. The ILPT Floating Rate Loan matures on October 9, 2024, subject tothree, one year extension options, and requires that interest only payments be made at an annual rate of SOFR, which is capped at an annual rate of 2.25% for the initial term of the ILPT Floating Rate Loan, plus a weighted average premium of 3.93%. Subject to the satisfaction of certain conditions, we have the option: (1) to prepay up to $247,000 of the ILPT Floating Rate Loan at par with no premium; and (2) to prepay the balance of the ILPT Floating Rate Loan in full or in part at any time, subject to a premium. Subject to the satisfaction of certain conditions, we have the option to prepay the ILPT Floating Rate Loan in full or in part at any time at par with no premium. The weighted average interest rate payable under the ILPT Floating Rate Loan was 6.18% for the year ended December 31, 2023 and the period from September 22, 2022 to December 31, 2022.

In May 2023, our consolidated joint venture obtained a $91,000 fixed rate, interest only mortgage loan secured byfour properties owned by our consolidated joint venture. This mortgage loan matures in June 2030 and requires that interest be paid at an annual rate of 6.25%. A portion of the net proceeds from this mortgage loan was used to repay four outstanding mortgage loans of our consolidated joint venture with an aggregate outstanding principal balance of $35,910 and a weighted average interest rate of 3.70%. We recognized a loss on early extinguishment of debt of $359 for the year ended December 31, 2023 in conjunction with the repayment of these mortgage loans.

The agreements governing certain of our indebtedness contain customary covenants and provide for acceleration of payment of all amounts due thereunder upon the occurrence and continuation of certain events of default.

The required principal payments due during the next five years and thereafter under all our outstanding debt as of December 31, 2023 are as follows:

Note 6. Fair Value of Assets and Liabilities

Our financial instruments include cash and cash equivalents, restricted cash, mortgages and notes payable, accounts payable and interest rate caps. At December 31, 2023 and 2022, the fair value of our financial instruments approximated their carrying values in our consolidated financial statements, due to their short term nature or floating interest rates, except for our fixed rate mortgage notes payable. Our fixed rate mortgage notes payable had an aggregate carrying value of $1,682,501 and $1,646,736 as of December 31, 2023 and 2022, respectively, and a fair value of $1,553,863 and $1,487,147 as of December 31, 2023 and 2022, respectively. We estimate the fair value of our fixed rate mortgage notes payable using significant unobservable inputs (Level 3), including discounted cash flow analyses and prevailing market rates as of the measurement date.

The table below presents certain of our assets measured on a recurring and non-recurring basis at fair value at December 31, 2023 and 2022, categorized by the level of inputs as defined in the fair value hierarchy under GAAP, used in the valuation of each asset:

(1)The fair values of our interest rate caps are based on market prices in secondary markets for similar derivative contracts.

(2)During the years ended December 31, 2023 and December 31, 2022, we reduced the carrying value ofone property and 25 properties, respectively, to their fair values based on third party offers. See Note 2 for more information.

At December 31, 2023 and 2022, the fair value of our investment in the unconsolidated joint venture was determined by applying our ownership percentage to the net asset value of the entity. The net asset value of the unconsolidated joint venture is determined by using similar estimation techniques as those used for consolidated real estate properties, including discounting expected future cash flows of the underlying real estate investments based on prevailing market rents over a holding period and including an exit capitalization rate to determine the final year of cash flows. The discount rates, exit capitalization rates and holding periods used are Level 3 significant unobservable inputs and are shown in the table below:

The table below presents a summary of the changes in fair value for our investment in the unconsolidated joint venture:

Note 7. Shareholders’ Equity

Common Share Awards

We have common shares available for issuance under the terms of our 2018 Equity Compensation Plan, or the 2018 Plan. During the years ended December 31, 2023, 2022 and 2021, we awarded to our officers and other employees of The RMR Group LLC, or RMR, annual share awards of 188,350,173,300 and 118,800 of our common shares, respectively, valued at $684, $1,184 and $3,086, in aggregate, respectively. In accordance with our Trustee compensation arrangements, we awarded each of our then Trustees 20,000 of our common shares with an aggregate value of $249,3,500 of our common shares with an aggregate value of $369 and 3,500 of our common shares with an aggregate value of $538 during the years ended December 31, 2023, 2022 and 2021, respectively, as part of their annual compensation. The values of the share awards were based upon the closing price of our common shares trading on The Nasdaq Stock Market LLC, or Nasdaq, on the dates of awards. The common shares awarded to our Trustees vested immediately. The common shares awarded to our officers and certain other employees of RMR vest infive equal annual installments beginning on the date of award. We recognize share forfeitures as they occur and include the value of awarded shares in general and administrative expenses ratably over the vesting period.

A summary of shares awarded, vested and forfeited under the terms of the 2018 Plan for the years ended December 31, 2023, 2022 and 2021 is as follows:

The 288,310 unvested shares as of December 31, 2023 are scheduled to vest as follows:100,280 shares in 2024,84,660 shares in 2025,66,000 shares in 2026 and 37,370 shares in 2027. As of December 31, 2023, the estimated future compensation expense for the unvested shares was approximately $2,111. The weighted average period over which the compensation expense will be recorded is approximately 23 months. During the years ended December 31, 2023, 2022 and 2021, we recorded $1,741, $2,221 and $2,328, respectively, of compensation expense related to the 2018 Plan.

At December 31, 2023,3,156,613 common shares remain available for issuance under the 2018 Plan.

Common Share Purchases

During the years ended December 31, 2023, 2022 and 2021, we purchased an aggregate of 49,158,32,347 and 35,596 of our common shares, respectively, valued at weighted average prices of $3.29, $7.50 and $25.91 per common share, respectively, from certain of our Trustees, our officers and certain other current and former officers and employees of RMR in satisfaction of tax withholding and payment obligations in connection with the vesting of awards of our common shares.

Distributions

During the years ended December 31, 2023, 2022 and 2021, we paid distributions on our common shares as follows:

On January 11, 2024, we declared a regular quarterly distribution to common shareholders of record on January 22, 2024 of $0.01 per common share, or approximately $658. We expect to pay this distribution to our shareholders on or about February 15, 2024 using cash on hand.

Note 8. Per Common Share Amounts

We calculate basic earnings per common share by dividing net (loss) 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 common share awards, 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:

Note 9. Business and Property Management Agreements with RMR

We haveno employees. The personnel and various services we require to operate our business are provided to us by RMR. We havetwo agreements with RMR 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.

Management Agreements with RMR. Our management agreements with RMR provide for an annual base management fee, an annual incentive management fee and property management and construction supervision fees, payable in cash, among other terms:

•Base Management Fee. The annual base management fee payable to RMR by us for each applicable period is equal to the lesser of:

•the sum of (i)0.5% of the average aggregate historical cost of the real estate assets acquired from a REIT to which RMR provided business management or property management services, or the Transferred Assets, plus (ii)0.7% of the average aggregate historical cost of our real estate investments excluding the Transferred Assets up to $250,000, plus (iii)0.5% of the average aggregate historical cost of our real estate investments excluding the Transferred Assets exceeding $250,000; and

•the sum of (i)0.7% of the average closing price per share of our common shares on the stock exchange on which such shares are principally traded during such period, multiplied by the average number of our common shares outstanding during such period, plus the daily weighted average of the aggregate liquidation preference of each class of our preferred shares outstanding during such period, plus the daily weighted average of the aggregate principal amount of our consolidated indebtedness during such period, or, together, our Average Market Capitalization, up to $250,000, plus (ii)0.5% of our Average Market Capitalization exceeding $250,000.

The average aggregate historical cost of our real estate investments includes our consolidated assets invested, directly or indirectly, in equity interests in or loans secured by real estate and personal property owned in connection with such real estate (including acquisition related costs and costs which may be allocated to intangibles or are unallocated), all before reserves for depreciation, amortization, impairment charges or bad debts or other similar non-cash reserves.

•Incentive Management Fee. The incentive management fee which may be earned by RMR for an annual period is calculated as follows:

•An amount, subject to a cap, based on the value of our common shares outstanding, equal to 12.0% of the product of:

•our equity market capitalization on the last trading day of the year immediately prior to the relevant three year measurement period, and

•the amount (expressed as a percentage) by which the total return per share, as defined in the business management agreement and further described below, of our common shareholders (i.e., share price appreciation plus dividends) exceeds the total shareholder return of the applicable market index, or the benchmark return per share, for the relevant measurement period. The MSCI U.S. REIT/Industrial REIT Index is the benchmark index for periods on and after August 1, 2021, and the SNL U.S. REIT Industrial Index is the benchmark index for periods prior to August 1, 2021.

For purposes of the total return per share of our common shareholders, share price appreciation for a measurement period is determined by subtracting (i) the closing price of our common shares on Nasdaq on the last trading day of the year immediately before the first year of the applicable measurement period, or the initial share price, from (ii) the average closing price of our common shares on the 10 consecutive trading days having the highest average closing prices during the final 30 trading days in the last year of the measurement period.

•The calculation of the incentive management fee (including the determinations of our equity market capitalization, initial share price and the total return per share of our common shareholders) is subject to adjustments if we issue or repurchase our common shares, or our common shares are forfeited, during the measurement period.

•No incentive management fee is payable by us unless our total return per share during the measurement period is positive.

•The measurement periods arethree year periods ending with the year for which the incentive management fee is being calculated.

•If our total return per share exceeds 12.0% per year in any measurement period, the benchmark return per share is adjusted to be the lesser of the total shareholder return of the applicable market index for such measurement period and 12.0% per year, or the adjusted benchmark return per share. In instances where the adjusted benchmark return per share applies, the incentive management fee will be reduced if our total return per share is between 200 basis points and 500 basis points below the applicable market index in any year, by a low return factor, as defined in the business management agreement, and there will beno incentive management fee paid if, in these instances, our total return per share is more than 500 basis points below the applicable market index in any year, determined on a cumulative basis (i.e., between 200 basis points and 500 basis points per year multiplied by the number of years in the measurement period and below the applicable market index).

•The incentive management fee is subject to a cap. The cap is equal to the value of the number of our common shares which would, after issuance, represent 1.5% of the number of our common shares then outstanding multiplied by the average closing price of our common shares during the 10 consecutive trading days having the highest average closing prices during the final 30 trading days of the relevant measurement period.

•Incentive management fees we paid to RMR for any period may be subject to “clawback” if our financial statements for that period are restated due to material non-compliance with any financial reporting requirements under the securities laws as a result of the bad faith, fraud, willful misconduct or gross negligence of RMR and the amount of the incentive management fee we paid was greater than the amount we would have paid based on the restated financial statements.

Pursuant to our business management agreement with RMR, we recognized business management fees of $23,154, $23,701 and $10,562 for the years ended December 31, 2023, 2022 and 2021, respectively. The business management fees we recognized are included in general and administrative expenses in our consolidated statements of comprehensive income (loss) for the years ended December 31, 2023, 2022 and 2021. We didnot incur any incentive management fee pursuant to our business management agreement for the years ended December 31, 2023, 2022 and 2021.

•Property Management and Construction Supervision Fees. The property management fees payable to RMR by us for each applicable period are equal to 3.0% of gross collected rents and the construction supervision fees payable to RMR by us for each applicable period are equal to 5.0% of construction costs. Pursuant to our property management agreement with RMR, we recognized aggregate property management and construction supervision fees of $13,449, $11,916 and $6,606 for the years ended December 31, 2023, 2022 and 2021, respectively. For the years ended December 31, 2023, 2022 and 2021, $12,800, $11,058 and $6,395, respectively, of the total property management and construction supervision fees were included in other operating expenses in our consolidated statements of comprehensive income (loss) and $649, $858 and $211, respectively, were capitalized as building improvements in our consolidated balance sheets. The amounts capitalized are being depreciated over the estimated useful lives of the related capital assets.

•Expense Reimbursement. We are generally responsible for all of our operating expenses, including certain expenses incurred or arranged by RMR on our behalf. We are generally not responsible for payment of RMR’s employment, office or administrative expenses incurred to provide management services to us, except for the employment and related expenses of RMR’s employees assigned to work exclusively or partly at our properties, our share of the wages, benefits and other related costs of RMR’s centralized accounting personnel, our share of RMR’s costs for providing our internal audit function and as otherwise agreed. Our property level operating expenses are generally incorporated into rents charged to our tenants, including certain payroll and related costs incurred by RMR. We reimbursed RMR amounts totaling $8,378, $6,785 and $4,786 for these expenses and costs for the years ended December 31, 2023, 2022 and 2021, respectively. These amounts are included in other operating expenses and general and administrative expenses, as applicable, for these periods.

•Term. Our management agreements with RMR have terms that end on December 31, 2043, and automatically extend on December 31st of each year for an additional year, so that the terms of our management agreements thereafter end on the 20th anniversary of the date of the extension.

•Termination Rights. We have the right to terminate one or both of our management agreements with RMR: (i) at any time on 60 days’ written notice for convenience; (ii) immediately on written notice for cause, as defined therein; (iii) on written notice given within 60 days after the end of an applicable calendar year for a performance reason, as defined therein; and (iv) by written notice during the 12 months following a change of control of RMR, as defined therein. RMR has the right to terminate the management agreements for good reason, as defined therein.

•Termination Fee. If we terminate one or both of our management agreements with RMR for convenience, or if RMR terminates one or both of our management agreements for good reason, we have agreed to pay RMR a termination fee in an amount equal to the sum of the present values of the monthly future fees, as defined therein, for the terminated management agreement(s) for the term that was remaining prior to such termination, which, depending on the time of termination would be between 19 and 20 years. If we terminate one or both of our management agreements with RMR for a performance reason, we have agreed to pay RMR the termination fee calculated as described above, but assuming a 10 year term was remaining prior to the termination. We are not required to pay any termination fee if we terminate our management agreements with RMR for cause or as a result of a change of control of RMR.

•Transition Services. RMR has agreed to provide certain transition services to us for 120 days following an applicable termination by us or notice of termination by RMR, including cooperating with us and using commercially reasonable efforts to facilitate the orderly transfer of the management and real estate investment services provided under our business management agreement and to facilitate the orderly transfer of the management of the managed properties under our property management agreement, as applicable.

•Vendors. Pursuant to our management agreements with RMR, RMR may from time to time negotiate on our behalf with certain third party vendors and suppliers for the procurement of goods and services to us. As part of this arrangement, we may enter agreements with RMR and other companies to which RMR or its subsidiaries provide management services for the purpose of obtaining more favorable terms from such vendors and suppliers.

•Investment Opportunities. Under our business management agreement with RMR, we acknowledge that RMR may engage in other activities or businesses and act as the manager to any other person or entity (including other REITs) even though such person or entity has investment policies and objectives similar to ours and we are not entitled to preferential treatment in receiving information, recommendations and other services from RMR.

Management Agreements Between Our Joint Ventures and RMR. We havetwo separate joint venture arrangements. One of these joint ventures, the unconsolidated joint venture, is withtwo, third party institutional investors. This joint venture owns 18 properties, and we own a 22% equity interest in this joint venture. The other joint venture, our consolidated joint venture, which we entered into in connection with the Merger, is withone, third party institutional investor. This joint venture owns 94 properties. We own a 61% equity interest in this joint venture, and the other joint venture investor acquired a 39% equity interest in the joint venture from us for $589,411, as of the completion of the transaction, in connection with our consolidated joint venture’s formation in February 2022. See Note 3 for further information about our joint ventures.

RMR provides management services to both of these joint ventures. We are not obligated to pay management fees to RMR under our management agreements with RMR for the services it provides to the unconsolidated joint venture. We are obligated to pay management fees to RMR under our management agreements with RMR for the services it provides to our consolidated joint venture; however, our consolidated joint venture pays management fees directly to RMR, and any such fees paid by our consolidated joint venture are credited against the fees payable by us to RMR. See Note 3 for further information about our joint ventures.

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

Note 10. Related Person Transactions

We have relationships and historical and continuing transactions with RMR, The RMR Group Inc., or RMR Inc., and others related to them, including other companies to which RMR or its subsidiaries provide management services and some of which have trustees, directors or officers who are also our Trustees or officers. RMR is a majority owned subsidiary of RMR Inc. The Chair of our Board of Trustees and one of our Managing Trustees, Adam D. Portnoy, is the sole trustee, an officer and the controlling shareholder of ABP Trust, which is the controlling shareholder of RMR Inc., the chair of the board of directors, a managing director and the president and chief executive officer of RMR Inc. and an officer and employee of RMR. Matthew P. Jordan, our other Managing Trustee, is an executive vice president and the chief financial officer and treasurer of RMR Inc., an officer and employee of RMR and an officer of ABP Trust. John G. Murray, one of our Managing Trustees until June 1, 2022 and our President and Chief Executive Officer until March 31, 2022, also serves as an officer and employee of RMR, and each of our current officers is also an officer and employee of RMR. Some of our Independent Trustees also serve as independent trustees of other public companies to which RMR or its subsidiaries provide management services. Adam D. Portnoy serves as chair of the boards and as a managing trustee of these public companies. Other officers of RMR, including Messrs. Jordan and Murray and certain of our officers, serve as managing trustees or officers of certain of these companies.

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

Joint Ventures. We havetwo separate joint venture arrangements. See Note 3 for further information regarding our joint ventures, including properties we have sold to, and equity interests we have sold in, these joint ventures.

As of December 31, 2023 and 2022, we owed $680 and $616, respectively, to the unconsolidated joint venture for rents that we collected on behalf of that joint venture. These amounts are presented as due to related persons in our consolidated balance sheets.

RMR provides management services to each of our joint ventures. See Note 9 for further information regarding RMR’s management agreements with our joint ventures.

Share Awards to RMR Employees. As described in Note 7, we award shares to our officers and other employees of RMR annually. Generally, one fifth of these awards vest on the grant date and one fifth vests on each of the next four anniversaries of the grant dates. In certain instances, we may accelerate the vesting of an award, such as in connection with the award holder’s retirement as an officer of us or an officer or employee of RMR. These awards to RMR employees are in addition to the share awards to our Managing Trustees, as Trustee compensation, and the fees we paid to RMR. See Note 7 for information regarding our share awards and activity as well as certain share repurchases we made in connection with share award recipients satisfying tax withholding obligations on the vesting of share awards.

TravelCenters of America Inc. In May 2021, we acquired a property located in the Mesquite, TX market from TravelCenters of America Inc., or TA, for a purchase price of $2,319, including acquisition related costs of $119. Until TA was acquired in May 2023 by BP Products North America Inc., RMR provided management services to TA and Mr. Portnoy served as the chair of the board of directors and as a managing director of TA. See Note 3 for further information regarding our acquisition and disposition of the property in Mesquite, TX.

Note 11. Derivatives and Hedging Activities

Risk Management Objective of Using Derivatives

We are exposed to certain risks relating to our ongoing business operations, including the impact of changes in interest rates. The only risk currently managed by us using derivative instruments is our interest rate risk. We have an interest rate cap agreement to manage our interest rate risk exposure on each of the ILPT Floating Rate Loan and the Floating Rate Loan, both with interest payable at a rate equal to SOFR plus a premium. The use of derivative financial instruments carries certain risks, including the risk that the counterparties to these contractual arrangements are not able to perform under the agreements. To mitigate this risk, we only enter into derivative financial instruments with counterparties with high credit ratings and with major financial institutions with which we or our related parties may also have other financial relationships. We do not anticipate that any of the counterparties will fail to meet their obligations.

Cash Flow Hedges of Interest Rate Risk

We record all derivatives in our consolidated balance sheets at fair value. The following table summarizes the terms of our outstanding interest rate cap agreements designated as cash flow hedges of interest rate risk at December 31, 2023 and 2022:

Interest rate caps designated as cash flow hedges involve the receipt of variable amounts from a counterparty if interest rates rise above the strike rate on the contract in exchange for an up-front premium. For derivatives designated and qualifying as cash flow hedges of interest rate risk, the gain or loss on the derivative is recorded in cumulative other comprehensive income and subsequently reclassified into interest expense in the same period during which the hedged transaction affects earnings. Gains and losses on the derivative representing hedge components excluded from the assessment of effectiveness are recognized over the life of the hedge on a systematic and rational basis, as documented at hedge inception in accordance with our accounting policy election. The earnings recognition of excluded components is presented in interest expense. Amounts reported in cumulative other comprehensive income related to derivatives will be reclassified to interest expense as interest payments are made on our applicable debt.

In September 2022, in conjunction with the repayment of the Bridge Loan, we soldtwo interest rate cap instruments with an aggregate notional amount of $1,385,158, a strike rate equal to 2.70% and an original expiration date of March 15, 2023 for $7,740. As the underlying debt instrument that these interest rate caps were intended to hedge was repaid in its entirety and the related interest expense was no longer probable to occur, these interest rate caps were no longer designated as cash flow hedges and the remaining deferred gain was reclassified from cumulative other comprehensive income to loss on early extinguishment of debt.

The following table summarizes the activity related to our cash flow hedges within cumulative other comprehensive income for the periods shown: