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Item 7. Management’s Discussion and Analysis

2021-02-19 compared with 2020-02-20 · 291 added, 274 removed, 269 unchanged (68% of the section changed)

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We are a REIT organized under Maryland law.

As of December 31, 2019 , our wholly owned properties were comprised of 189 properties and we had a noncontrolling ownership interest in three properties totaling 0.4 million rentable square feet through two unconsolidated joint ventures in which we own 51% and 50% interests.

As of December 31, 2019 , our properties are located in 35 states and the District of Columbia and contain approximately 25.7 million rentable square feet.

As of December 31, 2020, our wholly owned properties were comprised of 181 properties and we had noncontrolling ownership interests in three properties totaling approximately 444,000 rentable square feet through two unconsolidated joint ventures in which we own 51% and 50% interests.

As of December 31, 2020, our properties are located in 34 states and the District of Columbia and contain approximately 24,889,000 rentable square feet.

As of December 31, 2020, our properties were leased to 349 different tenants, with a weighted average remaining lease term (based on annualized rental income) of approximately 5.1 years.

government is our largest tenant, representing approximately 25.2% of our annualized rental income as of December 31, 2020.

Merger with Select Income REIT

On December 31, 2018, we completed the SIR Merger, as a result of which we acquired 99 properties with approximately 16.5 million rentable square feet.

The aggregate transaction value for the SIR Merger was $2,409,740 , excluding closing costs of $27,497 ( $14,508 of which was paid by us and $12,989 of which was paid by SIR) and including the repayment or assumption of $1,719,772 of SIR debt.

As a condition of the SIR Merger, on October 9, 2018, we completed the Secondary Sale, raising net proceeds of $435,125 , after deducting underwriting discounts and offering expenses.

As a result of the Secondary Sale, our former investment in SIR that was accounted for under the equity method, is classified in discontinued operations in our consolidated statements of comprehensive income (loss).

The completion of the SIR Merger significantly increased our property portfolio as of December 31, 2018 and the operating results of the properties we acquired in the SIR Merger are reflected in our results of operations beginning in 2019.

Accordingly, our financial results reported for the year ended December 31, 2019 do not provide a meaningful comparison to our results reported in prior periods.

For more information regarding the SIR Merger and the other SIR Transactions, see Notes 1, 3, 5, 10 and 11 to the Notes to Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report on Form 10-K.

COVID-19 Pandemic

The COVID-19 pandemic and the various governmental and market responses intended to contain and mitigate the spread of the virus and its detrimental public health impact, as well as the general uncertainty surrounding the dangers and impact of the pandemic, continue to have a significant impact on the global economy, including the U.S.

To date, the COVID-19 pandemic has not had a significant impact on our business and we believe that our current financial resources, the characteristics of our portfolio, including the diversity of our tenant base, both geographically and by industry, and the financial strength and resources of our tenants, will enable us to withstand the COVID-19 pandemic.

However, we have received requests from some of our tenants for rent assistance.

As of February 16, 2021, we have granted temporary rent assistance totaling $2,546 to 19 tenants who represent approximately 3.3% of our annualized rental income as of December 31, 2020.

This assistance generally entails a deferral of, in most cases, one month of rent pursuant to deferred payment plans which require the deferred rent amounts be payable over a 12-month period, certain of which commenced in 2020.

The deferred amounts did not impact our operating results for the year ended December 31, 2020.

As of February 16, 2021, we have collected $1,999, or 78.5%, of our granted rent deferrals.

For more information and risks relating to the COVID-19 pandemic on us and our business, see elsewhere in this Annual Report on Form 10-K, including “Warning Concerning Forward-Looking Statements”, Part I, Item1, “Business”, Part I, Item

1A, “Risk Factors” and Note 4 to the Notes to Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report on Form 10-K.

Property Operations

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For more information regarding our properties classified as held for sale and our two unconsolidated joint ventures, see Note 3 to the Notes to Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report on Form 10-K.

As of December 31, 2019 , 92.4% of our rentable square feet was leased, compared to 91.0% of our rentable square feet as of December 31, 2018 .

Occupancy data for our properties as of December 31, 2020 and 2019 was as follows (square feet in thousands):

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Comparable Properties (2)

December 31, December 31,

2020 2019 2020 2019

Total properties (3)

181 189 177 177

Total rentable square feet (4)

24,889 25,726 24,130 24,224

Percent leased (5)

91.2 % 92.4 % 92.1 % 93.3 %

(1) Based on properties we owned on December 31, 2020 and 2019, respectively.

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excludes properties classified as held for sale, properties undergoing significant redevelopment, if any, and three properties owned by two unconsolidated joint ventures in which we own 51% and 50% interests.

Includes one leasable land parcel as of December 31, 2019 and two leasable land parcels as of December 31, 2018.

(3) Includes one leasable land parcel.

(4) Subject to changes when space is remeasured or reconfigured for tenants.

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All properties (2)

$ 25.93 $ 27.02

Comparable properties (3)

$ 25.87 $ 26.04

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

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Year Ended December 31, 2020

Leased Available

for Lease Total

Beginning of year 23,761 1,965 25,726

Changes resulting from:

Acquisition of properties 150 13 163

Disposition of properties (836) (70) (906)

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Lease renewals (1)

1,691 (1,691) —

New leases (1)

Remeasurements (2)

(1) (93) (94)

End of year 22,705 2,184 24,889

(1) Based on leases entered during the year ended December 31, 2020.

(2) Rentable square feet are subject to changes when space is remeasured or reconfigured for tenants.

Leases at our properties totaling approximately 3.8 million rentable square feet expired during the year ended December 31, 2019 .

During the year ended December 31, 2019 , we entered leases totaling 2.9 million rentable square feet, including lease renewals of 2.6 million rentable square feet and new leases of approximately 0.4 million rentable square feet.

Leases at our properties totaling approximately 2,334,000 rentable square feet expired during the year ended December 31, 2020.

During the year ended December 31, 2020, we entered leases totaling approximately 1,965,000 rentable square feet, including lease renewals of approximately 1,691,000 rentable square feet and new leases of approximately 274,000 rentable square feet.

The weighted (by rentable square feet) average rents were 6.9% above prior rents for the same space and the weighted (by rentable square feet) average lease term for new and renewal leases entered during the year ended December 31, 2020 was 7.3 years.

During the year ended December 31, 2020, commitments made for expenditures, such as tenant improvements and leasing costs, in connection with leasing space at our properties were as follows (square feet in thousands):

Year Ended December 31, 2020

New Leases Renewals Total

Rentable square feet leased 274 1,691 1,965

Tenant leasing costs and concession commitments (1)

$ 21,356 $ 22,048 $ 43,404

Tenant leasing costs and concession commitments per rentable square foot (1)

$ 77.89 $ 13.04 $ 22.09

Weighted (by square feet) average lease term (years) 11.2 6.7 7.3

Total leasing costs and concession commitments per rentable square foot per year (1)

$ 6.94 $ 1.95 $ 3.02

(1) Includes commitments made for leasing expenditures and concessions, such as tenant improvements, leasing commissions, tenant reimbursements and free rent.

During the year ended December 31, 2020, changes in effective rental rates per square foot achieved for new leases and lease renewals at our properties that commenced during the year ended December 31, 2020, when compared to prior effective rental rates per square foot in effect for the same space (and excluding space acquired vacant), were as follows (square feet in thousands):

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Square Foot (1)

New leases $30.44 $29.28 321

Lease renewals $26.66 $28.43 1,700

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(1) Effective rental rate includes contractual base rents from our tenants pursuant to our lease agreements, plus straight line rent adjustments and estimated expense reimbursements to be paid to us, and excluding lease value amortization.

During the year ended December 31, 2019 , commitments made for expenditures, such as tenant improvements and leasing costs, in connection with leasing space at our properties were as follows (square feet in thousands):

Year Ended December 31, 2019

Rentable square feet leased

Tenant leasing costs and concession commitments (1)

Tenant leasing costs and concession commitments per rentable square foot (1)

Weighted (by square feet) average lease term (years)

Total leasing costs and concession commitments per rentable square foot per year (1)

Includes commitments made for leasing expenditures and concessions, such as tenant improvements, leasing commissions, tenant reimbursements and free rent.

During the years ended December 31, 2019 and 2018 , amounts capitalized at our properties for tenant improvements, leasing costs, building improvements and development and redevelopment activities were as follows:

During the years ended December 31, 2020 and 2019, amounts capitalized at our properties for lease related costs, building improvements and development, redevelopment and other activities were as follows:

Year Ended December 31,

Tenant improvements (1)

Leasing costs (2)

Lease related costs (1)

$ 34,972 $ 52,359

Building improvements (2)

41,280 33,383

Recurring capital expenditures 76,252 85,742

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Total capital expenditures $ 93,110 $ 91,622

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

Leasing costs include leasing related costs, such as brokerage commissions and other tenant inducements.

(1) Lease related costs generally include capital expenditures used to improve tenants’ space or amounts paid directly to tenants to improve their space and leasing related costs, such as brokerage commissions and other tenant inducements.

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

(3) Development, redevelopment and other activities generally include capital expenditure projects that reposition a property or result in new sources of revenue.

As of December 31, 2019 , we have estimated unspent leasing related obligations of $55,984 .

As of December 31, 2019 , we had leases at our properties totaling 1.9 million rentable square feet that were scheduled to expire during 2020.

As of February 19, 2020, tenants with leases totaling 0.6 million rentable square feet that are scheduled to expire during 2020 have notified us that they do not plan to renew their leases upon expiration and we cannot be sure as to whether other tenants may or may not renew their leases upon expiration.

Based upon current market conditions and tenant negotiations for leases scheduled to expire through December 31, 2020, we expect that the rental rates we are likely to achieve on new or renewed leases for space under leases expiring through December 31, 2020 will, in the aggregate and on a weighted (by annualized revenues) average basis, be higher than the rates currently being paid, thereby generally resulting in higher rent

from the same space.

We cannot be sure of the rental rates which will result from our ongoing negotiations regarding lease renewals or any new or renewed leases we may enter;

also, we may experience material declines in our rental income due to vacancies upon lease expirations or early terminations.

As of December 31, 2020, we have estimated unspent leasing related obligations of $51,913, of which we expect to spend $19,179 over the next 12 months.

As of December 31, 2020, we had leases at our properties totaling approximately 3,657,000 rentable square feet that were scheduled to expire during 2021.

As of February 18, 2021, we expect tenants with leases totaling approximately 2,614,000 rentable square feet that are scheduled to expire through December 31, 2021, to not renew their leases upon expiration and we cannot be sure as to whether other tenants will renew their leases upon expiration.

Of the approximately 2,614,000 rentable square feet that is expiring and expected to not renew in 2021, 1,371,000 rentable square feet is currently under agreement to be sold and 340,000 rentable square feet is in the planning stage for a potential redevelopment.

As a result of the COVID-19 pandemic and its economic impact, overall new leasing volume slowed in 2020 and may further slow or remain at a reduced level until market conditions meaningfully improve for a sustained period.

However, we remain focused on proactive dialogue with our existing tenants and overall tenant retention.

Prevailing market conditions and government and other tenants’ needs at the time we negotiate and enter leases or lease renewals will generally determine rental rates and demand for leased space at our properties, and market conditions and our tenants’ needs are beyond our control.

Whenever we extend, renew or enter into new leases for our properties, we intend to seek rents which are equal to or higher than our historical rents for the same properties;

Whenever we renew or enter into new leases for our properties, we intend to seek rents which are equal to or higher than our historical rents for the same properties;

however, our ability to maintain or increase the rents for our current properties will depend in large part upon market conditions, which are beyond our control.

We cannot be sure of the rental rates which will result from our ongoing negotiations regarding lease renewals or any new or renewed leases we may enter;

also, we may experience material declines in our rental income due to vacancies upon lease expirations or early terminations.

As of December 31, 2020, our lease expirations by year are as follows (square feet in thousands):

Number of Leases Expiring

Leased Square Feet Expiring (2)

Percent of Total

Cumulative Percent of Total

Annualized Rental Income Expiring

Percent of Total

Cumulative Percent of Total

Number of Leases Expiring Leased Square Feet Expiring (2)

Percent of Total Cumulative Percent of Total Annualized Rental Income Expiring Percent of Total Cumulative Percent of Total

2021 82 3,657 16.1% 16.1% $ 69,903 12.1% 12.1%

2022 74 1,944 8.6% 24.7% 54,821 9.5% 21.6%

2023 65 2,403 10.6% 35.3% 76,436 13.2% 34.8%

2024 58 3,858 17.0% 52.3% 101,530 17.6% 52.4%

2025 54 2,030 8.9% 61.2% 43,585 7.5% 59.9%

2026 31 1,724 7.6% 68.8% 45,837 7.9% 67.8%

2027 31 2,027 8.9% 77.7% 52,385 9.1% 76.9%

2028 15 901 4.0% 81.7% 25,858 4.5% 81.4%

2029 15 934 4.1% 85.8% 24,798 4.3% 85.7%

2030 and thereafter 39 3,227 14.2% 100.0% 82,865 14.3% 100.0%

Total 464 22,705 100.0% $ 578,018 100.0%

Weighted average remaining lease term (in years)

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If we are unable to extend or renew our leases, it may be time consuming and expensive to relet some of these properties.

We believe that current government budgetary methodology, spending priorities and the current U.S.

presidential administration’s views on the size and scope of government employment have resulted in a decrease in government employment.

Furthermore, for the past six years, government tenants have reduced their space utilization per employee and consolidated government tenants into existing government owned properties.

We believe that recent government budgetary and spending priorities and enhancements in technology have resulted in a decrease in government office use for employees.

Furthermore, over the past several years, government tenants have reduced their space utilization per employee and consolidated government tenants into existing government owned properties.

This activity has reduced the demand for government leased space.

Our historical experience with respect to properties of the type we own that are majority leased to government tenants has been that government tenants frequently renew leases to avoid the costs and disruptions that may result from relocating their operations.

However, efforts to reduce space utilization rates may result in our tenants exercising early termination rights under our leases, vacating our properties upon expiration of our leases in order to relocate, or renewing their leases for less space than they currently occupy.

Also, our government tenants’ desires to reconfigure leased office space to reduce utilization per employee may require us to spend significant amounts for tenant improvements, and tenant relocations have become more prevalent than our past experiences in instances where efforts by government tenants to reduce their space utilization require a significant reconfiguration of currently leased space.

Increasing uncertainty with respect to government agency budgets and funding to implement relocations, consolidations and reconfigurations has resulted in delayed decisions by

some of our government tenants and their reliance on short term lease renewals;

however, recent activity suggests that the government has begun to shift its leasing strategy to include longer term leases and is actively exploring 10 to 20 year lease terms at renewal, in some instances.

We believe the reduction in government tenant space utilization and the consolidation of government tenants into government owned real estate is substantially complete;

however, these activities may impact us for some time into the future.

At present, we are unable to reasonably project what the financial impact of market conditions or changing government circumstances will be on our financial results for future periods.

Our historical experience with respect to properties of the type we own that are majority leased to government tenants has been that government tenants frequently renew leases to avoid the

costs and disruptions that may result from relocating their operations.

However, efforts to manage space utilization rates may result in our tenants exercising early termination rights under our leases, vacating our properties upon expiration of our leases in order to relocate, or renewing their leases for less space than they currently occupy.

Also, our government tenants’ desire to reconfigure leased office space to manage utilization per employee may require us to spend significant amounts for tenant improvements, and tenant relocations are often more prevalent in those circumstances.

Increasing uncertainty with respect to government agency budgets and funding to implement relocations, consolidations and reconfigurations has resulted in delayed decisions by some of our government tenants and their reliance on short term lease renewals;

however, recent activity prior to the outbreak of the COVID-19 pandemic suggested that the U.S.

government had begun to shift its leasing strategy to include longer term leases and was actively exploring 10 to 20 year lease terms at renewal, in some instances.

It is also possible that as a result of the COVID-19 pandemic, government tenants may seek to manage space utilization rates in order to provide greater physical distancing for employees, which may require us to spend significant amounts for tenant improvements, mostly with lease renewals.

However, the COVID-19 pandemic and its aftermath have had negative impacts on government budgets and resources and it is unclear what the effect of these impacts will be on government demand for leasing office space.

In addition, the new presidential administration may result in a change in the federal government’s policy priorities, which may impact leasing at our government leased properties.

Given the significant uncertainties, including as to the COVID-19 pandemic, its economic impact and its aftermath and the new presidential administration, we are unable to reasonably project what the financial impact of market conditions or changing government circumstances will be on our financial results for future periods.

As of December 31, 2020, we derive 23.5% of our annualized rental income from our properties located in the metropolitan Washington, D.C.

market area, which includes Washington, D.C., Northern Virginia and suburban Maryland.

A downturn in economic conditions in this area could result in reduced demand from tenants for our properties or reduce the rents that our tenants in this area are willing to pay when our leases expire or terminate and when renewal or new terms are negotiated.

Additionally, in recent years there has been a decrease in demand for new leased space by the U.S.

A downturn in economic conditions in this area, including as a result of the COVID-19 pandemic, could result in reduced demand from tenants for our properties or reduce the rents that our tenants in this area are willing to pay when our leases expire or terminate and when renewal or new terms are negotiated.

Additionally, in recent years there has been a decrease in demand for new leased office space by the U.S.

government in the metropolitan Washington, D.C.

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In general, depending on facts and circumstances, RMR LLC evaluates the creditworthiness of a tenant based on information concerning the tenant that is provided by the tenant and, in some cases, information that is publicly available or obtained from third party sources.

RMR LLC also often uses a third party service to monitor the credit ratings of debt securities of our existing tenants whose debt securities are rated by a nationally recognized credit rating agency.

RMR LLC also often uses a third party service to monitor the credit ratings, both actual and implied, of our existing tenants.

We consider investment grade tenants to include:

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As of December 31, 2020, tenants representing 1% or more of our total annualized rental income were as follows:

Credit Rating

Rental Income

% of Total Annualized Rental Income

Investment Grade

State of California

Investment Grade

Tenant Credit Rating Sq.

% of Leased Sq.

Rental Income % of Total Annualized Rental Income

Government Investment Grade 5,316 23.4 % $ 145,916 25.2 %

2 Shook, Hardy & Bacon L.L.P.

Bank of America Corporation

Investment Grade

F5 Networks, Inc.

Not Rated 596 2.6 % 19,199 3.3 %

3 State of California Investment Grade 648 2.9 % 19,142 3.3 %

4 Bank of America Corporation Investment Grade 617 2.7 % 16,520 2.9 %

5 WestRock Company (1)

Investment Grade 311 1.4 % 12,871 2.2 %

6 F5 Networks, Inc.

Not Rated 299 1.3 % 12,777 2.2 %

7 Commonwealth of Massachusetts Investment Grade 311 1.4 % 11,953 2.1 %

8 CareFirst Inc.

Non Investment Grade

Northrop Grumman Corporation

Investment Grade

Not Rated 207 0.9 % 11,684 2.0 %

9 Northrop Grumman Corporation Investment Grade 337 1.5 % 11,320 2.0 %

10 Tyson Foods, Inc.

Investment Grade 248 1.1 % 11,011 1.9 %

Technicolor SA

Non Investment Grade

Commonwealth of Massachusetts

Investment Grade

Micro Focus International plc

Non Investment Grade

CommScope Holding Company Inc

Non Investment Grade

Investment Grade

State of Georgia

Investment Grade

11 Micro Focus International plc Non Investment Grade 406 1.8 % 8,710 1.5 %

12 CommScope Holding Company Inc Non Investment Grade 228 1.0 % 8,097 1.4 %

13 State of Georgia Investment Grade 308 1.4 % 7,094 1.2 %

14 PNC Bank Investment Grade 441 1.9 % 6,902 1.2 %

15 ServiceNow, Inc.

Investment Grade 149 0.7 % 6,481 1.1 %

16 Allstate Insurance Co.

Investment Grade 468 2.1 % 6,473 1.1 %

Compass Group plc

17 Compass Group plc Investment Grade 267 1.2 % 6,386 1.1 %

18 Automatic Data Processing, Inc.

Investment Grade 289 1.3 % 6,047 1.0 %

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Investment Grade 250 1.1 % 6,019 1.0 %

Investment and Acquisition Activities

On July 1, 2019, we sold all of the shares of class A common stock of RMR Inc.

we owned in an underwritten public offering at a price to the public of $40.00 per share pursuant to an underwriting agreement among us, RMR Inc., certain other REITs managed by RMR LLC that also sold their class A common stock of RMR Inc.

in the offering and the underwriters named therein.

We received net proceeds of $104,674 from this sale, after deducting underwriting discounts and commissions and other offering expenses, that we used to repay amounts outstanding under our term loan due in 2020.

On November 8, 2019, we acquired a land parcel for $2,900, excluding acquisition related costs, and in January 2020, we entered into an agreement to acquire a property for $11,500, excluding acquisition related costs, both of which are adjacent to a property we own in Boston, MA.

20 Tailored Brands, Inc.

Non Investment Grade 206 0.9 % 5,898 1.0 %

11,902 52.6 % $ 340,500 58.7 %

(1) This tenant occupied a property located in Richmond, VA that was classified as held for sale as of December 31, 2020 and sold in January 2021.

(2) In August 2020, Tailored Brands, Inc.

filed for Chapter 11 bankruptcy.

The tenant has paid its rental obligations to us through December 31, 2020.

On January 25, 2021, the lease was assumed in bankruptcy court.

As a condition to this lease being assumed, we entered into a lease amendment with the tenant as of January 25, 2021 that includes a reduction of approximately 104,000 square feet.

As a result of this lease restructure, this tenant will no longer represent 1% or more of our annualized rental income.

Acquisition Activities

During the year ended December 31, 2020, we acquired two properties containing a combined approximately 163,000 square feet for an aggregate purchase price of $46,625, excluding acquisition related costs.

In November 2020, we entered into an agreement to acquire a property adjacent to a property we own in Boston, MA for $26,975, excluding acquisition related costs.

This acquisition is expected to take place before the end of the first quarter.

However, this acquisition is subject to conditions;

accordingly, we cannot be sure that we will complete this acquisition or that this acquisition will not be delayed or the terms will not change.

For more information about our acquisition activities, see “Business —Acquisition Policies” in Part 1, Item 1 of this Annual Report on Form 10-K and Note 3 to the Notes to Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report on Form 10-K.

Disposition Activities

During the year ended December 31, 2019 , we sold 58 properties with a combined 6.2 million rentable square feet for an aggregate sales price of $ 848,853 , excluding closing costs.

Since January 1, 2020, we have sold three of the six properties classified as held for sale as of December 31, 2019 for an aggregate sales price of $21,063 , excluding closing costs.

In addition, we are currently marketing for sale four properties containing approximately 0.2 million rentable square feet.

We cannot be sure we will sell any properties we are marketing for prices in excess of their carrying values or otherwise.

With our disposition program substantially completed, we expect to pursue accretively growing our property portfolio through our capital recycling program.

Pursuant to our capital recycling program, we plan to sell certain properties from time to time to fund future acquisitions and to maintain leverage consistent with our current investment grade ratings with a goal of (1) improving the asset quality of our portfolio by reducing the average age of our properties, lengthening the weighted average term of our leases and increasing the likelihood of retaining our tenants and (2) increasing our distributions to shareholders.

During the year ended December 31, 2020, we sold 10 properties containing a combined approximately 906,000 rentable square feet for an aggregate sales price of $110,463, excluding closing costs and including the repayment of one mortgage note with an outstanding principal balance of $13,095, an annual interest rate of 5.9% and a maturity date in August 2021.

Since January 1, 2021, we have sold both of the properties classified as held for sale as of December 31, 2020 for an aggregate sales price of $130,845, excluding closing costs.

We sold these properties pursuant to our capital recycling program.

Through our capital recycling program, we seek to selectively sell certain properties from time to time to fund future acquisitions and to maintain leverage consistent with our current investment grade ratings with a goal of (1) improving the asset quality of our portfolio by reducing the average age of our properties, lengthening the weighted average term of our leases and increasing the likelihood of retaining our tenants and (2) increasing our cash available for distribution.

In February 2021, we entered into an agreement to sell a property located in Huntsville, AL containing approximately 1,371,000 rentable square feet for a sales price of $39,000, excluding closing costs.

This sale is expected to occur before the end of the second quarter.

However, this sale is subject to conditions;

accordingly, we cannot be sure that we will complete this sale or that this sale will not be delayed or the terms will not change.

For more information about our disposition activities, see “Business —Disposition Policies” in Part 1, Item 1 of this Annual Report on Form 10-K and Note 3 to the Notes to Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report on Form 10-K.

Financing Activities

In March 2019, we repaid at maturity, at par plus accrued interest, a mortgage note secured by one property with an outstanding principal balance of $7,890 using cash on hand.

During the year ended December 31, 2019, we repaid, without penalty, (i) the remaining principal balance of $88,000 then outstanding on our $250,000 term loan due in 2022 and (ii) the entire principal balance outstanding on our $300,000 term loan due in 2020 using cash on hand, proceeds from property sales and proceeds from the sale of our shares of class A common stock of RMR Inc.

In July 2019, we redeemed, at par plus accrued interest, all $350,000 of our 3.75% senior unsecured notes due 2019 using cash on hand and borrowings under our revolving credit facility.

Senior Unsecured Note Issuances

In June and July 2020, we issued an aggregate of $162,000 of 6.375% senior unsecured notes due 2050 in an underwritten public offering.

Our aggregate net proceeds from this offering were $156,226, after underwriters’ discounts and offering expenses, which we used to repay amounts outstanding under our revolving credit facility and for general business purposes.

These notes require quarterly payments of interest only through maturity and may be repaid at par (plus accrued and unpaid interest) on or after June 23, 2025.

In September 2020, we issued $250,000 of our 4.50% senior unsecured notes due 2025 in an underwritten public offering.

These notes were a further issuance of our existing $400,000 of senior unsecured notes due 2025 that were initially issued by SIR in February 2015, which we assumed in connection with the SIR Merger.

The public offering price of these notes was 101.414% of the principal amount, raising net proceeds of $251,214, after underwriters’ discounts and offering expenses, which we used to repay amounts outstanding under our revolving credit facility and for general business purposes.

These notes require semi-annual payments of interest only through maturity.

Senior Unsecured Note Redemption

In January 2020, we redeemed, at par plus accrued interest, all $400,000 of our 3.60% senior unsecured notes due 2020 using cash on hand, proceeds from property sales and borrowings under our revolving credit facility.

Mortgage Note Repayments

date in August 2021, which was classified in liabilities of properties held for sale in our consolidated balance sheet as of December 31, 2019.

Also in March 2020, we prepaid, at a premium plus accrued interest, a mortgage note secured by one property with an outstanding principal balance of $66,780, an annual interest rate of 4.0% and a maturity date in September 2030 using cash on hand and borrowings under our revolving credit facility.

In April 2020, we prepaid, at par plus accrued interest, a mortgage note secured by one property with an outstanding principal balance of $32,677, an annual interest rate of 5.7% and a maturity date in July 2020 using cash on hand and borrowings under our revolving credit facility.

In August 2020, we repaid at maturity, at par plus accrued interest, a mortgage note secured by one property with an outstanding principal balance of $39,635 and an annual interest rate of 2.2% using cash on hand and borrowings under our revolving credit facility.

For more information about our financing activities, see “Business —Our Financing Policies” in Part 1, Item 1 of this Annual Report on Form 10-K and Note 8 to the Notes to Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report on Form 10-K.

Segment Information

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Comparable Properties Results (1)

Consolidated Results

Year Ended December 31,

Year Ended Consolidated Results

Year Ended December 31, December 31, Year Ended December 31,

Change 2020 2019 2020 2019 $

Rental income $ 572,419 $ 582,497 $ (10,078) (1.7 %) $ 15,500 $ 95,907 $ 587,919 $ 678,404 $ (90,485) (13.3 %)

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Other operating expenses

102,596 104,316 (1,720) (1.6 %) 2,869 16,627 105,465 120,943 (15,478) (12.8 %)

Total operating expenses

Property net operating income (2)

190,521 196,509 (5,988) (3.0 %) 5,447 32,453 195,968 228,962 (32,994) (14.4 %)

Net operating income (2)

$ 381,898 $ 385,988 $ (4,090) (1.1 %) $ 10,053 $ 63,454 391,951 449,442 (57,491) (12.8 %)

Other expenses:

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Gain on sale of real estate 10,855 105,131 (94,276) (89.7 %)

Dividend income

Loss on equity securities, net

Interest income

Dividend income — 1,960 (1,960) n/m

Loss on equity securities, net — (44,007) 44,007 n/m

Interest and other income 779 1,045 (266) (25.5 %)

Interest expense (108,303) (134,880) 26,577 (19.7 %)

Loss on early extinguishment of debt

Income (loss) from continuing operations before income tax expense and equity in net losses of investees

Loss on early extinguishment of debt (3,839) (769) (3,070) n/m

Income before income tax expense and equity in net losses of investees 8,248 32,372 (24,124) (74.5 %)

Income tax expense (377) (778) 401 (51.5 %)

Equity in net losses of investees (1,193) (1,259) 66 (5.2 %)

Income (loss) from continuing operations

Income from discontinued operations

Net income (loss)

Preferred units of limited partnership distributions

Net income (loss) available for common shareholders

Net income $ 6,678 $ 30,335 $ (23,657) (78.0 %)

Weighted average common shares outstanding (basic and diluted) 48,124 48,062 62 0.1 %

Per common share amounts (basic and diluted):

Income (loss) from continuing operations

Income from discontinued operations

Net income (loss) available for common shareholders

Net income $ 0.14 $ 0.63 $ (0.49) (77.8 %)

n/m - not meaningful

Comparable properties consists of 96 properties we owned on December 31, 2019 and which we owned continuously since January 1, 2018;

Our definition of Property net operating income, or NOI, and our reconciliation of net income (loss) available for common shareholders to Property NOI are included below under the heading “Non-GAAP Financial Measures.”

(1) Comparable properties consists of 177 properties we owned on December 31, 2020 and which we owned continuously since January 1, 2019 and excludes properties classified as held for sale, properties undergoing significant redevelopment, if any, and three properties owned by two unconsolidated joint ventures in which we own 51% and 50% interests.

(2) Our definition of net operating income, or NOI, and our reconciliation of net income to NOI are included below under the heading “Non-GAAP Financial Measures.”

References to changes in the income and expense categories below relate to the comparison of consolidated results for the year ended December 31, 2020, compared to the year ended December 31, 2019.

1 unchanged sentence

Rental income.

The increase in rental income primarily reflects an increase in rental income associated with the properties acquired in the SIR Merger of $284,790, partially offset by a decrease in rental income of $28,506 as a result of property dispositions as well as a decline in rental income for comparable properties of $4,181 .

The decrease in rental income for comparable properties is primarily due to reductions in occupied space at certain of our properties in 2019 .

The decrease in rental income reflects decreases in rental income of $74,411 as a result of property disposition activities, $10,078 related to comparable properties and $6,204 related to a property undergoing significant redevelopment that became vacant in September 2019, offset by an increase in rental income of $208 related to acquired properties.

The decrease in rental income for comparable properties is primarily due to reductions in occupied space at certain of our properties in 2020, certain below market lease intangibles becoming fully amortized, termination fee revenue totaling $1,543 recorded at certain of our comparable properties in 2019, reductions in reimbursement income due to reductions in expenses that are reimbursable to us by our tenants as a result of the COVID-19 pandemic and resulting decrease in space utilization, and decreased parking revenue at certain of our comparable properties due to lower parking activity resulting from the COVID-19 pandemic.

Rental income includes non-cash straight line rent adjustments totaling $16,079 in 2020 and $27,507 in 2019, and amortization of acquired leases and assumed lease obligations totaling ($5,440) in 2020 and ($2,710) in 2019.

Real estate taxes.

The increase in real estate taxes reflects the increase in real estate taxes associated with the properties acquired in the SIR Merger of $26,417 as well as an increase for comparable properties of $1,828 , partially offset by a decrease in real estate taxes as a result of property dispositions of $3,326 and a decrease of $977 at one property classified as held for sale resulting from a successful real estate tax appeal.

Real estate taxes for comparable properties increased primarily due to the effect of higher real estate tax valuation assessments at certain of our properties in 2019 .

The decrease in real estate taxes reflects a decrease in real estate taxes of $7,765 as a result of property disposition activities, a decrease of $803 for a property undergoing significant redevelopment and a decrease of $80 for comparable properties, offset by increases in real estate taxes of $50 for acquired properties.

Real estate taxes for comparable properties declined primarily due to the effect of lower real estate tax valuation assessments resulting from successful real estate tax appeals at certain of our properties since January 1, 2019.

Utility expenses.

The increase in utility expenses reflects an increase in utility expenses associated with the properties acquired in the SIR Merger of $9,412, partially offset by a decrease in utility expenses for comparable properties of $428 , as well as a decrease as a result of property dispositions of $1,176.

Utility expenses for comparable properties declined primarily due to a decrease in electricity and water usage as a result of energy savings initiatives at certain of our properties in 2019 .

The decrease in utility expenses reflects a decrease in utility expenses of $4,796 as a result of property disposition activities and a decrease in utility expenses for comparable properties of $4,188, offset by an increase in utility expenses for a property undergoing significant redevelopment of $66.

Utility expenses for comparable properties declined primarily due to a decrease in electricity and water usage resulting from cost savings initiatives implemented by our manager, RMR LLC, in response to decreased space utilization at our properties as a result of the COVID-19 pandemic, as well as the implementation of real time energy management programs at certain of our properties in 2020.

Other operating expenses.

Other operating expenses consist of salaries and benefit costs of property level personnel, repairs and maintenance expense, cleaning expense, other direct costs of operating our properties and property management fees.

The increase in other operating expenses reflects an increase in expenses associated with the properties acquired in the SIR Merger of $36,858 and an increase for comparable properties of $2,764 , partially offset by a decrease in other operating expenses as a result of property dispositions of $8,108.

Other operating expenses for comparable properties increased primarily as a result of higher repairs and maintenance and snow removal costs at certain of our properties in 2019 .

The decrease in other operating expenses reflects a decrease of $13,448 as a result of property disposition activities, a decrease of $1,720 for comparable properties and a decrease of $436 related to a property undergoing significant redevelopment, offset by an increase in other operating expenses related to acquired properties of $126.

Other operating expenses for comparable properties declined primarily due to lower net cleaning costs resulting from cost savings initiatives implemented by our manager, RMR LLC, in response to decreased space utilization at our properties as a result of the COVID-19 pandemic, which were partially offset by an increase in cleaning costs related to more frequent cleaning and sanitizing practices at our properties to help mitigate the spread of COVID-19, lower snow removal costs and lower parking garage maintenance costs due to lower parking activity at certain of our properties resulting from the COVID-19 pandemic, partially offset by higher insurance costs in 2020.

Depreciation and amortization.

The increase in depreciation and amortization primarily reflects the increase in depreciation and amortization related to properties acquired in the SIR Merger of $154,365, partially offset by a decrease for comparable properties of $10,961 and a decrease related to property dispositions of $16,772.

Depreciation and amortization for comparable properties declined due to certain leasing related assets becoming fully depreciated in 2019, partially offset by depreciation and amortization of improvements made to certain of our properties after January 1, 2019.

The decrease in depreciation and amortization primarily reflects a decrease of $23,092 as a result of property disposition activities, a decrease for comparable properties of $12,891 and a decrease related to a property undergoing significant redevelopment of $2,567, offset by an increase related to acquired properties of $231.

Depreciation and amortization for comparable properties and the property undergoing significant redevelopment declined due to certain leasing related assets becoming fully depreciated in 2020, partially offset by depreciation and amortization of improvements made to certain of our properties during 2019 and 2020.

Loss on impairment of real estate.

We recorded a $2,954 loss on impairment of real estate in 2020 to reduce the carrying value of four properties to their estimated fair value less costs to sell.

We recorded a $22,255 loss on impairment of real estate in 2019 to reduce the carrying value of 45 properties to their estimated fair value less costs to sell.

We recorded an $8,630 loss on impairment of real estate in 2018 to reduce the carrying value of 37 properties to their estimated fair value less costs to sell.

Acquisition and transaction related costs.

Acquisition and transaction related costs include costs incurred in connection with the SIR Merger and the other SIR Transactions, including certain post-merger activity costs incurred during 2019.

For more information regarding the SIR Merger and the other SIR Transactions, see Notes 1, 3, 10 and 11 to the Notes to Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report on Form 10-K.

Acquisition and transaction related costs incurred in 2020 represent costs related to an acquisition opportunity we terminated in November 2020.

Acquisition and transaction related costs incurred in 2019 represent costs incurred in connection with the SIR Merger, comprised of certain post-merger activity costs incurred during 2019.

For more information regarding the SIR Merger, see Notes 1, 3, 11 and 12 to the Notes to Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report on Form 10-K.

General and administrative.

General and administrative expenses consist of fees pursuant to our business management agreement, equity compensation expense, legal and accounting fees, Trustees’ fees and expenses, securities listing and transfer agency fees and other costs relating to our status as a publicly traded company.

The increase in general and administrative expenses is primarily the result of an increase in business management fees in 2019 as a result of the SIR Merger and increased equity compensation expenses, legal fees, including fees associated with the execution of our leases required to be expensed beginning January 1, 2019 in accordance with GAAP, and other professional services costs.

The decrease in general and administrative expenses is primarily the result of a decrease in business management fees in 2020 mostly as a result of property sales during 2019 and 2020 and declines in our share price in 2020 during the COVID-19 pandemic, as well as lower legal expenses and audit fees.

Gain on sale of real estate.

We recorded a $105,131 gain on sale of real estate in 2019, resulting from the sale of 17 properties in 2019.

We recorded a $20,661 gain on sale of real estate in 2018 resulting from the sale of 17 properties in 2018.

We recorded a $10,855 net gain on sale of real estate in 2020 resulting from the sale of 10 properties.

We recorded a $105,131 net gain on sale of real estate in 2019 resulting from the sale of 17 properties.

Dividend income.

The increase in dividend income in 2019 is a result of the additional shares of class A common stock of RMR Inc.

SIR owned which we acquired as a result of the SIR Merger and a higher dividend rate paid by RMR Inc., partially offset by the sale of our investment in RMR Inc.

on July 1, 2019.

As a result of this sale, we did not record any dividend income during the period beginning July 1, 2019 through December 31, 2019.

Dividend income in 2019 consists of distributions received in connection with our former investment in RMR Inc.

that we sold on July 1, 2019.

Loss on equity securities, net.

Loss on equity securities, net represents a realized loss in 2019 for the sale of our 2.8 million shares of class A common stock of RMR Inc.

on July 1, 2019, and an unrealized loss in 2018 to adjust our former investment in RMR Inc.

to its fair value.

Interest income.

The increase in interest income is primarily the result of the combination of higher cash balances and higher stated interest rates in 2019 compared to 2018.

Loss on equity securities, net represents a realized loss in 2019 from the sale of our 2.8 million shares of class A common stock of RMR Inc.

on July 1, 2019.

Interest and other income.

The decrease in interest and other income is primarily due to lower returns on cash invested and the June 2020 payoff of a mortgage note receivable in connection with a property we sold in 2016, partially offset by a settlement we received in 2020 resulting from a dispute with a vendor.

Interest expense.

The increase in interest expense is primarily due to higher average outstanding debt balances as a result of the debt assumed in conjunction with the SIR Merger and the associated additional interest expense of $74,233 during 2019 , which was partially offset by decreases in interest expense resulting from debt repayment activity in 2019, including the repayment of the remaining $388,000 outstanding on our term loans and the redemption of our $350,000 3.75% senior unsecured notes in July 2019, resulting in decreases in interest expense of $14,304 and $6,633, respectively.

In addition, we had a lower average balance outstanding on our revolving credit facility of $161,903 in 2019 compared to $418,511 in 2018 at average interest rates of 3.3% and 3.0%, respectively, resulting in a decrease in interest expense of $7,341.

The decrease in interest expense is primarily due to lower average outstanding debt balances in 2020 resulting from debt repayment activity in 2019 and 2020, including the repayment of $388,000 outstanding on our term loans during 2019, the redemption of all $350,000 of our 3.75% senior unsecured notes in July 2019, the redemption of all $400,000 of our 3.60% senior unsecured notes in January 2020 and the repayment of four mortgage notes with an aggregate principal balance of $152,187 in 2020, as well as lower weighted average interest rates on borrowings outstanding during 2020 compared to 2019, partially offset by an increase in interest expense resulting from the issuance of $162,000 of our 6.375% senior unsecured notes in June and July 2020 and $250,000 of our 4.50% senior unsecured notes in September 2020.

Loss on early extinguishment of debt .

We recorded a loss on early extinguishment of debt of $769 in 2019 from the write-off of unamortized debt issuance costs and discounts associated with the repayments of our term loans and redemption of our senior unsecured notes due 2019.

We recorded a loss on early extinguishment of debt of $709 in 2018 from the write-off of debt issuance costs associated with the partial paydown of one of our term loans and the amendment to our revolving credit facility in December 2018.

We recorded a loss on early extinguishment of debt of $3,839 in 2020 from prepayment fees incurred and the write off of unamortized discounts, premiums and debt issuance costs associated with the prepayment of three mortgage notes and a loss on the settlement of a mortgage note receivable that was repaid in 2020 related to a property sold in 2016.

We recorded a loss on early extinguishment of debt of $769 in 2019 from the write off of unamortized debt issuance costs and discounts associated with the repayment of our term loans and redemption of our senior unsecured notes due 2019.

Income tax expense.

Income tax expense increased as a result of properties acquired in the SIR Merger, reflecting higher operating income in certain jurisdictions in 2019 that was subject to state income taxes.

The decrease in income tax expense reflects lower operating income in certain jurisdictions in 2020 where we are subject to state income taxes.

Equity in net losses of investees.

Equity in net losses of investees represents our proportionate share of earnings and losses from our investments in AIC and our two unconsolidated joint ventures.

Income from discontinued operations.

Income from discontinued operations in 2018 consists of our proportionate share of earnings from our former equity method investment in SIR, the loss on the Secondary Sale and the gain on issuance of shares by SIR as a result of the issuance of common shares by SIR at prices which were in the aggregate above the then per share carrying value of our SIR common shares.

For more information about our equity method investment in SIR, see Notes 1, 10 and 11 to the Notes to Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report on Form 10-K.

Preferred units of limited partnership distributions.

Preferred units of limited partnership distributions in 2018 represent distributions to the holders of the previously outstanding 5.5% Series A Cumulative Preferred Units of one of our subsidiaries that were fully redeemed in May 2018.

Net income (loss) and net income (loss) available for common shareholders.

Our net income (loss), net income (loss) available for common shareholders and net income (loss) available for common shareholders per basic and diluted common share increased in 2019 compared to 2018 primarily as a result of the changes noted above.

Weighted average common shares outstanding (basic and diluted).

The increase in weighted average common shares outstanding (basic and diluted) is primarily a result of our issuance of 23,281,738 shares to SIR shareholders on December 31, 2018 in connection with the SIR Merger.

Equity in net losses of investees represents our proportionate share of earnings and losses from our investments in two unconsolidated joint ventures and, in the 2019 period, our former investment in Affiliates Insurance Company.

Our net income and net income per basic and diluted common share decreased in 2020 compared to 2019 primarily as a result of the changes noted above.

Non-GAAP Financial Measures

We present certain "non-GAAP financial measures" within the meaning of applicable SEC rules, including the calculations below of Property NOI, as well as funds from operations, or FFO, available for common shareholders, normalized funds from operations, or Normalized FFO, available for common shareholders, for the years ended December 31, 2019 and 2018 .

These measures do not represent cash generated by operating activities in accordance with GAAP and should not be considered alternatives to income (loss) from continuing operations, net income (loss) or net income (loss) available for common shareholders as indicators of our operating performance or as measures of our liquidity.

These measures should be considered in conjunction with income (loss) from continuing operations, net income (loss) and net income (loss) available for common shareholders as presented in our consolidated statements of comprehensive income (loss).

We consider these non-GAAP measures to be appropriate supplemental measures of operating performance for a REIT, along with income (loss) from

continuing operations, net income (loss) and net income (loss) available for common shareholders.

We believe these measures provide useful information to investors because by excluding the effects of certain historical amounts, such as depreciation and amortization expense, they may facilitate a comparison of our operating performance between periods and with other REITs and, in the case of Property NOI, reflecting only those income and expense items that are generated and incurred at the property level may help both investors and management to understand the operations of our properties.

Property Net Operating Income

The calculation of Property NOI excludes certain components of net income (loss) available for common shareholders in order to provide results that are more closely related to our property level results of operations.

We calculate Property NOI as shown below.

We define Property NOI as income from our rental of real estate less our property operating expenses.

Property NOI excludes amortization of capitalized tenant improvement costs and leasing commissions that we record as depreciation and amortization expense.

We use Property NOI to evaluate individual and company-wide property level performance.

Other real estate companies and REITs may calculate Property NOI differently than we do.

The following table presents the reconciliation of net income (loss) available for common shareholders to Property NOI for the years ended December 31, 2019 and 2018 .

We present certain "non-GAAP financial measures" within the meaning of applicable SEC rules, including the calculations below of NOI, as well as funds from operations, or FFO, and normalized funds from operations, or Normalized FFO.

These measures do not represent cash generated by operating activities in accordance with GAAP and should not be considered alternatives to net income (loss) as indicators of our operating performance or as measures of our liquidity.

These measures should be considered in conjunction with net income (loss) as presented in our consolidated statements of comprehensive income (loss).

We consider these non-GAAP measures to be appropriate supplemental measures of operating performance for a REIT, along with net income (loss).

We believe these measures provide useful information to investors because by excluding the effects of certain historical amounts, such as depreciation and amortization expense, they may facilitate a comparison of our operating performance between periods and with other REITs and, in the case of NOI, reflecting only those income and expense items that are generated and incurred at the property level may help both investors and management to understand the operations of our properties.

Net Operating Income

The calculation of NOI excludes certain components of net income (loss) in order to provide results that are more closely related to our property level results of operations.

We calculate NOI as shown below.

We define NOI as income from our rental of real estate less our property operating expenses.

NOI excludes amortization of capitalized tenant improvement costs and leasing commissions that we record as depreciation and amortization expense.

We use NOI to evaluate individual and company-wide property level performance.

Other real estate companies and REITs may calculate NOI differently than we do.

The following table presents the reconciliation of net income to NOI for the years ended December 31, 2020 and 2019.

Year Ended December 31,

Net income (loss) available for common shareholders

Preferred units of limited partnership distributions

Net income (loss)

Income from discontinued operations

Income (loss) from continuing operations

Net income $ 6,678 $ 30,335

Equity in net losses of investees 1,193 1,259

Income tax expense 377 778

Income before income tax expense and equity in net losses of investees 8,248 32,372

Loss on early extinguishment of debt 3,839 769

Interest expense 108,303 134,880

Interest income

Interest and other income (779) (1,045)

Loss on equity securities, net — 44,007

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Depreciation and amortization 251,566 289,885

Funds From Operations Available for Common Shareholders and Normalized Funds From Operations Available for Common Shareholders

We calculate FFO available for common shareholders and Normalized FFO available for common shareholders as shown below.

FFO available for common shareholders is calculated on the basis defined by The National Association of Real Estate Investment Trusts, which is net income (loss) available for common shareholders, calculated in accordance with GAAP, plus real estate depreciation and amortization of consolidated properties and our proportionate share of the real estate depreciation and amortization of unconsolidated joint venture properties, and the difference between FFO attributable to an equity investment and equity in earnings of SIR included in discontinued operations, but excluding impairment charges on and increases in the carrying value of real estate assets, any gain or loss on sale of real estate and equity securities, as well as certain other adjustments currently not applicable to us.

In calculating Normalized FFO available for common shareholders, we adjust for the difference between Normalized FFO attributable to an equity investment and FFO attributable to an equity investment and for the other items shown below and include business management incentive fees, if any, only in the fourth quarter versus the quarter when they are recognized as an expense in accordance with GAAP due to their quarterly volatility not necessarily being indicative of our core operating performance and the uncertainty as to whether any such business management incentive fees will be payable when all contingencies for determining such fees are known at the end of the calendar year.

FFO available for common shareholders and Normalized FFO available for common shareholders are among the factors considered by our Board of Trustees when determining the amount of distributions to our shareholders.

Other factors include, but are not limited to, requirements to maintain our qualification for taxation as a REIT, limitations in our

credit agreement and public debt covenants, the availability to us of debt and equity capital, our expectation of our future capital requirements and operating performance and our expected needs for and availability of cash to pay our obligations.

Other real estate companies and REITs may calculate FFO available for common shareholders and Normalized FFO available for common shareholders differently than we do.

The following table presents the reconciliation of net income (loss) available for common shareholders to FFO available for common shareholders and Normalized FFO available for common shareholders for the years ended December 31, 2019 and 2018 .

NOI $ 391,951 $ 449,442

Funds From Operations and Normalized Funds From Operations

We calculate FFO and Normalized FFO as shown below.

FFO is calculated on the basis defined by The National Association of Real Estate Investment Trusts, which is net income (loss), calculated in accordance with GAAP, plus real estate depreciation and amortization of consolidated properties and our proportionate share of the real estate depreciation and amortization of unconsolidated joint venture properties, but excluding impairment charges on real estate assets, any gain or loss on sale of real estate and equity securities, as well as certain other adjustments currently not applicable to us.

In calculating Normalized FFO, we adjust for the other items shown below and include business management incentive fees, if any, only in the fourth quarter versus the quarter when they are recognized as an expense in accordance with GAAP due to their quarterly volatility not necessarily being indicative of our core operating performance and the uncertainty as to whether any such business management incentive fees will be payable when all contingencies for determining such fees are known at the end of the calendar year.

FFO and Normalized FFO are among the factors considered by our Board of Trustees when determining the amount of distributions to our shareholders.

Other factors include, but are not limited to, requirements to maintain our qualification for taxation as a REIT, limitations in our credit agreement and public debt covenants, the availability to us of debt and equity capital, our expectation of our future capital requirements and operating performance and our expected needs for and availability of cash to pay our obligations.

Other real estate companies and REITs may calculate FFO and Normalized FFO differently than we do.

The following table presents the reconciliation of net income to FFO and Normalized FFO for the years ended December 31, 2020 and 2019.

Year Ended December 31,

Net income (loss) available for common shareholders

Net income $ 6,678 $ 30,335

Depreciation and amortization:

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Unconsolidated joint venture properties 4,803 5,903

FFO attributable to Select Income REIT

Loss on impairment of real estate 2,954 22,255

Equity in earnings from Select Income REIT included in discontinued operations

Gain on sale of real estate (10,855) (105,131)

Loss on equity securities, net — 44,007

FFO available for common shareholders

FFO 255,146 287,254

Acquisition and transaction related costs 232 682

Loss on early extinguishment of debt 3,839 769

Normalized FFO attributable to Select Income REIT

FFO attributable to Select Income REIT

Net gain on issuance of shares by Select Income REIT included in discontinued operations

Loss on sale of Select Income REIT shares included in discontinued operations

Normalized FFO available for common shareholders

FFO available for common shareholders per common share (basic and diluted)

Normalized FFO available for common shareholders per common share (basic and diluted)

Normalized FFO $ 259,217 $ 288,705

Weighted average common shares outstanding (basic and diluted) 48,124 48,062

FFO per common share (basic and diluted) $ 5.30 $ 5.98

Normalized FFO per common share (basic and diluted) $ 5.39 $ 6.01

LIQUIDITY AND CAPITAL RESOURCES

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We believe that these sources of funds will be sufficient to meet our operating and capital expenses, pay debt service obligations and make distributions to our shareholders for the next 12 months and for the foreseeable future thereafter.

As of December 31, 2018, including certain assets acquired from SIR in the SIR Merger, we had identified certain assets to be sold by us.

Since that date, we have sold 61 properties for an aggregate sales price of $869,916 , excluding closing costs.

In addition, on July 1, 2019, we sold all of the 2.8 million shares of class A common stock of RMR Inc.

we owned, raising net proceeds of $104,674, after deducting underwriting discounts and commissions and other offering expenses.

As of February 19, 2020, we have entered agreements to sell three properties for $64,300 , excluding closing costs, and we are actively marketing for sale an additional four properties.

With our disposition program substantially complete, we expect to pursue accretively growing our property portfolio through our capital recycling program.

Our future cash flows from operating activities will depend primarily upon:

• our ability to collect rent from our tenants;

• our ability to maintain or increase the occupancy of, and the rental rates at, our properties;

• our ability to control operating and capital expenses at our properties;

our ability to successfully complete our pending property sales and to sell properties that we market for sale;

• our ability to successfully sell properties that we market for sale;

• our ability to develop or redevelop properties to produce cash flows in excess of our cost of capital;

• our ability to purchase additional properties which produce cash flows from operations in excess of our cost of acquisition capital and property operating expenses and capital expenses.

Following the SIR Merger, we announced a regular quarterly distribution of $0.55 per common share ($2.20 per common share per year), based on a target payout ratio of 75% of projected cash available for distribution.

With $750,000 available under our revolving credit facility as of February 18, 2021 and no significant debt maturities until 2022, we believe that we are well positioned to weather the present disruptions facing the real estate industry and the economy generally.

As a result of the COVID-19 pandemic, we have received requests from some of our tenants for rent assistance.

As of February 16, 2021, we have granted temporary rent assistance totaling $2,546 to 19 tenants who represent approximately 3.3% of our annualized rental income as of December 31, 2020.

As of February 16, 2021, we have collected $1,999, or 78.5%, of our granted rent deferrals.

Although some of our tenants have sought temporary rent assistance, we remain focused on proactive dialogue with our existing tenants and overall tenant retention.

Also, we believe we will benefit from the approximately 64.8% of our annualized rental income as of December 31, 2020 paid by investment grade tenants, the majority of which is made up of government tenants, and the diversity of our tenant base, both geographically and by industry, which may help mitigate the economic impact of the COVID-19 pandemic.

On January 14, 2021, we announced a regular quarterly cash distribution of $0.55 per common share ($2.20 per common share per year), maintaining our previous distribution rate.

At this time, we continue to expect that the quarterly distribution rate will remain unchanged.

We determine our distribution payout ratio with consideration for our expected capital expenditures as well as cash flows from operations and debt obligations.

In early 2020, we completed our previously announced disposition program and transitioned to a capital recycling program through which we expect to accretively grow our property portfolio.

During the year ended December 31, 2020, pursuant to our capital recycling program, we sold 10 properties for an aggregate sales price of $110,463, excluding closing costs, and acquired two properties for an aggregate purchase price of $46,625, excluding acquisition related costs.

In November 2020, we entered into an agreement to acquire a property for a purchase price of $26,975, excluding acquisition related costs.

Since January 1, 2021, we sold two additional properties for an aggregate sales price of $130,845, excluding closing costs.

Given the current economic conditions, we continue to carefully consider our capital allocation strategy and believe we are well positioned to continue to opportunistically recycle and deploy capital.

Our future purchases of properties cannot be accurately projected because such purchases depend upon purchase opportunities which come to our attention and our ability to successfully complete the acquisitions.

We generally do not intend to purchase “turn around” properties, or properties which do not generate positive cash flows.

Our changes in cash flows for the year ended December 31, 2019 compared to the prior year were as follows:

(i) cash provided by operating activities increased from $144,916 in 2018 to $215,329 in 2019 ;

(ii) cash flows provided by investing activities increased from $738,656 in 2018 to $877,819 in 2019 ;

and (iii) cash flows used in financing activities increased from $864,309 in 2018 to $1,031,395 in 2019 .

The increase in cash provided by operating activities for the year ended December 31, 2019 compared to the prior year was due to an increase in Property NOI primarily due to the SIR Merger, partially offset by unfavorable changes in working capital in 2019 as we assumed operations and paid outstanding liabilities, including $25,817 of the SIR business management incentive fee, as a result of the SIR Merger.

The increase in cash provided by investing activities for the year ended December 31, 2019 compared to the prior year was primarily due to our receipt of cash proceeds from the sale of 58 properties and the sale of 2.8 million shares of class A common stock of RMR Inc.

in 2019, in excess of the cash proceeds received from our sale of properties and our sale of SIR shares in 2018.

The increase in cash used in financing activities for the year ended December 31, 2019 compared to the prior year is primarily due to an increase in debt repayments, including the repayment of $388,000 of term loans and $350,000 of senior unsecured notes in 2019 and net repayment activity on our revolving credit facility, partially offset by a decrease in distributions paid to common shareholders in 2019 and the redemption of the preferred units of one of our subsidiaries in 2018.

The following is a summary of our sources and uses of cash flows for the periods presented, as reflected in our consolidated statements of cash flows:

Year Ended December 31,

Cash, cash equivalents and restricted cash at beginning of period $ 100,696 $ 38,943

Net cash provided by (used in):

Operating activities 233,628 215,329

Investing activities (22,987) 877,819

Financing activities (254,482) (1,031,395)

Cash, cash equivalents and restricted cash at end of period $ 56,855 $ 100,696

The increase in cash provided by operating activities for the year ended December 31, 2020 compared to the prior year is the result of favorable changes in working capital in 2020 compared to the prior year, offset by the net impact of disposition activities.

The decrease in cash provided by investing activities for the year ended December 31, 2020 compared to the prior year is primarily due to lower cash proceeds received from our sales of properties in 2020 compared to the prior year, the sale of our 2.8 million shares of Class A common stock of RMR Inc.

in 2019 and higher real estate acquisition and improvement activities in 2020.

The decrease in cash used in financing activities for the year ended December 31, 2020 compared to the prior year is primarily due to the issuance of $162,000 of our 6.375% senior unsecured notes due 2050 and $250,000 of our 4.50% senior unsecured notes due 2025 in 2020 and a decrease in net debt repayment activity, due to repayments of our unsecured term loans, the redemption of all $350,000 of our 3.75% senior unsecured notes and net repayment activity on our revolving credit facility using cash on hand and proceeds from sales of properties in the prior year, compared to increased borrowings under our revolving credit facility in 2020 in order to facilitate the repayment of other debts, including the redemption of all $400,000 of our 3.60% senior unsecured notes and the repayment of $152,187 of mortgage debt.

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

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We are required to pay interest at a rate of LIBOR plus a premium, which was 110 basis points per annum at December 31, 2020, on the amount outstanding under our revolving credit facility, if any.

We also pay a facility fee on the total amount of lending commitments under our revolving credit facility, which was 25 basis points per annum at December 31, 2019 .

We also pay a facility fee on the total

amount of lending commitments under our revolving credit facility, which was 25 basis points per annum at December 31, 2020.

Both the interest rate premium and facility fee are subject to adjustment based upon changes to our credit ratings.

As of December 31, 2020, the annual interest rate payable on borrowings under our revolving credit facility was 1.2%.

As of December 31, 2019 , we had no amounts outstanding under our revolving credit facility and $750,000 available for borrowing.

As of February 19, 2020, we had $335,000 outstanding under our revolving credit facility and $415,000 available for borrowing under our revolving credit facility.

Our revolving credit facility is governed by our credit agreement, which is with a syndicate of institutional lenders, and which also governed our former term loans:

During the year ended December 31, 2019, we repaid in full our $300,000 term loan, which was scheduled to mature on March 31, 2020, without penalty, using cash on hand, proceeds from property sales and proceeds from the sale of our shares of class A common stock of RMR Inc.

During the year ended December 31, 2019, we repaid the remaining $88,000 outstanding on our $250,000 term loan, which was scheduled to mature on March 31, 2022, without penalty, using proceeds from the sale of a property portfolio.

As of December 31, 2020 and February 18, 2021, we had no amounts outstanding under our revolving credit facility and $750,000 available for borrowing.

Our credit agreement includes a feature under which the maximum borrowing availability may be increased to up to $1,950,000 in certain circumstances.

Our credit agreement provides that, with certain exceptions, a subsidiary of ours is required to guaranty our obligations under our $750,000 revolving credit facility only if that subsidiary has separately incurred debt (other than nonrecourse debt), within the meaning specified in our credit agreement, or provided a guarantee of debt incurred by us or any of our other subsidiaries.

In July 2019, we redeemed, at par plus accrued interest, all $350,000 of our 3.75% senior unsecured notes due 2019, using cash on hand, proceeds from property sales and borrowings under our revolving credit facility.

As of December 31, 2019 , our debt maturities (other than our revolving credit facility which had no amounts outstanding), consisting of senior unsecured notes and mortgage notes, are as follows:

Debt Maturities

2025 and thereafter

During the year ended December 31, 2020, we completed the following senior unsecured notes and mortgage notes transactions:

Senior Unsecured Note Issuances

In June and July 2020, we issued an aggregate of $162,000 of 6.375% senior unsecured notes due 2050 in an underwritten public offering.

These notes require quarterly payments of interest only through maturity and may be repaid at par (plus accrued and unpaid interest) on or after June 23, 2025.

In September 2020, we issued $250,000 of our 4.50% senior unsecured notes due 2025 in an underwritten public offering.

These notes are a further issuance of our existing $400,000 of senior unsecured notes due 2025 that were initially issued by SIR in February 2015, which we assumed in connection with the SIR Merger.

These notes require semi-annual payments of interest only through maturity.

Senior Unsecured Note Redemption

Mortgage Note Repayments

In March 2020, in connection with the sale of one property, we prepaid, at a premium plus accrued interest, a mortgage note secured by that property with an outstanding principal balance of $13,095, an annual interest rate of 5.9% and a maturity date in August 2021, which was classified in liabilities of properties held for sale in our consolidated balance sheet as of December 31, 2019.

As of December 31, 2020, our debt maturities (other than our revolving credit facility), consisting of senior unsecured notes and mortgage notes, are as follows:

Year Debt Maturities

Thereafter 472,000

Total $ 2,242,842

None of our unsecured debt obligations require sinking fund payments prior to their maturity dates.

Our $326,209 in mortgage debts, including one mortgage note with an outstanding principal balance of $13,166 classified in liabilities of properties held for sale in our consolidated balance sheet as of December 31, 2019 , generally require monthly payments of principal and interest through maturity.

In addition to our debt obligations, as of December 31, 2019 , we have estimated unspent leasing related obligations of $55,984 .

Our $170,842 in mortgage debts generally require monthly payments of principal and interest through maturity.

In addition to our debt obligations, as of December 31, 2020, we have estimated unspent leasing related obligations of $51,913, of which we expect to spend $19,179 over the next 12 months.

We are currently in the planning stage for a potential redevelopment project at a property located in Washington, D.C containing approximately 340,000 rentable square feet.

This redevelopment project may require significant capital expenditures and time to complete.

We currently expect to use cash balances, borrowings under our revolving credit facility, net proceeds from property sales, incurrences or assumptions of mortgage debt and net proceeds from offerings of debt or equity securities to fund our future operations, capital expenditures, distributions to our shareholders and property acquisitions.

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Potential investors and lenders likely will evaluate our ability to pay distributions to shareholders, fund required debt service and repay debts when they become due by reviewing our business practices and plans to balance our use of debt and equity capital so that our financial profile and leverage ratios afford us flexibility to withstand any reasonably anticipated adverse changes.

Similarly, our ability to raise equity capital in the future will depend primarily upon equity capital market conditions and our ability to conduct our business to maintain and grow our

operating cash flows.

Similarly, our ability to raise equity capital in the future will depend primarily upon equity capital market conditions and our ability to conduct our business to maintain and grow our operating cash flows.

We intend to conduct our business in a manner that will afford us reasonable access to capital for investment and financing activities, but we cannot be sure that we will be able to successfully carry out this intention.

In September 2018, following our announcement that we entered into a merger agreement for the SIR Merger, S&P affirmed our credit ratings and revised its outlook on our debt to stable.

At the time, Moody’s affirmed our credit ratings and maintained its negative outlook on our debt.

With the substantial completion of our disposition program and successful reduction of our leverage levels, S&P reaffirmed our credit ratings with a stable outlook on our debt in October 2019 and Moody’s reaffirmed our credit ratings and revised its outlook on our debt to stable in December 2019.

During the year ended December 31, 2019 , we paid quarterly cash distributions to our shareholders totaling $105,868 using cash on hand and borrowings under our revolving credit facility.

On January 16, 2020, we declared a regular quarterly distribution payable to common shareholders of record on January 27, 2020 in the amount of $0.55 per share, or approximately $26,511.

We expect to pay this distribution on or about February 20, 2020 using cash on hand and borrowings under our revolving credit facility.

For instance, it is uncertain what the duration and severity of the current economic impact resulting from the COVID-19 pandemic will be.

A protracted and extensive economic recession may cause a decline in financing availability and increased costs for financings.

Further, such conditions could also disrupt capital markets and limit our access to financing from public sources.

During the year ended December 31, 2020, we paid quarterly distributions to our shareholders totaling $106,121 using cash on hand and borrowings under our revolving credit facility.

On January 14, 2021, we declared a regular quarterly distribution payable to shareholders of record on January 25, 2021 in the amount of $0.55 per share, or $26,575.

We paid this distribution on February 18, 2021 using cash on hand.

For more information regarding the distributions we paid during 2020, see Note 10 to the Notes to Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report on Form 10-K.

As of December 31, 2019 , our contractual obligations were as follows:

Payments Due by Period

Contractual Obligations

Long term debt obligations

Tenant related obligations (1)

Operating lease (2)

Projected interest expense (3)

Committed tenant related obligations includes leasing commissions and tenant improvements and are based on leases in effect as of December 31, 2019.

Reflects the lease obligation we assumed related to FPO’s former corporate headquarters, net of sublease income.

Projected interest expense is attributable to only our debt obligations at existing rates as of December 31, 2019 and is not intended to project future interest costs which may result from debt prepayments, additional borrowings under our revolving credit facility, new debt issuances or changes in interest rates.

Off Balance Sheet Arrangements (dollars in thousands)

We own 51% and 50% interests in two unconsolidated joint ventures which own three properties.

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Debt Covenants (dollars in thousands)

Our principal debt obligations at December 31, 2019 consisted of an aggregate outstanding principal balance of $2,060,000 of public issuances of senior unsecured notes and mortgage notes with an aggregate outstanding principal balance of $326,209 , including one mortgage note with an outstanding principal balance of $13,166 classified in liabilities of properties held for sale in our consolidated balance sheet as of December 31, 2019, that were assumed in connection with certain of our acquisitions.

Our principal debt obligations at December 31, 2020 consisted of an aggregate outstanding principal balance of $2,072,000 of public issuances of senior unsecured notes and mortgage notes with an aggregate outstanding principal balance of $170,842 that were assumed in connection with certain of our acquisitions.

Also, the three properties owned by two joint ventures in which we own 51% and 50% interests secure two additional mortgage notes.

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Our credit agreement and our senior unsecured notes indentures and their supplements provide for acceleration of payment of all amounts outstanding upon the occurrence and continuation of certain events of default, such as, in the case of our credit agreement, a change of control of us, which includes RMR LLC ceasing to act as our business and property manager.

Our credit agreement and our senior unsecured notes indentures and their supplements also contain a number of covenants, including those that restrict our ability to incur debts, including debts secured by mortgages on our properties, in excess of calculated amounts, require us to comply with certain financial and other covenants and, in the case of our credit agreement, restrict our ability to make distributions to our shareholders under certain circumstances.

As of December 31, 2019 , we believe we were in compliance with the terms and conditions of our respective covenants under our credit agreement and senior unsecured notes indentures and

their supplements.

Our credit agreement and our senior unsecured notes indentures and their supplements also contain a number of covenants, including those that restrict our ability to incur debts, including debts secured by mortgages on our properties, in excess of calculated amounts, require us to comply with certain financial covenants and, in the case of our credit agreement, restrict our ability to make distributions to our shareholders under certain circumstances.

As of December 31, 2020, we believe we were in compliance with the terms and conditions of our respective covenants under our credit agreement and senior unsecured notes indentures and their supplements.

Our mortgage notes are non-recourse, subject to certain limited exceptions, and do not contain any material financial covenants.

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and others related to them.

we have no employees and the personnel and various services we require to operate our business are provided to us by RMR LLC pursuant to our business and property management agreements with RMR LLC;

is the managing member of RMR LLC;

Adam Portnoy, the Chair of our Board of Trustees and one of our Managing Trustees, is the sole trustee, an officer and the controlling shareholder of ABP Trust, which is the controlling shareholder of RMR Inc., a managing director, the president and chief executive officer of RMR Inc.

and an officer and employee of RMR LLC;

David Blackman, our other Managing Trustee and our President and Chief Executive Officer, also serves as an officer and employee of RMR LLC, and each of our other officers is also an officer and employee of RMR LLC;

and, until July 1, 2019 we owned shares of class A common stock of RMR Inc.

We have relationships and historical and continuing transactions with other companies to which RMR LLC or its subsidiaries provide management services and some of which have trustees, directors or officers who are also trustees, directors or officers of us, RMR LLC or RMR Inc.

For more information about these and other such relationships and related person transactions, see Notes 1, 5, 6 and 11 to the Notes to Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report on Form 10-K, which are incorporated herein by reference and our other filings with the SEC, including our definitive Proxy Statement for our 2021 Annual Meeting of Shareholders, or our definitive Proxy Statement, to be filed with the SEC within 120 days after the fiscal year ended December 31, 2020.

For more information about the risks that may arise as a result of these and other related person transactions and relationships, see elsewhere in this Annual Report on Form 10-K, including “Warning Concerning Forward Looking Statements,” Part I, Item 1, “Business” and Part I, Item 1A, “Risk Factors.” Our filings with the SEC and copies of certain of our agreements with these related persons, including our business and property management agreements with RMR LLC and our merger agreement with SIR for the SIR Merger, are available as exhibits to our public filings with the SEC and accessible at the SEC’s website, www.sec.gov.

We may engage in additional transactions with related persons, including businesses to which RMR LLC or its subsidiaries provide management services.

Critical Accounting Policies

For more information about the risks that may arise as a result of these and other related person transactions and relationships, see elsewhere in this Annual Report on Form 10-K, including “Warning Concerning Forward-Looking Statements,” Part I, Item 1, “Business” and Part I, Item 1A, “Risk Factors.” We may engage in additional transactions with related persons, including businesses to which RMR LLC or its subsidiaries provide management services.

Critical Accounting Estimates

Our critical accounting policies are those that will have the most impact on the reporting of our financial condition and results of operations and those requiring significant judgments and estimates.

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In the future, we may need to revise our carrying value assessments to incorporate information which is not now known, and such revisions could increase or decrease our depreciation expense related to properties we own or decrease the carrying values of our assets.

Impact of Inflation

Inflation in the past several years in the United States has been modest, but recently there have been indications of inflation in the U.S.

economy and some market forecasts indicate an expectation of increased inflation in the near to intermediate term.

Future inflation might have both positive and negative impacts on our business.

Inflation might cause the value of our real estate assets to increase.

Our government leases generally provide for annual rent increases based on a cost of living index calculation which may mitigate the impact upon us of increased costs as a result of inflation.

Further, inflation may permit us to increase rents upon renewal or enter new leases for the leased space for increased rent amounts.

Increases in operating costs as a result of inflation are likely to have modest, if any, impacts on our operating results.

This is because most of the operating costs arising in our business are incurred at our properties and our tenants pay most of the property operating cost increases directly or indirectly when we pass through such costs as additional rent under our leases.

Increased debt capital costs as a result of inflation are not directly or immediately paid by, or passed through, to our tenants;

therefore, such cost increases are more likely to impact our financial results.

Over time, however, inflationary debt capital cost increases may be mitigated as leases at our properties expire and new leases are entered which reflect inflationary increases in market rents.

To mitigate the adverse impact of any increased cost of debt capital in the event of material inflation, we may enter into interest rate hedge arrangements in the future.

The decision to enter into these agreements will be based on various factors, including the amount of our floating rate debt outstanding, our belief that material interest rate increases are likely to occur, the costs of, and our expected benefit from, these agreements and upon possible requirements of our borrowing arrangements.

Generally, we do not expect inflation to have a material impact on our financial results for the next 12 months or for the current foreseeable future thereafter.

Impact of Climate Change

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These and other laws may cause energy or other costs at our properties to increase.

We do not expect the direct impact of these increases to be material to our results of operations, because the increased costs either would be the responsibility of our tenants directly or in the longer term, passed through and paid by tenants of our

Although we do not believe it is likely in the foreseeable future, laws enacted to mitigate climate change may make some of our properties obsolete or cause us to make material investments in our properties, which could materially and adversely affect our financial condition or the financial condition of our tenants and their ability to pay rent to us.

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Green Building Council, a nonprofit organization focused on promoting energy efficiency at commercial properties through its LEED® green building program.

Additionally, in July 2020, RMR LLC released its first annual Sustainability Report, which summarizes the environmental, social and governance initiatives RMR LLC and its client companies, including OPI, employ.

RMR LLC’s Sustainability Report may be accessed on RMR Inc.’s website at www.rmrgroup.com/corporate-sustainability/default.aspx.

The information on or accessible through RMR Inc.’s website is not incorporated by reference into this Annual Report on Form 10-K.

Some observers believe severe weather in different parts of the world over the last few years is evidence of global climate change.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis