What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-10-28 compared with 2021-07-29 · 161 added, 103 removed, 341 unchanged (44% of the section changed)

3 unchanged sentences

(dollars in thousands, except per share data)

June 30, 2021 December 31, 2020

September 30, 2021 December 31, 2020

Real estate properties:

35 unchanged sentences

(amounts in thousands, except per share data)

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

20 unchanged sentences

Comprehensive income (loss) $ 3,712 $ ( 3,712 ) $ ( 25,125 ) $ 8,542

Weighted average common shares outstanding (basic and diluted) 48,165 48,106 48,163 48,101

Weighted average common shares outstanding (basic) 48,211 48,132 48,179 48,111

Weighted average common shares outstanding (diluted) 48,244 48,132 48,179 48,111

Per common share amounts (basic and diluted):

7 unchanged sentences

Net Income Cumulative

Comprehensive

Loss Cumulative

Distributions Total Shareholders’ Equity

9 unchanged sentences

Balance at June 30, 2021 48,334,357 483 2,616,450 155,058 ( 1,243,441 ) 1,528,550

Share grants 117,800 1 950 — — 951

Share forfeitures and repurchases ( 26,233 ) — ( 649 ) — — ( 649 )

Net income — — — 3,712 — 3,712

Distributions to common shareholders — — — — ( 26,584 ) ( 26,584 )

Balance at September 30, 2021 48,425,924 $ 484 $ 2,616,751 $ 158,770 $ ( 1,270,025 ) $ 1,505,980

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

OFFICE PROPERTIES INCOME TRUST

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(dollars in thousands)

of Shares Common Shares Additional

Paid In Capital Cumulative

Net Income Cumulative

Comprehensive

Loss Cumulative

Distributions Total Shareholders’ Equity

Balance at December 31, 2019 48,201,941 $ 482 $ 2,612,425 $ 177,217 $ ( 200 ) $ ( 1,084,170 ) $ 1,705,754

11 unchanged sentences

Balance at June 30, 2020 48,227,800 482 2,613,868 189,356 ( 85 ) ( 1,137,191 ) 1,666,430

Share grants 108,600 1 864 — — — 865

Share forfeitures and repurchases ( 18,034 ) — ( 386 ) — — — ( 386 )

Amounts reclassified from cumulative other comprehensive loss to net loss — — — — 85 — 85

Net loss — — — ( 3,797 ) — — ( 3,797 )

Distributions to common shareholders — — — — — ( 26,525 ) ( 26,525 )

Balance at September 30, 2020 48,318,366 $ 483 $ 2,614,346 $ 185,559 $ — $ ( 1,163,716 ) $ 1,636,672

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

2 unchanged sentences

(dollars in thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

43 unchanged sentences

(dollars in thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

SUPPLEMENTAL CASH FLOW INFORMATION:

7 unchanged sentences

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the condensed consolidated balance sheets to the amounts shown in the condensed consolidated statements of cash flows:

As of June 30,

As of September 30,

Cash and cash equivalents $ 54,881 $ 45,035

19 unchanged sentences

Per Common Share Amounts

We calculate basic earnings per common share by dividing net income (loss) by the weighted average number of our common shares outstanding during the period.

We calculate diluted earnings per share using the more dilutive of the two class method or the treasury stock method.

Unvested share awards and other potentially dilutive common shares, together with the related impact on earnings, are considered when calculating diluted earnings per share.

For the three and six months ended June 30, 2021 and 2020, there were no dilutive common shares and certain unvested common shares were not included in the calculation of diluted earnings per share because to do so would have been antidilutive.

The following table provides a reconciliation of the weighted average number of common shares used in the calculation of basic and diluted earnings per share (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

Weighted average common shares for basic earnings per share 48,211 48,132 48,179 48,111

Effect of dilutive securities:

unvested share awards (1)

Weighted average common shares for diluted earnings per share 48,244 48,132 48,179 48,111

(1) For the three months ended September 30, 2020 and the nine months ended September 30, 2021 and 2020, there were no dilutive common shares and certain unvested common shares were not included in the calculation of diluted earnings per share because to do so would have been antidilutive.

Real Estate Properties

As of June 30, 2021, our wholly owned properties were comprised of 181 properties containing a combined approximately 24,091,000 rentable square feet.

The aggregate undepreciated carrying value of our wholly owned properties as of June 30, 2021 was $ 3,889,200 , including $ 41,236 classified as held for sale, and we had noncontrolling ownership interests of 51 % and 50 % in two unconsolidated joint ventures that own three properties containing a combined approximately 444,000 rentable square feet.

As of September 30, 2021, our wholly owned properties were comprised of 178 properties containing a combined approximately 23,274,000 rentable square feet.

The aggregate undepreciated carrying value of our wholly owned properties as of September 30, 2021 was $ 3,916,800 , including $ 79,035 classified as held for sale, and we had noncontrolling ownership interests of 51 % and 50 % in two unconsolidated joint ventures that own three properties containing a combined approximately 444,000 rentable square feet.

We generally lease space at our properties on a gross lease, modified gross lease or net lease basis pursuant to fixed term contracts expiring between 2021 and 2053.

Some of our leases generally require us to pay all or some property operating expenses and to provide all or most property management services.

During the three months ended June 30, 2021, we entered into 25 leases for approximately 548,000 rentable square feet for a weighted (by rentable square feet) average lease term of 16.6 years and we made commitments for approximately $ 76,702 of leasing related costs.

During the six months ended June 30, 2021, we entered into 45 leases for approximately 1,123,000 rentable square feet for a weighted (by rentable square feet) average lease term of 10.9 years and we made commitments for approximately $ 83,847 of leasing related costs.

As of June 30, 2021, we had estimated unspent leasing related obligations of $ 113,099 .

During the three months ended September 30, 2021, we entered into 20 leases for approximately 659,000 rentable square feet for a weighted (by rentable square feet) average lease term of 10.9 years and we made commitments for approximately $ 46,133 of leasing related costs.

During the nine months ended September 30, 2021, we entered into 65 leases for approximately 1,782,000 rentable square feet for a weighted (by rentable square feet) average lease term of 10.9 years and we made commitments for approximately $ 129,980 of leasing related costs.

As of September 30, 2021, we had estimated unspent leasing related obligations of $ 129,369 .

We regularly evaluate whether events or changes in circumstances have occurred that could indicate an impairment in the value of our long lived assets.

3 unchanged sentences

We estimate fair value through an evaluation of recent financial performance and projected discounted cash flows using standard industry valuation techniques.

In addition to the consideration of impairment upon the events or changes in circumstances described above, we regularly evaluate the remaining lives of our long lived assets.

If we change our estimate of the remaining lives, we allocate the carrying value of the affected assets over their revised remaining lives.

Acquisition Activities

During the six months ended June 30, 2021, we acquired two properties containing a combined approximately 877,000 rentable square feet for an aggregate purchase price of $ 548,933 , including net purchase price adjustments of $ 1,761 and

In addition to the consideration of impairment upon the events or changes in circumstances

OFFICE PROPERTIES INCOME TRUST

1 unchanged sentence

(dollars in thousands, except per share data)

acquisition related costs of $ 694 .

described above, we regularly evaluate the remaining lives of our long lived assets.

If we change our estimate of the remaining lives, we allocate the carrying value of the affected assets over their revised remaining lives.

Acquisition Activities

During the nine months ended September 30, 2021, we acquired three properties containing a combined approximately 926,000 rentable square feet for an aggregate purchase price of $ 576,478 , including net purchase price adjustments of $ 1,761 and acquisition related costs of $ 1,264 .

These acquisitions were accounted for as asset acquisitions.

4 unchanged sentences

June 2021 Atlanta, GA 1 346,000 180,602 13,040 135,459 32,103 —

August 2021 Boston, MA 1 49,000 27,545 16,103 10,217 1,225 —

3 926,000 $ 576,478 $ 72,078 $ 404,024 $ 109,464 $ ( 9,088 )

(1) Purchase price includes an adjustment of $ 13,031 to record an estimated real estate tax liability as of the acquisition date.

As of July 28, 2021, we have entered into an agreement to acquire a property adjacent to a property we own in Boston, MA containing approximately 49,000 rentable square feet for $ 26,975 , excluding acquisition related costs.

This acquisition is expected to occur before the end of the third 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.

Disposition Activities

During the six months ended June 30, 2021, we sold two properties and a warehouse facility adjacent to a property we own containing a combined approximately 1,692,000 rentable square feet for an aggregate sales price of $ 169,845 , excluding closing costs.

During the nine months ended September 30, 2021, we sold six properties and a warehouse facility adjacent to a property we own containing a combined approximately 2,565,000 rentable square feet for an aggregate sales price of $ 198,415 , excluding closing costs.

The sales of these properties, as presented in the table below, do not represent significant dispositions, individually or in the aggregate, nor do they represent a strategic shift in our business.

7 unchanged sentences

April 2021 1 Huntsville, AL 1,371,000 39,000 — 5,383

2 1,692,000 $ 169,845 $ 54,118 $ 5,371

(1) Gross sales price is the gross contract price, includes purchase price adjustments, if any, and excludes closing costs.

(2) Consists of a warehouse facility adjacent to a property we own in Kansas City, MO.

As of June 30, 2021, we had three properties under agreement to sell for an aggregate sales price of $ 21,920 , excluding closing costs.

These properties were classified as held for sale in our condensed consolidated balance sheet as of June 30, 2021 and are summarized below:

Date of Sale Agreement Number of Properties Location Rentable Square Feet Gross

Sales Price (1)

Loss on Impairment of Real Estate

April 2021 1 Liverpool, NY (2)

38,000 $ 650 $ —

May 2021 1 Fresno, CA (2)

532,000 6,000 33,917

May 2021 1 Memphis, TN 205,000 15,270 —

July 2021 1 Fresno, CA 532,000 6,000 — 33,902

July 2021 1 Liverpool, NY 38,000 650 31 —

August 2021 1 Memphis, TN 205,000 15,270 287 —

September 2021 1 Stoneham, MA 98,000 6,650 ( 282 ) 5,911

6 2,565,000 $ 198,415 $ 54,154 $ 45,196

(1) Gross sales price is the gross contract price, includes purchase price adjustments, if any, and excludes closing costs.

(2) The sales of these properties were completed in July 2021.

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

(2) Consists of a warehouse facility adjacent to a property we own located in Kansas City, MO.

OFFICE PROPERTIES INCOME TRUST

1 unchanged sentence

(dollars in thousands, except per share data)

As of June 30, 2021, we also had an additional four properties with approximately 546,000 rentable square feet classified as held for sale in our condensed consolidated balance sheet.

We recorded a $ 16,569 loss on impairment of real estate during the six months ended June 30, 2021, including $ 14,280 recorded during the three months ended June 30, 2021, to adjust the carrying value of these properties to their estimated fair values less cost to sell.

As of September 30, 2021, we had five properties and two land parcels classified as held for sale in our condensed consolidated balance sheet.

These properties and land parcels have been sold or are under agreement to sell for an aggregate sales price of $ 84,500 , excluding closing costs, and are summarized below:

Date of Sale Agreement Number of Properties Location Rentable Square Feet Gross

Sales Price (1)

August 2021 — Sterling, VA (2)

October 2021 5 Brookhaven, GA 378,000 56,000

5 378,000 $ 84,500

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

(2) Consists of two vacant land parcels adjacent to properties we own located in Sterling, VA.

The sale of these land parcels was completed in October 2021.

In addition to the properties discussed above, we are currently marketing for sale 17 properties containing approximately 2,161,000 rentable square feet.

As of September 30, 2021, three of these properties containing approximately 448,000 rentable square feet are classified as held for sale in our condensed consolidated balance sheet.

We recorded a $ 10,658 loss on impairment of real estate to adjust the carrying value of these three properties to their estimated fair values less cost to sell during the nine months ended September 30, 2021.

We have determined the remaining 14 properties were not impaired nor did they meet the held for sale criteria as of September 30, 2021.

We cannot be sure we will sell any properties we are marketing for prices in excess of our carrying values or that we will not recognize impairment losses or losses on sale with respect to these properties.

In addition, our pending 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.

Unconsolidated Joint Ventures

1 unchanged sentence

We account for these investments under the equity method of accounting.

As of June 30, 2021 and December 31, 2020, our investments in unconsolidated joint ventures consisted of the following:

As of September 30, 2021 and December 31, 2020, our investments in unconsolidated joint ventures consisted of the following:

OPI Carrying Value of Investments at

Joint Venture OPI Ownership June 30,

Joint Venture OPI Ownership September 30,

2021 December 31, 2020 Number of Properties Location Rentable Square Feet

4 unchanged sentences

Joint Venture Interest Rate (1)

Maturity Date Principal Balance at June 30, 2021 and December 31, 2020 (2)

Maturity Date Principal Balance at September 30, 2021 and December 31, 2020 (2)

Prosperity Metro Plaza 4.09 % 12/1/2029 $ 50,000

4 unchanged sentences

None of the debt is recourse to us.

At June 30, 2021, the aggregate unamortized basis difference of our two unconsolidated joint ventures of $ 7,220 is primarily attributable to the difference between the amount we paid to purchase our interest in these joint ventures, including transaction costs, and the historical carrying value of the net assets of these joint ventures.

At September 30, 2021, the aggregate unamortized basis difference of our two unconsolidated joint ventures of $ 7,098 is primarily attributable to the difference between the amount we paid to purchase our interest in these joint ventures, including transaction costs, and the historical carrying value of the net assets of these joint ventures.

This difference is being amortized over the remaining useful life of the related properties and the resulting amortization expense is included in equity in net losses of investees in our condensed consolidated statements of comprehensive income (loss).

OFFICE PROPERTIES INCOME TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except per share data)

Our leases provide for base rent payments and in addition may include variable payments.

3 unchanged sentences

we have determined the fixed non-cancelable lease term of these leases to be the full term of the lease because we believe the occurrence of early terminations to be a remote contingency based on both our historical experience and our assessments of the likelihood of lease cancellation on a separate lease basis.

We increased rental income to record revenue on a straight line basis by $ 3,847 and $ 3,468 for the three months ended June 30, 2021 and 2020, respectively, and $ 9,204 and $ 9,051 for the six months ended June 30, 2021 and 2020, respectively.

Rents receivable, excluding properties classified as held for sale, include $ 74,674 and $ 68,824 of straight line rent receivables at June 30, 2021 and December 31, 2020, respectively.

We increased rental income to record revenue on a straight line basis by $ 3,924 and $ 3,912 for the three months ended September 30, 2021 and 2020, respectively, and $ 13,128 and $ 12,963 for the nine months ended September 30, 2021 and 2020, respectively.

Rents receivable, excluding properties classified as held for sale, include $ 76,033 and $ 68,824 of straight line rent receivables at September 30, 2021 and December 31, 2020, respectively.

We do not include in our measurement of our lease receivables certain variable payments, including payments determined by changes in the index or market-based indices after the inception of the lease, certain tenant reimbursements and other income until the specific events that trigger the variable payments have occurred.

Such payments totaled $ 17,488 and $ 36,348 for the

OFFICE PROPERTIES INCOME TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except per share data)

three and six months ended June 30, 2021, respectively, of which tenant reimbursements totaled $ 16,639 and $ 34,442 , respectively.

For the three and six months ended June 30, 2020, such payments totaled $ 18,302 and $ 38,048 , respectively, of which tenant reimbursements totaled $ 17,229 and $ 35,851 , respectively.

Such payments totaled $ 24,098 and $ 60,446 for the three and nine months ended September 30, 2021, respectively, of which tenant reimbursements totaled $ 23,167 and $ 57,609 , respectively.

For the three and nine months ended September 30, 2020, such payments totaled $ 18,606 and $ 56,654 , respectively, of which tenant reimbursements totaled $ 17,495 and $ 53,346 , respectively.

Concentration

1 unchanged sentence

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

As of June 30, 2021, the U.S.

As of September 30, 2021, the U.S.

government, 11 state governments and four other government tenants combined were responsible for approximately 29.8 % of our annualized rental income.

As of June 30, 2020, the U.S.

As of September 30, 2020, the U.S.

government, 11 state governments and two other government tenants combined were responsible for approximately 35.6 % of our annualized rental income.

government is our largest tenant by annualized rental income and represented approximately 22.0 % and 25.2 % of our annualized rental income as of June 30, 2021 and 2020, respectively.

government is our largest tenant by annualized rental income and represented approximately 19.7 % and 25.2 % of our annualized rental income as of September 30, 2021 and 2020, respectively.

Geographic Concentration

At June 30, 2021, our 181 wholly owned properties were located in 34 states and the District of Columbia.

Properties located in California, Virginia, the District of Columbia, Illinois and Georgia were responsible for 12.1 %, 12.1 %, 9.4 %, 9.0 % and 7.9 % of our annualized rental income as of June 30, 2021, respectively.

Our principal debt obligations at June 30, 2021 were:

(1) $ 385,000 of outstanding borrowings under our $ 750,000 unsecured revolving credit facility;

At September 30, 2021, our 178 wholly owned properties were located in 33 states and the District of Columbia.

Properties located in Virginia, California, the District of Columbia, Illinois and Georgia were responsible for 12.2 %, 11.0 %, 9.6 %, 9.1 % and 8.0 % of our annualized rental income as of September 30, 2021, respectively.

Our principal debt obligations at September 30, 2021 were:

(1) $ 2,512,000 aggregate outstanding principal amount of senior unsecured notes;

4 unchanged sentences

We can borrow, repay and reborrow funds available under our revolving credit facility until maturity and no principal repayment is due until maturity.

We are required to pay interest at a rate of LIBOR plus a premium, which was 110 basis points per annum at June 30, 2021, 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 June 30, 2021.

We are required to pay interest at a rate of LIBOR plus a premium, which was 110 basis points per annum at September 30, 2021, 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

OFFICE PROPERTIES INCOME TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except per share data)

basis points per annum at September 30, 2021.

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

As of June 30, 2021 and December 31, 2020, the annual interest rate payable on borrowings under our revolving credit facility was 1.2 %.

The weighted average annual interest rate for borrowings under our revolving credit facility was 1.2 % and 1.3 % for the three months ended June 30, 2021 and 2020, respectively, and 1.2 % and 2.1 % for the six months ended June 30, 2021 and 2020, respectively.

As of June 30, 2021 and July 28, 2021, we had $ 385,000 and $ 380,000 , respectively, outstanding under our revolving credit facility, and $ 365,000 and $ 370,000 , respectively, available for borrowing.

As of September 30, 2021 and December 31, 2020, the annual interest rate payable on borrowings under our revolving credit facility was 1.2 %.

The weighted average annual interest rate for borrowings under our revolving credit facility was 1.2 % for each of the three months ended September 30, 2021 and 2020, and 1.2 % and 2.0 % for the nine months ended September 30, 2021 and 2020, respectively.

As of September 30, 2021 and October 27, 2021, we had no amounts outstanding under our revolving credit facility and $ 750,000 available for borrowing.

Our credit agreement and senior unsecured notes indentures and their supplements provide for acceleration of payment of all amounts due thereunder 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 The RMR Group LLC, or RMR LLC, ceasing to act as our business and property manager.

Our credit agreement and senior unsecured notes indentures and their supplements also contain covenants, including covenants that restrict our ability to incur debts, require us to comply with certain financial covenants and, in the case of our credit agreement, restrict our ability to make distributions under certain circumstances.

We believe we were in compliance with the terms and conditions of the respective covenants under our credit agreement and senior unsecured notes indentures and their supplements at June 30, 2021.

We believe we were in compliance with the terms and conditions of the respective covenants under our credit agreement and senior unsecured notes indentures and their supplements at September 30, 2021.

Senior Unsecured Note Issuances

In May 2021, we issued $ 300,000 of 2.650 % senior unsecured notes due 2026 in an underwritten public offering, raising net proceeds of $ 296,826 , after deducting underwriters’ discounts and offering expenses.

These notes require semi-annual payments of interest only through maturity on June 15, 2026 and may be repaid at par plus accrued and unpaid interest on or after May 15, 2026.

In August 2021, we issued $ 350,000 of 2.400 % senior unsecured notes due 2027 in an underwritten public offering, raising net proceeds of $ 346,630 , after deducting underwriters’ discounts and offering expenses.

These notes require semi-annual payments of interest only through maturity on February 1, 2027 and may be repaid at par plus accrued and unpaid interest on or after January 1, 2027.

In September 2021, we issued $ 400,000 of 3.450 % senior unsecured notes due 2031 in an underwritten public offering, raising net proceeds of $ 395,698 , after deducting underwriters’ discounts and offering expenses.

These notes require semi-annual payments of interest only through maturity on October 15, 2031 and may be repaid at par plus accrued and unpaid interest on or after July 15, 2031.

Senior Unsecured Note Redemptions

In June 2021, we redeemed, at par plus accrued interest, all $ 310,000 of our 5.875 % senior unsecured notes due 2046.

As a result of this redemption, we recognized a loss on early extinguishment of debt of $ 8,581 during the nine months ended September 30, 2021, from the write off of unamortized debt issuance costs.

In September 2021, we redeemed, at a premium plus accrued interest, all $ 300,000 of our 4.15 % senior unsecured notes due 2022.

As a result of this redemption, we recognized a loss on early extinguishment of debt of $ 2,274 during the nine months ended September 30, 2021, from a prepayment penalty and the write off of unamortized discounts.

Mortgage Note Repayment

In June 2021, we prepaid, at a premium plus accrued interest, a mortgage note secured by three properties with an outstanding principal balance of $ 71,000 , an annual interest rate of 3.55 % and a maturity date in May 2023.

As a result of the prepayment of this mortgage note, we recognized a loss on early extinguishment of debt of $ 3,213 during the nine months ended September 30, 2021, from a prepayment penalty and the write off of unamortized discounts.

At September 30, 2021, three of our properties with an aggregate net book value of $ 189,298 were encumbered by mortgage notes with an aggregate principal amount of $ 98,604 .

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

OFFICE PROPERTIES INCOME TRUST

1 unchanged sentence

(dollars in thousands, except per share data)

In June 2021, we redeemed, at par plus accrued interest, all $ 310,000 of our 5.875 % senior unsecured notes due 2046.

As a result of this redemption, we recognized a loss on early extinguishment of debt of $ 8,581 during the six months ended June 30, 2021, from the write off of unamortized debt issuance costs.

Also in June 2021, we prepaid, at a premium plus accrued interest, a mortgage note secured by three properties with an outstanding principal balance of $ 71,000 , an annual interest rate of 3.55 % and a maturity date in May 2023.

As a result of the prepayment of this mortgage note, we recognized a loss on early extinguishment of debt of $ 3,213 during the six months ended June 30, 2021, from a prepayment penalty and the write off of unamortized discounts.

At June 30, 2021, three of our properties with an aggregate net book value of $ 190,969 were encumbered by mortgage notes with an aggregate principal amount of $ 98,903 .

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

Fair Value of Assets and Liabilities

The following table presents certain of our assets measured at fair value at June 30, 2021, categorized by the level of inputs, as defined in the fair value hierarchy under GAAP, used in the valuation of each asset:

The following table presents certain of our assets measured at fair value at September 30, 2021, categorized by the level of inputs, as defined in the fair value hierarchy under GAAP, used in the valuation of each asset:

Fair Value at Reporting Date Using

3 unchanged sentences

$ 20,300 $ — $ — $ 20,300

(1) We recorded an impairment charge of $ 33,917 to reduce the carrying value of one property that is classified as held for sale in our condensed consolidated balance sheet to its estimated fair value, less estimated costs to sell of $ 200 , based upon a negotiated sales price with a third party buyer (Level 2 inputs as defined in the fair value hierarchy under GAAP).

See Note 3 for more information.

(2) We recorded impairment charges of $ 16,569 to reduce the carrying value of four properties that are classified as held for sale in our condensed consolidated balance sheet to their estimated fair value, less estimated costs to sell of $ 714 , based on third party offers (Level 3 inputs as defined in the fair value hierarchy under GAAP).

(1) We recorded impairment charges of $ 10,658 to reduce the carrying value of three properties that are classified as held for sale in our condensed consolidated balance sheet to their estimated fair value, less estimated costs to sell of $ 425 , based on third party offers (Level 3 inputs as defined in the fair value hierarchy under GAAP).

See Note 3 for more information.

In addition to the assets described in the table above, our financial instruments include our cash and cash equivalents, restricted cash, rents receivable, accounts payable, a revolving credit facility, senior unsecured notes, mortgage notes payable, amounts due to related persons, other accrued expenses and security deposits.

At June 30, 2021 and December 31, 2020, the fair values of our financial instruments approximated their carrying values in our condensed consolidated financial statements, due to their short term nature or floating interest rates, except as follows:

As of June 30, 2021 As of December 31, 2020

At September 30, 2021 and December 31, 2020, the fair values of our financial instruments approximated their carrying values in our condensed consolidated financial statements, due to their short term nature or floating interest rates, except as follows:

As of September 30, 2021 As of December 31, 2020

Financial Instrument Carrying Value (1)

14 unchanged sentences

395,701 393,680 — —

Senior unsecured notes, 5.875 % interest rate, due in 2046 (6)

— — 301,264 322,028

Senior unsecured notes, 6.375 % interest rate, due in 2050

156,471 180,533 156,326 171,590

Mortgage notes payable (7)

1 unchanged sentence

Total $ 2,576,190 $ 2,701,023 $ 2,202,971 $ 2,335,352

(1) Includes unamortized debt premiums, discounts and issuance costs totaling $ 29,400 and $ 39,871 as of June 30, 2021 and December 31, 2020, respectively.

(1) Includes unamortized debt premiums, discounts and issuance costs totaling $ 34,414 and $ 39,871 as of September 30, 2021 and December 31, 2020, respectively.

(2) These senior notes were redeemed in September 2021.

(3) These senior notes were issued in May 2021.

(4) These senior notes were issued in August 2021.

(5) These senior notes were issued in September 2021.

(6) These senior notes were redeemed in June 2021.

(7) Balance as of December 31, 2020 includes one mortgage note secured by three properties with an outstanding principal balance of $ 71,000 that was prepaid in June 2021.

OFFICE PROPERTIES INCOME TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except per share data)

We estimated the fair value of our senior unsecured notes (except for our senior unsecured notes due 2046 and 2050) using an average of the bid and ask price of the notes (Level 2 inputs as defined in the fair value hierarchy under GAAP) as of the measurement date.

2 unchanged sentences

Because Level 3 inputs are unobservable, our estimated fair values may differ materially from the actual fair values.

OFFICE PROPERTIES INCOME TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except per share data)

Shareholders’ Equity

On June 17, 2021, in accordance with our Trustee compensation arrangements, we awarded to each of our eight Trustees 3,500 of our common shares, valued at $ 29.88 per share, the closing price of our common shares on Nasdaq on that day.

On September 15, 2021, we awarded under our equity compensation plan an aggregate of 117,800 of our common shares, valued at $ 25.42 per share, the closing price of our common shares on Nasdaq on that day, to our officers and certain other employees of RMR LLC.

Share Purchases

During the six months ended June 30, 2021, we purchased an aggregate of 12,009 of our common shares valued at a weighted average share price of $ 29.33 per share, from one of our Trustees and certain former officers and employees of RMR LLC in satisfaction of tax withholding and payment obligations in connection with the vesting of awards of our common shares.

During the three and nine months ended September 30, 2021, we purchased an aggregate of 25,533 and 37,542 of our common shares, respectively, valued at a weighted average share price of $ 25.24 and $ 26.55 per share, respectively, from certain of our current and former Trustees and officers and certain other current and former officers and employees of RMR LLC in satisfaction of tax withholding and payment obligations in connection with the vesting of awards of our common shares.

Distributions

During the six months ended June 30, 2021, we declared and paid regular quarterly distributions to common shareholders as follows:

During the nine months ended September 30, 2021, we declared and paid regular quarterly distributions to common shareholders as follows:

Declaration Date Record Date Paid Date Distributions Per Common Share Total Distributions

1 unchanged sentence

April 15, 2021 April 26, 2021 May 20, 2021 0.55 26,575

July 15, 2021 July 26, 2021 August 19, 2021 0.55 26,584

$ 1.65 $ 79,734

On July 15, 2021, we declared a regular quarterly distribution to common shareholders of record on July 26, 2021 of $ 0.55 per share, or approximately $ 26,600 .

We expect to pay this distribution on or about August 19, 2021.

On October 14, 2021, we declared a regular quarterly distribution to common shareholders of record on October 25, 2021 of $ 0.55 per share, or approximately $ 26,600 .

We expect to pay this distribution on or about November 18, 2021.

Business and Property Management Agreements with RMR LLC

4 unchanged sentences

and (2) a property management agreement, which relates to our property level operations.

Pursuant to our business management agreement with RMR LLC, we recognized net business management fees of $ 10,551 and $ 20,025 for the three and six months ended June 30, 2021, respectively, and $ 4,302 and $ 9,001 for the three and six months ended June 30, 2020, respectively.

The net business management fees we recognized for the three and six months ended June 30, 2021 include $ 5,911 and $ 11,111 , respectively, of estimated business management incentive fees based on our common share total return, as defined in our business management agreement, as of June 30, 2021.

We did no t recognize any estimated business management fees for the three or six months ended June 30, 2020.

Pursuant to our business management agreement with RMR LLC, we recognized net business management fees of $( 1,738 ) and $ 18,287 for the three and nine months ended September 30, 2021, respectively, and $ 4,236 and $ 13,237 for the three and nine months ended September 30, 2020, respectively.

The net business management fees we recognized for the three months ended September 30, 2021 include a reversal of $ 6,627 of previously accrued estimated business management incentive fees, which represents the amount by which the 2021 business management incentive fees as of June 30, 2021 exceeded the amount estimated as of September 30, 2021.

The net business management fees for the nine months ended September 30, 2021 include $ 4,484 of estimated business management incentive fees.

The estimated business management incentive fees as of September 30, 2021 are based on our common share total return, as defined in our business management agreement, for the measurement period ending as of that date.

We did no t recognize any estimated business management incentive fees for the three or nine months ended September 30, 2020.

The actual amount of annual incentive fees for 2021, if any, will be based on our common share total return, as defined in our business management agreement, for the three year period ending December 31, 2021, and will be payable in January 2022.

1 unchanged sentence

We include business management fees in general and administrative expenses in our condensed consolidated statements of comprehensive income (loss).

Pursuant to our property management agreement with RMR LLC, we recognized aggregate property management and construction supervision fees of $ 4,914 and $ 9,526 for the three and six months ended June 30, 2021, respectively, and $ 5,128 and $ 10,192 for the three and six months ended June 30, 2020, respectively.

Of these amounts, for the three and six months ended June 30, 2021, $ 3,935 and $ 8,015 , respectively, were expensed to other operating expenses in our condensed

OFFICE PROPERTIES INCOME TRUST

1 unchanged sentence

(dollars in thousands, except per share data)

consolidated financial statements and $ 979 and $ 1,511 , respectively, were capitalized as building improvements in our condensed consolidated balance sheets and are being depreciated over the estimated useful lives of the related capital assets.

For the three and six months ended June 30, 2020, $ 4,242 and $ 8,650 , respectively, were expensed to other operating expenses in our condensed consolidated financial statements and $ 886 and $ 1,542 , respectively, were capitalized as building improvements in our condensed consolidated balance sheets and are being depreciated over the estimated useful lives of the related capital assets.

We and RMR LLC amended our business management agreement effective August 1, 2021 to replace the benchmark index used in the calculation of incentive management fees.

Pursuant to the amendment, for periods beginning on and after August 1, 2021, the MSCI U.S.

REIT/Office REIT Index will replace the discontinued SNL U.S.

REIT Office Index and be used to calculate benchmark returns per share for purposes of determining any incentive management fee payable by us to RMR LLC.

For periods prior to August 1, 2021, the SNL U.S.

REIT Office Index will continue to be used.

Accordingly, the calculation of incentive management fees for the next three measurement periods will continue to use the SNL U.S.

REIT Office Index in calculating the benchmark returns for periods through July 31, 2021.

This change of index was due to S&P Global ceasing to publish the SNL U.S.

REIT Office Index.

Pursuant to our property management agreement with RMR LLC, we recognized aggregate net property management and construction supervision fees of $ 5,519 and $ 15,045 for the three and nine months ended September 30, 2021, respectively, and $ 5,189 and $ 15,381 for the three and nine months ended September 30, 2020, respectively.

Of these amounts, for the three and nine months ended September 30, 2021, $ 4,224 and $ 12,239 , respectively, were expensed to other operating expenses in our condensed consolidated financial statements and $ 1,295 and $ 2,806 , respectively, were capitalized as building improvements in our condensed consolidated balance sheets.

For the three and nine months ended September 30, 2020, $ 4,302 and $ 12,952 , respectively, were expensed to other operating expenses in our condensed consolidated financial statements and $ 887 and $ 2,429 , respectively, were capitalized as building improvements in our condensed consolidated balance sheets.

The amounts capitalized are being depreciated over the estimated useful lives of the related capital assets.

We are generally responsible for all of our operating expenses, including certain expenses incurred or arranged by RMR LLC on our behalf.

1 unchanged sentence

Our property level operating expenses are generally incorporated into the rents charged to our tenants, including certain payroll and related costs incurred by RMR LLC.

We reimbursed RMR LLC $ 5,925 and $ 11,977 for these expenses and costs for the three and six months ended June 30, 2021, respectively, and $ 6,259 and $ 12,250 for the three and six months ended June 30, 2020, respectively.

We reimbursed RMR LLC $ 6,131 and $ 18,108 for these expenses and costs for the three and nine months ended September 30, 2021, respectively, and $ 6,437 and $ 18,687 for the three and nine months ended September 30, 2020, respectively.

We included these amounts in other operating expenses and general and administrative expenses, as applicable, in our condensed consolidated statements of comprehensive income (loss).

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

Related Person Transactions

11 unchanged sentences

Some of our Independent Trustees also serve as independent trustees or independent directors of other public companies to which RMR LLC or its subsidiaries provide management services.

Adam Portnoy serves as chair of the boards of trustees or boards of directors of several of these public companies and as a managing director or managing trustee of these public companies.

Adam Portnoy serves as chair of the boards of trustees or boards of directors and as a managing director or managing trustee of those companies.

Other officers of RMR LLC, including Ms.

Clark, serve as managing trustees, managing directors or officers of certain of these companies.

See Note 8 for further information relating to our awards of common shares to our officers and certain other employees of RMR LLC in September 2021 and our repurchases of common shares from certain of our current and former Trustees and officers and certain other current and former officers and employees of RMR LLC in satisfaction of tax withholding and payment obligations in connection with the vesting of awards of our common shares to them.

We include amounts recognized as expense for awards of our common shares to our officers and to other RMR LLC employees in general and administrative expenses in our condensed consolidated statements of comprehensive income (loss).

Our Manager, RMR LLC.

1 unchanged sentence

See Note 9 for more information regarding our management agreements with RMR LLC.

OFFICE PROPERTIES INCOME TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except per share data)

Leases with RMR LLC.

We lease office space to RMR LLC in certain of our properties for RMR LLC’s property management offices.

Pursuant to our lease agreements with RMR LLC, we recognized rental income from RMR LLC for leased office space of $ 287 and $ 575 for the three and six months ended June 30, 2021, respectively, and $ 274 and $ 554 for the three and six months ended June 30, 2020, respectively.

Pursuant to our lease agreements with RMR LLC, we recognized rental income from RMR LLC for leased office space of $ 275 and $ 850 for the three and nine months ended September 30, 2021, respectively, and $ 282 and $ 836 for the three and nine months ended September 30, 2020, respectively.

In June 2021, we entered into a 30 -year lease agreement with a subsidiary of Sonesta International Hotels Corporation, or Sonesta, in connection with the redevelopment of an office property we own in Washington, D.C.

9 unchanged sentences

Jennifer Clark is also a director of Sonesta.

OFFICE PROPERTIES INCOME TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except per share data)

For more information about these and other such relationships and certain other related person transactions, refer to our 2020 Annual Report.

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-Q

Item 1. Financial Statements