What changed in this filing

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Item 1. Financial Statements

2022-04-28 compared with 2021-10-28 · 123 added, 245 removed, 257 unchanged (59% of the section changed)

3 unchanged sentences

(dollars in thousands, except per share data)

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

Real estate properties:

35 unchanged sentences

(amounts in thousands, except per share data)

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

2021 2020 2021 2020

Three Months Ended March 31,

Rental income $ 147,354 $ 144,524

10 unchanged sentences

( 27,439 ) ( 28,798 )

Loss on early extinguishment of debt ( 2,274 ) — ( 14,068 ) ( 3,839 )

Income (loss) before income tax (expense) benefit and equity in net losses of investees 4,434 ( 3,572 ) ( 23,113 ) 9,377

Income tax (expense) benefit ( 34 ) 54 ( 348 ) ( 220 )

Income (loss) before income tax expense and equity in net losses of investees ( 12,030 ) 38,691

Income tax expense ( 531 ) ( 435 )

Equity in net losses of investees ( 846 ) ( 396 )

Net income (loss) $ ( 13,407 ) $ 37,860

Other comprehensive income (loss):

Unrealized gain on financial instrument — 85 — 200

Other comprehensive income — 85 — 200

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

Weighted average common shares outstanding (basic) 48,243 48,161

12 unchanged sentences

Share grants — — 415 — — 415

Net income — — — 37,860 — 37,860

Distributions to common shareholders — — — — ( 26,575 ) ( 26,575 )

Balance at March 31, 2021 48,318,366 483 2,615,626 221,755 ( 1,216,866 ) 1,620,998

Share grants 28,000 — 1,176 — — 1,176

Share repurchases ( 12,009 ) — ( 352 ) — — ( 352 )

Share forfeitures ( 400 ) — ( 1 ) — — ( 1 )

Net loss — — — ( 13,407 ) — ( 13,407 )

Distributions to common shareholders — — — — ( 26,634 ) ( 26,634 )

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 March 31, 2022 48,425,265 $ 484 $ 2,617,583 $ 162,308 $ ( 1,323,293 ) $ 1,457,082

Balance at December 31, 2020 48,318,366 $ 483 $ 2,615,305 $ 183,895 $ ( 1,190,291 ) $ 1,609,392

Share grants — — 321 — — 321

Share repurchases ( 1,012 ) — ( 27 ) — — — ( 27 )

Net current period other comprehensive loss — — — — ( 61 ) — ( 61 )

Net income — — — 37,860 — 37,860

1 unchanged sentence

Balance at March 31, 2021 48,318,366 $ 483 $ 2,615,626 $ 221,755 $ ( 1,216,866 ) $ 1,620,998

Share grants 28,000 — 1,121 — — — 1,121

Share repurchases ( 1,129 ) — ( 30 ) — — — ( 30 )

Net current period other comprehensive income — — — — 176 — 176

Net income — — — 1,299 — — 1,299

Distributions to common shareholders — — — — — ( 26,510 ) ( 26,510 )

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)

Nine Months Ended September 30,

Three Months Ended March 31,

CASH FLOWS FROM OPERATING ACTIVITIES:

7 unchanged sentences

Loss on impairment of real estate 17,047 7,660

Loss on early extinguishment of debt 9,694 2,701

Straight line rental income ( 2,686 ) ( 5,357 )

9 unchanged sentences

CASH FLOWS FROM INVESTING ACTIVITIES:

Real estate acquisitions ( 563,447 ) ( 11,864 )

Real estate improvements ( 36,229 ) ( 15,329 )

Distributions in excess of earnings from unconsolidated joint ventures 51 153

Distributions in excess of earnings from Affiliates Insurance Company — 287

Contributions to unconsolidated joint ventures ( 1,070 ) —

Proceeds from sale of properties, net 28,464 129,072

Proceeds from repayment of mortgage note receivable — 2,880

Net cash (used in) provided by investing activities ( 8,784 ) 113,896

1 unchanged sentence

Repayment of mortgage notes payable ( 305 ) ( 643 )

Repayment of senior unsecured notes ( 610,000 ) ( 400,000 )

Proceeds from issuance of senior unsecured notes, net 1,041,809 408,932

Borrowings on unsecured revolving credit facility 755,000 561,467

Repayments on unsecured revolving credit facility ( 755,000 ) ( 561,467 )

Payment of debt issuance costs ( 2,655 ) ( 1,477 )

Repurchase of common shares ( 1,001 ) ( 434 )

Distributions to common shareholders ( 26,634 ) ( 26,575 )

Net cash provided by (used in) financing activities 276,181 ( 227,259 )

Decrease in cash, cash equivalents and restricted cash ( 835 ) ( 43,057 )

Net cash used in financing activities ( 26,939 ) ( 27,218 )

Increase in cash, cash equivalents and restricted cash 14,543 144,620

Cash, cash equivalents and restricted cash at beginning of period 84,515 56,855

4 unchanged sentences

(dollars in thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

SUPPLEMENTAL CASH FLOW INFORMATION:

Interest paid $ 28,630 $ 36,136

Income taxes paid $ 294 $ 1,097

NON-CASH INVESTING ACTIVITIES:

Real estate improvements accrued, not paid $ 25,165 $ 9,164

Real estate acquisitions $ ( 13,031 ) $ —

Capitalized interest $ 607 $ 50

1 unchanged sentence

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 September 30,

As of March 31,

Cash and cash equivalents $ 97,656 $ 184,462

19 unchanged sentences

Per Common Share Amounts

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

We calculate basic earnings per common share by dividing net income (loss) by the weighted average number of our common shares of beneficial interest, $.01 per share, or 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.

The calculation of basic and diluted earnings per share is as follows:

Three Months Ended March 31,

Net income (loss) $ ( 13,407 ) $ 37,860

Income attributable to unvested participating securities — ( 123 )

Net income (loss) used in calculating earnings per share $ ( 13,407 ) $ 37,737

Denominators:

Weighted average common shares outstanding - basic 48,243 48,161

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.

Weighted average common shares outstanding - diluted 48,243 48,196

Net income (loss) per common share - basic $ ( 0.28 ) $ 0.78

Net income (loss) per common share - diluted $ ( 0.28 ) $ 0.78

(1) For the three months ended March 31, 2022, 22 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 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.

As of March 31, 2022, our wholly owned properties were comprised of 174 properties containing approximately 22,941,000 rentable square feet, with an undepreciated carrying value of $ 3,937,509 , including $ 61,543 classified as held for sale.

We also had noncontrolling ownership interests of 51 % and 50 % in two unconsolidated joint ventures that own three properties containing 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 2022 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 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 .

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

OFFICE PROPERTIES INCOME TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except per share data)

During the three months ended March 31, 2022, we entered into 21 leases for approximately 572,000 rentable square feet for a weighted (by rentable square feet) average lease term of 10.7 years and we made commitments for approximately $ 32,748 of leasing related costs.

As of March 31, 2022, we have estimated unspent leasing related obligations of $ 128,009 .

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

OFFICE PROPERTIES INCOME TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except per share data)

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

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 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.

We allocated the purchase prices of these acquisitions based on the relative estimated fair values of the acquired assets and assumed liabilities as follows:

Acquisition Date Location Number of Properties Rentable Square Feet Purchase Price Land Buildings and Improvements Acquired Real Estate Leases Assumed Real Estate Lease Obligations

June 2021 Chicago, IL (1)

1 531,000 $ 368,331 $ 42,935 $ 258,348 $ 76,136 $ ( 9,088 )

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.

Disposition Activities

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.

During the three months ended March 31, 2022, we sold four properties containing approximately 330,000 rentable square feet for an aggregate sales price of $ 29,470 , 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.

2 unchanged sentences

Sales Price (1)

Gain (Loss) on Sale of Real Estate Loss on Impairment of Real Estate

January 2021 — Kansas City, MO (2)

10,000 $ 845 $ ( 63 ) $ —

January 2021 1 Richmond, VA 311,000 130,000 54,181 —

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

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, excluding closing costs.

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

OFFICE PROPERTIES INCOME TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except per share data)

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

Gain (Loss) on Sale of Real Estate

January 2022 1 Rockville, MD 129,000 $ 6,750 $ ( 72 )

February 2022 2 Chesapeake, VA 172,000 18,945 2,296

March 2022 1 Milwaukee, WI 29,000 3,775 ( 75 )

4 330,000 $ 29,470 $ 2,149

(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.

As of March 31, 2022, we had three properties containing approximately 583,000 rentable square feet classified as held for sale in our condensed consolidated balance sheet.

During the three months ended March 31, 2022, we recorded a $ 2,184 loss on impairment of real estate to adjust the carrying value of one property that was classified as held for sale to its estimated fair value less costs to sell and a $ 14,863 loss on impairment of real estate to adjust the carrying value of one property that was held and used to its estimated fair value, based on a negotiated sales price with a third-party buyer.

As of April 27, 2022, we have entered into agreements to sell two properties containing approximately 470,000 rentable square feet, including one property that was classified as held for sale as of March 31, 2022, for an aggregate sales price of $ 38,300 , excluding closing costs.

These sales are subject to conditions;

accordingly, we cannot be sure that we will complete these sales or that these sales 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 September 30, 2021 and December 31, 2020, our investments in unconsolidated joint ventures consisted of the following:

As of March 31, 2022 and December 31, 2021, our investments in unconsolidated joint ventures consisted of the following:

OPI Carrying Value of Investments at

Joint Venture OPI Ownership September 30,

Joint Venture OPI Ownership March 31,

2022 December 31, 2021 Number of Properties Location Rentable Square Feet

2 unchanged sentences

Total $ 35,011 $ 34,838 3 444,000

OFFICE PROPERTIES INCOME TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except per share data)

The following table provides a summary of the mortgage debt of our two unconsolidated joint ventures:

Joint Venture Interest Rate (1)

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

Maturity Date Principal Balance at March 31, 2022 and December 31, 2021 (2)

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

4 unchanged sentences

None of the debt is recourse to us.

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.

At March 31, 2022, the aggregate unamortized basis difference of our two unconsolidated joint ventures of $ 6,855 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 $ 3,924 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 increased rental income to record revenue on a straight line basis by $ 2,686 and $ 5,357 for the three months ended March 31, 2022 and 2021, respectively.

Rents receivable, excluding properties classified as held for sale, include $ 85,388 and $ 82,978 of straight line rent receivables at March 31, 2022 and December 31, 2021, 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 $ 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.

Such payments totaled $ 22,536 and $ 18,860 for the three months ended March 31, 2022 and 2021, respectively, of which tenant reimbursements totaled $ 21,475 and $ 17,803 , 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 September 30, 2021, the U.S.

As of March 31, 2022, the U.S.

government, 11 state governments and four other government tenants combined were responsible for approximately 29.0 % of our annualized rental income.

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 19.7 % and 25.2 % of our annualized rental income as of September 30, 2021 and 2020, respectively.

As of March 31, 2021, the U.S.

government, 11 state governments and three other government tenants combined were responsible for approximately 36.3 % of our annualized rental income.

government is our largest tenant by annualized rental income and represented approximately 19.4 % and 25.9 % of our annualized rental income as of March 31, 2022 and 2021, respectively.

Geographic Concentration

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:

At March 31, 2022, our 174 wholly owned properties were located in 32 states and the District of Columbia.

Properties located in Virginia, California, the District of Columbia, Illinois and Georgia were responsible for approximately 12.1 %, 11.1 %, 10.0 %, 10.0 % and 8.4 % of our annualized rental income as of March 31, 2022, respectively.

OFFICE PROPERTIES INCOME TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except per share data)

Our principal debt obligations at March 31, 2022 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 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.

We are required to pay interest at a rate of LIBOR plus a premium, which was 110 basis points per annum at March 31, 2022, 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 March 31, 2022.

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

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.

As of March 31, 2022 and December 31, 2021, the annual interest rate payable on borrowings under our revolving credit facility was 1.6 % and 1.2 %, respectively.

We did not borrow any funds under our revolving credit facility during the three months ended March 31, 2022 or 2021.

As of March 31, 2022 and April 27, 2022, 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, 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 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 .

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 March 31, 2022.

At March 31, 2022, three of our properties with an aggregate net book value of $ 187,129 were encumbered by mortgage notes with an aggregate principal amount of $ 97,996 .

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

In April 2022, we prepaid, at par plus accrued interest, a mortgage note secured by one property with an outstanding principal balance of $ 24,863 , an annual interest rate of 4.22 % and a maturity date in July 2022.

OFFICE PROPERTIES INCOME TRUST

2 unchanged sentences

Fair Value of Assets and Liabilities

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:

The following table presents certain of our assets measured at fair value at March 31, 2022, 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

1 unchanged sentence

Non-recurring Fair Value Measurements Assets

Real estate properties (1)

$ 9,800 $ — $ 9,800 $ —

Assets of properties held for sale (2)

$ 2,500 $ — $ — $ 2,500

(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).

(1) We recorded an impairment charge of $ 14,863 to reduce the carrying value of one property in our condensed consolidated balance sheet to its estimated fair value based on 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 an impairment charge of $ 2,184 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 $ 138 , 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 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

At March 31, 2022 and December 31, 2021, 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 March 31, 2022 As of December 31, 2021

Financial Instrument Carrying Value (1)

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156,566 160,963 156,519 177,098

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 (2)

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Total $ 2,579,796 $ 2,493,773 $ 2,577,950 $ 2,661,462

(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.

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.

We estimated the fair value of our senior unsecured notes due 2046 and 2050 based on the closing price on The Nasdaq Stock Market LLC, or Nasdaq, (Level 1 inputs as defined in the fair value hierarchy under GAAP) as of the measurement date.

(1) Includes unamortized debt premiums, discounts and issuance costs totaling $ 30,200 and $ 32,351 as of March 31, 2022 and December 31, 2021, respectively.

(2) In April 2022, we prepaid, at par plus accrued interest, a mortgage note secured by one property with an outstanding principal balance of $ 24,863 , an annual interest rate of 4.22 % and a maturity date in July 2022.

We estimated the fair values of our senior unsecured notes (except for our senior unsecured notes due 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.

We estimated the fair value of our senior unsecured notes due 2050 based on the closing price on The Nasdaq Stock Market LLC, or Nasdaq, (Level 1 inputs as defined in the fair value hierarchy under GAAP) as of the measurement date.

We estimated the fair values of our mortgage notes payable using discounted cash flow analyses and currently prevailing market rates (Level 3 inputs as defined in the fair value hierarchy under GAAP) as of the measurement date.

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

During the three months ended March 31, 2022, we declared and paid regular quarterly distributions to common shareholders as follows:

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

January 13, 2022 January 24, 2022 February 17, 2022 $ 0.55 $ 26,634

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 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

On April 14, 2022, we declared a regular quarterly distribution payable to common shareholders of record on April 25, 2022 in the amount of $ 0.55 per share, or approximately $ 26,600 .

We expect to pay this distribution on or about May 19, 2022.

Business and Property Management Agreements with RMR

We have no employees.

The personnel and various services we require to operate our business are provided to us by RMR LLC.

We have two agreements with RMR LLC to provide management services to us:

The personnel and various services we require to operate our business are provided to us by RMR.

We have two agreements with RMR to provide management services to us:

(1) a business management agreement, which relates to our business generally;

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

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.

Pursuant to our business management agreement with RMR, we recognized net business management fees of $ 4,710 and $ 9,474 for the three months ended March 31, 2022 and 2021, respectively.

Based on our common share total return, as defined in our business management agreement, as of March 31, 2022, no estimated incentive fees are included in the net business management fees we recognized for the three months ended March 31, 2022.

The actual amount of annual incentive fees for 2022, 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, 2022, and will be payable in January 2023.

We did no t incur an incentive fee payable to RMR LLC for the year ended December 31, 2020.

The net business management fees we recognized for the three months ended March 31, 2021 included $ 5,200 of accrued estimated incentive fees based on our common share total return as of March 31, 2021.

We did no t incur an incentive fee payable to RMR for the year ended December 31, 2021.

We include business management fees in general and administrative expenses 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)

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.

We and RMR amended our business management agreement effective August 1, 2021 to provide that (i) for periods beginning on and after August 1, 2021, the MSCI U.S.

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

Pursuant to our property management agreement with RMR, we recognized aggregate net property management and construction supervision fees of $ 6,128 and $ 4,612 for the three months ended March 31, 2022 and 2021, respectively.

Of these amounts, for the three months ended March 31, 2022 and 2021, $ 4,226 and $ 4,080 , respectively, were expensed to other operating expenses in our condensed consolidated statements of comprehensive income (loss) and $ 1,902 and $ 532 , 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.

We are generally not responsible for payment of RMR LLC’s employment, office or administrative expenses incurred to provide management services to us, except for the employment and related expenses of RMR LLC’s employees assigned to work exclusively or partly at our properties, our share of the wages, benefits and other related costs of RMR LLC’s centralized accounting personnel, our share of RMR LLC’s costs for providing our internal audit function and as otherwise agreed.

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

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

We are generally not responsible for payment of RMR’s employment, office or administrative expenses incurred to provide management services to us, except for the employment and related expenses of RMR’s employees assigned to work exclusively or partly at our properties, our share of the wages, benefits and other related costs of RMR’s centralized accounting personnel, our share of RMR’s costs for providing our internal audit function and as otherwise agreed.

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

We reimbursed RMR $ 5,966 and $ 6,052 for these expenses and costs for the three months ended March 31, 2022 and 2021, 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).

Related Person Transactions

We have relationships and historical and continuing transactions with RMR LLC, The RMR Group Inc., or RMR Inc., and others related to them, including other companies to which RMR LLC or its subsidiaries provide management services and some of which have trustees, directors or officers who are also our Trustees or officers.

RMR LLC is a majority owned subsidiary of RMR Inc.

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

and an officer and employee of RMR LLC.

David Blackman resigned as our President and Chief Executive Officer, effective December 31, 2020, and as a Managing Trustee, effective June 17, 2021.

In replacement of Mr.

Blackman, Christopher J.

Bilotto was appointed as our President and Chief Operating Officer, effective January 1, 2021, and Jennifer Clark was elected as a Managing Trustee on June 17, 2021.

Bilotto is an officer and employee of RMR LLC, Ms.

Clark is a managing director and an executive officer of RMR Inc.

and an officer and employee of RMR LLC, and each of our other officers is also an officer and employee of RMR LLC.

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

Adam Portnoy serves as chair of the boards of trustees or boards of directors 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.

We have two agreements with RMR LLC to provide management services to us.

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

OFFICE PROPERTIES INCOME TRUST

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(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 $ 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.

Related Person Transactions

We have relationships and historical and continuing transactions with RMR, The RMR Group Inc., or RMR Inc., and others related to them, including other companies to which RMR or its subsidiaries provide management services and some of which have trustees, directors or officers who are also our Trustees or officers.

RMR is a majority owned subsidiary of RMR Inc.

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

and an officer and employee of RMR.

Jennifer Clark, our other Managing Trustee and our Secretary, also serves as a managing director and the executive vice president, general counsel and secretary of RMR Inc., an officer and employee of RMR and an officer of ABP Trust.

Our other officers are also officers and employees of RMR.

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

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

Other officers of RMR, including Ms.

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

Our Manager, RMR.

We have two agreements with RMR to provide management services to us.

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

Leases with RMR.

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

Pursuant to our lease agreements with RMR, we recognized rental income from RMR for leased office space of $ 284 and $ 288 for the three months ended March 31, 2022 and 2021, 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.

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We estimate that the total cost to build the hotel space will be approximately $ 66,000 .

Adam Portnoy is a director and controlling shareholder of Sonesta and Ms.

Jennifer Clark is also a director of Sonesta.

Portnoy is a director and controlling shareholder of Sonesta and Ms.

Clark is also a director of Sonesta.

For more information about these and other such relationships and certain other related person transactions, refer to our 2021 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