What changed in this filing

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Item 4. Controls and Procedures

2022-04-28 compared with 2021-10-28 · 31 added, 37 removed, 93 unchanged (42% of the section changed)

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Based upon that evaluation, our Managing Trustees, our President and Chief Operating Officer and our Chief Financial Officer and Treasurer concluded that our disclosure controls and procedures are effective.

There have been no changes in our internal control over financial reporting during the quarter ended September 30, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

There have been no changes in our internal control over financial reporting during the quarter ended March 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Warning Concerning Forward-Looking Statements

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• Our belief that we are in a position to opportunistically recycle and deploy capital,

• Our expectations that the diversity and other characteristics of our property portfolio and our financial resources will result in our ability to successfully withstand the current economic conditions,

• Our expectations that the diversity and other characteristics of our property portfolio and our financial resources will result in our ability to successfully withstand the COVID-19 pandemic,

• The likelihood that our tenants will renew or extend their leases and not exercise early termination options pursuant to their leases or that we will obtain replacement tenants, on terms as favorable to us as our prior leases,

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• Our expectations regarding capital expenditures,

• Our expectation that there will be opportunities for us to acquire, and that we will acquire, additional properties primarily leased to single tenants and tenants with high credit quality characteristics such as government entities,

• Our expectations regarding the costs and timing of our redevelopment projects,

• Our expectation that there will be opportunities for us to acquire, and that we will acquire, additional properties primarily leased to single or majority tenants and tenants with high credit quality characteristics,

• Our expectations regarding the costs and timing of our development, redevelopment and repositioning activities,

• Our ability to compete for acquisitions and tenancies effectively,

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• Our ability to maintain sufficient liquidity during the duration of the COVID-19 pandemic and any resulting economic downturn,

government’s debt ceiling limit and related impact on its ability to fund its obligations, including pay rent owed to us,

• Our credit ratings,

• Our expectation that we benefit from our relationships with RMR LLC,

• Our expectation that we benefit from our relationships with RMR,

• The credit qualities of our tenants,

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Risks, uncertainties and other factors that could have a material adverse effect on our forward-looking statements and upon our business, results of operations, financial condition, FFO, Normalized FFO, NOI, cash flows, liquidity and prospects include, but are not limited to:

• The impact of conditions in the economy, including the COVID-19 pandemic and its aftermath, and the capital markets on us and our tenants,

• The impact of conditions in the economy, including the COVID-19 pandemic and its aftermath and inflation, and the capital markets on us and our tenants,

• Competition within the real estate industry, particularly in those markets in which our properties are located,

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government shutdown on our ability to collect rents or pay our operating expenses, debt obligations and distributions to shareholders on a timely basis,

• Actual and potential conflicts of interest with our related parties, including our Managing Trustees, RMR LLC, Sonesta and others affiliated with them,

• Actual and potential conflicts of interest with our related parties, including our Managing Trustees, RMR, Sonesta and others affiliated with them,

• Limitations imposed on our business and our ability to satisfy complex rules in order for us to maintain our qualification for taxation as a REIT for U.S.

federal income tax purposes, and

• Acts of terrorism, outbreaks of pandemics, including the COVID-19 pandemic, or other manmade or natural disasters beyond our control.

• Our ability to make future distributions to our shareholders and to make payments of principal and interest on our indebtedness depends upon a number of factors, including our receipt of rent from our tenants, our future earnings, the capital costs we incur to lease our properties and our working capital requirements.

• Acts of terrorism, war or other hostilities, outbreaks of pandemics, including the COVID-19 pandemic, or other manmade or natural disasters beyond our control.

• Our ability to make or sustain distributions to our shareholders and to make payments of principal and interest on our indebtedness depends upon a number of factors, including our receipt of rent from our tenants, our future earnings, the capital costs we incur to lease our properties and our working capital requirements.

We may be unable to pay our debt obligations or to maintain our current rate of distributions on our common shares and future distributions may be reduced or eliminated,

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• We may fail to maintain, or we may elect to change our distribution rate.

Our Board of Trustees considers many factors when setting distribution rates, including our historical and projected income, Normalized FFO, CAD, the then current and expected needs and availability of cash to pay our obligations and fund our investments, distributions which may be required to be paid to maintain our qualification for taxation as a REIT and other factors deemed

relevant by our Board of Trustees.

Our Board of Trustees considers many factors when setting distribution rates, including our historical and projected income, Normalized FFO, cash available for distribution, the then current and expected needs and availability of cash to pay our obligations and fund our investments, distributions which may be required to be paid to maintain our qualification for taxation as a REIT and other factors deemed relevant by our Board of Trustees.

Accordingly, future distribution rates may be increased or decreased and there is no assurance as to the rate at which future distributions will be paid,

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• We may not receive the amounts we expect for properties we seek to sell,

• We may not succeed in maintaining our leverage consistent with our current investment grade ratings or levels that the market or credit rating agencies believe are appropriate,

• We may not succeed in managing leverage at levels we believe are appropriate,

• Some of our tenants may not renew expiring leases or they may exercise their rights, if any, to vacate their space before the stated expirations of their leases, and we may be unable to obtain new tenants to maintain or increase the historical occupancy rates of, or rents from, our properties,

• Rents that we can charge at our properties may decline upon renewals or expirations because of changing market conditions or otherwise,

• Leasing for some of our properties depends on a private sector single tenant and we may be adversely affected by the bankruptcy, insolvency, a downturn of business or a lease termination of such single tenant,

• Leasing for some of our properties depends on a single or majority tenant and we may be adversely affected by the bankruptcy, insolvency, a downturn of business or a lease termination of such single or majority tenant at these properties,

• Our belief that there is a likelihood that tenants may renew or extend our leases prior to their expirations whenever they have made significant investments in the leased properties, or because those properties may be of strategic importance to them, may not be realized,

• Overall new leasing volume may decrease more than we currently expect.

In addition, if the COVID-19 pandemic and any resulting economic downturn continue for an extended period or worsen, our tenants may become unable to pay rent or they may elect to not renew their leases with us.

• Our belief that our recent leasing activity and negotiations for vacant or expiring space may suggest that there is an improving demand environment for office space may be incorrect or the demand for office space may decrease,

• Overall new leasing volume may remain volatile.

In addition, if the COVID-19 pandemic and current inflationary conditions continue for an extended period or worsen, our tenants may become unable to pay rent or they may elect to not renew their leases with us.

Further, some of our government leases provide the tenant with certain rights to terminate their lease early.

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We may fail to identify and execute on opportunities to deploy capital and any deployment of capital we may make may not result in the returns that we expect,

• Our perception that, as a result of the COVID-19 pandemic, government tenants may seek to manage space utilization rates in order to provide greater physical distancing for employees, may prove incorrect,

• Our perception that activity prior to the outbreak of the COVID-19 pandemic suggested that the government had begun to shift its leasing strategy to include longer term leases and that the government was actively exploring 10 to 20 year lease terms at renewal, in some instances, may mistakenly imply that these activities are indicative of a trend or broader change in government leasing strategy or practices that will recommence after the COVID-19 pandemic ends.

Further, even if such a trend or change were to recommence, that trend or change may not be sustained by the government,

• Contingencies in our acquisition and sale agreements may not be satisfied and any expected acquisitions and sales and any related lease arrangements we expect to enter may not occur, may be delayed or the terms of such transactions or arrangements may change,

• Contingencies in our acquisition and sale agreements, if any, may not be satisfied and any expected acquisitions and sales and any related lease arrangements we expect to enter may not occur, may be delayed or the terms of such transactions or arrangements may change,

• We expect to pursue accretively growing our property portfolio.

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• Continued availability of borrowings under our revolving credit facility is subject to our satisfying certain financial covenants and other credit facility conditions that we may be unable to satisfy,

• Actual costs under our revolving credit facility will be higher than LIBOR plus a premium because of fees and expenses associated with such debt,

• Actual costs under our revolving credit facility will be higher than the stated rate plus a premium because of fees and expenses associated with such debt,

• The interest rates payable under our floating rate debt obligations depend upon our credit ratings.

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however, the applicable conditions may not be met,

• We may incur significant costs to prepare a property for tenancy, particularly for single tenant properties,

• We may spend more for capital expenditures than we currently expect,

• We may incur significant costs to prepare a property for tenancy, particularly for single or majority tenant properties,

• We may spend more for capital expenditures than we currently expect or than we had planned when the project was commenced, including as a result of inflation, supply chain challenges or otherwise, and we plan to spend more for capital expenditures than we have in the past,

• We may fail to obtain development rights or entitlements that we may seek for development and other projects we may wish to conduct at our properties,

• Our existing joint venture arrangements and any other joint venture arrangements that we may enter may not be successful,

• Any redevelopment projects we undertake may be unsuccessful, may require greater capital expenditures or other costs than we project or may take significant time to complete,

• We believe that we are well positioned to weather the present disruptions of the COVID-19 pandemic facing the real estate industry.

However, the full extent of the future impact of the COVID-19 pandemic is unknown and we may not realize similar or better operating results in the future,

• We believe that the near term impact of the COVID-19 pandemic to us will not be material due to the strength of our tenant base.

However, if the COVID-19 pandemic and any resulting economic downturn continue for an extended period of time or worsen, our tenants may be significantly adversely impacted, which may result in those tenants seeking relief from their rent obligations, their inability to pay rent, the termination of their leases or our tenants not renewing their leases or renewing their leases for less space.

Therefore, the impact we experience in the near term may be worse than we currently expect and our results of operations and financial position may be negatively affected,

• We have granted requests to some of our tenants to defer payments over, in most cases, a 12-month period, all of which have commenced.

However, current market and economic conditions may deteriorate further and the rent assistance granted by us may not be sufficient to ensure that tenants will be able to meet their rent payment obligations under their leases with us, which may result in an increase in tenant defaults and terminations,

• The business and property management agreements between us and RMR LLC have continuing 20 year terms.

• Our existing joint ventures and any additional joint ventures we may enter into in the future may not be successful,

• Any development, redevelopment or repositioning projects we undertake may be unsuccessful, may require greater capital expenditures or other costs than we project or may take significant time to complete, including as a result of inflation, supply chain challenges or otherwise,

• We believe that we are well positioned to weather the present COVID-19 pandemic conditions in the economy and the real estate industry.

However, the full extent of the future impact of the COVID-19 pandemic to us is unknown and we may not realize similar or better operating results in the future,

• The business and property management agreements between us and RMR have continuing 20 year terms.

However, those agreements permit early termination in certain circumstances.

Accordingly, we cannot be sure that these agreements will remain in effect for continuing 20 year terms,

• We believe that our relationships with our related parties, including RMR LLC, Sonesta and others affiliated with them, may benefit us and provide us with competitive advantages in operating and growing our business.

• We expect that we will benefit from RMR’s Environmental, Social and Governance, or ESG, program and initiatives.

However, we may not realize the benefits we expect from such program and initiatives and we or RMR may not succeed in meeting existing or future standards regarding ESG,

• We believe that our relationships with our related parties, including RMR, Sonesta and others affiliated with them, may benefit us and provide us with competitive advantages in operating and growing our business.

However, the advantages we believe we may realize from these relationships may not materialize, and

• It is difficult to accurately estimate leasing related obligations and costs of property repositioning, development, redevelopment and tenant improvement costs.

Our unspent leasing related obligations and development or redevelopment costs may cost more and may take longer to complete than we currently expect, and we may incur increased amounts for these and similar purposes in the future.

Currently unexpected results could occur due to many different circumstances, some of which are beyond our control, such as the COVID-19 pandemic and its aftermath, changes in our tenants’ needs for leased space, the ability of the U.S.

and state governments to approve spending bills to fund their obligations, acts of terrorism, natural disasters, climate change or changes in capital markets or the economy generally.

• It is difficult to accurately estimate leasing related obligations and costs of property development, redevelopment or repositioning and tenant improvement costs.

Our unspent leasing related obligations and development, redevelopment or repositioning costs may cost more and may take longer to complete than we currently expect or than we planned when the project was commenced, and we may incur increased amounts for these and similar purposes in the future.

Currently unexpected results could occur due to many different circumstances, some of which are beyond our control, such as the COVID-19 pandemic and its aftermath, economic conditions, including high inflation, changes in our tenants’ needs for leased space, the ability of the U.S.

and state governments to approve spending bills to fund their obligations, acts of terrorism, war or other hostilities, natural disasters, climate change and climate related events or changes in capital markets or the economy generally.

The information contained elsewhere in this Quarterly Report on Form 10-Q and our 2021 Annual Report, or in our other filings with the SEC, including under the caption “Risk Factors”, or incorporated herein or therein, identifies other important factors that could cause differences from our forward-looking statements.

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Other Information

There have been no material changes to the risk factors from those previously disclosed in 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 4. Controls and Procedures