What changed in this filing

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Item 1. Financial Statements

2023-10-30 compared with 2023-07-26 · 165 added, 146 removed, 300 unchanged (51% of the section changed)

3 unchanged sentences

(dollars in thousands, except per share data)

June 30, 2023 December 31, 2022

September 30, 2023 December 31, 2022

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,

2023 2022 2023 2022

8 unchanged sentences

Total expenses 123,784 111,689 350,113 364,300

Gain (loss) on sale of real estate ( 2,305 ) ( 11,637 ) 243 ( 9,488 )

Gain on sale of real estate 244 16,925 487 7,437

Interest and other income 281 56 782 73

2 unchanged sentences

Loss on early extinguishment of debt — — — ( 77 )

Loss before income tax (expense) benefit and equity in net losses of investees ( 11,340 ) ( 15,413 ) ( 10,922 ) ( 27,443 )

Income tax (expense) benefit ( 211 ) 190 ( 241 ) ( 341 )

(Loss) income before income tax expense and equity in net losses of investees ( 18,733 ) 18,006 ( 29,655 ) ( 9,437 )

Income tax expense ( 95 ) ( 90 ) ( 336 ) ( 431 )

Equity in net losses of investees ( 765 ) ( 952 ) ( 2,290 ) ( 2,631 )

Net loss $ ( 12,242 ) $ ( 16,056 ) $ ( 12,688 ) $ ( 29,463 )

Net (loss) income $ ( 19,593 ) $ 16,964 $ ( 32,281 ) $ ( 12,499 )

Weighted average common shares outstanding (basic and diluted) 48,403 48,286 48,365 48,260

Per common share amounts (basic and diluted):

Net loss $ ( 0.25 ) $ ( 0.33 ) $ ( 0.27 ) $ ( 0.61 )

Net (loss) income $ ( 0.41 ) $ 0.35 $ ( 0.67 ) $ ( 0.27 )

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

7 unchanged sentences

Balance at December 31, 2022 48,565,644 $ 486 $ 2,619,532 $ 169,606 $ ( 1,403,289 ) $ 1,386,335

Share grants — — 477 — — 477

Share forfeitures and repurchases ( 1,935 ) — ( 15 ) — — ( 15 )

Common share grants — — 477 — — 477

Common share forfeitures and repurchases ( 1,935 ) — ( 15 ) — — ( 15 )

Net loss — — — ( 446 ) — ( 446 )

1 unchanged sentence

Balance at March 31, 2023 48,563,709 486 2,619,994 169,160 ( 1,429,999 ) 1,359,641

Share grants 31,500 — 744 — — 744

Share forfeitures and repurchases ( 7,559 ) — ( 47 ) — — ( 47 )

Common share grants 31,500 — 744 — — 744

Common share forfeitures and repurchases ( 7,559 ) — ( 47 ) — — ( 47 )

Net loss — — — ( 12,242 ) — ( 12,242 )

1 unchanged sentence

Balance at June 30, 2023 48,587,650 486 2,620,691 156,918 ( 1,442,140 ) 1,335,955

Common share grants 210,300 2 656 — — 658

Common share forfeitures and repurchases ( 40,704 ) — ( 240 ) — — ( 240 )

Net loss — — — ( 19,593 ) — ( 19,593 )

Distributions to common shareholders — — — — ( 12,147 ) ( 12,147 )

Balance at September 30, 2023 48,757,246 $ 488 $ 2,621,107 $ 137,325 $ ( 1,454,287 ) $ 1,304,633

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

Distributions Total Shareholders’ Equity

Balance at December 31, 2021 48,425,665 $ 484 $ 2,617,169 $ 175,715 $ ( 1,296,659 ) $ 1,496,709

Share grants — — 415 — — 415

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

Common share grants — — 415 — — 415

Common share forfeitures ( 400 ) — ( 1 ) — — ( 1 )

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

1 unchanged sentence

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

Share grants 31,500 1 1,078 — — 1,079

Share forfeitures and repurchases ( 1,690 ) — ( 21 ) — — ( 21 )

Common share grants 31,500 1 1,078 — — 1,079

Common share forfeitures and repurchases ( 1,690 ) — ( 21 ) — — ( 21 )

Net loss — — — ( 16,056 ) — ( 16,056 )

1 unchanged sentence

Balance at June 30, 2022 48,455,075 485 2,618,640 146,252 ( 1,349,927 ) 1,415,450

Common share grants 141,200 1 922 — — 923

Common share forfeitures and repurchases ( 30,069 ) — ( 521 ) — — ( 521 )

Net income — — — 16,964 — 16,964

Distributions to common shareholders — — — — ( 26,651 ) ( 26,651 )

Balance at September 30, 2022 48,566,206 $ 486 $ 2,619,041 $ 163,216 $ ( 1,376,578 ) $ 1,406,165

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:

5 unchanged sentences

Amortization of deferred leasing costs 7,359 6,115

(Gain) loss on sale of real estate ( 243 ) 9,488

Gain on sale of real estate ( 487 ) ( 7,437 )

Loss on impairment of real estate — 21,820

8 unchanged sentences

Accounts payable and other liabilities 14,952 ( 3,255 )

Due to related persons ( 237 ) ( 119 )

Due to/from related persons 1,297 ( 7,251 )

Net cash provided by operating activities 109,133 152,687

4 unchanged sentences

Proceeds from sale of properties, net 22,449 189,069

Net cash used in investing activities ( 129,960 ) ( 17,112 )

Net cash (used in) provided by investing activities ( 156,942 ) 49,175

CASH FLOWS FROM FINANCING ACTIVITIES:

15 unchanged sentences

(dollars in thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

SUPPLEMENTAL CASH FLOW INFORMATION:

6 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 $ 24,358 $ 14,005

18 unchanged sentences

Significant estimates in the condensed consolidated financial statements include purchase price allocations, useful lives of fixed assets and assessment of impairment of real estate and the related intangibles.

Pending Merger with Diversified Healthcare Trust

On April 11, 2023, we and Diversified Healthcare Trust, or DHC, entered into an Agreement and Plan of Merger, or the Merger Agreement, pursuant to which, on the terms and subject to the satisfaction or waiver of the conditions thereof, DHC will be merged with and into us, with us continuing as the surviving entity in the merger, or the Merger.

Pursuant to the terms and subject to the conditions and limitations set forth in the Merger Agreement, at the date and time the Merger becomes effective, or the Effective Time, each common share of beneficial interest, $ 0.01 par value per share, of DHC, or the DHC Common Shares, issued and outstanding as of immediately prior to the Effective Time will be automatically converted into the right to receive 0.147 (such ratio, the Exchange Ratio) of our common shares of beneficial interest, $ 0.01 par value per share, or our common shares, subject to adjustment for certain reclassifications, distributions, recapitalizations or similar transactions and other exceptional distributions as described in the Merger Agreement, with cash paid in lieu of fractional shares.

Other than as provided in the Merger Agreement, the Exchange Ratio is fixed and will not be adjusted to reflect changes in the market price of our common shares or the DHC Common Shares prior to the Effective Time.

Our common shares issued and outstanding immediately prior to the Effective Time will remain issued and outstanding common shares of beneficial ownership of the surviving entity following the Merger.

In connection with the Merger, we expect to change our name to “Diversified Properties Trust” and, following the Effective Time, will change our ticker symbol to “DPT.”

The transactions contemplated by the Merger Agreement and the terms thereof were evaluated, negotiated and recommended to our Board of Trustees, or our Board, by a special committee of our Board, or the OPI Special Committee, and to DHC’s board of trustees, or the DHC Board, by a special committee of DHC’s Board, or the DHC Special Committee, each consisting of disinterested, independent trustees of us and DHC, respectively.

Following the recommendations of the OPI Special Committee and the DHC Special Committee, our Board and the DHC Board each approved the Merger Agreement and the transactions contemplated thereby and resolved to recommend that the OPI and DHC shareholders, respectively, vote in favor of approval of the Merger and the transactions contemplated thereby.

Our shareholders will be asked to vote on the approval of the Merger and related matters, including the issuance of our common shares in the Merger, at a special meeting of our shareholders.

The consummation of the Merger is subject to the satisfaction or waiver of certain closing conditions, including, among others:

(1) the approval of the Merger by the affirmative vote of at least a majority of all the votes entitled to be cast by holders of outstanding DHC Common Shares at the meeting held for that purpose;

(2) the approval of the Merger by the affirmative vote of at least a majority of all the votes entitled to be cast by holders of our outstanding common shares at the meeting held for that purpose;

(3) the approval of the issuance of our common shares to be issued in the Merger, or the Share Issuance, by the affirmative vote of at least a majority of all votes cast by holders of our outstanding common shares at the meeting held for that purpose;

(4) the absence of any statute, rule or regulation by any governmental entity of competent jurisdiction or any temporary, preliminary or permanent judgment, order or decree by any court of competent jurisdiction which would prohibit or make illegal or prevent the consummation of the Merger or any of the transactions contemplated by the Merger Agreement;

Termination of Merger with Diversified Healthcare Trust

As previously disclosed, on April 11, 2023, we and Diversified Healthcare Trust, or DHC, entered into an Agreement and Plan of Merger, or the Merger Agreement, pursuant to which we and DHC had agreed that DHC would merge with and into us, with us as the surviving entity in the merger, subject to the terms and conditions of the Merger Agreement.

On September 1, 2023, we and DHC mutually agreed to terminate the Merger Agreement and entered into a termination agreement, or the Termination Agreement.

The mutual termination of the Merger Agreement was separately recommended by our and DHC’s respective Special Committees of each Board of Trustees, and approved by our and DHC’s respective Board of Trustees.

Neither we nor DHC will be required to pay any termination fee as a result of the mutual decision to terminate the Merger Agreement.

We and DHC will bear our and its respective costs and expenses related to the Merger Agreement and the transactions contemplated thereby in accordance with the terms of the Merger Agreement.

We recorded $ 30,534 of expenses during the nine months ended September 30, 2023 related to the potential merger with DHC, which is included in acquisition and transaction related costs in our condensed consolidated statement of comprehensive income (loss).

Contemporaneously with the execution of the Merger Agreement, on April 11, 2023, we and our manager, The RMR Group LLC, or RMR, entered into a Third Amended and Restated Property Management Agreement, or the Amended Property Management Agreement.

The effectiveness of the Amended Property Management Agreement was conditioned upon the consummation of the merger.

Since the merger will not be consummated, the Amended Property Management Agreement will not become effective and the Second Amended and Restated Property Management Agreement between us and RMR will remain in effect.

In connection with the execution of the Merger Agreement, on April 11, 2023, we entered into a commitment letter with an institutional lender, pursuant to which it committed to provide, subject to the terms and conditions of the commitment letter, a senior secured bridge facility to us in an aggregate principal amount of $ 368,000 .

On September 1, 2023, we terminated the commitment letter.

OFFICE PROPERTIES INCOME TRUST

1 unchanged sentence

(dollars in thousands, except per share data)

the effectiveness of the registration statement on Form S-4, as amended, or the Form S-4, filed by us with the Securities and Exchange Commission, or the SEC, in connection with the Share Issuance;

(6) the approval (subject to notice of issuance) of The Nasdaq Stock Market LLC, or Nasdaq, of the listing of our common shares to be issued in the Merger;

(7) the replacement of our existing revolving credit agreement, on terms that, among other things, would not be reasonably likely to be materially adverse to the business, operations or financial condition of us after giving effect to the Merger and would not delay or prevent the consummation of the Merger;

(8) the receipt of certain tax opinions by us and DHC;

and (9) the other party’s representations and warranties being accurate (subject to certain customary materiality exceptions) and the other party having performed or complied in all material respects with its agreements and covenants in the Merger Agreement.

The Merger Agreement contains certain customary representations, warranties and covenants, including covenants providing that we and DHC will use reasonable best efforts to conduct our and its respective businesses in all material respects in the ordinary course during the period between the execution of the Merger Agreement and the earlier of the Effective Time or the termination of the Merger Agreement, and to refrain from taking certain types of actions without the other party’s consent during the period between the execution of the Merger Agreement and the earlier of the Effective Time or the termination of the Merger Agreement, subject in each case to specified exceptions.

In connection with the execution of the Merger Agreement, we entered into a commitment letter, dated as of April 11, 2023, with JPMorgan Chase Bank, N.A., or JPM, pursuant to which JPM committed to provide, subject to the terms and conditions of the commitment letter, a senior secured bridge facility to us in an aggregate principal amount of $ 368,000 .

As of June 30, 2023, we have issued four mortgage notes with an aggregate principal balance of $ 108,120 secured by properties that previously collateralized the senior secured bridge facility, and as a result, we subsequently amended the commitment letter to reduce the principal amount of the senior secured bridge facility to $ 259,880 .

For more information regarding our mortgage notes, see Note 6.

Per Common Share Amounts

We calculate basic earnings per common share using the two class method.

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 (amounts in thousands, except per share data):

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

We calculate diluted earnings per common 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 common share.

The calculation of basic and diluted earnings per common share is as follows (amounts in thousands, except per share data):

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

2023 2022 2023 2022

Net loss $ ( 12,242 ) $ ( 16,056 ) $ ( 12,688 ) $ ( 29,463 )

Income attributable to unvested participating securities ( 56 ) ( 100 ) ( 182 ) ( 200 )

Net loss used in calculating earnings per share $ ( 12,298 ) $ ( 16,156 ) $ ( 12,870 ) $ ( 29,663 )

Net (loss) income $ ( 19,593 ) $ 16,964 $ ( 32,281 ) $ ( 12,499 )

Income/loss attributable to unvested participating securities ( 50 ) ( 99 ) ( 232 ) ( 299 )

Net (loss) income used in calculating earnings per common share $ ( 19,643 ) $ 16,865 $ ( 32,513 ) $ ( 12,798 )

Denominators:

Weighted average common shares outstanding - basic and diluted 48,403 48,286 48,365 48,260

Net loss per common share - basic and diluted $ ( 0.25 ) $ ( 0.33 ) $ ( 0.27 ) $ ( 0.61 )

Net (loss) income per common share - basic and diluted $ ( 0.41 ) $ 0.35 $ ( 0.67 ) $ ( 0.27 )

Real Estate Properties

As of June 30, 2023, our wholly owned properties were comprised of 155 properties containing approximately 20,784,000 rentable square feet, with an undepreciated carrying value of $ 4,050,183 , including $ 14,630 classified as held for sale.

As of September 30, 2023, our wholly owned properties were comprised of 154 properties containing approximately 20,705,000 rentable square feet, with an undepreciated carrying value of $ 4,081,026 , including $ 17,390 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 451,000 rentable square feet.

1 unchanged sentence

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, 2023, we entered into 23 leases for approximately 713,000 rentable square feet for a weighted (by rentable square feet) average lease term of 10.3 years and we made commitments of $ 40,638 for leasing related costs.

During the six months ended June 30, 2023, we entered into 39 leases for approximately 916,000 rentable square feet for a weighted

OFFICE PROPERTIES INCOME TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except per share data)

(by rentable square feet) average lease term of 9.5 years and we made commitments for approximately $ 49,385 of leasing related costs.

As of June 30, 2023, we had estimated unspent leasing related obligations of $ 151,798 .

During the three months ended September 30, 2023, we entered into 29 leases for approximately 586,000 rentable square feet for a weighted (by rentable square feet) average lease term of 7.4 years, and we made commitments of $ 25,359 for leasing related costs.

During the nine months ended September 30, 2023, we entered into 68 leases for approximately 1,502,000 rentable square feet for a weighted (by rentable square feet) average lease term of 8.7 years, and we made commitments for approximately $ 74,744 of leasing related costs.

As of September 30, 2023, we had estimated unspent leasing related obligations of $ 137,223 .

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

Impairment indicators may include declining tenant occupancy, lack of progress releasing vacant space, tenant bankruptcies, low long term prospects for improvement in property performance, weak or declining tenant profitability, cash flow or liquidity, our decision to dispose of an asset before the end of its estimated useful life and legislative, market or industry changes that could permanently reduce the value of a property.

Impairment indicators may include declining tenant occupancy, lack of progress leasing vacant space, tenant bankruptcies, low long term prospects for improvement in property performance, weak or declining tenant profitability, cash flow or liquidity, our decision to dispose of an asset before the end of its estimated useful life and legislative, market or industry changes that could permanently reduce the value of a property.

If there is an indication that the carrying value of an asset is not recoverable, we estimate the projected undiscounted cash flows to determine if an impairment loss should be recognized.

The future net undiscounted cash flows are subjective and are based in part on assumptions regarding hold periods, market rents and terminal capitalization rates.

We determine the amount of any impairment loss by comparing the historical carrying value to estimated fair value.

We determine the amount of any impairment loss by comparing the carrying value to estimated fair value.

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

1 unchanged sentence

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

OFFICE PROPERTIES INCOME TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except per share data)

Acquisition Activities

As of October 27, 2023 , we have entered into an agreement to acquire a land parcel adjacent to a property we own in Irving, TX containing approximately 4.7 acres for $ 2,750 , excluding acquisition related costs.

This acquisition is expected to close before the end of the fourth quarter.

This pending acquisition is subject to conditions, and 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, 2023, we sold five properties containing approximately 296,000 rentable square feet for an aggregate sales price of $ 13,075 , excluding closing costs.

During the nine months ended September 30, 2023, we sold six properties containing approximately 376,000 rentable square feet for an aggregate sales price of $ 23,575 , 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.

5 unchanged sentences

June 2023 1 Vernon Hills, IL 100,000 2,825 ( 2,816 )

September 2023 1 Windsor Mill, MD 80,000 10,500 244

6 376,000 $ 23,575 $ 487

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

As of June 30, 2023, we had two properties classified as held for sale in our condensed consolidated balance sheet.

As of July 25, 2023, we have entered into an agreement to sell one of the properties classified as held for sale containing approximately 80,000 rentable square feet for a sales price of $ 10,500 , excluding closing costs.

This pending sale is subject to conditions, and 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 September 30, 2023, we had two properties classified as held for sale in our condensed consolidated balance sheet.

As of October 27, 2023 , we have entered into agreements to sell the two properties classified as held for sale containing approximately 177,000 rentable square feet for an aggregate sales price of $ 21,299 , excluding closing costs.

These pending sales are subject to conditions, and 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 June 30, 2023 and December 31, 2022, our investments in unconsolidated joint ventures consisted of the following:

As of September 30, 2023 and December 31, 2022, 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,

2023 December 31, 2022 Number of Properties Location Rentable Square Feet

7 unchanged sentences

Joint Venture Interest Rate (1)

Maturity Date Principal Balance at June 30, 2023 and December 31, 2022 (2)

Maturity Date Principal Balance at September 30, 2023 and December 31, 2022 (2)

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

6 unchanged sentences

(3) In July 2023, the maturity date of this mortgage loan was extended by three years at the same interest rate.

At June 30, 2023, the aggregate unamortized basis difference of our two unconsolidated joint ventures of $ 6,245 was 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.

As of September 30, 2023, the aggregate unamortized basis difference of our two unconsolidated joint ventures of $ 6,123 was 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).

In October 2023, our joint venture partner that has a 50 % equity interest in the 1750 H Street, NW joint venture failed to fund a $ 600 capital call.

We are currently evaluating our options regarding this funding and there can be no assurance that we will be successful pursuing any remedies available to us under the joint venture agreement.

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

4 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 $ 4,256 and $ 2,775 for the three months ended June 30, 2023 and 2022, respectively, and $ 8,429 and $ 5,461 for the six months ended June 30, 2023 and 2022, respectively.

Rents receivable, excluding properties classified as held for sale, included $ 94,705 and $ 86,305 of straight line rent receivables at June 30, 2023 and December 31, 2022, respectively.

We increased rental income to record revenue on a straight line basis by $ 8,691 and $ 1,765 for the three months ended September 30, 2023 and 2022, respectively, and $ 17,120 and $ 7,226 for the nine months ended September 30, 2023 and 2022, respectively.

Rents receivable, excluding properties classified as held for sale, included $ 103,366 and $ 86,305 of straight line rent receivables at September 30, 2023 and December 31, 2022, 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 $ 22,190 and $ 43,560 for the three and six months ended June 30, 2023, respectively, of which tenant reimbursements totaled $ 20,853 and $ 40,919 , respectively.

For the three and six months ended June 30, 2022, such payments totaled $ 22,101 and $ 44,637 , respectively, of which tenant reimbursements totaled $ 21,009 and $ 42,484 , respectively.

Such payments totaled $ 21,067 and $ 64,627 for the three and nine months ended September 30, 2023, respectively, of which tenant reimbursements totaled $ 19,722 and $ 60,641 , respectively.

For the three and nine months ended September 30, 2022, such payments totaled $ 23,183 and $ 67,820 , respectively, of which tenant reimbursements totaled $ 21,953 and $ 64,437 , respectively.

Concentration

Tenant and Credit Concentration

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, 2023 and 2022, the U.S.

As of September 30, 2023 and 2022, the U.S.

government and certain state and other government tenants combined were responsible for approximately 28.1 % and 27.8 %, respectively, of our annualized rental income.

government is our largest tenant by annualized rental income and represented approximately 19.6 % and 18.5 % of our annualized rental income as of June 30, 2023 and 2022, respectively.

government is our largest tenant by annualized rental income and represented approximately 20.0 % and 19.1 % of our annualized rental income as of September 30, 2023 and 2022, respectively.

OFFICE PROPERTIES INCOME TRUST

2 unchanged sentences

Geographic Concentration

At June 30, 2023, our 155 wholly owned properties were located in 30 states and the District of Columbia.

Properties located in California, Virginia, Illinois, the District of Columbia and Georgia were responsible for approximately 11.9 %, 11.1 %, 10.7 %, 10.3 % and 9.2 % of our annualized rental income as of June 30, 2023, respectively.

Our principal debt obligations at June 30, 2023 were:

As of September 30, 2023, our 154 wholly owned properties were located in 30 states and the District of Columbia.

Properties located in California, Virginia, Illinois, Georgia and the District of Columbia were responsible for approximately 12.2 %, 11.3 %, 10.6 %, 9.4 % and 9.2 % of our annualized rental income as of September 30, 2023, respectively.

Our principal debt obligations as of September 30, 2023 were:

(1) $ 200,000 of outstanding borrowings under our $ 750,000 unsecured revolving credit facility;

3 unchanged sentences

Our revolving credit facility is available for general business purposes, including acquisitions.

In June 2023, we exercised our option to extend the maturity date of our revolving credit facility by six months to January 31, 2024 and paid an extension fee of $ 469 .

The maturity date of our revolving credit facility is January 31, 2024.

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

In March 2023, we amended our credit agreement to, among other things, replace LIBOR with the secured overnight financing rate, or SOFR, as the benchmark interest rate for calculating interest payable on the amounts outstanding under our revolving credit facility.

We are required to pay interest at a rate of SOFR plus a premium, which was 145 basis points per annum at June 30, 2023, on the amount outstanding under our revolving credit facility.

We also pay a facility fee on the total amount of lending commitments under our revolving credit facility, which was 30 basis points per annum at June 30, 2023.

We are required to pay interest at a rate of SOFR plus a premium, which was 145 basis points per annum at September 30, 2023, on the amount outstanding under our revolving credit facility.

We also pay a facility fee on the total amount of lending commitments under our revolving credit facility, which was 30 basis points per annum at September 30, 2023.

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

As of June 30, 2023 and December 31, 2022, the annual interest rate payable on borrowings under our revolving credit facility was 6.6 % and 5.4 %, respectively.

The weighted average annual interest rate for borrowings under our revolving credit facility was 6.5 % and 6.2 % for the three and six months ended June 30, 2023, respectively, and 2.4 % for both the three and six months ended June 30, 2022.

As of June 30, 2023 and July 25, 2023, we had $ 240,000 and $ 230,000 , respectively, outstanding under our revolving credit facility, and $ 510,000 and $ 520,000 , respectively, 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.

As of September 30, 2023 and December 31, 2022, the annual interest rate payable on borrowings under our revolving credit facility was 6.9 % and 5.4 %, respectively.

The weighted average annual interest rate for borrowings under our revolving credit facility was 6.8 % and 6.4 % for the three and nine months ended September 30, 2023, respectively, and 3.3 % and 3.2 % for the three and nine months ended September 30, 2022.

As of September 30, 2023 and October 27, 2023, we had $ 200,000 and $ 205,000 , respectively, outstanding under our revolving credit facility, and $ 550,000 and $ 545,000 , respectively, available for borrowing, subject to meeting required financial covenants.

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 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 June 30, 2023.

Mortgage Note Issuances

During the six months ended June 30, 2023, we issued the following four mortgage notes with an aggregate principal balance of $ 108,120 and a weighted average interest rate of 7.863 %:

Issuance Date Principal Balance Interest Rate Maturity

May 2023 $ 30,680 7.210 % 7/1/2033

June 2023 26,340 8.139 % 7/1/2028

June 2023 42,700 8.272 % 7/1/2028

June 2023 8,400 7.305 % 7/1/2033

Total / Weighted Average $ 108,120 7.863 %

Mortgage Note Repayment

In June 2023, we repaid at maturity, a mortgage note secured by one property with an outstanding principal balance of $ 50,000 and an annual interest rate of 3.70 %.

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, 2023.

We are currently in discussion with our lenders regarding a new revolving credit facility.

We are also evaluating different options to repay our maturing senior notes, including new financings and potential property sales.

While our plans could be impacted by factors outside of our control, including unfavorable market, economic and commercial real estate conditions, we believe based on our current discussions and history of working with our lenders that it is probable that these plans will allow us to repay our maturing debt.

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(dollars in thousands, except per share data)

At June 30, 2023, four of our properties with a net book value of $ 153,078 were encumbered by mortgage notes with an aggregate principal balance of $ 108,120 .

Mortgage Note Issuances

During the nine months ended September 30, 2023, we issued six fixed rate, interest-only mortgage notes as summarized in the following table:

Issuance Date Secured By Principal Balance (1)

Interest Rate Maturity Net Book Value of Collateral as of September 30, 2023

$ 30,680 7.210 % 7/1/2033 $ 36,752

June 2023 One property

26,340 8.139 % 7/1/2028 52,878

June 2023 One property

42,700 8.272 % 7/1/2028 43,445

June 2023 One property

8,400 7.305 % 7/1/2033 19,085

August 2023 One property

14,900 7.717 % 9/1/2033 24,113

September 2023 Two properties

54,300 7.671 % 10/6/2028 64,192

Total / Weighted Average $ 177,320 7.792 % $ 240,465

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

(2) Requires interest-only payments through May 2028, at which time principal and interest payments are due monthly through the maturity date.

Mortgage Note Repayment

In June 2023, we repaid at maturity, a mortgage note secured by one property with an outstanding principal balance of $ 50,000 and an annual interest rate of 3.70 %.

Fair Value of Assets and Liabilities

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, 2023 and December 31, 2022, 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, 2023 As of December 31, 2022

At September 30, 2023 and December 31, 2022, 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, 2023 As of December 31, 2022

Financial Instrument Carrying Value (1)

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Total $ 2,365,908 $ 1,744,621 $ 2,237,792 $ 1,840,543

(1) Includes unamortized debt premiums, discounts and issuance costs totaling $ 22,079 and $ 24,208 as of June 30, 2023 and December 31, 2022, respectively.

(1) Includes unamortized debt premiums, discounts and issuance costs totaling $ 23,412 and $ 24,208 as of September 30, 2023 and December 31, 2022, respectively.

(2) Balances as of December 31, 2022 include a mortgage note secured by one property with an outstanding principal balance of $ 50,000 that was repaid in June 2023.

(3) Balances as of June 30, 2023 include four mortgage notes issued during the six months ended June 30, 2023 with an aggregate outstanding principal balance of $ 108,120 .

(3) Balances as of September 30, 2023 include six mortgage notes issued during the nine months ended September 30, 2023 with an aggregate outstanding principal balance of $ 177,320 .

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 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.

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

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(dollars in thousands, except per share data)

currently prevailing market rates (Level 3 inputs as defined in the fair value hierarchy under GAAP) as of the measurement date.

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

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On June 13, 2023, in accordance with our Trustee compensation agreements, we awarded to each of our nine Trustees 3,500 of our common shares, valued at $ 7.90 per share, the closing price of our common shares on Nasdaq on that day.

On September 13, 2023, we awarded under our equity compensation plan an aggregate of 210,300 of our common shares, valued at $ 5.76 per share, the closing price of our common shares on Nasdaq on that day, to our current and former officers and certain other employees of RMR.

Share Purchases

During the three and six months ended June 30, 2023, we purchased an aggregate of 6,779 and 7,754 of our common shares, valued at a weighted average share price of $ 6.48 and $ 7.37 from one of our Trustees and certain former officers and employees of RMR in satisfaction of tax withholding and payment obligations in connection with the vesting of awards of our common shares.

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(dollars in thousands, except per share data)

During the three and nine months ended September 30, 2023, we purchased an aggregate of 40,104 and 47,858 of our common shares, valued at a weighted average share price of $ 5.84 and $ 6.09 from one of our Trustees, our current and former officers and certain current and former officers and employees of RMR in satisfaction of tax withholding and payment obligations in connection with the vesting of awards of our common shares.

Distributions

During the six months ended June 30, 2023, we declared and paid regular quarterly distributions to common shareholders as follows:

During the nine months ended September 30, 2023, we declared and paid regular quarterly distributions to common shareholders as follows:

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

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April 13, 2023 April 24, 2023 May 18, 2023 0.25 12,141

July 13, 2023 July 24, 2023 August 17, 2023 0.25 12,147

$ 1.05 $ 50,998

On July 13, 2023, we declared a regular quarterly distribution payable to common shareholders of record on July 24, 2023 in the amount of $ 0.25 per share, or approximately $ 12,150 .

We expect to pay this distribution on or about August 17, 2023.

On October 12, 2023, we declared a regular quarterly distribution payable to common shareholders of record on October 23, 2023 in the amount of $ 0.25 per share, or approximately $ 12,200 .

We expect to pay this distribution on or about November 16, 2023.

Business and Property Management Agreements with RMR

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

Pursuant to our business management agreement with RMR, we recognized net business management fees of $ 3,592 and $ 7,543 for the three and six months ended June 30, 2023, respectively, and $ 4,492 and $ 9,202 for the three and six months ended June 30, 2022, respectively.

Based on our common share total return, as defined in our business management agreement, as of June 30, 2023, no estimated incentive fees are included in the net business management fees we recognized for the three and six months ended June 30, 2023.

Pursuant to our business management agreement with RMR, we recognized net business management fees of $ 3,637 and $ 11,180 for the three and nine months ended September 30, 2023, respectively, and $ 4,260 and $ 13,462 for the three and nine months ended September 30, 2022, respectively.

Based on our common share total return, as defined in our business management agreement, as of September 30, 2023, no estimated incentive fees are included in the net business management fees we recognized for the three and nine months ended September 30, 2023.

The actual amount of annual incentive fees for 2023, if any, will be based on our common share total return for the three year period ending December 31, 2023, and will be payable in January 2024.

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, we recognized aggregate net property management and construction supervision fees of $ 6,163 and $ 12,482 for the three and six months ended June 30, 2023, respectively, and $ 6,394 and $ 12,522 for the three and six months ended June 30, 2022, respectively.

Of these amounts, for the three and six months ended June 30, 2023, $ 3,801 and $ 7,534 , respectively, were expensed to other operating expenses in our condensed consolidated statements of comprehensive income (loss) and $ 2,362 and $ 4,948 , respectively, were capitalized as building improvements in our condensed consolidated balance sheet.

For the three and six months ended June 30, 2022, $ 4,015 and $ 8,241 , respectively, were expensed to other operating expenses in our condensed consolidated statements of comprehensive income (loss) and $ 2,379 and $ 4,281 , respectively, were capitalized as building improvements in our condensed consolidated balance sheet.

Pursuant to our property management agreement with RMR, we recognized aggregate net property management and construction supervision fees of $ 5,465 and $ 17,947 for the three and nine months ended September 30, 2023, respectively, and $ 6,502 and $ 19,024 for the three and nine months ended September 30, 2022, respectively.

Of these amounts, for the three and nine months ended September 30, 2023, $ 3,718 and $ 11,252 , respectively, were expensed to other operating expenses in our

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except per share data)

condensed consolidated statements of comprehensive income (loss) and $ 1,747 and $ 6,695 , respectively, were capitalized as building improvements in our condensed consolidated balance sheet.

For the three and nine months ended September 30, 2022, $ 3,996 and $ 12,237 , respectively, were expensed to other operating expenses in our condensed consolidated statements of comprehensive income (loss) and $ 2,506 and $ 6,787 , respectively, were capitalized as building improvements in our condensed consolidated balance sheet.

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

In connection with the Merger, on April 11, 2023, we and RMR entered into a Third Amended and Restated Property Management Agreement, or the Amended Property Management Agreement.

For more information about the Amended Property Management Agreement, refer to Note 10.

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

We reimbursed RMR $ 6,617 and $ 12,964 for these expenses and costs for the three and six months ended June 30, 2023, respectively, and $ 6,047 and $ 12,013 for the three and six months ended June 30, 2022, respectively.

We reimbursed RMR $ 6,331 and $ 19,295 for these expenses and costs for the three and nine months ended September 30, 2023, respectively, and $ 6,268 and $ 18,281 for the three and nine months ended September 30, 2022, 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).

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except per share data)

Management Agreements Between Our Joint Ventures and RMR .

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Other officers of RMR serve as managing trustees or officers of certain of these companies.

Share Awards to RMR Employees .

See Note 8 for further information relating to our awards of common shares to our officers and certain other employees of RMR in September 2023 and our repurchases of common shares from certain of our Trustees and officers and certain other current and former officers and employees of RMR in satisfaction of tax withholding and payment obligations in connection with the vesting of awards of our common shares to them.

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

Our Manager, RMR.

4 unchanged sentences

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 $ 244 and $ 467 for the three and six months ended June 30, 2023, respectively, and $ 285 and $ 569 for the three and six months ended June 30, 2022, respectively.

Pursuant to our lease agreements with RMR, we recognized rental income from RMR for leased office space of $ 205 and $ 671 for the three and nine months ended September 30, 2023, respectively, and $ 282 and $ 851 for the three and nine months ended September 30, 2022, 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.

as a mixed-use property.

Sonesta’s lease is for the full-service hotel component of the property that includes approximately 230,000 rentable square feet, which represents approximately 54 % of the total square feet upon completion of the redevelopment.

We substantially completed the redevelopment in June 2023 and the term of the lease is estimated to commence in August 2023.

Sonesta’s lease is for the full-service hotel component of the property that includes approximately 230,000 rentable square feet, which represents approximately 55 % of the total square feet of the property.

We substantially completed

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(dollars in thousands, except per share data)

the redevelopment in June 2023 and the term of the lease commenced in August 2023.

Sonesta has two options to extend the term for 10 years each.

Pursuant to the lease agreement, Sonesta will pay us annual base rent of approximately $ 6,436 beginning 18 months after the lease commences.

Pursuant to the lease agreement, Sonesta will pay us annual base rent of approximately $ 6,436 beginning 18 months after the lease commencement.

The annual base rent will increase by 10 % every five years throughout the term.

Sonesta is also obligated to pay its pro rata share of the operating costs for the building.

We estimate that the total cost to build the hotel space will be approximately $ 77,000 , of which approximately $ 73,000 has been incurred as of June 30, 2023.

As of September 30, 2023, we have paid approximately $ 77,000 of tenant improvement costs for the build out of the hotel space pursuant to the lease agreement.

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

Clark is also a director of Sonesta.

Merger Agreement with Diversified Healthcare Trust .

As described further in Note 1, on April 11, 2023, we and DHC entered into the Merger Agreement, pursuant to which, on the terms and subject to the satisfaction or waiver of the conditions thereof, DHC will be merged with and into us, with us continuing as the surviving entity in the merger.

Subject to the satisfaction or waiver of the conditions to closing, the Merger is expected to close during the third quarter of 2023.

RMR serves as our and DHC’s manager and will continue to manage the surviving entity following the Merger.

Contemporaneously with the execution of the Merger Agreement, on April 11, 2023, we and RMR entered into the Amended Property Management Agreement.

The effectiveness of the Amended Property Management Agreement is conditioned upon and will be concurrent with the consummation of the Merger.

If the Merger is not consummated, the Amended Property Management Agreement will not become effective and the Second Amended and Restated Property Management Agreement, or the Current Property Management Agreement, will remain in effect.

Pursuant to the Amended Property Management Agreement, at the Effective Time, properties currently owned by DHC that are subject to its existing property management agreement, including its medical office and life science properties, will become subject to the terms and conditions of the Amended Property Management Agreement.

Also pursuant to the Amended Property Management Agreement, RMR will be entitled to a renovation and repositioning fee equal to 3 % of the cost of any major capital projects and repositionings at senior living communities currently owned by DHC that the surviving entity may

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(dollars in thousands, except per share data)

request RMR to oversee from time to time, consistent with DHC’s existing property management agreement with RMR.

The terms of the Amended Property Management Agreement are otherwise consistent with the terms of the Current Property Management Agreement.

In addition, contemporaneously with the execution of the Merger Agreement, we, DHC and RMR entered into a letter agreement pursuant to which, on the terms and subject to conditions contained therein, DHC and RMR have acknowledged and agreed that, effective upon consummation of the Merger, DHC shall have terminated its business and property management agreements with RMR for convenience, and RMR shall have waived its right to receive payment of the termination fee pursuant to each such agreement upon such termination.

The foregoing terminations and waivers apply only in respect of the Merger and do not apply to any other transaction or arrangement.

For more information about these and other such relationships and certain other related person transactions, refer to our 2022 Annual Report and our joint proxy statement/prospectus that is included in our registration statement on Form S-4 filed with the SEC.

Clark is also a director and officer of Sonesta.

Terminated Merger Agreement with DHC .

See Note 1 for more information relating to our terminated merger agreement with DHC.

For more information about these and other such relationships and certain other related person transactions, refer to our 2022 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