What changed in this filing

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Item 1. Financial Statements

2024-05-01 compared with 2023-10-30 · 150 added, 209 removed, 256 unchanged (58% of the section changed)

3 unchanged sentences

(dollars in thousands, except per share data)

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

Real estate properties:

14 unchanged sentences

LIABILITIES AND SHAREHOLDERS’ EQUITY

Unsecured revolving credit facility $ 200,000 $ 195,000

Senior unsecured notes, net 2,193,577 2,187,875

Mortgage notes payable, net 172,331 49,917

Unsecured debt, net $ 1,847,664 $ 2,400,478

Secured debt, net 731,563 172,131

Liabilities of properties held for sale 324 2,525

16 unchanged sentences

(amounts in thousands, except per share data)

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

2023 2022 2023 2022

Three Months Ended March 31,

Rental income $ 139,435 $ 132,422

3 unchanged sentences

Depreciation and amortization 50,341 51,692

Loss on impairment of real estate — — — 21,820

Acquisition and transaction related costs 233 3,218

1 unchanged sentence

Total expenses 107,405 109,485

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

(Loss) gain on sale of real estate ( 2,384 ) 2,548

Interest and other income 1,357 164

5 unchanged sentences

Equity in net losses of investees ( 230 ) ( 834 )

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

Net loss $ ( 5,184 ) $ ( 446 )

Weighted average common shares outstanding (basic and diluted) 48,466 48,336

Per common share amounts (basic and diluted):

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

Net loss $ ( 0.11 ) $ ( 0.01 )

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

12 unchanged sentences

Balance at March 31, 2024 48,754,546 $ 488 $ 2,621,849 $ 94,990 $ ( 1,466,963 ) $ 1,250,364

Common share grants 31,500 — 744 — — 744

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

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

Distributions to common shareholders — — — — ( 12,141 ) ( 12,141 )

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

4 unchanged sentences

Common share grants — — 477 — — 477

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

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

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

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

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

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

1 unchanged sentence

Distributions to common shareholders — — — — ( 26,710 ) ( 26,710 )

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

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

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:

5 unchanged sentences

Amortization of deferred leasing costs 3,408 2,365

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

Loss on impairment of real estate — 21,820

Loss (gain) on sale of real estate 2,384 ( 2,548 )

Loss on early extinguishment of debt 425 —

7 unchanged sentences

Accounts payable and other liabilities ( 17,207 ) 4,110

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

Due to related persons 234 972

Net cash provided by operating activities 26,632 51,900

1 unchanged sentence

Real estate improvements ( 40,034 ) ( 66,665 )

Distributions in excess of earnings from unconsolidated joint ventures — 51

Contributions to unconsolidated joint ventures — ( 2,263 )

Proceeds from sale of properties, net 35,672 5,112

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

Net cash used in investing activities ( 4,362 ) ( 63,816 )

CASH FLOWS FROM FINANCING ACTIVITIES:

Repayment of mortgage notes payable ( 50,000 ) ( 25,400 )

Proceeds from issuance of mortgage notes payable 177,320 —

Repayment of senior unsecured notes ( 350,000 ) —

Borrowings on unsecured revolving credit facility 225,000 295,000

Repayments on unsecured revolving credit facility ( 220,000 ) ( 160,000 )

Proceeds from issuance of senior secured notes 280,500 —

Borrowings on revolving credit facility 232,000 75,000

Repayments on revolving credit facility ( 247,000 ) ( 25,000 )

Borrowings on secured term loan 100,000 —

Payment of debt issuance costs ( 19,885 ) ( 266 )

1 unchanged sentence

Distributions to common shareholders ( 487 ) ( 26,710 )

Net cash provided by (used in) financing activities 75,188 ( 270,852 )

Increase (decrease) in cash, cash equivalents and restricted cash 27,379 ( 68,990 )

Net cash (used in) provided by financing activities ( 4,878 ) 23,011

Increase in cash, cash equivalents and restricted cash 17,392 11,095

Cash, cash equivalents and restricted cash at beginning of period 26,714 12,249

4 unchanged sentences

(dollars in thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

SUPPLEMENTAL CASH FLOW INFORMATION:

Interest paid $ 34,639 $ 25,033

Income taxes paid $ 374 $ 283

NON-CASH INVESTING ACTIVITIES:

3 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 September 30,

As of March 31,

Cash and cash equivalents $ 23,513 $ 23,344

1 unchanged sentence

Total cash, cash equivalents and restricted cash shown in the condensed consolidated statements of cash flows $ 44,106 $ 23,344

(1) Restricted cash consists of amounts escrowed for future real estate taxes, insurance, leasing costs, capital expenditures and debt service, as required by certain of our mortgage debts.

(1) Restricted cash consists of cash held for operations and amounts escrowed for future real estate taxes, insurance, leasing costs, capital expenditures and debt service, as required by certain of our debt agreements.

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

14 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.

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.

Recent Accounting Pronouncements

O n November 27, 2023, the Financial Accounting Standards Board issued Accounting Standards Update No.

2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures, or ASU No.

2023-07, which requires public entities to:

(i) provide disclosures of significant segment expenses and other segment items if they are regularly provided to the Chief Operating Decision Maker, or the CODM, and included in each reported measure of segment profit or loss;

(ii) provide all annual disclosures about a reportable segment’s profit or loss and assets currently required by Accounting Standards Codification 280, Segment Reporting, or ASC 280, in interim periods;

and (iii) disclose the CODM’s title and position, as well as an explanation of how the CODM uses the reported measures and other disclosures.

Public entities with a single reportable segment must apply all the disclosure requirements of ASU No.

2023-07, as well as all the existing segment disclosures under ASC 280.

The amendments in ASU No.

2023-07 are incremental to the requirements in ASC 280 and do not change how a public entity identifies its operating segments, aggregates those operating segments, or applies the quantitative thresholds to determine its reportable segments.

2023-07 should be applied retrospectively to all prior periods presented in the financial statements and is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted.

We are currently evaluating the impact ASU No.

2023-07 will have on our consolidated financial statements and disclosures.

OFFICE PROPERTIES INCOME TRUST

6 unchanged sentences

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,

Three Months Ended March 31,

Net loss $ ( 5,184 ) $ ( 446 )

Income attributable to unvested participating securities

( 3 ) ( 126 )

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 )

Net loss used in calculating earnings per common share $ ( 5,187 ) $ ( 572 )

Denominators:

Weighted average common shares outstanding - basic and diluted 48,466 48,336

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

Net loss per common share - basic and diluted $ ( 0.11 ) $ ( 0.01 )

Real Estate Properties

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.

As of March 31, 2024, our wholly owned properties were comprised of 151 properties containing approximately 20,293,000 rentable square feet, with an undepreciated carrying value of $ 4,091,230 , including $ 11,979 classified as held for sale.

We also had noncontrolling ownership interests of 51 % and 50 % in two unconsolidated joint ventures that owned three properties containing approximately 471,000 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 2024 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, 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 .

During the three months ended March 31, 2024, we entered into 13 leases for approximately 488,000 rentable square feet for a weighted (by rentable square feet) average lease term of 9.3 years, and we made commitments of $ 10,977 for leasing related costs.

As of March 31, 2024, we had estimated unspent leasing related obligations of $ 103,390 .

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 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.

Impairment indicators may include declining tenant occupancy, lack of progress re-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 carrying value to estimated fair value.

We determine the amount of any impairment loss by comparing the historical 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.

Disposition Activities

During the three months ended March 31, 2024, we sold one property containing approximately 248,000 rentable square feet for a sales price of $ 38,500 , excluding closing costs, and recognized a $ 2,384 loss on sale of real estate.

The sale of this property does not represent a strategic shift in our business.

As a result, the results of operations of this property are included in continuing operations through the date of sale in our condensed consolidated statements of comprehensive income (loss).

OFFICE PROPERTIES INCOME TRUST

1 unchanged sentence

(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 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.

As a result, the results of operations of these properties are included in continuing operations through the date of sale in our condensed consolidated statements of comprehensive income (loss).

Date of Sale Number of Properties Location Rentable Square Feet Gross Sales Price (1)

Gain (Loss) on Sale of Real Estate

January 2023 3 Richmond, VA 89,000 $ 5,350 $ 2,548

April 2023 1 Phoenix, AZ 107,000 4,900 511

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 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.

As of March 31, 2024, we had one property containing approximately 156,000 rentable square feet classified as held for sale in our condensed consolidated balance sheet.

In April 2024 , we entered into an agreement to sell another property containing approximately 126,000 rentable square feet for a sales price of $ 7,800 , 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.

Unconsolidated Joint Ventures

We own interests in two joint ventures that own three properties.

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

As of September 30, 2023 and December 31, 2022, our investments in unconsolidated joint ventures consisted of the following:

As of March 31, 2024, we owned interests in two joint ventures that owned three properties.

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

As of March 31, 2024 and December 31, 2023, 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,

2024 December 31, 2023 Number of Properties Location Rentable Square Feet

2 unchanged sentences

Total $ 17,898 $ 18,128 3 471,000

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, 2023 and December 31, 2022 (2)

Maturity Date Principal Balance at March 31, 2024 and December 31, 2023 (2)

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

1750 H Street, NW 3.69 % 8/1/2027 32,000

3.69 % 8/1/2027 32,000

Weighted Average / Total 3.93 % $ 82,000

2 unchanged sentences

None of the debt is recourse to us.

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

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.

In March 2024, our 1750 H Street, NW joint venture did not have sufficient cash flow to pay its monthly debt service, resulting in an event of default.

We expect the non-recourse mortgage lender to this joint venture to take full possession of the property in the second quarter.

We wrote off our full investment in this joint venture as of December 31, 2023 and did not make capital contributions to this joint venture during the three months ended March 31, 2024.

Accordingly, we did not record our proportionate share of operating results of the joint venture for the three months ended March 31, 2024.

As of March 31, 2024, the unamortized basis difference of our Prosperity Metro Plaza joint venture of $ 694 was primarily attributable to the difference between the amount we paid to purchase our interest in this joint venture, including transaction costs, and the historical carrying value of the net assets of this joint venture.

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

As of March 31, 2024, there was no unamortized basis difference for our 1750 H Street, NW joint venture.

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

3 unchanged sentences

In certain circumstances, some leases provide the tenant with the right to terminate if the legislature or other funding authority does not appropriate the funding necessary for the tenant to meet its lease obligations;

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 $ 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 have determined the fixed non-cancelable lease term of these leases to

OFFICE PROPERTIES INCOME TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except per share data)

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 $ 7,379 and $ 4,173 for the three months ended March 31, 2024 and 2023, respectively.

Rents receivable, excluding properties classified as held for sale, included $ 119,102 and $ 112,440 of straight line rent receivables at March 31, 2024 and December 31, 2023, 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 $ 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.

Such payments totaled $ 22,558 and $ 21,370 for the three months ended March 31, 2024 and 2023, respectively, of which tenant reimbursements totaled $ 21,329 and $ 20,066 , respectively.

Concentration

Tenant and Credit Concentration

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

As of March 31, 2024 and 2023, the U.S.

government and certain state and other government tenants combined were responsible for approximately 27.6 % and 28.5 %, respectively, of our annualized rental income.

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.

government is our largest tenant by annualized rental income and represented approximately 20.2 % and 19.6 % of our annualized rental income as of March 31, 2024 and 2023, respectively.

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.

Geographic Concentration

As of March 31, 2024, our 151 wholly owned properties were located in 30 states and the District of Columbia.

Properties located in Virginia, California, the District of Columbia, Georgia and Illinois were responsible for approximately 12.1 %, 11.8 %, 9.9 %, 9.1 % and 8.8 % of our annualized rental income as of March 31, 2024, respectively.

Our principal debt obligations as of March 31, 2024 were:

(1) $ 190,000 of outstanding borrowings under our $ 325,000 secured revolving credit facility;

(2) $ 100,000 outstanding principal amount under our secured term loan;

(3) $ 2,162,000 aggregate outstanding principal amount of senior notes and (4) $ 177,320 aggregate outstanding principal amount of mortgage notes.

In January 2024, we entered into an amended and restated credit agreement, or our credit agreement, governing a new $ 325,000 secured revolving credit facility and a $ 100,000 secured term loan.

Our credit agreement replaced our prior revolving credit facility, which had a maturity date of January 31, 2024.

As collateral for all loans and other obligations under our credit agreement, certain of our subsidiaries pledged all of their respective equity interests in certain of our direct and indirect property owning subsidiaries, and our pledged subsidiaries provided first mortgage liens on 19 properties that had a gross book value of real estate assets of $ 994,753 as of March 31, 2024.

We can borrow, repay and reborrow funds available under our revolving credit facility until maturity, and no principal repayments on borrowings under our credit agreement are due until maturity.

The maturity date of our credit agreement is January 29, 2027 and, subject to the payment of an extension fee and meeting certain other requirements, we can extend the stated maturity date of our revolving credit facility by one year .

Our credit agreement contains a number of covenants, including covenants that require us to maintain certain financial ratios, restrict our ability to incur additional debt in excess of calculated amounts and, subject to limited exceptions, restrict our ability to increase our distribution rate above the current level of $ 0.01 per common share per quarter and enter into share repurchases.

Availability of borrowings under our credit agreement is subject to ongoing minimum performance and market values of the 19 collateral properties, our satisfying certain financial covenants and other credit facility conditions.

Interest payable on borrowings under our credit agreement is at a rate of the secured overnight financing rate, or SOFR, plus a margin of 350 basis points.

We are also required to pay an unused facility fee on the amount of total lending commitments, which was 25 basis points per annum at March 31, 2024.

As of March 31, 2024 and April 30, 2024, we had $ 190,000 and $ 180,000 , respectively, outstanding under our revolving credit facility, $ 100,000 outstanding under our term loan and $ 135,000 and $ 145,000 , respectively, available for borrowing under our revolving credit facility.

As of March 31, 2024, the

OFFICE PROPERTIES INCOME TRUST

1 unchanged sentence

(dollars in thousands, except per share data)

Geographic Concentration

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;

(2) $ 2,212,000 aggregate outstanding principal amount of senior unsecured notes;

and (3) $ 177,320 aggregate outstanding principal amount of mortgage notes.

Our $ 750,000 revolving credit facility is governed by a credit agreement, or our credit agreement, with a syndicate of institutional lenders that includes a feature under which the maximum aggregate borrowing availability may be increased to up to $ 1,950,000 in certain circumstances.

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

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 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 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 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.

annual interest rate payable on borrowings under our credit agreement was 8.9 %.

The weighted average annual interest rate for borrowings under our credit agreement for the three months ended March 31, 2024 was 8.5 %.

We were required to pay interest at a rate of SOFR plus a premium, which was 110 basis points per annum as of March 31, 2023, on the amount outstanding under our prior revolving credit facility, as well as a facility fee on the total amount of lending commitments, which was 25 basis points per annum.

The weighted average annual interest rate for borrowings under our prior revolving credit facility for the three months ended March 31, 2023 was 5.6 %.

Our revolving credit facility is governed by a credit agreement with a syndicate of institutional lenders.

Our credit agreement and senior 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 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 increase our distribution rate above the current level of $ 0.01 per common share per quarter.

We believe we were in compliance with the terms and conditions of the respective covenants under our credit agreement and senior notes indentures and their supplements at March 31, 2024.

Senior Secured Notes Issuance

In February 2024, we issued $ 300,000 of 9.000 % senior secured notes due 2029, or the 2029 Notes.

The aggregate net proceeds from the offering of the 2029 Notes were $ 270,848 , after initial purchaser discounts and other offering expenses.

The 2029 Notes are fully and unconditionally guaranteed on a joint, several and senior secured basis by certain of our subsidiaries and secured by a pledge of all of the respective equity interests of the subsidiary guarantors and first mortgage liens on 17 properties with a gross book value of real estate assets of $ 607,727 as of March 31, 2024.

The 2029 Notes require semi-annual payments of interest only and are prepayable, at par plus accrued interest, after March 31, 2028.

Senior Unsecured Notes Redemption

In March 2024, we redeemed, at par plus accrued interest, all $ 350,000 of our 4.25 % senior unsecured notes due 2024.

As a result of this redemption, we recorded a loss on early extinguishment of debt of $ 425 during the three months ended March 31, 2024, which represented the unamortized discounts related to these notes.

As of March 31, 2024, seven of our properties with an aggregate gross book value of real estate assets of $ 353,610 were encumbered by mortgage notes with an aggregate principal amount of $ 177,320 .

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

We currently do not have sufficient sources of liquidity to repay our $ 650,000 senior unsecured notes due 2025 and are evaluating market-based alternatives to obtain debt financing.

Based on the significant number of unencumbered properties in our portfolio, our successful history of obtaining debt financings and our current financing metrics, we believe it is probable that we can obtain new debt financing that will allow us to satisfy the 2025 senior unsecured notes as they become due.

We have also engaged Moelis & Company LLC as our financial advisor to assist in evaluating our options to address our upcoming debt maturities.

OFFICE PROPERTIES INCOME TRUST

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(dollars in thousands, except per share data)

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 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

Our financial instruments include our cash and cash equivalents, restricted cash, rents receivable, accounts payable, a revolving credit facility, a term loan, senior notes, mortgage notes payable, amounts due to related persons, other accrued expenses and security deposits.

At March 31, 2024 and December 31, 2023, 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, 2024 As of December 31, 2023

Financial Instrument Carrying Value (1)

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348,242 171,693 348,086 196,147

Senior secured notes, 9.000 % interest rate, due in 2029 (3)

271,620 276,528 — —

Senior unsecured notes, 3.450 % interest rate, due in 2031

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Mortgage notes payable 172,212 178,387 172,131 179,813

172,331 175,868 49,917 49,099

Total $ 2,291,496 $ 1,576,877 $ 2,367,609 $ 1,686,825

(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 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 .

(1) Includes unamortized debt premiums, discounts and issuance costs totaling $ 47,824 and $ 21,711 as of March 31, 2024 and December 31, 2023, respectively.

(2) These senior notes were redeemed in March 2024.

(3) These senior notes were issued in February 2024.

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

OFFICE PROPERTIES INCOME TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(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.

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.

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

Shareholders’ Equity

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 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.

During the three months ended March 31, 2024, we purchased 869 of our common shares, valued at a share price of $ 7.12 , from a former officer and employee of RMR in satisfaction of tax withholding and payment obligations in connection with the vesting of awards of our common shares.

We withheld and purchased these common shares at their fair market value based upon the trading price of our common shares at the close of trading on Nasdaq on the purchase date.

Distributions

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

During the three months ended March 31, 2024, 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 11, 2024 January 22, 2024 February 15, 2024 $ 0.01 $ 487

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 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.

On April 11, 2024, we declared a regular quarterly distribution payable to common shareholders of record on April 22, 2024 in the amount of $ 0.01 per share, or approximately $ 487 .

We expect to pay this distribution on or about May 16, 2024.

OFFICE PROPERTIES INCOME TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except per share data)

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 $ 3,637 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.

Pursuant to our business management agreement with RMR, we recognized net business management fees of $ 3,558 and $ 3,951 for the three months ended March 31, 2024 and 2023, respectively.

Based on our common share total return, as defined in our business management agreement, as of March 31, 2024, no estimated incentive fees are included in the net business management fees we recognized for the three months ended March 31, 2024.

The actual amount of annual incentive fees for 2024, if any, will be based on our common share total return for the three year period ending December 31, 2024, and will be payable in January 2025.

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 $ 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

OFFICE PROPERTIES INCOME TRUST

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.

Pursuant to our property management agreement with RMR, we recognized aggregate net property management and construction supervision fees of $ 4,550 and $ 6,319 for the three months ended March 31, 2024 and 2023, respectively.

Of these amounts, for the three months ended March 31, 2024 and 2023, $ 3,818 and $ 3,733 , respectively, were expensed to other operating expenses in our condensed consolidated statements of comprehensive income (loss) and $ 732 and $ 2,586 , 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.

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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 $ 6,331 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 reimbursed RMR $ 6,587 and $ 6,347 for these expenses and costs for the three months ended March 31, 2024 and 2023, 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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and an officer and employee of RMR.

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.

Each of our officers is an officer and employee of RMR.

Jennifer Clark, our other Managing Trustee, is 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.

Each of our officers is also an officer and employee of RMR.

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

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

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).

Other officers of RMR, including Ms.

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

Our Manager, RMR.

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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 $ 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 55 % of the total square feet of the property.

We substantially completed

Pursuant to our lease agreements with RMR, we recognized rental income from RMR for leased office space of $ 194 and $ 223 for the three months ended March 31, 2024 and 2023, respectively.

OFFICE PROPERTIES INCOME TRUST

1 unchanged sentence

(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 commencement.

We lease 230,000 rentable square feet of an office property in Washington, D.C.

to a subsidiary of Sonesta International Hotels Corporation, or Sonesta.

Our lease with Sonesta commenced in August 2023 and expires in 2053 and 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 February 2025.

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.

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.

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

We recognized rental income of $ 2,775 during the three months ended March 31, 2024 under our lease with Sonesta.

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

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.

Clark is a director of Sonesta.

Another officer and employee of RMR is a director and president and chief executive officer of Sonesta.

For more information about these and other such relationships and certain other related person transactions, refer to our 2023 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