OFFICE PROPERTIES INCOME TRUST 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following information should be read in conjunction with our Condensed Consolidated Financial Statements and accompanying notes included in Part I, Item 1 of this Quarterly Report on Form 10-Q and with our 2023 Annual Report. OVERVIEW (dollars in thousands, except per share and per square foot data) We are a real estate investment trust, or REIT, organized under Maryland law. As of June 30, 2024, our wholly owned properties were comprised of 151 properties and we had a noncontrolling ownership interest of 51% in one unconsolidated joint venture that owned two properties containing approximately 346,000 rentable square feet. As of June 30, 2024, our properties are located in 30 states and the District of Columbia and contain approximately 20,293,000 rentable square feet. As of June 30, 2024, our properties were leased to 260 different tenants with a weighted average remaining lease term (based on annualized rental income) of approximately 6.6 years. The U.S. government is our largest tenant, representing approximately 19.3% of our annualized rental income as of June 30, 2024. The term annualized rental income as used herein is defined as the annualized contractual base rents from our tenants pursuant to our lease agreements as of June 30, 2024, plus straight line rent adjustments and estimated recurring expense reimbursements to be paid to us, and excluding lease value amortization. Leases representing approximately 9.3% and 9.7% of our annualized rental income are scheduled to expire during the remainder of 2024 and 2025, respectively, and we may be unable to renew leases or find replacement tenants. Certain changes in office space utilization, including increased remote work arrangements and tenants consolidating their real estate footprint, continue to impact the market. The utilization and demand for office space continues to face headwinds and the duration and ultimate impact of current trends on the demand for office space at our properties remains uncertain and subject to change. Accordingly, we do not yet know what the full extent of the impacts will be on our or our tenants’ businesses and operations nor the long-term outlook for leasing our properties. Higher interest rates, inflationary pressures, geopolitical hostilities and tensions, and concerns that the U.S. economy may enter an economic recession have caused disruptions in the financial markets and these factors could adversely affect our and our tenants’ financial condition and the ability or willingness of our tenants to renew our leases or pay rent to us. We also have a significant amount of debt maturing in the next 12 months. Deteriorating office fundamentals, high interest rates and market sentiment towards the office sector will likely restrict our access to, and increase our cost of, capital as we seek to refinance our debts. For more information about the risks relating to these dynamics and conditions and their impacts on us and our business, see Part I, Item IA, “Risk Factors”, of our 2023 Annual Report. Property Operations Unless otherwise noted, the data presented in this section includes properties classified as held for sale as of June 30, 2024 and excludes two properties owned by an unconsolidated joint venture in which we owned a 51% interest. For more information regarding our properties classified as held for sale and our unconsolidated joint venture, see Note 4 to our Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q. Occupancy data for our properties as of June 30, 2024 and 2023 was as follows (square feet in thousands): All Properties (1) Comparable Properties (2) June 30, June 30, 2024 2023 2024 2023 Total properties 151 155 131 131 Total rentable square feet (3) 20,293 20,784 17,326 17,313 Percent leased (4) 83.5 % 90.6 % 89.9 % 95.3 % (1) Based on properties we owned on June 30, 2024 and 2023, respectively. (2) Based on properties we owned continuously since January 1, 2023; excludes 15 properties classified as held for sale, five properties affected by significant redevelopment activities and two properties owned by an unconsolidated joint venture in which we owned a 51% interest. (3) Subject to changes when space is remeasured or reconfigured for tenants. (4) Percent leased includes (i) space being fitted out for tenant occupancy pursuant to our lease agreements, if any, and (ii) space which is leased, but is not occupied or is being offered for sublease by tenants, if any, as of the measurement date. 17 Table of Contents The average effective rental rate per square foot for our properties for the three and six months ended June 30, 2024 and 2023 were as follows: Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Average effective rental rate per square foot (1) : All properties (2) $ 29.14 $ 29.39 $ 30.62 $ 29.12 Comparable properties (3) $ 28.78 $ 29.62 $ 28.96 $ 29.35 (1) Average effective rental rate per square foot represents annualized total rental income during the period specified divided by the average rentable square feet leased during the period specified. (2) Based on properties we owned on June 30, 2024 and 2023, respectively. (3) Based on properties we owned continuously since April 1, 2023 and January 1, 2023; excludes 15 properties classified as held for sale, five properties affected by significant redevelopment activities and two properties owned by an unconsolidated joint venture in which we owned a 51% interest. During the three and six months ended June 30, 2024, changes in rentable square feet leased and available for lease at our properties were as follows (square feet in thousands): Three Months Ended June 30, 2024 Six Months Ended June 30, 2024 Leased Available for Lease Total Leased Available for Lease Total Beginning of period 17,375 2,918 20,293 17,848 2,693 20,541 Changes resulting from: Disposition of properties — — — (248) — (248) Lease expirations (640) 640 — (1,353) 1,353 — Lease renewals (1) 184 (184) — 627 (627) — New leases (1) 24 (24) — 69 (69) — End of period 16,943 3,350 20,293 16,943 3,350 20,293 (1) Based on leases entered during the three and six months ended June 30, 2024, respectively. During the three and six months ended June 30, 2024, we entered into new and renewal leases as summarized in the following table (square feet in thousands): Three Months Ended June 30, 2024 New Leases Renewals Total Rentable square feet leased 24 184 208 Weighted average rental rate change (by rentable square feet) (22.2 %) 0.2 % (1.5 %) Tenant leasing costs and concession commitments (1) $ 687 $ 3,295 $ 3,982 Tenant leasing costs and concession commitments per rentable square foot (1) $ 29.29 $ 17.89 $ 19.18 Weighted (by square feet) average lease term (years) 3.7 4.0 4.0 Total leasing costs and concession commitments per rentable square foot per year (1) $ 7.90 $ 4.45 $ 4.81 Six Months Ended June 30, 2024 New Leases Renewals Total Rentable square feet leased 68 627 695 Weighted average rental rate change (by rentable square feet) (19.6 %) 8.4 % 4.3 % Tenant leasing costs and concession commitments (1) $ 3,513 $ 11,446 $ 14,959 Tenant leasing costs and concession commitments per rentable square foot (1) $ 51.43 $ 18.24 $ 21.50 Weighted (by square feet) average lease term (years) 5.3 8.0 7.7 Total leasing costs and concession commitments per rentable square foot per year (1) $ 9.72 $ 2.29 $ 2.79 (1) Includes commitments made for leasing expenditures and concessions, such as tenant improvements, leasing commissions, tenant reimbursements and free rent. 18 Table of Contents During the three and six months ended June 30, 2024, changes in effective rental rates per square foot achieved for new leases and lease renewals at our properties that commenced during the three and six months ended June 30, 2024, when compared to prior effective rental rates per square foot in effect for the same space (and excluding space acquired vacant), were as follows (square feet in thousands): Three Months Ended June 30, 2024 Six Months Ended June 30, 2024 Old Effective Rent Per Square Foot (1) New Effective Rent Per Square Foot (1) Rentable Square Feet Old Effective Rent Per Square Foot (1) New Effective Rent Per Square Foot (1) Rentable Square Feet New leases $ 22.88 $ 16.78 17 $ 28.87 $ 44.39 257 Lease renewals $ 30.03 $ 29.59 67 $ 15.79 $ 17.87 563 Total leasing activity $ 28.59 $ 27.01 84 $ 19.88 $ 26.16 820 (1) Effective rental rates include contractual base rents from our tenants pursuant to our lease agreements, plus straight line rent adjustments and estimated expense reimbursements to be paid to us, and exclude lease value amortization. During the three and six months ended June 30, 2024 and 2023, amounts capitalized at our properties for lease related costs, building improvements and development, redevelopment and other activities were as follows: Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Lease related costs (1) $ 25,965 $ 28,252 $ 42,733 $ 41,293 Building improvements (2) 4,085 5,355 8,559 9,937 Recurring capital expenditures 30,050 33,607 51,292 51,230 Development, redevelopment and other activities (3) 3,862 40,435 10,773 89,906 Total capital expenditures $ 33,912 $ 74,042 $ 62,065 $ 141,136 (1) Lease related costs generally include capital expenditures used to improve tenants’ space or amounts paid directly to tenants to improve their space and leasing related costs, such as brokerage commissions and other tenant inducements. (2) Building improvements generally include expenditures to replace obsolete building components and expenditures that extend the useful life of existing assets. (3) Development, redevelopment and other activities generally include capital expenditure projects that reposition a property or result in new sources of revenue. Includes capitalized interest and other operating costs of $1,172 for the six months ended June 30, 2024 and $3,721 and $6,713 for the three and six months ended June 30, 2023, respectively. We did not capitalize any interest and other operating costs during the three months ended June 30, 2024. As of June 30, 2024, we had estimated unspent leasing related obligations of $80,649, of which we expect to spend $40,947 over the next 12 months. As of June 30, 2024, we had leases at our properties totaling approximately 3,763,000 rentable square feet that were scheduled to expire through December 31, 2025. As of July 30, 2024, we expect tenants with leases totaling approximately 2,968,000 rentable square feet that are scheduled to expire through December 31, 2025, excluding space that has been re-leased and space for which we are in advanced negotiations to re-lease, not to renew or to downsize their leased space upon expiration, and we cannot be sure as to whether other tenants will renew their leases upon expiration. Of the 2,968,000 rentable square feet leased to tenants known to be vacating, 2,130,000 rentable square feet relate to properties, excluding properties classified as held for sale, not encumbered by debt. We continue to proactively engage with our existing tenants and are focused on overall tenant retention. Prevailing market conditions and our tenants’ needs at the time we negotiate and enter leases or lease renewals will generally determine rental rates and demand for leased space at our properties, all of which factors are beyond our control. Whenever we renew or enter into new leases for our properties, we intend to seek rents which are equal to or higher than our historical rents for the same properties; however, our ability to maintain or increase the rents for our current properties will depend in large part upon market conditions, which are beyond our control. We cannot be sure of the rental rates that will result from our ongoing negotiations regarding lease renewals or any new or renewed leases we may enter. Also, we may experience material declines in our rental income due to vacancies upon lease expirations or early terminations or lower rents upon lease renewal or reletting. Additionally, we may incur significant costs and make significant concessions to renew our leases with current tenants or lease our properties to new tenants. 19 Table of Contents As of June 30, 2024, our lease expirations by year were as follows (square feet in thousands): Year (1) Number of Leases Expiring Leased Square Feet Expiring (2) Percent of Total Cumulative Percent of Total Annualized Rental Income Expiring Percent of Total Cumulative Percent of Total 2024 43 1,806 10.7 % 10.7 % $ 44,936 9.3 % 9.3 % 2025 42 1,957 11.6 % 22.3 % 46,655 9.7 % 19.0 % 2026 (3) 40 1,454 8.6 % 30.9 % 40,215 8.3 % 27.3 % 2027 37 1,901 11.2 % 42.1 % 49,898 10.3 % 37.6 % 2028 18 659 3.9 % 46.0 % 31,137 6.4 % 44.0 % 2029 37 1,163 6.9 % 52.9 % 35,642 7.4 % 51.4 % 2030 29 1,037 6.1 % 59.0 % 28,081 5.8 % 57.2 % 2031 19 1,027 6.1 % 65.1 % 29,647 6.1 % 63.3 % 2032 14 377 2.2 % 67.3 % 13,907 2.9 % 66.2 % 2033 and thereafter 52 5,562 32.7 % 100.0 % 162,940 33.8 % 100.0 % Total 331 16,943 100.0 % $ 483,058 100.0 % Weighted average remaining lease term (in years) 6.1 6.6 (1) The year of lease expiration is pursuant to current contract terms. Some of our leases allow the tenants to vacate the leased premises before the stated expirations of their leases with little or no liability. As of June 30, 2024, tenants occupying approximately 2.2% of our rentable square feet and responsible for approximately 2.5% of our annualized rental income as of June 30, 2024 had exercisable rights to terminate their leases before the stated terms of their leases expire. Also, in 2024, 2025, 2026, 2027, 2028, 2029, 2030, 2031, 2032, 2034, 2035, 2036, 2037 and 2040, early termination rights become exercisable by other tenants who occupied an additional approximately 0.5%, 3.6%, 1.4%, 1.5%, 3.9%, 2.6%, 1.7%, 0.6%, 0.4%, 0.2%, 0.9%, 0.1%, 0.1% and 0.3% of our rentable square feet, respectively, and contributed an additional approximately 0.8%, 6.6%, 2.1%, 2.1%, 4.8%, 2.3%, 2.3%, 0.7%, 0.6%, 0.7%, 1.3%, 0.3%, 0.2% and 0.4% of our annualized rental income, respectively, as of June 30, 2024. In addition, as of June 30, 2024, pursuant to leases with eight of our tenants, these tenants had rights to terminate their leases if their respective legislature or other funding authority does not appropriate rent amounts in their respective annual budgets. These eight tenants occupied approximately 3.8% of our rentable square feet and contributed approximately 3.9% of our annualized rental income as of June 30, 2024. (2) Leased square feet is pursuant to leases existing as of June 30, 2024, and includes (i) space being fitted out for tenant occupancy pursuant to our lease agreements, if any, and (ii) space which is leased, but is not occupied or is being offered for sublease by tenants, if any. Square feet measurements are subject to changes when space is remeasured or reconfigured for new tenants. (3) In July 2024, we extended the lease term through 2037 for a tenant that leases 554 square feet representing $16,210 in annualized rental income as of June 30, 2024. We generally will seek to renew or extend the terms of leases at properties with tenants when they expire. However, market and economic factors, along with increases in remote work, changes in space utilization and government spending and budget priorities, may cause our tenants not to renew or extend their leases when they expire, or to seek to renew their leases for less space than they currently occupy. If we are unable to extend or renew our leases, or we renew leases for reduced space, it may be time consuming and expensive to relet some of these properties. As of June 30, 2024, we derived 23.7% of our annualized rental income from our properties located in the metropolitan Washington, D.C. market area, which includes Washington, D.C., Northern Virginia and suburban Maryland. Current economic conditions in this area or a possible recession, including as a result of current inflationary conditions or otherwise, could reduce demand from tenants for our properties, reduce rents that our tenants in this area are willing to pay when our leases expire and increase lease concessions for new leases and renewals. Additionally, there has been a decrease in demand for new leased office space by the U.S. government, including in the metropolitan Washington, D.C. market area, and that could increase competition for government tenants and adversely affect our ability to retain government tenants or maintain or increase our rents when our leases expire. Our manager, RMR, employs a tenant review process for us. RMR assesses tenants on an individual basis based on various applicable credit criteria. In general, depending on facts and circumstances, RMR evaluates the creditworthiness of a tenant based on information concerning the tenant that is provided by the tenant and, in some cases, information that is publicly available or obtained from third party sources. We consider investment grade tenants to include: (a) investment grade rated tenants; (b) tenants with investment grade rated parent entities that guarantee the tenant’s lease obligations; and/or (c) tenants with investment grade rated parent entities that do not guarantee the tenant’s lease obligations. As of June 30, 2024, tenants contributing 52.3% of annualized rental income were investment grade rated (or their payment obligations were guaranteed by an investment grade rated parent) and tenants contributing an additional 8.5% of annualized rental income were subsidiaries of an investment grade rated parent (although these parent entities were not liable for the payment of rents). 20 Table of Contents As of June 30, 2024, tenants representing 1% or more of our total annualized rental income were as follows (square feet in thousands): Tenant Credit Rating Sq. Ft. % of Leased Sq. Ft. Annualized Rental Income % of Total Annualized Rental Income 1 U.S. Government Investment Grade 3,277 19.3 % $ 93,349 19.3 % 2 Alphabet Inc. (Google) Investment Grade 386 2.3 % 23,004 4.8 % 3 Shook, Hardy & Bacon L.L.P. Not Rated 596 3.5 % 19,604 4.1 % 4 IG Investments Holdings LLC Not Rated 339 2.0 % 18,319 3.8 % 5 Bank of America Corporation (1) Investment Grade 577 3.4 % 16,893 3.5 % 6 State of California Investment Grade 467 2.8 % 14,086 2.9 % 7 Northrop Grumman Corporation Investment Grade 337 2.0 % 10,781 2.2 % 8 Sonesta International Hotels Corporation Not Rated 234 1.4 % 10,404 2.2 % 9 State of Georgia Investment Grade 308 1.8 % 7,713 1.6 % 10 Sonoma Biotherapeutics, Inc. Not Rated 84 0.5 % 7,189 1.5 % 11 PNC Bank Investment Grade 441 2.6 % 7,019 1.5 % 12 Allstate Insurance Corporation Investment Grade 468 2.8 % 6,486 1.3 % 13 Automatic Data Processing, Inc. Investment Grade 289 1.7 % 6,346 1.3 % 14 Open Text Corporation Non Investment Grade 190 1.1 % 6,178 1.3 % 15 Compass Group plc Investment Grade 267 1.6 % 6,076 1.3 % 16 Church & Dwight Co., Inc. Investment Grade 250 1.5 % 6,048 1.3 % 17 Leidos Holdings Inc. Investment Grade 159 0.9 % 5,962 1.2 % 18 Primerica, Inc. Investment Grade 344 2.0 % 5,734 1.2 % 19 Science Applications International Corp Non Investment Grade 159 0.9 % 5,254 1.1 % 20 BAE Systems plc Investment Grade 165 1.0 % 4,892 1.0 % 21 Rocky Mountain University of Health Professions, Inc. Not Rated 170 1.0 % 4,862 1.0 % Total 9,507 56.1 % $ 286,199 59.4 % (1) In July 2024, we extended the lease term through 2037 for 554 square feet with this tenant. Disposition Activities During the six months ended June 30, 2024, we sold one property containing approximately 248,000 rentable square feet for a sales price of $38,500, excluding closing costs. The net proceeds from this sale were used to repay amounts outstanding under our revolving credit facility. We continue to evaluate our portfolio and are currently in various stages of marketing certain of our properties for sale, and we may seek to sell additional properties in the future. As of July 30, 2024, we have entered into agreements to sell 12 properties containing approximately 1,395,000 rentable square feet for an aggregate sales price of $93,539, excluding closing costs. We cannot be sure we will sell any properties we are marketing for sale for prices in excess of their carrying values or otherwise. In addition, our pending sales are subject to conditions; accordingly, we cannot be sure that we will complete these sales or that these sales will not be delayed or the terms will not change. For more information about our disposition activities, see Note 4 to our Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q. Segment Information We operate in one business segment: ownership of real estate properties. 21 Table of Contents RESULTS OF OPERATIONS (amounts in thousands, except per share amounts) Three Months Ended June 30, 2024, Compared to Three Months Ended June 30, 2023 Comparable Properties (1) Results Three Months Ended June 30, Non-Comparable Properties Results Three Months Ended June 30, Consolidated Results Three Months Ended June 30, 2024 2023 $ Change % Change 2024 2023 2024 2023 $ Change % Change Rental income $ 111,366 $ 118,411 $ (7,045) (5.9 %) $ 12,320 $ 15,586 $ 123,686 $ 133,997 $ (10,311) (7.7 %) Operating expenses: Real estate taxes 12,217 13,281 (1,064) (8.0 %) 2,510 2,620 14,727 15,901 (1,174) (7.4 %) Utility expenses 5,132 5,056 76 1.5 % 630 686 5,762 5,742 20 0.3 % Other operating expenses 24,178 23,120 1,058 4.6 % 2,973 3,514 27,151 26,634 517 1.9 % Total operating expenses 41,527 41,457 70 0.2 % 6,113 6,820 47,640 48,277 (637) (1.3 %) Net operating income (2) $ 69,839 $ 76,954 $ (7,115) (9.2 %) $ 6,207 $ 8,766 76,046 85,720 (9,674) (11.3 %) Other expenses: Depreciation and amortization 50,391 51,601 (1,210) (2.3 %) Loss on impairment of real estate 131,732 — 131,732 n/m Transaction related costs — 11,181 (11,181) n/m General and administrative 5,290 5,785 (495) (8.6 %) Total other expenses 187,413 68,567 118,846 173.3 % Loss on sale of real estate (64) (2,305) 2,241 (97.2 %) Interest and other income 226 337 (111) (32.9 %) Interest expense (38,349) (26,525) (11,824) 44.6 % Gain on early extinguishment of debt 225,798 — 225,798 n/m Income (loss) before income tax benefit (expense) and equity in net losses of investees 76,244 (11,340) 87,584 n/m Income tax benefit (expense) 107 (211) 318 (150.7 %) Equity in net losses of investees (180) (691) 511 (74.0 %) Net income (loss) $ 76,171 $ (12,242) $ 88,413 n/m Weighted average common shares outstanding (basic and diluted) 48,648 48,354 294 0.6 % Per common share amounts (basic and diluted): Net income (loss) $ 1.56 $ (0.25) $ 1.81 n/m n/m - not meaningful (1) Comparable properties consists of 131 properties we owned on June 30, 2024 and which we owned continuously since April 1, 2023 and excludes 15 properties classified as held for sale, five properties affected by significant redevelopment activities and two properties owned by an unconsolidated joint venture in which we own a 51% interest. (2) Our definition of net operating income, or NOI, and our reconciliation of net income (loss) to NOI are included below under the heading “Non-GAAP Financial Measures.” References to changes in the income and expense categories below relate to the comparison of consolidated results for the three months ended June 30, 2024, compared to the three months ended June 30, 2023. Rental income. Rental income for non-comparable properties declined $8,432 related to our property disposition activities, partially offset by an increase in rental income of $5,166 due to the lease-up of certain properties affected by significant redevelopment activities. Rental income for comparable properties declined $7,045 as a result of increased vacancies and lower rents from lease renewals at certain of our properties in the 2024 period. Rental income includes non-cash straight line rent adjustments totaling $7,563 in the 2024 period and $4,256 in the 2023 period, and amortization of acquired real estate leases and assumed real estate lease obligations totaling $56 in the 2024 period and $61 in the 2023 period. 22 Table of Contents Real estate taxes. Real estate taxes for non-comparable properties declined $1,520 related to our property disposition activities, partially offset by an increase of $1,410 due to the substantial completion of redevelopment activities at certain properties. Real estate taxes for comparable properties declined $1,064 primarily due to refunds received in the 2024 period as a result of successful tax appeals at certain of our properties. Utility expenses. Utility expenses for non-comparable properties declined $170 related to our property disposition activities, partially offset by an increase of $114 due to the substantial completion of redevelopment activities at certain properties. Utility expenses for comparable properties increased $76 primarily due to higher water and sewer costs in the 2024 period. Other operating expenses. Other operating expenses for non-comparable properties declined $1,193 related to our property disposition activities, partially offset by an increase of $652 due to the substantial completion of redevelopment activities at certain properties. Other operating expenses for comparable properties increased $1,058 due to higher repair and maintenance and insurance costs in the 2024 period. Depreciation and amortization. Depreciation and amortization for comparable properties declined $3,487 due to certain leasing related assets becoming fully depreciated since April 1, 2023, partially offset by depreciation and amortization of improvements made to certain of our properties since April 1, 2023. Depreciation and amortization for non-comparable properties increased $4,011 due to the substantial completion of redevelopment activities at certain properties, partially offset by a decline of $1,734 related to our property disposition activities. Loss on impairment of real estate. We recorded a $131,732 loss on impairment of real estate in the 2024 period to reduce the carrying value of 13 properties to their estimated fair values less costs to sell. Transaction related costs. Transaction related costs in the 2023 period consist of costs incurred in connection with our terminated merger with Diversified Healthcare Trust, or DHC, and related financings. General and administrative. The decrease in general and administrative expenses is primarily the result of a decrease in base business management fees resulting from a decrease in average total market capitalization and a decrease in share based compensation in the 2024 period compared to the 2023 period. Loss on sale of real estate. We recorded a $2,305 net loss on sale of real estate resulting from the sale of two properties in the 2023 period. Interest and other income. The decrease in interest and other income is primarily due to the effect of lower cash balances invested in the 2024 period compared to the 2023 period. Interest expense. The increase in interest expense is due to higher weighted average interest rates in the 2024 period. Gain on early extinguishment of debt . We recorded a gain on early extinguishment of debt of $225,798 in the 2024 period resulting from the Senior Note Exchange. For more information regarding the Senior Note Exchange, see Note 7 to our Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q. Income tax benefit (expense). Income tax benefit (expense) is primarily the result of operating income earned in jurisdictions where we are subject to state income taxes and can fluctuate based on the timing of our income, including as a result of gains or losses on the sale of real estate or the repayment of debt. Equity in net losses of investees. Equity in net losses of investees represents our proportionate share of losses from our investments in two unconsolidated joint ventures. Net income (loss). Net income (loss) and net income (loss) per basic and diluted common share increased in the 2024 period compared to the 2023 period primarily as a result of the changes noted above. 23 Table of Contents Six Months Ended June 30, 2024, Compared to Six Months Ended June 30, 2023 Comparable Properties (1) Results Six Months Ended June 30, Non-Comparable Properties Results Six Months Ended June 30, Consolidated Results Six Months Ended June 30, 2024 2023 $ Change % Change 2024 2023 2024 2023 $ Change % Change Rental income $ 225,059 $ 235,403 $ (10,344) (4.4 %) $ 38,062 $ 31,016 $ 263,121 $ 266,419 $ (3,298) (1.2 %) Operating expenses: Real estate taxes 25,444 26,214 (770) (2.9 %) 4,992 5,020 30,436 31,234 (798) (2.6 %) Utility expenses 12,099 11,252 847 7.5 % 1,814 1,750 13,913 13,002 911 7.0 % Other operating expenses 47,684 45,573 2,111 4.6 % 6,794 7,118 54,478 52,691 1,787 3.4 % Total operating expenses 85,227 83,039 2,188 2.6 % 13,600 13,888 98,827 96,927 1,900 2.0 % Net operating income (2) $ 139,832 $ 152,364 $ (12,532) (8.2 %) $ 24,462 $ 17,128 164,294 169,492 (5,198) (3.1 %) Other expenses: Depreciation and amortization 100,732 103,293 (2,561) (2.5 %) Loss on impairment of real estate 131,732 — 131,732 n/m Transaction related costs 233 14,399 (14,166) (98.4 %) General and administrative 10,934 11,710 (776) (6.6 %) Total other expenses 243,631 129,402 114,229 88.3 % (Loss) gain on sale of real estate (2,448) 243 (2,691) n/m Interest and other income 1,583 501 1,082 n/m Interest expense (73,825) (51,756) (22,069) 42.6 % Gain on early extinguishment of debt 225,373 — 225,373 n/m Income (loss) before income tax benefit (expense) and equity in net losses of investees 71,346 (10,922) 82,268 n/m Income tax benefit (expense) 51 (241) 292 (121.2 %) Equity in net losses of investees (410) (1,525) 1,115 (73.1 %) Net income (loss) $ 70,987 $ (12,688) $ 83,675 n/m Weighted average common shares outstanding (basic and diluted) 48,557 48,345 212 0.4 % Per common share amounts (basic and diluted): Net income (loss) $ 1.45 $ (0.27) $ 1.72 n/m n/m - not meaningful (1) Comparable properties consists of 131 properties we owned on June 30, 2024 and which we owned continuously since January 1, 2023 and excludes 15 properties classified as held for sale, five properties affected by significant redevelopment activities and two properties owned by an unconsolidated joint venture in which we own a 51% interest. (2) Our definition of NOI and our reconciliation of net income (loss) to NOI are included below under the heading “Non-GAAP Financial Measures.” References to changes in the income and expense categories below relate to the comparison of consolidated results for the six months ended June 30, 2024, compared to the six months ended June 30, 2023. Rental income. Rental income for non-comparable properties increased $8,535 due to the lease-up of certain properties affected by significant redevelopment activities, partially offset by a decline in rental income of $1,489 related to our property disposition activities. Rental income for comparable properties declined $10,344 as a result of increased vacancies and lower rents from lease renewals at certain of our properties in the 2024 period. Rental income includes non-cash straight line rent adjustments totaling $14,942 in the 2024 period and $8,429 in the 2023 period, and amortization of acquired real estate leases and assumed real estate lease obligations totaling $89 in the 2024 period and $140 in the 2023 period. Real estate taxes. Real estate taxes for non-comparable properties declined $2,366 related to our property disposition activities, partially offset by an increase of $2,337 due to the substantial completion of redevelopment activities at certain 24 Table of Contents properties. Real estate taxes for comparable properties declined $770 primarily due to refunds received in the 2024 period as a result of successful tax appeals at certain of our properties. Utility expenses. Utility expenses for non-comparable properties increased $485 due to the substantial completion of redevelopment activities at certain properties, partially offset by a decline of $420 related to our property disposition activities. Utility expenses for comparable properties increased $847 primarily due to the lease-up of certain previously vacant properties and increased utility expenses at newly vacant properties where tenants previously paid utility expenses directly in the 2024 period. Other operating expenses. Other operating expenses for non-comparable properties declined $1,492 related to our property disposition activities, partially offset by an increase of $1,168 due to the substantial completion of redevelopment activities at certain properties. Other operating expenses for comparable properties increased $2,111 due to higher repair and maintenance costs, snow removal costs and insurance costs in the 2024 period. Depreciation and amortization. Depreciation and amortization for comparable properties declined $6,440 due to certain leasing related assets becoming fully depreciated since January 1, 2023, partially offset by depreciation and amortization of improvements made to certain of our properties since January 1, 2023. Depreciation and amortization for non-comparable properties increased $7,040 due to the substantial completion of redevelopment activities at certain properties, partially offset by a decline of $3,161 related to our property disposition activities. Loss on impairment of real estate. We recorded a $131,732 loss on impairment of real estate in the 2024 period to reduce the carrying value of 13 properties to their estimated fair values less costs to sell. Transaction related costs. Transaction related costs consist of costs incurred in connection with our terminated merger with DHC and related financings. General and administrative. The decrease in general and administrative expenses is primarily the result of a decrease in base business management fees resulting from a decrease in average total market capitalization and a decrease in share based compensation in the 2024 period compared to the 2023 period. (Loss) gain on sale of real estate. We recorded a $2,448 loss on sale of real estate resulting from the sale of one property in the 2024 period. We recorded a $243 net gain on sale of real estate resulting from the sale of five properties in the 2023 period. Interest and other income. The increase in interest and other income is primarily due to the effect of higher cash balances invested in the 2024 period compared to the 2023 period. Interest expense. The increase in interest expense is due to higher weighted average interest rates and higher average outstanding debt balances in the 2024 period. Gain on early extinguishment of debt. We recorded a net gain on early extinguishment of debt of $225,373 in the 2024 period resulting from the Senior Note Exchange. For more information regarding the Senior Note Exchange, see Note 7 to our Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q. Income tax benefit (expense). Income tax benefit (expense) is primarily the result of operating income earned in jurisdictions where we are subject to state income taxes and can fluctuate based on the timing of our income, including as a result of gains or losses on the sale of real estate or repayment of debt. Equity in net losses of investees. Equity in net losses of investees represents our proportionate share of losses from our investments in two unconsolidated joint ventures. Net income (loss). Net income (loss) and net income (loss) per basic and diluted common share increased in the 2024 period compared to the 2023 period primarily as a result of the changes noted above. 25 Table of Contents Non-GAAP Financial Measures We present certain “non-GAAP financial measures” within the meaning of the applicable SEC rules, including the calculations below of NOI, funds from operations, or FFO, and normalized funds from operations, or Normalized FFO. These measures do not represent cash generated by operating activities in accordance with GAAP and should not be considered alternatives to net income (loss) as indicators of our operating performance or as measures of our liquidity. These measures should be considered in conjunction with net income (loss) as presented in our condensed consolidated statements of comprehensive income (loss). We consider these non-GAAP measures to be appropriate supplemental measures of operating performance for a REIT, along with net income (loss). We believe these measures provide useful information to investors because by excluding the effects of certain historical amounts, such as depreciation and amortization expense, they may facilitate a comparison of our operating performance between periods and with other REITs and, in the case of NOI, reflecting only those income and expense items that are generated and incurred at the property level may help both investors and management to understand the operations of our properties. Net Operating Income The calculation of NOI excludes certain components of net income (loss) in order to provide results that are more closely related to our property level results of operations. We calculate NOI as shown below. We define NOI as income from our rental of real estate less our property operating expenses. NOI excludes amortization of capitalized tenant improvement costs and leasing commissions that we record as depreciation and amortization expense. We use NOI to evaluate individual and company-wide property level performance. Other real estate companies and REITs may calculate NOI differently than we do. The following table presents the reconciliation of net income (loss) to NOI for the three and six months ended June 30, 2024 and 2023: Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Net income (loss) $ 76,171 $ (12,242) $ 70,987 $ (12,688) Equity in net losses of investees 180 691 410 1,525 Income tax (benefit) expense (107) 211 (51) 241 Income (loss) before income tax (benefit) expense and equity in net losses of investees 76,244 (11,340) 71,346 (10,922) Gain on early extinguishment of debt (225,798) — (225,373) — Interest expense 38,349 26,525 73,825 51,756 Interest and other income (226) (337) (1,583) (501) Loss (gain) on sale of real estate 64 2,305 2,448 (243) General and administrative 5,290 5,785 10,934 11,710 Transaction related costs — 11,181 233 14,399 Loss on impairment of real estate 131,732 — 131,732 — Depreciation and amortization 50,391 51,601 100,732 103,293 NOI $ 76,046 $ 85,720 $ 164,294 $ 169,492 26 Table of Contents Funds From Operations and Normalized Funds From Operations We calculate FFO and Normalized FFO as shown below. FFO is calculated on the basis defined by The National Association of Real Estate Investment Trusts, which is net income (loss), calculated in accordance with GAAP, plus real estate depreciation and amortization of consolidated properties and our proportionate share of the real estate depreciation and amortization of unconsolidated joint venture properties, but excluding impairment charges on real estate assets and any gain or loss on sale of real estate, as well as certain other adjustments currently not applicable to us. In calculating Normalized FFO, we adjust for the other items shown below and include business management incentive fees, if any, only in the fourth quarter versus the quarter when they are recognized as an expense in accordance with GAAP due to their quarterly volatility not necessarily being indicative of our core operating performance and the uncertainty as to whether any such business management incentive fees will be payable when all contingencies for determining such fees are known at the end of the calendar year. FFO and Normalized FFO are among the factors considered by our Board of Trustees when determining the amount of distributions to our shareholders. Other factors include, but are not limited to, requirements to maintain our qualification for taxation as a REIT, limitations in our credit agreement and public debt covenants, the availability to us of debt and equity capital, our expectation of our future capital requirements and operating performance and our expected needs for and availability of cash to pay our obligations. Other real estate companies and REITs may calculate FFO and Normalized FFO differently than we do. The following table presents the reconciliation of net income (loss) to FFO and Normalized FFO for the three and six months ended June 30, 2024 and 2023: Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Net income (loss) $ 76,171 $ (12,242) $ 70,987 $ (12,688) Add (less): Depreciation and amortization: Consolidated properties 50,391 51,601 100,732 103,293 Unconsolidated joint venture properties 611 868 1,253 1,698 Loss on impairment of real estate 131,732 — 131,732 — Loss (gain) on sale of real estate 64 2,305 2,448 (243) FFO 258,969 42,532 307,152 92,060 Add (less): Transaction related costs — 11,181 233 14,399 Gain on early extinguishment of debt (225,798) — (225,373) — Lease termination fees for sold property — — (10,524) — Normalized FFO $ 33,171 $ 53,713 $ 71,488 $ 106,459 Weighted average common shares outstanding (basic and diluted) 48,648 48,354 48,557 48,345 FFO per common share (basic and diluted) $ 5.32 $ 0.88 $ 6.33 $ 1.90 Normalized FFO per common share (basic and diluted) $ 0.68 $ 1.11 $ 1.47 $ 2.20 LIQUIDITY AND CAPITAL RESOURCES Our Operating Liquidity and Resources (dollar amounts in thousands, except per share amounts) Our principal sources of funds to meet operating and capital expenses, pay debt service obligations and make distributions to our shareholders are the operating cash flows we generate from our properties, net proceeds from property sales and borrowings under our revolving credit facility. We believe that these sources of funds will be sufficient to meet our operating and capital expenses, pay debt service obligations and make distributions to our shareholders for the next 12 months and for the foreseeable future thereafter. Our future cash flows from operating activities will depend primarily upon: • our ability to collect rent from our tenants; • our ability to maintain or increase the occupancy of, and the rental rates at, our properties; • our ability to control operating and capital expenses at our properties; • our ability to successfully sell properties that we market for sale; and 27 Table of Contents • our ability to develop, redevelop or reposition properties to produce cash flows in excess of our cost of capital and property operating and capital expenses. We plan to selectively sell certain properties from time to time to manage leverage levels and to improve our asset diversification, our geographic make-up and the average age of our properties, lengthen the weighted average term of our leases and increase tenant retention. During the six months ended June 30, 2024, we sold one property for an aggregate sales price of $38,500 , excluding closing costs. W e continue to evaluate our portfolio and are currently in various stages of marketing certain of our properties for sale. As of July 30, 2024, we had 12 properties containing approximately 1,395,000 rentable square feet which are under agreement to sell for an aggregate sales price of $93,539. We cannot be sure we will sell any properties we are marketing for sale for prices in excess of their carrying values or otherwise. In addition, our pending sales are subject to conditions; accordingly, we cannot be sure that we will complete these sales or that these sales will not be delayed or the terms will not change. The following is a summary of our sources and uses of cash flows for the periods presented, as reflected in our condensed consolidated statements of cash flows: Six Months Ended June 30, 2024 2023 Cash, cash equivalents and restricted cash at beginning of period $ 26,714 $ 12,249 Net cash provided by (used in): Operating activities 58,499 88,228 Investing activities (21,282) (129,960) Financing activities (29,544) 55,305 Cash, cash equivalents and restricted cash at end of period $ 34,387 $ 25,822 The decrease in cash provided by operating activities for the 2024 period compared to the 2023 period was primarily due to higher interest expense and decreased NOI due to property dispositions and reductions in occupied space at certain of our properties in the 2024 period. The decrease in cash used in investing activities in the 2024 period compared to the 2023 period was primarily due to decreased capital expenditures in the 2024 period and higher proceeds received from property sales. The change from cash provided by financing activities in the 2023 period to cash used in financing activities in the 2024 period was primarily due to lower net borrowings and payment of debt issuance costs, partially offset by decreased distributions to our common shareholders in the 2024 period. Our Investment and Financing Liquidity and Resources (dollar amounts in thousands, except per share amounts) In order to meet cash needs that may result from our desire or need to make distributions or pay operating or capital expenses or fund acquisitions, we maintain a revolving credit facility which is governed by our credit agreement. Our obligations under our credit agreement are secured by a pledge by certain of our subsidiaries of all of their respective equity interests in certain of our direct and indirect property owning subsidiaries and first mortgage liens on 19 properties owned by the pledged subsidiaries with a gross book value of real estate assets of $1,001,437 as of June 30, 2024. We can borrow, repay and reborrow funds available under our revolving credit facility until maturity, and no principal repayments 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 based on a rate of 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 June 30, 2024. As of June 30, 2024, the annual interest rate payable on borrowings under our credit agreement was 8.9%. As of June 30, 2024 and July 30, 2024, we had $178,000 and $190,000, respectively, outstanding under our revolving credit facility, $100,000 outstanding under our term loan and $147,000 and $135,000, respectively, available for borrowing under our revolving credit facility. 28 Table of Contents Senior Secured Notes Issuance and Senior Unsecured Notes Redemption In February 2024, we issued $300,000 of the 2029 Notes. The aggregate net proceeds from this offering were $270,712, 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 $618,644 as of June 30, 2024. The 2029 Notes require semi-annual payments of interest only and are prepayable, at par plus accrued interest, after March 31, 2028. In March 2024, we redeemed, at par plus accrued interest, all $350,000 of our 4.25% senior unsecured notes due 2024 using the proceeds from the 2029 Notes and borrowings under our revolving credit facility. Senior Notes Exchange In June 2024, in connection with the Senior Note Exchange, we exchanged $567,429 of the New 2029 Notes for $865,219 aggregate principal of the Existing Notes. The New 2029 Notes are fully and unconditionally guaranteed on a joint, several and senior secured basis by certain of our subsidiaries and are secured by first mortgage liens on 19 properties with a gross book value of real estate assets of $715,986 as of June 30, 2024 and second mortgage liens on the 19 properties securing our credit agreement. The New 2029 Notes require semi-annual payments of interest only and are prepayable, at par plus accrued interest, after June 3, 2028. For more information regarding the Senior Note Exchange and the New 2029 Notes, see Note 7 to our Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q. As of June 30, 2024, our debt maturities (other than our revolving credit facility), consisting of senior notes, a term loan and mortgage notes, were as follows: Year Debt Maturities 2024 $ — 2025 499,154 2026 140,488 2027 180,784 2028 123,487 2029 and thereafter 1,197,617 Total $ 2,141,530 None of our unsecured debt obligations require sinking fund payments prior to their maturity dates. Our mortgage notes currently require monthly payments of interest only; however, certain of our mortgage notes will require payments of principal and interest after a specified date through maturity. In addition to our debt obligations, as of June 30, 2024, we had estimated unspent leasing related obligations of $80,649, of which we expect to spend $40,947 over the next 12 months. We currently expect to use cash balances, borrowings under our revolving credit facility, net proceeds from property sales, incurrences or assumptions of mortgage debt and net proceeds from offerings of debt or equity securities to fund our future operations, capital expenditures, distributions to our shareholders and property acquisitions. When significant amounts are outstanding under our credit agreement or the maturities of our indebtedness approach, we expect to explore refinancing alternatives. Such alternatives may include incurring term debt, issuing debt or equity securities, extending the maturity date of our revolving credit facility and entering into a new credit facility. We may assume additional mortgage debt in connection with our acquisitions or elect to place new mortgages on properties we own as a source of financing. We may also seek to participate in additional joint ventures or other arrangements that may provide us with additional sources of financing. Although we cannot be sure that we will be successful in consummating any particular type of financing, we believe that we will have access to financing, such as debt and equity offerings, to fund capital expenditures and to pay our obligations or fund future acquisitions. We currently have an effective shelf registration statement that allows us to issue public securities on an expedited basis, but it does not assure that there will be buyers for such securities. We currently do not have sufficient sources of liquidity to repay our $499,154 senior unsecured notes due 2025 and are evaluating market-based alternatives to obtain debt or equity 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 29 Table of Contents due. Additionally, as we have evaluated our financing options, we have determined that certain assets in our portfolio may not be suitable for secured financing. We are considering whether to sell those assets to raise cash and are at various stages of the sales process for those properties. We also continue to engage with Moelis & Company LLC as our financial advisor to assist in evaluating our options to address our upcoming debt maturities. Our ability to obtain, and the costs of, our future debt financings will depend primarily on credit market conditions and our creditworthiness. We have no control over market conditions. Potential investors and lenders likely will evaluate our ability to pay distributions to shareholders, fund required debt service and repay debts when they become due by reviewing our business practices and plans to balance our use of debt and equity capital so that our financial profile and leverage ratios afford us flexibility to withstand any reasonably anticipated adverse changes. Similarly, our ability to raise equity capital in the future will depend primarily upon equity capital market conditions and our ability to conduct our business to maintain and grow our operating cash flows. We intend to conduct our business in a manner that will afford us reasonable access to capital for investment and financing activities, but we cannot be sure that we will be able to successfully carry out this intention. For instance, it is uncertain what the ultimate impacts of inflationary pressures, sustained high interest rates, deteriorating office fundamentals and market sentiment toward the office sector or any economic recession will be. A protracted and extensive economic recession, further deterioration of office fundamentals or continued or intensified disruptions in capital markets could limit our access to financing from public sources, would likely increase our cost of capital and impact our ability to satisfy covenants and conditions under our credit agreement or senior notes. During the six months ended June 30, 2024, we paid quarterly distributions to our shareholders totaling $975 using cash on hand. On July 11, 2024, we declared a regular quarterly distribution payable to shareholders of record on July 22, 2024 of $0.01 per share, or approximately $503. We expect to pay this distribution on or about August 15, 2024 using cash on hand. We determine our distribution payout ratio with consideration for restrictions under our credit agreement, our expected capital expenditures, cash flows from operations and payment of debt obligations. For more information regarding the distributions we paid and declared during 2024, see Note 9 to our Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q. We owned a 51% interest in an unconsolidated joint venture which owned two properties at June 30, 2024. As of June 30, 2024, the properties owned by this joint venture were encumbered by $50,000 principal amount of mortgage indebtedness, none of which is recourse to us. As of June 30, 2024, we did not control the activities that are most significant to this joint venture and, as a result, we accounted for our investment in this joint venture under the equity method of accounting. For more information on the financial condition and results of operations of this joint venture, see Note 4 to our Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q. Other than this joint venture, as of June 30, 2024, we had no off balance sheet arrangements that have had or that we expect would be reasonably likely to have a material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources. Debt Covenants (dollars in thousands) Our principal debt obligations as of June 30, 2024 consisted of $178,000 of borrowings outstanding under our revolving credit facility, $100,000 outstanding principal amount under our secured term loan, an outstanding principal balance of $1,864,210 of senior notes and mortgage notes with an outstanding principal balance of $177,320. Also, the two properties owned by the joint venture in which we owned a 51% interest secured an additional mortgage note. Our senior notes are governed by indentures and their supplements. Our credit agreement and our senior notes indentures and their supplements provide for acceleration of payment of all amounts outstanding 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 our senior notes indentures and their supplements also contain a number of covenants, including those that restrict our ability to incur debts, including debts secured by mortgages on our properties, in excess of calculated amounts, 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. As of June 30, 2024, we believe we were in compliance with the terms and conditions of our respective covenants under our credit agreement and our senior notes indentures and their supplements. Our mortgage notes are non-recourse, subject to certain limited exceptions, and do not contain any material financial covenants. As of June 30, 2024, adjusted total assets for covenant purposes as defined in our senior notes indentures were $5,092,680. Assets serving as collateral under our credit agreement, our secured senior notes or mortgage notes represented $2,729,020 of adjusted total assets, as defined in our senior notes indentures. Our unencumbered assets represented $2,363,660 of adjusted total assets. 30 Table of Contents The following table presents the calculation of adjusted total assets to total assets in accordance with GAAP as of June 30, 2024: Total assets $ 3,799,856 Plus: accumulated depreciation 610,698 Plus: adjustments to reflect original cost of real estate assets 1,047,943 Less: accounts receivable and intangibles (365,817) Adjusted total assets $ 5,092,680 Neither our credit agreement nor our senior notes indentures and their supplements contain provisions for acceleration which could be triggered by our credit ratings. Our credit agreement and our senior notes indentures and their supplements contain cross default provisions to any other debts of more than $25,000 (or more than $50,000 in certain circumstances). Related Person Transactions We have relationships and historical and continuing transactions with RMR, RMR Inc. and others related to them. For more information about these and other such relationships and related person transactions, see Notes 10 and 11 to our Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q, our 2023 Annual Report, our definitive Proxy Statement for our 2024 Annual Meeting of Shareholders and our other filings with the SEC. In addition, see the section captioned “Risk Factors” in Part I, Item 1A of our 2023 Annual Report for a description of risks that may arise as a result of these and other related person transactions and relationships. We may engage in additional transactions with related persons, including businesses to which RMR or its subsidiaries provide management services. Critical Accounting Estimates The preparation of our Condensed Consolidated Financial Statements in conformity with GAAP requires us to make estimates and assumptions that affect reported amounts. Actual results could differ from those estimates. 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. A discussion of our critical accounting estimates is included in our 2023 Annual Report. There have been no significant changes in our critical accounting estimates since the year ended December 31, 2023. 31 Table of Contents