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 REIT organized under Maryland law. As of September 30, 2024, our wholly owned properties were comprised of 145 properties and we had a noncontrolling ownership interest of 51% in an unconsolidated joint venture that owned two properties containing approximately 346,000 rentable square feet. As of September 30, 2024, our properties are located in 30 states and the District of Columbia and contain approximately 19,543,000 rentable square feet. As of September 30, 2024, our properties were leased to 237 different tenants with a weighted average remaining lease term (based on annualized rental income) of approximately 7.2 years. The U.S. government is our largest tenant, representing approximately 16.6% of our annualized rental income as of September 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 September 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 4.4% and 9.8% 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 office sector and our portfolio. 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 at 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. As of October 30, 2024, our total available liquidity was comprised of $146,448 of cash and, in addition to long-term debt, we had $456,700 of the 2025 Notes due on February 1, 2025. Given the limited alternatives available to us to obtain debt or equity to refinance our maturing debt, the illiquid nature of our real estate assets and our ability to incur additional debt while maintaining compliance with the financial covenants in our existing debt agreements, we are currently in negotiations with certain holders of the 2025 Notes regarding a potential note exchange. However, we are not able to conclude that it is probable that the negotiations will result in an exchange that refinances the 2025 Notes prior to their maturity. Accordingly, we have concluded that there is substantial doubt about our ability to continue as a going concern for at least one year from the date of issuance of our Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q, or October 30, 2024. 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 September 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. 19 Table of Contents Occupancy data for our properties as of September 30, 2024 and 2023 was as follows (square feet in thousands): All Properties (1) Comparable Properties (2) September 30, September 30, 2024 2023 2024 2023 Total properties 145 154 123 123 Total rentable square feet (3) 19,543 20,705 16,881 16,803 Percent leased (4) 82.8 % 89.9 % 89.3 % 93.9 % (1) Based on properties we owned on September 30, 2024 and 2023, respectively. (2) Based on properties we owned continuously since January 1, 2023; excludes 17 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. The average effective rental rate per square foot for our properties for the three and nine months ended September 30, 2024 and 2023 were as follows: Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Average effective rental rate per square foot (1) : All properties (2) $ 29.34 $ 29.37 $ 30.21 $ 29.25 Comparable properties (3) $ 28.97 $ 29.25 $ 28.87 $ 29.21 (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 September 30, 2024 and 2023, respectively. (3) Based on properties we owned continuously since July 1, 2023 and January 1, 2023; excludes 17 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 nine months ended September 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 September 30, 2024 Nine Months Ended September 30, 2024 Leased Available for Lease Total Leased Available for Lease Total Beginning of period 16,943 3,350 20,293 17,848 2,693 20,541 Changes resulting from: Disposition of properties (301) (449) (750) (549) (449) (998) Lease expirations (1,448) 1,448 — (2,801) 2,801 — Lease renewals (1) 947 (947) — 1,574 (1,574) — New leases (1) 40 (40) — 109 (109) — End of period 16,181 3,362 19,543 16,181 3,362 19,543 (1) Based on leases entered during the three and nine months ended September 30, 2024, respectively. 20 Table of Contents During the three and nine months ended September 30, 2024, we entered into new and renewal leases as summarized in the following table (square feet in thousands): Three Months Ended September 30, 2024 New Leases Renewals Total Rentable square feet leased 40 947 987 Weighted average rental rate change (by rentable square feet) 26.3 % 0.5 % 1.7 % Tenant leasing costs and concession commitments (1) $ 1,571 $ 64,345 $ 65,916 Tenant leasing costs and concession commitments per rentable square foot (1) $ 38.64 $ 68.01 $ 66.80 Weighted (by square feet) average lease term (years) 8.9 10.2 10.2 Total leasing costs and concession commitments per rentable square foot per year (1) $ 4.36 $ 6.65 $ 6.57 Nine Months Ended September 30, 2024 New Leases Renewals Total Rentable square feet leased 109 1,574 1,683 Weighted average rental rate change (by rentable square feet) (4.1 %) 3.3 % 2.7 % Tenant leasing costs and concession commitments (1) $ 5,084 $ 75,791 $ 80,875 Tenant leasing costs and concession commitments per rentable square foot (1) $ 46.66 $ 48.16 $ 48.07 Weighted (by square feet) average lease term (years) 6.6 9.3 9.1 Total leasing costs and concession commitments per rentable square foot per year (1) $ 7.05 $ 5.17 $ 5.26 (1) Includes commitments made for leasing expenditures and concessions, such as tenant improvements, leasing commissions, tenant reimbursements and free rent. During the three and nine months ended September 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 nine months ended September 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 September 30, 2024 Nine Months Ended September 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 $ — $ 32.89 2 $ 28.64 $ 44.30 258 Lease renewals $ 26.38 $ 26.45 1,078 $ 22.74 $ 23.51 1,642 Total leasing activity $ 26.33 $ 26.46 1,080 $ 23.55 $ 26.33 1,900 (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. 21 Table of Contents During the three and nine months ended September 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 September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Lease related costs (1) $ 29,148 $ 15,677 $ 71,881 $ 56,970 Building improvements (2) 5,225 8,516 13,784 18,453 Recurring capital expenditures 34,373 24,193 85,665 75,423 Development, redevelopment and other activities (3) 864 28,326 11,637 118,232 Total capital expenditures $ 35,237 $ 52,519 $ 97,302 $ 193,655 (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 nine months ended September 30, 2024 and $1,978 and $8,691 for the three and nine months ended September 30, 2023, respectively. We did not capitalize any interest and other operating costs during the three months ended September 30, 2024. As of September 30, 2024, we had estimated unspent leasing related obligations of $100,646, of which we expect to spend $66,949 over the next 12 months. As of September 30, 2024, we had leases at our properties totaling approximately 3,090,000 rentable square feet that were scheduled to expire through December 31, 2025. As of October 29, 2024, we expect tenants with leases totaling approximately 2,637,000 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 2,637,000 rentable square feet leased to tenants known to be vacating, 1,765,000 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 ne gotiate and enter leases or lease renewals will generally determine rental rates and demand for leased space at our properties, all of which 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 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, 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 attract new tenants to our properties. 22 Table of Contents As of September 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 23 1,281 7.9 % 7.9 % $ 19,914 4.4 % 4.4 % 2025 43 1,809 11.2 % 19.1 % 44,298 9.8 % 14.2 % 2026 38 528 3.3 % 22.4 % 18,237 4.0 % 18.2 % 2027 32 1,872 11.6 % 34.0 % 47,018 10.4 % 28.6 % 2028 18 649 4.0 % 38.0 % 31,019 6.9 % 35.5 % 2029 36 1,083 6.7 % 44.7 % 33,298 7.4 % 42.9 % 2030 28 1,083 6.7 % 51.4 % 30,356 6.7 % 49.6 % 2031 20 1,255 7.8 % 59.2 % 31,233 6.9 % 56.5 % 2032 13 502 3.1 % 62.3 % 17,412 3.8 % 60.3 % 2033 and thereafter 53 6,119 37.7 % 100.0 % 180,040 39.7 % 100.0 % Total 304 16,181 100.0 % $ 452,825 100.0 % Weighted average remaining lease term (in years) 6.6 7.2 (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 September 30, 2024, tenants occupying approximately 2.2% of our rentable square feet and responsible for approximately 2.6% of our annualized rental income as of September 30, 2024 had exercisable rights to terminate their leases before the stated terms of their leases expire. Also, in 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 2.0%, 1.4%, 1.6%, 4.1%, 2.7%, 1.8%, 0.6%, 3.2%, 0.3%, 0.9%, 0.1%, 0.2% and 0.3% of our rentable square feet, respectively, and contributed an additional approximately 0.1%, 2.4%, 2.2%, 2.3%, 5.1%, 2.5%, 2.4%, 0.7%, 4.4%, 0.7%, 1.4%, 0.3%, 0.2% and 0.4% of our annualized rental income, respectively, as of September 30, 2024. In addition, as of September 30, 2024, pursuant to leases with seven 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 seven tenants occupied approximately 3.9% of our rentable square feet and contributed approximately 4.2% of our annualized rental income as of September 30, 2024. (2) Leased square feet is pursuant to leases existing as of September 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. 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 our properties. As of September 30, 2024, we derived 24.1% 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 September 30, 2024, tenants contributing 51.2% 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 8.2% of annualized rental income were subsidiaries of an investment grade rated parent (although these parent entities were not liable for the payment of rents). 23 Table of Contents As of September 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 2,896 17.9 % $ 75,190 16.6 % 2 Alphabet Inc. (Google) Investment Grade 386 2.4 % 23,004 5.1 % 3 Shook, Hardy & Bacon L.L.P. Not Rated 596 3.7 % 19,604 4.3 % 4 IG Investments Holdings LLC Not Rated 339 2.1 % 18,303 4.0 % 5 Bank of America Corporation Investment Grade 577 3.6 % 17,290 3.8 % 6 State of California Investment Grade 431 2.7 % 12,745 2.8 % 7 Sonesta International Hotels Corporation Not Rated 240 1.5 % 10,828 2.4 % 8 Northrop Grumman Corporation Investment Grade 337 2.1 % 10,781 2.4 % 9 State of Georgia Investment Grade 308 1.9 % 7,713 1.7 % 10 Sonoma Biotherapeutics, Inc. Not Rated 84 0.5 % 7,189 1.6 % 11 PNC Bank Investment Grade 441 2.7 % 7,019 1.6 % 12 Automatic Data Processing, Inc. Investment Grade 289 1.8 % 6,346 1.4 % 13 Allstate Insurance Corporation Investment Grade 458 2.8 % 6,270 1.4 % 14 Open Text Corporation Non Investment Grade 166 1.0 % 6,178 1.4 % 15 Compass Group plc Investment Grade 267 1.7 % 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 1.0 % 5,962 1.3 % 18 Primerica, Inc. Investment Grade 344 2.1 % 5,734 1.3 % 19 Science Applications International Corp Non Investment Grade 159 1.0 % 5,254 1.2 % 20 Rocky Mountain University of Health Professions, Inc. Not Rated 170 1.1 % 4,862 1.1 % 21 Berkshire Hathaway Inc. Investment Grade 134 0.8 % 4,674 1.0 % 22 CommScope Holding Company Inc. Non Investment Grade 96 0.6 % 4,546 1.0 % Total 9,127 56.5 % $ 271,616 60.0 % Disposition Activities During the nine months ended September 30, 2024, we sold seven properties containing approximately 998,000 rentable square feet for a sales price of $84,810, excluding closing costs. The net proceeds from these sales 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 October 29, 2024, we have entered into agreements to sell 17 properties containing approximately 1,609,000 rentable square feet for an aggregate sales price of $119,152, 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 pricing 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. 24 Table of Contents RESULTS OF OPERATIONS (amounts in thousands, except per share amounts) Three Months Ended September 30, 2024, Compared to Three Months Ended September 30, 2023 Comparable Properties (1) Results Three Months Ended September 30, Non-Comparable Properties Results Three Months Ended September 30, Consolidated Results Three Months Ended September 30, 2024 2023 $ Change % Change 2024 2023 2024 2023 $ Change % Change Rental income $ 109,781 $ 112,939 $ (3,158) (2.8 %) $ 10,839 $ 20,422 $ 120,620 $ 133,361 $ (12,741) (9.6 %) Operating expenses: Real estate taxes 14,173 12,638 1,535 12.1 % 2,754 1,619 16,927 14,257 2,670 18.7 % Utility expenses 6,805 6,340 465 7.3 % 1,064 1,120 7,869 7,460 409 5.5 % Other operating expenses 23,636 23,439 197 0.8 % 2,983 4,507 26,619 27,946 (1,327) (4.7 %) Total operating expenses 44,614 42,417 2,197 5.2 % 6,801 7,246 51,415 49,663 1,752 3.5 % Net operating income (2) $ 65,167 $ 70,522 $ (5,355) (7.6 %) $ 4,038 $ 13,176 69,205 83,698 (14,493) (17.3 %) Other expenses: Depreciation and amortization 46,047 52,266 (6,219) (11.9 %) Loss on impairment of real estate 41,847 — 41,847 n/m Transaction related costs 738 16,135 (15,397) (95.4 %) General and administrative 4,927 5,720 (793) (13.9 %) Total other expenses 93,559 74,121 19,438 26.2 % Gain on sale of real estate 8,456 244 8,212 n/m Interest and other income 196 281 (85) (30.2 %) Interest expense (42,580) (28,835) (13,745) 47.7 % Gain on early extinguishment of debt 264 — 264 n/m Loss before income tax expense and equity in earnings of unconsolidated joint venture (58,018) (18,733) (39,285) n/m Income tax expense (230) (95) (135) 142.1 % Equity in net losses of investees (166) (765) 599 (78.3 %) Net loss $ (58,414) $ (19,593) $ (38,821) 198.1 % Weighted average common shares outstanding (basic and diluted) 51,197 48,403 2,794 5.8 % Per common share amounts (basic and diluted): Net loss $ (1.14) $ (0.41) $ (0.73) 178.0 % n/m - not meaningful (1) Comparable properties consists of 123 properties we owned on September 30, 2024 and which we owned continuously since July 1, 2023 and excludes 17 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 September 30, 2024, compared to the three months ended September 30, 2023. Rental income. Rental income for non-comparable properties declined $14,129 related to our property disposition activities, partially offset by an increase in rental income of $4,546 due to the lease-up of certain properties affected by significant redevelopment activities. Rental income for comparable properties declined $3,158 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 $8,854 in the 2024 period and $8,691 in the 2023 period, and amortization of acquired real estate leases and assumed real estate lease obligations totaling ($59) in the 2024 period and $56 in the 2023 period. 25 Table of Contents Real estate taxes. Real estate taxes increased $2,217 for redevelopment properties due to the substantial completion of redevelopment activities at certain properties and $1,535 for comparable properties resulting from successful tax appeals at certain of our properties in the 2023 period, partially offset by a decrease of $1,082 related to our property disposition activities. Utility expenses. Utility expenses for comparable properties increased $465 primarily due to higher electricity costs in the 2024 period and $51 due to the substantial completion of redevelopment activities at certain properties, partially offset by a decrease of $107 related to our property disposition activities. Other operating expenses. Other operating expenses for non-comparable properties declined $2,133 related to our property disposition activities, partially offset by an increase of $609 due to the substantial completion of redevelopment activities at certain properties. Other operating expenses for comparable properties increased $197 due to higher repair and maintenance and salary costs in the 2024 period. Depreciation and amortization. Depreciation and amortization for comparable properties declined $519 due to certain leasing related assets becoming fully depreciated since July 1, 2023, partially offset by depreciation and amortization of improvements made to certain of our properties since July 1, 2023. Depreciation and amortization for non-comparable properties increased $2,551 due to the substantial completion of redevelopment activities at certain properties, partially offset by a decline of $8,251 related to our property disposition activities. Loss on impairment of real estate. We recorded a $41,847 loss on impairment of real estate in the 2024 period to reduce the carrying value of 10 properties to their estimated fair values less costs to sell. Transaction related costs. Transaction related costs in the 2024 period consist of costs related to our evaluation of potential financing transactions. 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. Gain on sale of real estate. We recorded a $8,456 net gain on sale of real estate resulting from the sale of six properties in the 2024 period. We recorded a $244 gain on sale of real estate resulting from the sale of one property 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 $264 in the 2024 period resulting from the exchange of certain of the 2025 Notes for our common shares. For more information regarding these exchanges, 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 expense. Income tax 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 loss. Net loss and net loss per basic and diluted common share decreased in the 2024 period compared to the 2023 period primarily as a result of the changes noted above. 26 Table of Contents Nine Months Ended September 30, 2024, Compared to Nine Months Ended September 30, 2023 Comparable Properties (1) Results Nine Months Ended September 30, Non-Comparable Properties Results Nine Months Ended September 30, Consolidated Results Nine Months Ended September 30, 2024 2023 $ Change % Change 2024 2023 2024 2023 $ Change % Change Rental income $ 329,763 $ 340,686 $ (10,923) (3.2 %) $ 53,978 $ 59,094 $ 383,741 $ 399,780 $ (16,039) (4.0 %) Operating expenses: Real estate taxes 38,740 38,017 723 1.9 % 8,623 7,474 47,363 45,491 1,872 4.1 % Utility expenses 18,738 17,534 1,204 6.9 % 3,044 2,928 21,782 20,462 1,320 6.5 % Other operating expenses 70,355 67,932 2,423 3.6 % 10,742 12,705 81,097 80,637 460 0.6 % Total operating expenses 127,833 123,483 4,350 3.5 % 22,409 23,107 150,242 146,590 3,652 2.5 % Net operating income (2) $ 201,930 $ 217,203 $ (15,273) (7.0 %) $ 31,569 $ 35,987 233,499 253,190 (19,691) (7.8 %) Other expenses: Depreciation and amortization 146,779 155,559 (8,780) (5.6 %) Loss on impairment of real estate 173,579 — 173,579 n/m Transaction related costs 971 30,534 (29,563) (96.8 %) General and administrative 15,861 17,430 (1,569) (9.0 %) Total other expenses 337,190 203,523 133,667 65.7 % Gain on sale of real estate 6,008 487 5,521 n/m Interest and other income 1,779 782 997 127.5 % Interest expense (116,405) (80,591) (35,814) 44.4 % Gain on early extinguishment of debt 225,637 — 225,637 n/m Income (loss) before income tax expense and equity in earnings of unconsolidated joint venture 13,328 (29,655) 42,983 (144.9 %) Income tax expense (179) (336) 157 (46.7 %) Equity in net losses of investees (576) (2,290) 1,714 (74.8 %) Net income (loss) $ 12,573 $ (32,281) $ 44,854 (138.9 %) Weighted average common shares outstanding (basic and diluted) 49,444 48,365 1,079 2.2 % Per common share amounts (basic and diluted): Net (loss) income $ 0.25 $ (0.67) $ 0.92 (137.3 %) n/m - not meaningful (1) Comparable properties consists of 123 properties we owned on September 30, 2024 and which we owned continuously since January 1, 2023 and excludes 17 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 nine months ended September 30, 2024, compared to the nine months ended September 30, 2023. Rental income. Rental income for non-comparable properties decreased $18,197 related to our property disposition activities, partially offset by an increase in rental income of $13,081 due to the lease-up of certain properties affected by significant redevelopment activities. Rental income for comparable properties declined $10,923 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 $23,796 in the 2024 period and $17,120 in the 2023 period, and amortization of acquired real estate leases and assumed real estate lease obligations totaling $30 in the 2024 period and $196 in the 2023 period. Real estate taxes. Real estate taxes for non-comparable properties increased $4,553 due to the substantial completion of redevelopment activities at certain properties, partially offset by a decrease of $3,404 related to our property disposition 27 Table of Contents activities. Real estate taxes for comparable properties increased $723 primarily due to successful tax appeals at certain of our properties in the 2023 period. Utility expenses. Utility expenses increased $536 due to the substantial completion of redevelopment activities at certain properties and $1,204 for comparable properties 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, partially offset by a decline of $420 related to our property disposition activities. Other operating expenses. Other operating expenses for comparable properties increased $2,423 due to higher repair and maintenance costs, snow removal costs and insurance costs in the 2024 period and $1,778 due to the substantial completion of redevelopment activities at certain properties, partially offset by a decline of $3,741 related to our property disposition activities. Depreciation and amortization. Depreciation and amortization for comparable properties declined $6,103 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 $9,590 due to the substantial completion of redevelopment activities at certain properties, partially offset by a decline of $12,267 related to our property disposition activities. Loss on impairment of real estate. We recorded a $173,579 loss on impairment of real estate in the 2024 period to reduce the carrying value of 16 properties to their estimated fair values less costs to sell. Transaction related costs. Transaction related costs in the 2024 period consist of costs related to our evaluation of potential financing transactions. Transaction related costs in the 2023 period 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. Gain on sale of real estate. We recorded a $6,008 net gain on sale of real estate resulting from the sale of seven properties in the 2024 period. We recorded a $487 net gain on sale of real estate resulting from the sale of six 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 in the 2024 period. Gain on early extinguishment of debt. We recorded a gain on early extinguishment of debt of $225,637 in the 2024 period resulting from the Senior Note Exchange and exchanges of certain of the 2025 Notes for our common shares. For more information regarding the Senior Note Exchange and the exchanges of the 2025 Notes for our common shares, 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 expense. Income tax 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. 28 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 (loss) income as indicators of our operating performance or as measures of our liquidity. These measures should be considered in conjunction with net (loss) income as presented in our condensed consolidated statements of comprehensive net (loss) income. We consider these non-GAAP measures to be appropriate supplemental measures of operating performance for a REIT, along with net (loss) income. 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 (loss) income 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 nine months ended September 30, 2024 and 2023: Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Net (loss) income $ (58,414) $ (19,593) $ 12,573 $ (32,281) Equity in net losses of investees 166 765 576 2,290 Income tax expense 230 95 179 336 (Loss) income before income tax expense and equity in net losses of investees (58,018) (18,733) 13,328 (29,655) Gain on early extinguishment of debt (264) — (225,637) — Interest expense 42,580 28,835 116,405 80,591 Interest and other income (196) (281) (1,779) (782) Gain on sale of real estate (8,456) (244) (6,008) (487) General and administrative 4,927 5,720 15,861 17,430 Transaction related costs 738 16,135 971 30,534 Loss on impairment of real estate 41,847 — 173,579 — Depreciation and amortization 46,047 52,266 146,779 155,559 NOI $ 69,205 $ 83,698 $ 233,499 $ 253,190 29 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 (loss) income, 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 (loss) income to FFO and Normalized FFO for the three and nine months ended September 30, 2024 and 2023: Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Net (loss) income $ (58,414) $ (19,593) $ 12,573 $ (32,281) Add (less): Depreciation and amortization: Consolidated properties 46,047 52,266 146,779 155,559 Unconsolidated joint venture properties 616 840 1,869 2,538 Loss on impairment of real estate 41,847 — 173,579 — Gain on sale of real estate (8,456) (244) (6,008) (487) FFO 21,640 33,269 328,792 125,329 Add (less): Transaction related costs 738 16,135 971 30,534 Gain on early extinguishment of debt (264) — (225,637) — Lease termination fees for sold property — — (10,524) — Normalized FFO $ 22,114 $ 49,404 $ 93,602 $ 155,863 Weighted average common shares outstanding (basic and diluted) 51,197 48,403 49,444 48,365 FFO per common share (basic and diluted) $ 0.42 $ 0.69 $ 6.65 $ 2.59 Normalized FFO per common share (basic and diluted) $ 0.43 $ 1.02 $ 1.89 $ 3.22 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. 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 • 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. 30 Table of Contents The office industry has been adversely affected by shifts in office space utilization, including increased remote work arrangements and tenants consolidating their real estate footprint. Demand for office space continues to face headwinds and the duration and ultimate impact of current trends on our properties remains uncertain and subject to change. These conditions continue to have a significant negative impact on our results of operations, financial position and cash flows. We are actively pursuing several strategic initiatives to improve liquidity, including asset sales and debt refinancing opportunities. 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 nine months ended September 30, 2024 , we sold seven properties for an aggregate sales price of $84,810 , 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 October 29, 2024, we had 17 properties containing approximately 1,609,000 rentable square feet which are under agreement to sell for an aggregate sales price of $119,152. 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 pricing 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: Nine Months Ended September 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 41,442 109,133 Investing activities (13,251) (156,942) Financing activities (18,636) 75,188 Cash, cash equivalents and restricted cash at end of period $ 36,269 $ 39,628 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, partially offset by 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 pay operating or capital expenses, make distributions 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 $1,012,536 as of September 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 September 30, 2024. As of September 30, 2024, the annual interest rate payable on borrowings under our credit agreement was 8.4%. As of September 30, 2024, we had $200,000 outstanding under our revolving credit facility, $100,000 outstanding under our term loan and $125,000 available for borrowing under our revolving credit facility. In October 2024, we 31 Table of Contents borrowed $125,000 under our revolving credit facility to preserve financial flexibility. As of October 29, 2024, we had fully drawn our $325,000 revolving credit facility and $100,000 was outstanding under our term loan. 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 $619,467 as of September 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 Exchanges 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 $716,969 as of September 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. During the three and nine months ended September 30, 2024, in a series of exchange transactions, we exchanged an aggregate principal amount of $8,300 of the 2025 Notes for an aggregate 3,184,432 of our common shares. In October 2024, in a series of exchange transactions, we exchanged an additional aggregate principal amount of $34,154 of the 2025 Notes for an aggregate principal amount of $42,570 of new 9.0% senior secured notes due 2029 on substantially similar terms as the New 2029 Notes and 1,870,238 of our common shares. For more information regarding the Senior Note Exchange, our subsequent senior note exchanges 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 September 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 490,854 2026 140,488 2027 180,784 2028 123,487 2029 and thereafter 1,197,617 Total $ 2,133,230 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 September 30, 2024, we had estimated unspent leasing related obligations of $100,646, of which we expect to spend $66,949 over the next 12 months. As of October 30, 2024, our total available liquidity was comprised of $146,448 of cash and, in addition to long-term debt, the 2025 Notes are due within one year from the date of issuance of these financial statements. We are currently in negotiations with certain holders of the 2025 Notes for a potential note exchange. While we believe a note exchange with certain holders of the 2025 Notes would alleviate the substantial doubt about our ability to continue as going concern, we are not able to conclude that it is probable that the negotiations will result in an exchange that satisfies the 2025 Notes prior to their maturity. If we are unable to consummate a transaction that refinances the 2025 Notes on terms which, in our view, allow us to continue as a going 32 Table of Contents concern, our Board of Trustees may consider a reorganization in a bankruptcy court. As a result of the foregoing, we have concluded that there is substantial doubt about our ability to continue as a going concern for at least one year from the date of issuance of our Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q, or October 30, 2024. 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 will likely evaluate our ability to fund required debt service, repay debts when they become due and pay distributions to shareholders 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. 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 nine months ended September 30, 2024, we paid quarterly distributions to our shareholders totaling $1,477 using cash on hand. On October 16, 2024, we declared a regular quarterly distribution payable to shareholders of record on October 28, 2024 of $0.01 per share, or approximately $555. We expect to pay this distribution on or about November 14, 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 September 30, 2024. As of September 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 September 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 September 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 September 30, 2024 consisted of $200,000 of borrowings outstanding under our revolving credit facility, $100,000 outstanding principal amount under our secured term loan, an outstanding principal balance of $1,855,910 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 September 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 September 30, 2024, adjusted total assets for covenant purposes as defined in our senior notes indentures were $5,173,078. Assets serving as collateral under our credit agreement, our secured senior notes or mortgage notes represented $2,756,946 of adjusted total assets, as defined in our senior notes indentures. Our unencumbered assets represented $2,416,132 of adjusted total assets. 33 Table of Contents The following table presents the calculation of adjusted total assets to total assets in accordance with GAAP as of September 30, 2024: Total assets $ 3,725,951 Plus: accumulated depreciation 619,474 Plus: adjustments to reflect original cost of real estate assets 1,184,176 Less: accounts receivable and intangibles (356,523) Adjusted total assets $ 5,173,078 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. 34 Table of Contents