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The following is a summary of the principal risk factors described in this section:
−Removed: • we have a substantial amount of debt and we are subject to risks related to our debt, including our ability to refinance maturing debt and the cost of any such refinanced debt and our ability to reduce our debt leverage, which may remain at or above current levels for an indefinite period, covenants and conditions contained in our debt agreements which may restrict our operations by increasing our interest expense and limiting our ability to make investments in our properties, sell properties securing our debt and pay distributions to our shareholders, potential downgrades to our credit ratings and other limitations on our ability to access capital at reasonable costs or at all, including the limited availability of debt capital to office REITs generally;
+Added: • we have concluded that there is substantial doubt about our ability to continue as a going concern;
+Added: • we have a substantial amount of debt and we are subject to risks related to our debt, including the inability to refinance maturing debt and the cost of any such refinanced debt and the inability to reduce our debt leverage, which may remain at or above current levels for an indefinite period, covenants and conditions contained in our debt agreements which may restrict our operations by increasing our interest expense and limiting our ability to make investments in our properties, sell properties securing our debt and pay distributions to our shareholders, potential downgrades to our credit ratings and other limitations on our ability to access capital at reasonable costs or at all, including the limited availability of debt capital to office REITs generally;
• we have a significant amount of scheduled lease expirations in 2025 and thereafter and we may be unable to renew our leases when they expire or lease our properties to new tenants without decreasing rents or incurring significant costs or at all;
in addition, some of our tenants have the right to terminate their leases prior to their stated lease expiration date;
−Removed: • remote and other alternative work arrangements and changes in space utilization and other business practices may continue to reduce the demand for office leasing;
• our concentration of investments in properties leased to private sector single or majority tenants and the U.S.
government, and in properties located in the metropolitan Washington, D.C.
−Removed: area, may subject us to risks associated with bankruptcy, insolvency, a downturn of business or a lease termination of such single or majority tenants, government budgetary pressures and priorities and trends and other fiscal pressures and a downturn in economic conditions or a possible recession;
−Removed: • unfavorable market and commercial real estate industry conditions due to, among other things, high interest rates, prolonged high inflation, labor market challenges, supply chain disruptions, volatility in the public equity and debt markets and in the commercial real estate markets, generally, reductions in government spending to fund their obligations, pandemics, geopolitical instability and tensions, economic downturns or a possible recession, changes in real estate utilization and other conditions beyond our control, may have a material adverse effect on our and our tenants’ results of operations and financial conditions, and our tenants may be unable to satisfy their lease obligations to us;
−Removed: • our development or redevelopment projects, or potential future sales or acquisitions or development or redevelopment projects, may not be successful or may not be executed on the terms or within the timing we expect as a result of competition, ongoing market and economic conditions, including capital market disruptions, high interest rates, prolonged high inflation, or otherwise;
+Added: area, may subject us to risks associated with bankruptcy, insolvency, a downturn of business or a lease termination of such single or majority tenants, government budgetary pressures, changes in government policies, priorities related to real estate and other fiscal pressures, including any downturn in economic conditions or a possible recession;
+Added: • unfavorable market and commercial real estate industry conditions, particularly impacting the office sector, due to, among other things, uncertainties surrounding interest rates and inflation, supply chain disruptions, volatility in the public equity and debt markets and in the commercial real estate markets, generally, reductions in government spending to fund their obligations, pandemics, geopolitical instability and tensions, economic downturns or a possible recession, labor market conditions, changes in real estate utilization, including increased remote and other alternative work arrangements and tenants consolidating their real estate footprint, and other conditions beyond our control, have had, and may continue to have, a material adverse effect on our and our tenants’ results of operations and financial conditions, and our tenants may be unable to satisfy their lease obligations to us;
+Added: • we may not succeed in selling properties at prices we target;
+Added: • development or redevelopment projects, or potential future sales or development or redevelopment projects, may not be successful or may not be executed on the terms or within the timing we expect as a result of competition, ongoing market and economic conditions, including capital market disruptions, uncertainties surrounding interest rates and inflation, or otherwise;
• we are subject to risks related to our qualification for taxation as a REIT, including REIT distribution requirements;
• ownership of real estate is subject to environmental risks and liabilities, as well as risks from adverse weather, natural disasters and adverse impacts from global climate change;
−Removed: • insurance may not adequately cover our losses, and insurance costs may continue to increase;
−Removed: • we are subject to risks related to our dependence upon RMR to implement our business strategies and manage our day to day operations;
−Removed: • we are subject to risks related to the security of RMR’s information technology;
−Removed: • our management structure and agreements with RMR and our relationships with our related parties, including our Managing Trustees, RMR and others affiliated with them, may create conflicts of interest;
+Added: • insurance may not adequately cover our losses, and insurance costs may increase;
+Added: • we are subject to risks related to our dependence upon RMR to implement our business strategies and manage our operations;
+Added: • we are subject to risks related to the security of RMR’s information technology and RMR’s use of artificial intelligence, or AI;
+Added: • our management structure and agreements with RMR and our relationships with our related parties, including our Managing Trustees, RMR, Sonesta and others affiliated with them, may create conflicts of interest;
• sustainability initiatives, requirements and market expectations may impose additional costs and expose us to new risks;
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Risks Related to Our Business
+Added: We have concluded that there is substantial doubt about our ability to continue as a going concern.
+Added: Our portfolio has been adversely affected by shifts in office space utilization, including increased remote work arrangements and tenants consolidating their real estate footprint.
+Added: Demand for office space continues to face headwinds and declining rents and increasing costs to re-lease space when tenants can be identified continue to impact the market.
+Added: In addition, there are limited debt or equity financing alternatives available to us to refinance our debt and financing sources we have utilized have increased our cost of capital.
+Added: The duration and ultimate impact of these factors on our properties and our business remains uncertain and subject to change;
+Added: however, these conditions continue to have a significant negative impact on our results of operations, financial position and cash flows.
+Added: As of February 13, 2025, our total available liquidity was comprised of $113.0 million of cash and, in addition to long-term debt, our near-term obligations include outstanding lease obligations of $81.9 million and principal debt repayments of $26.0 million in 2025 and $291.5 million in 2026.
+Added: As discussed in Note 1 to the Notes to Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report on Form 10-K, based on these challenges and upcoming debt maturities, we concluded that there was substantial doubt about our ability to continue as a going concern.
+Added: Our continuation as a going concern is dependent upon many factors, including our ability to meet our debt covenants, repay our debts and other obligations when due and our ability to make required principal payments under our debt agreements.
+Added: We are currently seeking to refinance our senior unsecured notes due 2026, or the 2026 Notes, through a debt exchange, and we expect to sell certain properties to raise cash and may pursue other strategies to address our liquidity needs, including equity issuances.
+Added: We cannot be sure that we will be able to obtain any future financing, and any such financing we may obtain may not be sufficient to repay our existing debt.
+Added: If we are unable to obtain sufficient funds, we may be unable to continue as a going concern and our Board of Trustees may consider a reorganization in bankruptcy court.
We have a substantial amount of debt and are subject to risks related to our debt, including our ability to refinance maturing debt and the cost of any such refinanced debt.
−Removed: As of December 31, 2023, our consolidated debt was $2.6 billion.
−Removed: We are subject to numerous risks associated with our debt, including our ability to refinance maturing debt and the cost of any refinancing, the risk that our liquidity could remain insufficient for us to make required payments and risks associated with high interest rates.
−Removed: For example, we currently do not have sufficient sources of liquidity to repay our $650.0 million senior unsecured notes due 2025, and while we believe it is probable that we can obtain new debt financing, we cannot be sure that we will be successful in doing so.
−Removed: We have engaged a financial advisor to assist in evaluating our options to address our upcoming debt maturities.
+Added: As of December 31, 2024, our consolidated debt was $2.6 billion and we were fully drawn on our revolving credit facility .
+Added: We are subject to numerous risks associated with our debt, including our ability to refinance maturing debt and the cost of any refinancing, the risk that our liquidity could be insufficient for us to make required payments and risks associated with high interest rates.
+Added: For example, we currently do not have sufficient liquidity on hand to make the required principal payments of $157.5 million due by March 31, 2026 under our senior secured notes due 2027, or the March 2027 Notes, and the outstanding $140.5 million in principal amount of the 2026 Notes.
+Added: We continue to engage a financial advisor to assist in evaluating our options to address our upcoming debt maturities.
There can be no assurance our advisor will be successful in assisting us with our debt maturities.
−Removed: There are also no limits in our organizational documents on the amount of debt we may incur, and, subject to any limitations in our debt agreements, we may incur additional debt.
+Added: There are also no limits in our organizational documents on the amount of debt we may incur or maintain, and, subject to any limitations in our debt agreements, we may incur and maintain additional debt.
Our debt may increase our vulnerability to adverse market and economic conditions, limit our flexibility in planning for changes in our business and place us at a disadvantage in relation to competitors that have lower debt levels.
Our debt could increase our cost of capital, limit our ability to incur additional debt in the future, and increase our exposure to floating interest rates or expose us to potential events of default (if not cured or waived) under covenants contained in debt instruments that could have a material adverse effect on our business, financial condition and operating results.
−Removed: High interest rates have significantly increased our borrowing costs.
+Added: High interest rates under our recently issued debt instruments have significantly increased our borrowing costs and we have pledged a significant portion of our assets as collateral.
Although we have an option to extend the maturity date of certain of our debt upon payment of a fee and meeting other conditions, the applicable conditions may not be met, and we may be required to repay or refinance our existing debt with new debt at less favorable terms.
Excessive or expensive debt could reduce the available cash flow to fund, or limit our ability to obtain financing for, lease obligations, working capital, capital expenditures, refinancing, acquisitions, development or redevelopment projects or other purposes and hinder our ability to pay distributions to our shareholders.
−Removed: If we default under any of our debt obligations, we may be in default under other debt agreements of ours that have cross default provisions, including our credit agreement and our senior notes indentures and their supplements.
−Removed: In such case, our lenders or noteholders may demand immediate payment of any outstanding debt and could seek payment from the subsidiary guarantors under our credit agreement or our 9.000% senior secured notes due 2029, or the 2029 Notes, seek to sell any pledged equity interests of certain subsidiaries or the mortgaged properties owned by certain pledged subsidiaries, or we could be forced to liquidate our assets for less than the values we would receive in a more orderly process.
+Added: If we default under any of our debt obligations, we may be in default under our other debt agreements that have cross default provisions, including our credit agreement and our senior notes indentures and their supplements.
+Added: In such case, our lenders or noteholders may demand immediate payment of any outstanding debt and could seek payment from the subsidiary guarantors under our credit agreement, our March 2027 Notes, our 9.000% senior secured notes due March 2029, or the March 2029 Notes, or our 9.000% senior secured notes due September 2029, or the September 2029 Notes, seek to sell any pledged equity interests of certain subsidiaries or the mortgaged properties owned by certain pledged subsidiaries, or we could be forced to liquidate our assets for less than the values we would receive in a more orderly process.
We have a significant amount of scheduled lease expirations in 2025 and thereafter and we may be unable to lease our properties when our leases expire.
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Although we typically will seek to renew or extend the terms of leases for our properties with tenants when they expire, we cannot be sure that we will be successful in doing so.
−Removed: Certain changes in space utilization, including increases in remote and other alternative work arrangements, as well as ongoing market and economic conditions, including high interest rates, prolonged high inflation 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.
−Removed: 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 to new tenants.
−Removed: Remote and other alternative work arrangements and changes in space utilization and other business practices may continue to reduce the demand for office leasing.
−Removed: Certain changes in office space utilization, including increased remote and other alternative work arrangements and tenants consolidating their real estate footprints, continue to impact the market for both private sector and government tenants.
+Added: Certain shifts in space utilization, including increases in remote and other alternative work arrangements, as well as ongoing market and economic conditions, including 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.
+Added: 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 re-lease these properties to new tenants.
+Added: Remote and other alternative work arrangements and shifts in space utilization and other business practices may continue to reduce the demand for office leasing.
+Added: Certain shifts in office space utilization, including increased remote and other alternative work arrangements and tenants consolidating their real estate footprint, as well as declining rents and increasing costs to re-lease space when tenants can be identified, continue to impact the market for both private sector and government tenants.
It is uncertain to what extent and for how long such remote or other alternative work arrangements may continue.
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The value of the properties leased to these tenants is materially dependent on their performance under their respective leases.
−Removed: These tenants face competition within their industries and other factors that could reduce their ability to pay us rent based on market and economic conditions, such as high interest rates, prolonged high inflation, supply chain challenges and economic downturns or a possible recession.
+Added: These tenants face competition within their industries and other factors that could reduce their ability to pay us rent based on market and economic conditions, such as uncertainties surrounding interest rates and inflation, supply chain challenges and economic downturns or a possible recession.
A default by a single or majority tenant, the failure of a guarantor to fulfill its obligations or other premature termination of a lease to such a tenant or such tenant’s election not to extend a lease upon its expiration could have an adverse effect on our financial condition, results of operations, liquidity and ability to pay distributions to our shareholders.
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As of December 31, 2024, we derived approximately 25.0% of our annualized rental income from our consolidated properties located in the metropolitan Washington, D.C.
−Removed: In addition, the three properties owned by two joint ventures in which we owned 51% and 50% interests are also located in the metropolitan Washington, D.C.
−Removed: A downturn in economic conditions in this area or a possible recession, including as a result of prolonged high inflation or otherwise, could result in reduced demand from tenants for our properties, reduced rents that our tenants in this area are willing to pay when our leases expire and increased lease concessions for new leases and renewals.
+Added: In addition, two properties owned by a joint venture in which we owned a 51% interest are located in the metropolitan Washington, D.C.
+Added: market continues to have weak conditions and a further downturn in economic conditions in this area or a possible recession could result in reduced demand from tenants for our properties, reduced rents that our tenants in this area are willing to pay when our leases expire and increased lease concessions for new leases and renewals.
Additionally, there has been a decrease in demand for new leased space by the U.S.
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market area could reduce demand for space, impact the creditworthiness of our tenants or force our tenants to curtail operations, which could impair their ability to meet their rent obligations to us and, accordingly, could have an adverse effect on our financial condition, results of operations, liquidity and ability to pay distributions to our shareholders.
−Removed: Unfavorable market and industry conditions may have a material adverse effect on our results of operations, financial condition and ability to pay distributions to our shareholders.
+Added: Unfavorable market and industry conditions have had, and may continue to have, a material adverse effect on our results of operations, financial condition and ability to pay distributions to our shareholders.
Our business and operations may be adversely affected by market and economic volatility experienced by the U.S.
and global economies, the commercial real estate industry and/or the local economies in the markets in which our properties are located.
−Removed: Unfavorable economic and industry conditions may be due to, among other things, high interest rates, prolonged high inflation, labor market challenges, supply chain disruptions, volatility in the public equity and debt markets, pandemics, geopolitical instability and tensions, economic downturns or a possible recession, changes in real estate utilization and other
−Removed: conditions beyond our control.
+Added: Unfavorable economic and industry conditions may be due to, among other things, uncertainties surrounding interest rates and inflation, supply chain disruptions, volatility in the public equity and debt markets, pandemics, geopolitical instability and tensions, economic downturns or a possible recession, labor market conditions, changes in real estate utilization and other conditions beyond our control.
As economic conditions in the United States may affect the demand for office space, real estate values, occupancy levels and property income, current and future economic conditions in the United States, including slower growth or a possible recession and capital market volatility or disruptions, could have a material adverse impact on our earnings and financial condition.
Economic conditions may be affected by numerous factors, including, but not limited to, the pace of economic growth and/or recessionary concerns, inflation, increases in the levels of unemployment, energy prices, uncertainty about government fiscal and tax policy, geopolitical events, the regulatory environment, the availability of credit and interest rates.
−Removed: Current conditions have negatively impacted our ability to pay distributions to our shareholders and these or other conditions may continue to have similar impacts in the future and on our results of operations and financial condition.
+Added: Unfavorable market conditions have particularly impacted the office sector and sustained low occupancy in office properties, reduced values of these properties and limited acquisition and disposition volume have negatively impacted our ability to pay distributions to our shareholders and these or other conditions may continue to have similar impacts in the future and on our results of operations and financial condition.
We may experience declining rents or incur significant costs to renew our leases with current tenants or lease our properties to new tenants, and any rent increases that we do achieve may not exceed increased costs we may incur.
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if the current leases for those properties are terminated or are not renewed, we may be required to renovate those properties at substantial costs, decrease the rents we charge or provide other concessions in order to lease those properties to new tenants.
−Removed: In addition, any rent increases that we do achieve may not exceed our costs associated with renewing our leases with current tenants or leasing our properties to new tenants, which costs have increased as a result of high interest rates, prolonged high inflation and supply chain challenges, among other things.
+Added: In addition, any rent increases that we do achieve may not exceed our costs associated with renewing our leases with current tenants or leasing our properties to new tenants, which costs have increased as a result of uncertainty surrounding interest rates and inflation and supply chain challenges, among other things.
Further, certain of our long-term leases have contractual rent adjustments which may not keep pace with inflation.
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Our business depends on our tenants satisfying their lease obligations.
−Removed: The financial capacities of our private sector tenants to pay us rent will depend upon their abilities to successfully operate their businesses, which may be adversely affected by factors over which we and they have no control, including market and economic conditions, such as high interest rates, prolonged high inflation, supply chain challenges and economic downturns or a possible recession.
+Added: The financial capacities of our private sector tenants to pay us rent will depend upon their abilities to successfully operate their businesses, which may be adversely affected by factors over which we and they have no control, including market and economic conditions, such as uncertainties surrounding interest rates and inflation, supply chain challenges and economic downturns or a possible recession.
The failure of our private sector tenants and any applicable parent guarantor to satisfy their lease obligations to us, whether due to a downturn in their business or otherwise, could materially and adversely affect us.
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The budget environment and uncertainty surrounding the appropriations processes remain significant long-term risks as budget cuts could adversely affect the ability of our government tenants to pay us rent.
−Removed: Government budgetary pressures and priorities and trends in government employment and office leasing, including remote working and other space utilization trends, may adversely impact our business.
+Added: Government budgetary pressures, policies and priorities and trends in government employment and office leasing, including elimination or reduction of government agencies and programs, remote working and other space utilization trends, may adversely impact our business.
We believe that recent government budgetary and spending priorities and enhancements in technology have resulted in a decrease in government office use for employees.
Furthermore, over the past several years, government tenants have reduced their space utilization per employee and consolidated government tenants into existing government owned properties.
−Removed: This activity has reduced the demand for government leased space.
−Removed: Our historical experience with respect to properties of the type we own that are majority leased to government tenants has been that government tenants have generally renewed leases to avoid the costs and disruptions that may result from relocating their operations.
−Removed: However, efforts to manage space utilization rates may result in our tenants exercising early termination rights under their leases, vacating our properties upon expiration of their leases in order to relocate to government owned properties or consolidate leased space within a market, or renew their leases for less space than they currently occupy.
+Added: This activity has reduced the demand for government leased space and efforts to manage space utilization rates may result in our tenants exercising early termination rights under their leases, vacating our properties upon expiration of their leases in order to relocate to government owned properties or consolidate leased space within a market, or renew their leases for less space than they currently occupy.
+Added: The current administration is reportedly seeking to reduce the U.S.
+Added: government’s office leases through termination of existing leases.
+Added: Accordingly, there can be no assurance that the U.S.
+Added: government will not seek to exercise early termination rights or otherwise purport to terminate our leases with the U.S.
+Added: government or use the threat thereof to seek rent concessions.
Also, our government tenants’ desire to reconfigure office space to manage utilization per employee may require us to spend significant amounts for tenant improvements, and tenant relocations are often more prevalent in those circumstances.
Increasing uncertainty with respect to government agency budgets and funding to implement relocations, consolidations and reconfigurations has, in some instances, resulted in delayed decisions by some of our government tenants and more focus on short term lease renewals.
−Removed: Given the significant uncertainties, including the extent to which remote or alternative work arrangements may continue or increase, we are unable to reasonably project what the financial
−Removed: impact of market conditions or changing government circumstances will be on the demand for leased space at our properties and our financial results for future periods.
−Removed: A prolonged U.S.
−Removed: government shutdown may adversely impact our operations, financial results and liquidity.
−Removed: Under our leases with the U.S.
−Removed: government, the tenants pay us rent monthly in arrears.
−Removed: government experiences a prolonged shutdown, these tenants may not pay us rent during the pendency of the shutdown.
−Removed: Although we expect that these tenants would pay us any outstanding rents after the shutdown ends, our available cash and leverage targets may be adversely impacted during the period we do not receive rents from these tenants.
−Removed: A failure to receive rents during a government shutdown may impair our ability to fund our operations and investments, pay our debt obligations, make capital expenditures and pay distributions to our shareholders.
−Removed: In addition, the impact of a prolonged government shutdown on government personnel resources could hinder our ability to renew expiring leases or initiate or complete renovation, construction and other capital maintenance of the affected properties.
−Removed: Moreover, some of our tenants are government contractors that rely on government business.
−Removed: If a government shutdown results in our government contractor tenants not paying us rent, the negative impact on us from a government shutdown may be compounded.
+Added: In addition, the new presidential administration may implement new or change existing policies, including the potential elimination or reduction of government agencies and programs, which may impact leasing at our government leased properties.
+Added: Although the current administration has issued so called return to work mandates, there can be no assurance such actions will result in increased office utilization.
+Added: Given the significant uncertainties, including the extent to which remote or alternative work arrangements may continue or increase, we are unable to reasonably project what the financial impact of market conditions or changing government circumstances will be on the demand for leased space at our properties and our financial results for future periods.
We may not succeed in selling properties we may identify for sale and any proceeds we may receive from sales we do complete may be less than expected, and we may incur losses with respect to any such sales.
−Removed: We plan to selectively sell certain properties from time to time to reduce our leverage, fund capital expenditures and strategically update, rebalance and reposition our investment portfolio, with the goal of (1) improving the asset quality of our portfolio through diversification of property types, by reducing the average age of our properties, lengthening the weighted average lease term of our leases and increasing the likelihood of retaining our tenants and (2) increasing our cash available for distribution.
+Added: We expect to sell properties, or sell an interest in properties through joint venture arrangements, from time to time, in order to manage leverage levels or to recycle capital into properties that we believe have better long-term earnings potential or that we believe will help diversify our revenue base, improve the average age of our properties, lengthen the weighted average term of our leases, reduce our ongoing capital requirements and/or increase our distributions to shareholders.
Our ability to sell properties, and the prices we may receive in any such sales may be affected by various factors.
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• the number of competing properties in the market;
−Removed: • unfavorable local, national or international economic conditions, such as high interest rates, labor market challenges, prolonged high inflation, supply chain challenges and economic downturns or a possible recession;
+Added: • unfavorable local, national or international economic conditions, such as uncertainties surrounding interest rates and inflation, supply chain challenges and economic downturns or a possible recession and labor market challenges;
• changes in laws, regulations or fiscal policies of jurisdictions in which the properties are located.
−Removed: For example, current market conditions have caused, and may continue to cause, increased capitalization rates which, together with high interest rates, has resulted in reduced commercial real estate transaction volume, and such conditions may continue or worsen.
+Added: For example, current market conditions have caused, and may continue to cause, increased capitalization rates which, together with increased high interest rates, has resulted in reduced commercial real estate transaction volume, and such conditions may continue or worsen.
We may not succeed in selling properties and any sales may be delayed or may not occur or, if sales do occur, the terms may not meet our expectations and we may incur losses in connection with any sales.
−Removed: If we are unable to realize proceeds from the sale of assets sufficient to allow us to reduce our leverage to a level we, or ratings agencies or possible financing sources, believe appropriate, we may be unable to fund capital expenditures or future acquisitions to grow our business.
+Added: If we are unable to realize proceeds from the sale of assets sufficient to allow us to reduce our leverage to a level we, or possible financing sources, believe appropriate, we may be unable to fund capital expenditures or future acquisitions to grow our business.
In addition, we may elect to change or abandon our strategy and forego or abandon property or other asset sales.
+Added: We may fail to comply with the terms of our debt agreements, which could adversely affect our business and prohibit us from paying distributions to our shareholders.
+Added: Our debt agreements include various conditions, covenants and events of default.
+Added: We may not be able to satisfy all of these conditions or may default on some of these covenants for various reasons, including for reasons beyond our control.
+Added: If any of the covenants in these debt agreements are breached and not cured within the applicable cure period, we could be required to repay the debt immediately, even in the absence of a payment default, or be prevented from refinancing maturing debt or issuing new debt.
+Added: Complying with these covenants may limit our ability to take actions that may be beneficial to us and our security holders.
+Added: Our credit agreement and our senior notes indentures and their supplements require us to comply with certain financial and other covenants.
+Added: These covenants may limit our operational flexibility and acquisition and disposition activity.
+Added: Our ability to comply with those covenants will depend upon the net rental income we receive from our properties.
+Added: If our operating results and financial condition are significantly negatively impacted by the current market conditions or otherwise, we may fail to satisfy covenants under our credit agreement or our senior notes indentures and their supplements.
+Added: Further, if the occupancy at our properties declines or if our rents decline, we may be unable to borrow under our revolving credit facility.
+Added: Our revolving credit facility is secured by certain properties and the availability of borrowings under the facility is subject to minimum performance and value levels of those properties.
+Added: We are currently fully drawn under our revolving credit facility, and we may therefore experience future liquidity constraints.
+Added: An inability to incur additional debt would require us to meet our capital needs from other sources, such as cash on hand, operating cash flow, equity financing or asset sales, which may not be available to us on attractive terms or at all and we may be unable to meet our obligations or grow our business by acquiring additional properties or otherwise.
+Added: If we default under our credit agreement, our lenders may demand immediate payment and could seek payment from the subsidiary guarantors under our credit agreement, the March 2027 Notes, the March 2029 Notes or the September 2029 Notes, seek to sell any pledged equity interests of certain subsidiaries or the mortgaged properties owned by such pledged subsidiaries, or may elect not to fund future borrowings.
+Added: During the continuance of any event of default under our credit agreement, we may be limited or, in some cases, prohibited from paying distributions to our shareholders.
+Added: Any default under our credit agreement that results in acceleration of our obligations to repay outstanding debt or in our no longer being permitted to borrow under our revolving credit facility would likely have serious adverse consequences to us and would likely cause the value of our securities to decline.
+Added: In the future, we may obtain additional debt financing, and the covenants and conditions applicable to that debt may be more restrictive than the covenants and conditions that are contained in our existing debt agreements.
We are exposed to risks associated with property development, redevelopment and repositioning that could adversely affect us, including our financial condition and results of operations.
−Removed: We currently have properties under development and we may engage in additional development, redevelopment and repositioning activities with respect to our properties in the future, and, as a result, we are subject to certain risks.
−Removed: These risks include cost overruns and untimely completion of construction due to, among other things, weather conditions, inflation, labor or material shortages or delays in receiving permits or other governmental approvals, as well as the availability and pricing of financing on favorable terms or at all.
−Removed: The global economy continues to experience commodity pricing and other inflation,
−Removed: including inflation impacting wages and employee benefits.
−Removed: Although inflation rates have recently declined, it is uncertain whether inflation will decline further, remain relatively steady or increase;
−Removed: however, some market forecasts indicate that inflation rates may remain elevated for a prolonged period.
+Added: We have engaged in and may engage in future development, redevelopment and repositioning activities with respect to our properties, and, as a result, we are subject to certain risks.
+Added: These risks include cost overruns and untimely completion of construction due to, among other things, weather conditions, inflation, labor or material shortages or delays in receiving permits or other governmental approvals, as well as the availability and pricing of financing on favorable terms or at all, and finding tenants to lease our properties.
+Added: While inflation declined significantly in 2024, it remains above historic levels, and the global
+Added: economy continues to experience commodity pricing and other inflation, including inflation impacting wages and employee benefits, and it is uncertain whether inflation will decline, remain relatively steady or increase.
These conditions have increased the costs for materials, other goods and labor, including construction materials, and caused some delays in construction activities, and these conditions may continue and worsen.
These pricing increases, as well as increases in labor costs, could result in substantial unanticipated delays and increased development and renovation costs and could prevent the initiation or the completion of development, redevelopment or repositioning activities.
−Removed: In addition, changes to demand for office space and increased vacancies due to continued increases in remote and other alternative work arrangements and changes in space utilization, as well as current economic conditions and volatility in the commercial real estate markets, generally, may cause delays in leasing these properties or possible loss of tenancies and negatively impact our ability to generate cash flows from these properties that meet or exceed our cost of investment.
+Added: In addition, changes to demand for office space and increased vacancies due to continued increases in remote and other alternative work arrangements and shifts in space utilization, as well as current economic conditions and volatility in the commercial real estate markets, generally, may cause delays in leasing these properties or possible loss of tenancies and negatively impact our ability to generate cash flows from these properties that meet or exceed our cost of investment.
Any of these risks associated with our current or future development, redevelopment and repositioning activities could have a material adverse effect on our business, financial condition and results of operations.
+Added: A prolonged U.S.
+Added: government shutdown may adversely impact our operations, financial results and liquidity.
+Added: Under our leases with the U.S.
+Added: government, the tenants pay us rent monthly in arrears.
+Added: government experiences a prolonged shutdown, these tenants may not pay us rent during the pendency of the shutdown.
+Added: Although we expect that these tenants would pay us any outstanding rents after the shutdown ends, our available cash and leverage targets may be adversely impacted during the period we do not receive rents from these tenants.
+Added: A failure to receive rents during a government shutdown may impair our ability to fund our operations and investments, pay our debt obligations, make capital expenditures and pay distributions to our shareholders.
+Added: In addition, the impact of a prolonged government shutdown on government personnel resources could hinder our ability to renew expiring leases or initiate or complete renovation, construction and other capital maintenance of the affected properties.
+Added: Moreover, some of our tenants are government contractors that rely on government business.
+Added: If a government shutdown results in our government contractor tenants not paying us rent, the negative impact on us from a government shutdown may be compounded.
We may be unable to grow our business by acquiring additional properties, and we might encounter unanticipated difficulties and expenditures relating to our acquired properties.
−Removed: Our business plan includes the acquisition of additional properties.
+Added: Although our business plan does not currently contemplate the acquisition of additional properties, we may acquire additional properties in the future .
Our ability to make profitable acquisitions is subject to risks, including, but not limited to, risks associated with:
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• the availability, terms and cost of debt and equity capital;
+Added: • our liquidity position;
• competition from other investors;
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• property operating costs for our acquired properties may be higher than anticipated and our acquired properties may not yield expected returns.
−Removed: For these reasons, among others, we might not realize the anticipated benefits of our acquisitions, and our business plan to acquire additional properties may not succeed or may cause us to experience losses.
+Added: For these reasons, among others, we might not realize the anticipated benefits of our acquisitions.
REIT distribution requirements and limitations on our ability to access capital at reasonable costs or at all may adversely impact our ability to carry out our business plan.
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Our business strategies therefore depend, in part, upon our ability to raise additional capital at reasonable costs.
−Removed: We may also be unable to raise capital at reasonable costs or at all because of reasons related to our business, market perceptions of our prospects, the terms of our debt, the extent of our leverage or for reasons beyond our control, such as capital market volatility, high interest rates and other market conditions.
−Removed: For example, decreased demand for leased space and increased vacancies due to continued increases in remote and other alternative work arrangements and changes in space utilization, as well as current economic conditions, have negatively impacted the availability of debt capital to office REITs on reasonable terms or at all.
−Removed: Because the earnings we are permitted to retain are limited by the rules
−Removed: governing REIT qualification and taxation, if we are unable to raise reasonably priced capital, we may not be able to carry out our business plan.
+Added: We may also be unable to raise capital at reasonable costs or at all because of reasons related to our business, market perceptions of our prospects, the terms of our debt, the extent of our leverage or for reasons beyond our control, such as capital market volatility, sustained high interest rates and other market conditions.
+Added: For example, decreased demand for leased space and increased vacancies due to continued increases in remote and other alternative work arrangements and shifts in space utilization, as well as current economic conditions, have negatively impacted the availability of debt capital to office REITs on reasonable terms or at all.
+Added: Because the earnings we are permitted to retain are limited by the rules governing REIT qualification and taxation, if we are unable to raise reasonably priced capital, we may not be able to carry out our business plan.
We face significant competition.
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Competition may make it difficult for us to attract and retain tenants and may reduce the rents we are able to charge and the values of our properties.
−Removed: We also face significant competition for acquisition opportunities from other investors, including publicly traded and private REITs, numerous financial institutions, individuals, foreign investors and other public and private companies.
−Removed: Some of our competitors may have greater financial and other resources than us and may be able to accept more risk than we can prudently manage, including risks with respect to the creditworthiness of tenants and guarantors and the extent of leverage used in their capital structure.
−Removed: Because of competition for acquisitions, we may be unable to acquire desirable properties or we may pay higher prices for, and realize lower net cash flows than we hope to achieve from, acquisitions.
Some tenants have the right to terminate their leases prior to their lease expiration date.
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In particular:
−Removed: • Twelve tenants occupying approximately 4.0% of our rentable square feet and responsible for approximately 4.1% of our annualized rental income as of December 31, 2023 have current exercisable rights to terminate their leases before the stated term of their leases expire.
−Removed: • As of December 31, 2023, pursuant to leases with eight of our tenants, these tenants have rights to terminate their leases if their respective legislature or other funding authority does not appropriate rent amounts in their respective annual budgets.
−Removed: These eight tenants represented approximately 4.2% of our rentable square feet and 4.4% of our annualized rental income as of December 31, 2023.
+Added: • Eight tenants occupying approximately 2.1% of our rentable square feet and responsible for approximately 2.3% of our annualized rental income as of December 31, 2024 have current exercisable rights to terminate their leases before the stated term of their leases expire.
+Added: • As of December 31, 2024, pursuant to leases with five of our tenants, these tenants have rights to terminate their leases if their respective legislature or other funding authority does not appropriate rent amounts in their respective annual budgets.
+Added: These five tenants represented approximately 3.6% of our rentable square feet and 3.7% of our annualized rental income as of December 31, 2024.
For various reasons, some or all of our tenants may decide to exercise early termination rights under our leases or vacate our properties upon expiration of our leases.
If a significant number of our leases are terminated pursuant to these termination rights, our income and cash flow may materially decline, our ability to pay distributions to our shareholders may be negatively impacted and the values of our properties may decline.
−Removed: We may fail to comply with the terms of our debt agreements, which could adversely affect our business and prohibit us from paying distributions to our shareholders.
−Removed: Our debt agreements include various conditions, covenants and events of default.
−Removed: We may not be able to satisfy all of these conditions or may default on some of these covenants for various reasons, including for reasons beyond our control.
−Removed: If any of the covenants in these debt agreements are breached and not cured within the applicable cure period, we could be required to repay the debt immediately, even in the absence of a payment default, or be prevented from refinancing maturing debt.
−Removed: Complying with these covenants may limit our ability to take actions that may be beneficial to us and our security holders.
−Removed: Our credit agreement and our senior notes indentures and their supplements require us to comply with certain financial and other covenants.
−Removed: These covenants may limit our operational flexibility and acquisition and disposition activity.
−Removed: Our ability to comply with those covenants will depend upon the net rental income we receive from our properties.
−Removed: If the occupancy at our properties declines or if our rents decline, we may be unable to borrow under our revolving credit facility.
−Removed: Our revolving credit facility is secured by certain properties and the availability of borrowings under the facility is subject to minimum performance and value levels of those properties.
−Removed: If we are unable to borrow under our revolving credit facility, our liquidity would be negatively affected and we may be unable to meet our obligations or grow our business by acquiring additional properties or otherwise.
−Removed: If we default under our credit agreement, our lenders may demand immediate payment and could seek payment from the subsidiary guarantors under our credit agreement or the 2029 Notes, seek to sell any pledged equity interests of certain subsidiaries or the mortgaged properties owned by such pledged subsidiaries, or may elect not to fund future borrowings.
−Removed: During the continuance of any event of default under our credit agreement, we may be limited or, in some cases, prohibited from paying distributions to our shareholders.
−Removed: Any default under our credit agreement that results in acceleration of our
−Removed: obligations to repay outstanding debt or in our no longer being permitted to borrow under our revolving credit facility would likely have serious adverse consequences to us and would likely cause the value of our securities to decline.
−Removed: In the future, we may obtain additional debt financing, and the covenants and conditions applicable to that debt may be more restrictive than the covenants and conditions that are contained in our existing debt agreements.
Secured debt exposes us to the possibility of foreclosure, which could result in the loss of our investment in certain of our subsidiaries or in a property or group of properties or other assets that secure that debt.
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If the outstanding balance of the debt secured by the mortgage exceeds our tax basis in the property, we would recognize taxable income on foreclosure, but would not receive any cash proceeds, which could materially and adversely affect us.
−Removed: High interest rates have significantly increased our interest expense and may otherwise materially and negatively affect us.
+Added: We face challenges from uncertainties regarding interest rates and high interest rates have significantly increased our interest expense and may otherwise materially and negatively affect us.
In response to significant and prolonged increases in inflation, the U.S.
−Removed: Federal Reserve has raised interest rates multiple times since the beginning of 2022, which has significantly increased our interest expense.
−Removed: Although the U.S.
−Removed: Federal Reserve has indicated that it may lower interest rates in 2024, we cannot be sure that it will do so, and interest rates may continue to increase.
−Removed: High interest rates may materially and negatively affect us in several ways, including:
+Added: Federal Reserve raised interest rates eleven times during 2022 and 2023.
+Added: Federal Reserve then paused rate increases in the fourth quarter of 2023 following the deceleration of inflationary growth, and cut interest rates three times in late 2024, and it may further reduce interest rates, increase interest rates or maintain current interest rates.
+Added: Interest rates remain high compared to historical levels, and high interest rates may materially and negatively affect us in several ways, including:
• one of the factors that investors typically consider important in deciding whether to buy or sell our common shares is the distribution rate on our common shares relative to prevailing interest rates, and our quarterly cash distribution rate on our common shares is currently $0.01 per common share in order to enhance our liquidity until our leverage profile otherwise improves.
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High interest rates could therefore lower the value of our properties and cause the value of our securities to decline.
−Removed: Further downgrades in our credit ratings may increase our cost of capital and could otherwise materially adversely affect our business and financial condition.
+Added: Our credit ratings may increase our cost of capital and could otherwise materially adversely affect our business and financial condition.
In determining our credit ratings, rating agencies consider a number of both quantitative and qualitative factors, including earnings, fixed charges, cash flows, total debt outstanding, total secured debt, off balance sheet obligations, total capitalization and various ratios calculated from these factors.
The rating agencies also consider predictability of cash flows, business strategy, joint venture activity, property development risks, industry conditions and contingencies.
−Removed: Downgrades in our current credit ratings by rating agencies could adversely affect our cost and access to sources of liquidity and capital, adversely impact our ability to obtain unsecured debt or refinance our unsecured debt on competitive terms in the future, or require us to take certain actions to support our obligations, any of which would adversely affect our business and financial condition.
+Added: Further downgrades in our current credit ratings by rating agencies could adversely affect our cost and access to sources of liquidity and capital, adversely impact our ability to obtain unsecured debt or refinance our unsecured debt on competitive terms in the future, or require us to take certain actions to support our obligations, any of which would adversely affect our business and financial condition.
Ownership of real estate is subject to environmental risks and liabilities.
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We are subject to risks and could be exposed to additional costs from adverse weather, natural disasters and adverse impacts from global climate change.
−Removed: For example, our properties could be severely damaged or destroyed from either singular extreme weather events (such as floods, storms and wildfires) or through long term impacts of climatic conditions (such as precipitation frequency, weather instability and rise of sea levels).
−Removed: Such events could also adversely impact us or the tenants of our properties if we or they are unable to operate our or their businesses due to damage resulting from such events.
+Added: For example, our properties could be severely damaged or destroyed from either singular extreme weather events (such as floods, storms and wildfires) or through long term impacts of climatic conditions (such as precipitation frequency, weather instability and the rise of sea levels).
+Added: Severe weather events and climatic conditions could also adversely impact us and the tenants of our properties if we or they are unable to operate our or their businesses due to damage resulting from such events.
Insurance may not adequately cover all losses sustained by us or the tenants of our properties.
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The cybersecurity risks to us or our third-party vendors are heightened by, among other things, the evolving nature of the threats faced, advances in computer capabilities, new discoveries in the field of cryptography and new and increasingly sophisticated methods used to perpetrate illegal or fraudulent activities, including cyberattacks, email or wire fraud and other attacks exploiting security vulnerabilities in RMR’s or other third parties’ information technology networks and systems or operations.
−Removed: Although most of RMR’s staff returned to its offices during the pandemic, flexible working arrangements have resulted in a higher extent of remote working than it experienced prior to the pandemic.
−Removed: This and other possible changing work practices have adversely impacted, and may in the future
−Removed: adversely impact, RMR’s ability to maintain the security, proper function and availability of its information technology and systems since remote working by its employees could strain its technology resources and introduce operational risk, including heightened cybersecurity risk.
+Added: Although most of RMR’s staff work from its offices for a majority of the work week, flexible working arrangements have resulted in increased remote working.
+Added: This and other possible changing work practices have adversely impacted, and may in the future adversely impact, RMR’s ability to maintain the security, proper function and availability of its information technology and systems since remote working by its employees could strain its technology resources and introduce operational risk, including heightened cybersecurity risk.
Remote working environments may be less secure and more susceptible to hacking attacks, including phishing and social engineering attempts that have sought, and may seek, to exploit remote working environments.
In addition, RMR’s data security, data privacy, investor reporting and business continuity processes could be impacted by a third-party’s inability to perform in a remote work environment or by the failure of, or attack on, their information systems and technology.
+Added: The SEC has adopted rules requiring public companies to disclose material cybersecurity incidents on Form 8-K and periodic disclosure of a registrant’s cybersecurity risk management, strategy and governance in annual reports.
+Added: With the SEC particularly focused on cybersecurity, we expect increased scrutiny of RMR’s policies and systems designed to manage our cybersecurity risks and our related disclosures.
+Added: In addition, the SEC has indicated that one of its examination priorities for the Office of Compliance Inspections and Examinations is to continue to examine cybersecurity procedures and controls, including testing the implementation of these procedures and controls.
Any failure by RMR or other third-party vendors to maintain the security, proper function and availability of their respective information technology and systems could result in financial losses, interrupt our operations, damage our reputation, cause us to be in default of material contracts and subject us to liability claims or regulatory penalties, any of which could materially and adversely affect our business and the value of our securities.
+Added: RMR is incorporating artificial intelligence into some of its business workflows and processes, and challenges with properly managing its use could result in reputational harm, competitive harm, legal liability, and increased regulatory costs and could adversely affect our results of operations.
+Added: RMR has begun using AI and machine learning technologies to enhance certain workflows and processes used in its business, and its research into and continued deployment of such capabilities remain ongoing.
+Added: AI is still in its early stages, and the introduction and incorporation of AI technologies may result in unintended consequences or other new or expanded risks and liabilities.
+Added: If the content, analyses or recommendations that AI applications assist in producing are, or are alleged to be, deficient, inaccurate or biased, such as due to limitations in AI algorithms, insufficient or biased base data or flawed training methodologies, our business, financial condition, results of operations and reputation may be adversely affected.
+Added: Additionally, AI technology is continuously evolving, and RMR may adopt and deploy AI technologies that could become obsolete earlier than expected, and there can be no assurance that we will realize the desired or anticipated benefits from AI.
+Added: Also, our competitors or other third parties may incorporate AI into their products and services more quickly or more successfully than RMR, which could impair our ability to compete effectively and adversely affect our results of operations.
+Added: The use of AI applications to support business processes carries inherent risks related to data privacy and security, such as unintended or inadvertent transmission of proprietary or sensitive information, including personal data.
+Added: AI presents emerging ethical issues, and RMR may be unsuccessful in identifying and resolving these issues before they arise.
+Added: If RMR’s use of AI becomes controversial, it may experience brand or reputational harm, competitive harm, or legal liability.
+Added: There is uncertainty in the legal and regulatory landscape for AI, which is not fully developed, and any laws, regulations or industry standards adopted in response to the emergence of AI may be burdensome, could entail significant costs, and may restrict or impede RMR’s ability to successfully develop, adopt and deploy AI technologies efficiently and effectively.
Sustainability initiatives, requirements and market expectations may impose additional costs and expose us to new risks.
−Removed: There continues to be increased focus from regulators, investors, tenants, including the General Services Administration, and other stakeholders concerning corporate sustainability.
−Removed: The SEC is considering climate change related regulations and certain states have enacted climate focused disclosure laws and we may incur significant costs in compliance with such rules.
+Added: There remains a continued focus from regulators, investors, tenants, including the General Services Administration, and other stakeholders concerning corporate sustainability.
+Added: For example, the SEC has adopted climate change related regulations and certain states have enacted climate focused disclosure laws and we may incur significant costs in compliance with such rules if and when such regulations become effective.
Some investors may use ESG factors to guide their investment strategies and, in some cases, may choose not to invest in us, or otherwise do business with us, if they believe our or RMR’s policies relating to corporate sustainability are inadequate.
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In addition, we may incur significant costs in attempting to comply with regulatory requirements, ESG policies or third-party expectations or demands.
−Removed: Insurance may not adequately cover our losses, and insurance costs may continue to increase.
+Added: Insurance may not adequately cover our losses, and insurance costs may increase.
We or our tenants are generally responsible for the costs of insurance coverage for our properties and the operations conducted on them, including for casualty, liability, fire, extended coverage and rental or business interruption loss insurance.
In the future, we may acquire properties for which we are responsible for the costs of insurance.
−Removed: In the past few years, the costs of insurance have increased significantly, and these increased costs have had an adverse effect on us and certain of our tenants.
+Added: The costs of insurance may increase which may have an adverse effect on us and certain of our tenants.
Increased insurance costs may adversely affect our applicable tenants’ abilities to pay us rent or result in downward pressure on rents we can charge under new or renewed leases.
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If we lose the services provided by RMR or its key personnel, our business and growth prospects may decline.
−Removed: We may be unable to duplicate the quality and depth of management
−Removed: available to us by becoming internally managed or by hiring another manager.
+Added: We may be unable to duplicate the quality and depth of management available to us by becoming internally managed or by hiring another manager.
In the event RMR is unwilling or unable to continue to provide management services to us, our cost of obtaining substitute services may be greater than the fees we pay RMR under our management agreements, and as a result our expenses may increase.
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RMR or its subsidiaries also act as the manager to certain other Nasdaq listed companies and private companies, and Mr.
−Removed: Portnoy serves as a managing director, managing trustee, director or trustee, as applicable, of those companies, and as chair of the board of trustees or board of directors, as applicable, of those Nasdaq listed companies.
+Added: Portnoy serves as a managing trustee, director or trustee, as applicable, of those companies, and as chair of the board of trustees of those Nasdaq listed companies.
Jennifer Clark, our other Managing Trustee, Yael Duffy, our President and Chief Operating Officer, and Brian Donley, our Chief Financial Officer and Treasurer, are also officers and employees of RMR.
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In addition to his investments in RMR Inc.
−Removed: Portnoy holds equity investments in other companies to which RMR or its subsidiaries provide management services and some of these companies have significant cross ownership interests.
+Added: Portnoy holds equity investments in other companies to which RMR or its subsidiaries provide management services, including Sonesta, of which Mr.
+Added: Portnoy is the controlling shareholder, and some of these companies have significant cross ownership interests.
Our executive officers also own equity investments in other companies to which RMR or its subsidiaries provide management services.
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Accordingly, we may lose investment opportunities to, and may compete for tenants with, other businesses managed by RMR or its subsidiaries.
−Removed: We cannot be sure that our Code of Conduct or our governance guidelines, or other procedural protections we adopt will be sufficient to enable us to identify, adequately address or mitigate actual or alleged conflicts of interest or ensure that our transactions with related persons are made on terms that are at least as favorable to us as those that would have been obtained with an unrelated person.
+Added: We cannot be sure that our Code of Conduct or our
+Added: governance guidelines, or other procedural protections we adopt will be sufficient to enable us to identify, adequately address or mitigate actual or alleged conflicts of interest or ensure that our transactions with related persons are made on terms that are at least as favorable to us as those that would have been obtained with an unrelated person.
Our management agreements with RMR were not negotiated on an arm’s length basis and their fee and expense structure may not create proper incentives for RMR, which may increase the risk of an investment in our common shares.
As a result of our relationships with RMR and its current and former controlling shareholder(s), our management agreements with RMR were not negotiated on an arm’s length basis between unrelated parties, and therefore, while such agreements were negotiated with the use of a special committee and disinterested Trustees, the terms, including the fees payable to RMR, may be different from those negotiated on an arm’s length basis between unrelated parties.
−Removed: Our property management
−Removed: fees are calculated based on rents we receive and we also pay RMR construction supervision fees for construction at our properties overseen and managed by RMR, and our base business management fee is calculated based upon the lower of the historical costs of our real estate investments and our market capitalization.
+Added: Our property management fees are calculated based on rents we receive and we also pay RMR construction supervision fees for construction at our properties overseen and managed by RMR, and our base business management fee is calculated based upon the lower of the historical costs of our real estate investments and our market capitalization.
We pay RMR substantial base management fees regardless of our financial results.
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If any challenges to related party transactions were to be successful, we might not realize the benefits expected from the transactions being challenged.
−Removed: Moreover, any such challenge could result in substantial costs and a diversion of our management’s attention, could have a material adverse effect on our reputation, business and growth and could adversely affect our ability to realize the benefits expected from the transactions, whether or not the allegations have merit or are substantiated.
+Added: Moreover, any such challenge could result in substantial costs and a diversion of our
+Added: management’s attention, could have a material adverse effect on our reputation, business and growth and could adversely affect our ability to realize the benefits expected from the transactions, whether or not the allegations have merit or are substantiated.
We may be at an increased risk for dissident shareholder activities due to perceived conflicts of interest arising from our management structure and relationships.
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Certain proxy advisory firms which have significant influence over the voting by shareholders of public companies have, in the past, recommended, and in the future may recommend, that shareholders withhold votes for the election of our incumbent Trustees, vote against our say on pay vote or other management proposals or vote for shareholder proposals that we oppose.
−Removed: These recommendations by proxy advisory
−Removed: firms in the future would likely affect the outcome of future Board of Trustees elections and votes on our say on pay or other shareholder votes, which may increase shareholder activism and litigation.
+Added: These recommendations by proxy advisory firms in the future would likely affect the outcome of future Board of Trustees elections and votes on our say on pay or other shareholder votes, which may increase shareholder activism and litigation.
These activities, if instituted against us, could result in substantial costs and diversion of our management’s attention and could have a material adverse impact on our reputation and business.
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Our declaration of trust prohibits any shareholder, other than RMR and its affiliates (as defined under Maryland law) and certain persons who have been exempted by our Board of Trustees, from owning, directly and by attribution, more than 9.8% of the number or value of shares (whichever is more restrictive) of any class or series of our outstanding shares of beneficial interest, including our common shares.
−Removed: This provision of our declaration of trust is intended to, among other purposes, assist with our REIT compliance under the IRC and otherwise promote our orderly governance.
−Removed: However, this provision may also inhibit acquisitions of a significant stake in us and may deter, delay or prevent a change in control of us or unsolicited acquisition proposals that a shareholder may consider favorable.
+Added: This restriction is intended to, among other purposes, assist with our REIT compliance under the IRC.
+Added: Further, our bylaws contain provisions that generally prohibit shareholders from owning more than 5% (in value or in number of shares, whichever is more restrictive) of any class or series of our outstanding shares, including our common shares.
+Added: This ownership limitation in our bylaws is intended to help us preserve our ability to use our net operating losses and other tax benefits to reduce our future taxable income.
+Added: We also believe these restrictions in our declaration of trust and bylaws promote good orderly governance.
+Added: However, these restrictions may also inhibit acquisitions of a significant stake in us and may deter, delay or prevent a change in control of us or unsolicited acquisition proposals that a shareholder may consider favorable.
Additionally, provisions contained in our declaration of trust and bylaws or under Maryland law may have a similar impact, including, for example, provisions relating to:
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As a result of these limitations on liability and indemnification obligations, we and our shareholders may have more limited rights against our present and former Trustees and officers than might exist with other companies, which could limit shareholder recourse in the event of actions which some shareholders may believe are not in our best interest.
−Removed: Shareholder litigation against us or our Trustees, officers, manager or other agents may be referred to mandatory arbitration proceedings, which follow different procedures than in-court litigation and may be more restrictive to shareholders asserting claims than in-court litigation.
−Removed: Our shareholders agree, by virtue of becoming shareholders, that they are bound by our governing documents, including the arbitration provisions of our declaration of trust and bylaws, as they may be amended from time to time.
−Removed: Our governing documents provide that certain actions by one or more of our shareholders against us or any of our Trustees, officers, manager or other agents, other than disputes, or any portion thereof, regarding the meaning, interpretation or validity of any provision of our declaration of trust or bylaws, will be referred to mandatory, binding and final arbitration proceedings if we, or any other party to such dispute, including any of our Trustees, officers, manager or other agents unilaterally so demands.
−Removed: As a result, we and our shareholders would not be able to pursue litigation in state or federal court against us or our Trustees, officers, manager or other agents, including, for example, claims alleging violations of federal securities laws or breach of fiduciary duties or similar director or officer duties under Maryland law, if we or any of our Trustees, officers, manager or other agents against whom the claim is made unilaterally demands the matter be resolved by arbitration.
−Removed: Instead, our shareholders would be required to pursue such claims through binding and final arbitration.
−Removed: Our governing documents provide that such arbitration proceedings would be conducted in accordance with the procedures of the Commercial Arbitration Rules of the American Arbitration Association, as modified in our bylaws.
−Removed: These procedures may provide materially more limited rights to our shareholders than litigation in a federal or state court.
−Removed: For example, arbitration in accordance with these procedures does not include the opportunity for a jury trial, document discovery is limited, arbitration hearings generally are not open to the public, there are no witness depositions in advance of arbitration hearings and arbitrators may have different qualifications or experiences than judges.
−Removed: In addition, although our governing documents’ arbitration provisions contemplate that arbitration may be brought in a representative capacity or on behalf of a class of our shareholders, the rules governing such representation or class arbitration may be different from, and less favorable to shareholders than, the rules governing representative or class action litigation in courts.
−Removed: Our governing documents also generally provide that each party to such an arbitration is required to bear its own costs in the arbitration, including attorneys’ fees, and that the arbitrators may not render an award that includes shifting of such costs or, in a derivative or class proceeding, award any portion of our award to any shareholder or such shareholder’s attorneys.
−Removed: The arbitration provisions of our governing documents may discourage our shareholders from bringing, and attorneys from agreeing to represent our shareholders wishing to bring, litigation against us or our Trustees, officers, manager or other agents.
−Removed: Our agreements with RMR have similar arbitration provisions to those in our governing documents.
−Removed: We believe that the arbitration provisions in our governing documents are enforceable under both state and federal law, including with respect to federal securities laws claims.
−Removed: We are a Maryland real estate investment trust and Maryland courts have upheld the enforceability of arbitration bylaws.
−Removed: In addition, the U.S.
−Removed: Supreme Court has repeatedly upheld agreements to arbitrate other federal statutory claims, including those that implicate important federal policies.
−Removed: However, some academics, legal practitioners and others are of the view that charter or bylaw provisions mandating arbitration are not enforceable with respect to federal securities laws claims.
−Removed: It is possible that the arbitration provisions of our governing documents may ultimately be determined to be unenforceable.
−Removed: By agreeing to the arbitration provisions of our governing documents, shareholders will not be deemed to have waived compliance by us with federal securities laws and the rules and regulations thereunder.
Our bylaws designate the Circuit Court for Baltimore City, Maryland as the sole and exclusive forum for certain actions and proceedings that may be initiated by our shareholders, which could limit our shareholders’ ability to obtain a favorable judicial forum for disputes with us or our Trustees, officers, manager or other agents.
−Removed: Our bylaws currently provide that, unless the dispute has been referred to binding arbitration, the Circuit Court for Baltimore City, Maryland will be the sole and exclusive forum for:
+Added: Our bylaws currently provide that other than any action arising under the Securities Act, the Circuit Court for Baltimore City, Maryland will be the sole and exclusive forum for:
+Added: (1) any Internal Corporate Claim, as such term is defined under the Maryland General Corporation Law;
(2) any derivative action or proceeding brought on our behalf;
(3) any action asserting a claim for breach of a fiduciary duty owed by any of our Trustees, officers, manager or other agents to us or our shareholders;
−Removed: (3) any action asserting a claim against us or any of our Trustees, officers, manager or other agents arising pursuant to Maryland law, our declaration of trust or bylaws brought by or on behalf of a shareholder, either on such shareholder’s own behalf, on our behalf or on behalf of any series or class of shares of beneficial interest of ours or by our shareholders against us or any of our Trustees, officers, manager or other agents, including any disputes, claims or controversies relating to the meaning, interpretation, effect, validity, performance or enforcement of our declaration of trust or bylaws;
−Removed: or (4) any action asserting a claim against us or any of our Trustees, officers, manager or other agents that is governed by the internal affairs doctrine of the State of Maryland.
+Added: (4) any action asserting a claim against us or any of our Trustees, officers, manager or other agents arising pursuant to Maryland law, our declaration of trust or bylaws, including any disputes, claims or controversies brought by or on behalf of a shareholder, either on such shareholder’s own behalf, on our behalf or on behalf of any series or class of shares of beneficial interest of ours or by our shareholders against us or any of our Trustees, officers, manager or other agents, including any disputes, claims or controversies relating to the meaning, interpretation, effect, validity, performance or enforcement of our declaration of trust or bylaws;
+Added: and (5) any action asserting a claim against us or any of our Trustees, officers, manager or other agents that is governed by the internal affairs doctrine of the State of Maryland.
Our bylaws currently also provide that the Circuit Court for Baltimore City, Maryland will be the sole and exclusive forum for any dispute, or portion thereof, regarding the meaning, interpretation or validity of any provision of our declaration of trust or bylaws.
−Removed: The exclusive forum provision of our bylaws does not apply to any action for which the Circuit Court for Baltimore City, Maryland does not have jurisdiction or to a dispute that has been referred to binding arbitration in accordance with our bylaws.
−Removed: The exclusive forum provision of our bylaws does not establish exclusive jurisdiction in the Circuit Court for Baltimore City, Maryland for claims that arise under the Securities Act, the Exchange Act or other federal securities laws if there is exclusive or concurrent jurisdiction in the federal courts.
+Added: The exclusive forum provision of our bylaws does not apply to any action for which the Circuit Court for Baltimore City, Maryland does not have jurisdiction.
+Added: Unless we otherwise consent in writing, the sole and exclusive forum for claims that arise under the Securities Act is the federal district courts of the United States of America, to the fullest extent permitted by law.
Any person or entity purchasing or otherwise acquiring or holding any interest in our shares of beneficial interest shall be deemed to have notice of and to have consented to these provisions of our bylaws, as they may be amended from time to time.
−Removed: The arbitration and exclusive forum provisions of our bylaws may limit a shareholder’s ability to bring a claim in a judicial forum that the shareholder believes is favorable for disputes with us or our Trustees, officers, manager or other agents, which may discourage lawsuits against us and our Trustees, officers, manager or other agents.
+Added: The exclusive forum provisions of our bylaws may limit a shareholder’s ability to bring a claim in a judicial forum that the shareholder believes is favorable for disputes with us or our Trustees, officers, manager or other agents, which may discourage lawsuits against us and our Trustees, officers, manager or other agents.
Disputes with RMR may be referred to mandatory arbitration proceedings, which follow different procedures than in-court litigation and may be more restrictive to those asserting claims than in-court litigation.
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generally accepted accounting principles, or GAAP, or differences in timing between the recognition of taxable income and the actual receipt of cash may occur.
−Removed: If we do not have other funds available in these situations, among other things, we may borrow funds on unfavorable terms, sell investments at disadvantageous prices or distribute amounts that would otherwise be invested in future acquisitions in order to pay distributions sufficient to enable us to distribute enough of our taxable income to satisfy the REIT distribution requirement and to avoid corporate income tax and the 4% excise tax in a particular year.
+Added: If we do not have other funds available in these situations, among other things, we may borrow funds on unfavorable terms, sell investments at disadvantageous prices or distribute amounts that would otherwise be invested in future acquisitions in order to pay distributions sufficient to enable us to distribute enough of our taxable income to satisfy the REIT distribution requirement and to avoid corporate income tax and the 4% excise tax in a
+Added: particular year.
These alternatives could increase our costs or reduce our shareholders’ equity.
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Any of these taxes would decrease cash available for distribution to our shareholders.
+Added: If arrangements involving one of our TRSs fail to comply as intended with the REIT qualification and taxation rules, we may fail to qualify for taxation as a REIT under the IRC or be subject to significant penalty taxes.
+Added: Effective January 1, 2025, one of our properties includes a hotel leased to one of our TRSs pursuant to arrangements that, under the IRC, are intended to qualify the rents we receive from our TRS as income that satisfies the REIT gross income tests.
+Added: We also intend that our transactions with our TRS be conducted on arm’s length bases so that we and our TRS will not be subject to penalty taxes under the IRC applicable to mispriced transactions.
+Added: While relief provisions can sometimes excuse REIT gross income test failures, significant penalty taxes may still be imposed.
+Added: For our TRS arrangements to comply as intended with the REIT qualification and taxation rules under the IRC, a number of requirements must be satisfied, including:
+Added: • our TRS may not directly or indirectly operate or manage a lodging facility, as defined by the IRC;
+Added: • the leases to our TRS must be respected as true leases for federal income tax purposes and not as service contracts, partnerships, joint ventures, financings or other types of arrangements;
+Added: • the leased properties must constitute qualified lodging facilities (including customary amenities and facilities) under the IRC;
+Added: • our leased properties must be managed and operated on behalf of the TRS by independent contractors who are less than 35% affiliated with us and who are actively engaged (or have affiliates so engaged) in the trade or business of managing and operating qualified lodging facilities for any person unrelated to us;
+Added: • the rental and other terms of the leases must be arm’s length.
+Added: We cannot be sure that the IRS or a court will agree with our assessment that our TRS arrangements comply as intended with REIT qualification and taxation rules.
+Added: If arrangements involving our TRS fail to comply as we intended, we may fail to qualify for taxation as a REIT under the IRC and may be subject to significant penalty taxes.
Legislative or other actions affecting REITs could materially and adversely affect us and our shareholders.
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Our quarterly cash distribution rate on our common shares is currently $0.01 per common share and future distributions may remain at this level for an indefinite period or be eliminated and the form of payment could change.
−Removed: Beginning with the first quarter of 2024, we have reduced our quarterly cash distribution rate on our common shares to $0.01 per common share in order to increase our liquidity and financial flexibility when addressing future leasing costs, capital
−Removed: expenditures and debt maturities.
−Removed: We intend to continue to pay quarterly distributions to our shareholders at this rate for an indefinite period, subject to applicable REIT tax requirements;
−Removed: • our ability to pay distributions to our shareholders or sustain the rate of distributions may continue to be adversely affected if any of the risks described in this Annual Report on Form 10-K occur, including any negative impact caused by current market and economic conditions, such as high interest rates, prolonged high inflation and economic downturns or a possible recession, on our business, results of operations and liquidity;
+Added: Beginning with the first quarter of 2024, we reduced our quarterly cash distribution rate on our common shares to $0.01 per common share in order to increase our liquidity and financial flexibility when addressing future leasing costs, capital expenditures and debt maturities.
+Added: We intend to continue to pay quarterly distributions to our shareholders at a rate that enables us to comply with REIT tax requirements;
+Added: • our ability to pay distributions to our shareholders or sustain the rate of distributions may continue to be adversely affected if any of the risks described in this Annual Report on Form 10-K occur, including any negative impact caused by current market and economic conditions, such as uncertainties surrounding interest rates and inflation and economic downturns or a possible recession, on our business, results of operations and liquidity;
• our credit agreement requires us to obtain lender approval for any increase in our distribution rate above the current level;
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Further, in order to preserve liquidity, we may elect to, in part, pay distributions to our shareholders in a form other than cash, such as issuing additional common shares to our shareholders, as permitted by the applicable tax rules.
−Removed: The Notes and the Guarantees are structurally subordinated to the payment of all indebtedness and other liabilities of our subsidiaries that do not guarantee the 2029 Notes.
−Removed: We are the sole obligor on our outstanding senior unsecured notes, the 2029 Notes and any notes or other debt securities we may issue in the future, or, together with our outstanding senior unsecured notes and the 2029 Notes, the Notes.
−Removed: Our subsidiaries that guarantee the 2029 Notes are the sole obligors on the guarantees of such notes, or the Guarantees.
−Removed: The subsidiaries that guarantee the 2029 Notes do not currently guarantee any of our other Notes.
+Added: The Notes and the Guarantees are structurally subordinated to the payment of all indebtedness and other liabilities of our subsidiaries that do not guarantee the March 2027 Notes, the March 2029 Notes and the September 2029 Notes.
+Added: We are the sole obligor on our outstanding senior unsecured notes, the March 2027 Notes, the March 2029 Notes, the September 2029 Notes and any notes or other debt securities we may issue in the future, or, together with our outstanding senior unsecured notes, the March 2027 Notes, the March 2029 Notes and the September 2029 Notes, the Notes.
+Added: Certain of our subsidiaries guarantee the March 2027 Notes, the March 2029 Notes and/or the September 2029 Notes, and such subsidiaries are the sole obligors on the applicable guarantees of such notes, or the Guarantees.
+Added: The subsidiaries that guarantee the March 2027 Notes, the March 2029 Notes and/or the September 2029 Notes do not currently guarantee any of our other Notes.
Our non-guarantor subsidiaries are separate and distinct legal entities and have no obligation, contingent or otherwise, to pay any amounts due on the Notes or the Guarantees, or to make any funds available therefor, whether by dividend, distribution, loan or other payments.
The rights of holders of the Notes to benefit from any of the assets of our non-guarantor subsidiaries are subject to the prior satisfaction of claims of our non-guarantor subsidiaries’ creditors.
−Removed: As a result, the Notes and the Guarantees are, and, except to the extent that future Notes are guaranteed by our subsidiaries, will be, structurally subordinated to all indebtedness and other liabilities of our subsidiaries that do not guarantee the 2029 Notes, including guarantees of or pledges under other indebtedness of ours, payment obligations under lease agreements, trade payables and preferred equity.
−Removed: As of December 31, 2023, our non-guarantor subsidiaries had total indebtedness and other liabilities (excluding security and other deposits and guaranties) of $270.8 million (including guarantees of other indebtedness and trade payables, but excluding liabilities to us or by a subsidiary guarantor), which are structurally senior to the 2029 Notes.
−Removed: The Notes, other than the 2029 Notes, or the Unsecured Notes, are unsecured and effectively subordinated to all of our and our subsidiary guarantors’ existing and future secured debt to the extent of the value of the assets securing such indebtedness.
+Added: As a result, the Notes and the Guarantees are, and, except to the extent that future Notes are guaranteed by our subsidiaries, will be, structurally subordinated to all indebtedness and other liabilities of our subsidiaries that do not guarantee the March 2027 Notes, the March 2029 Notes and/or the September 2029 Notes, including guarantees of or pledges under other indebtedness of ours, payment obligations under lease agreements, trade payables and preferred equity.
+Added: As of December 31, 2024, our non-guarantor subsidiaries had total indebtedness and other liabilities (excluding security and other deposits and guaranties) of $181 million (including guarantees of other indebtedness and trade payables, but excluding liabilities to us or by a subsidiary guarantor), which are structurally senior to the March 2027 Notes, the March 2029 Notes and the September 2029 Notes.
+Added: The Notes, other than the March 2027 Notes, the March 2029 Notes and the September 2029 Notes, or the Unsecured Notes, are unsecured and effectively subordinated to all of our and our subsidiary guarantors’ existing and future secured debt to the extent of the value of the assets securing such indebtedness.
The outstanding Unsecured Notes are not secured and any Unsecured Notes we may issue in the future may not be secured.
−Removed: Upon any distribution to our creditors in a bankruptcy, liquidation, reorganization or similar proceeding relating to us or our property, the holders of our secured debt, including debt under our credit agreement, the 2029 Notes and our $177.3 million in aggregate principal amount of mortgage notes (to the extent such debt remains outstanding and is still then secured), will be entitled to exercise the remedies available to a secured lender under applicable law and pursuant to the instruments governing such debt and to be paid in full, from the assets securing that secured debt before any payment may be made with respect to the Unsecured Notes that are not secured by those assets.
+Added: Upon any distribution to our creditors in a bankruptcy, liquidation, reorganization or similar proceeding relating to us or our property, the holders of our secured debt, including debt under our credit agreement, the March 2027 Notes, the March 2029 Notes, the September 2029 Notes and our $177.3 million in aggregate principal amount of mortgage notes (to the extent such
+Added: debt remains outstanding and is still then secured), will be entitled to exercise the remedies available to a secured lender under applicable law and pursuant to the instruments governing such debt and to be paid in full, from the assets securing that secured debt before any payment may be made with respect to the Unsecured Notes that are not secured by those assets.
In that event, because such Unsecured Notes will not be secured by any of our assets, it is possible that there will be no assets from which claims of holders of such Unsecured Notes can be satisfied or, if any assets remain, that the remaining assets will be insufficient to satisfy those claims in full.
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Accordingly, we may not have sufficient funds to pay amounts due on such Unsecured Notes.
−Removed: As a result, note holders may lose a portion or the entire value of their
−Removed: investment in such Unsecured Notes.
+Added: As a result, note holders may lose a portion or the entire value of their investment in such Unsecured Notes.
Further, the terms of the outstanding Unsecured Notes permit, and the terms of any Unsecured Notes we may issue in the future may permit, us to incur additional secured debt subject to compliance with certain debt ratios.
The Unsecured Notes will be effectively subordinated to any such additional secured debt.
−Removed: As of February 14, 2024, our secured debt included $232.0 million in outstanding borrowings under our credit agreement, the 2029 Notes and $177.3 million in aggregate principal amount of mortgage notes.
+Added: As of February 12, 2025, our secured debt included $425.0 million in outstanding borrowings under our credit agreement, the March 2027 Notes, the March 2029 Notes, the September 2029 Notes and $177.3 million in aggregate principal amount of mortgage notes.
Federal and state statutes allow courts, under specific circumstances, to void guarantees and require holders of notes to return payments received from guarantors.
−Removed: Under the federal bankruptcy law and comparable provisions of state fraudulent transfer laws, the Guarantees and the related liens (or any future notes that are guaranteed by our subsidiaries) could be voided, or claims in respect of a guarantee and the related lien could be subordinated to all other debts of that guarantor if, among other things, the guarantor, at the time it incurred the debt evidenced by its guarantee and related lien:
+Added: Under the federal bankruptcy law and comparable provisions of state fraudulent transfer laws, the Guarantees and any related liens (or any future notes that are guaranteed by our subsidiaries) could be voided, or claims in respect of a guarantee and any related lien could be subordinated to all other debts of that guarantor if, among other things, the guarantor, at the time it incurred the debt evidenced by its guarantee and related lien:
• received less than reasonably equivalent value or fair consideration for the incurrence of such guarantee or granting of such lien;
13 unchanged sentences
We have not applied for listing of certain of the Notes on any securities exchange or for quotation on any automatic dealer quotation system, and we may not do so for Notes issued in the future.
−Removed: We cannot be sure of the liquidity of any market that may develop for such Notes, the ability of any holder to sell such Notes or the price at which holders would be able to sell such Notes.
+Added: We cannot be sure of the liquidity of any market that may develop for such Notes, the ability of any holder to sell such Notes or the price at which holders would be able to sell such
If a market for such Notes does not develop, holders may be unable to resell such Notes for an extended period of time, if at all.
3 unchanged sentences
Any decline in market prices, regardless of cause, may adversely affect the liquidity and trading markets for the Notes.
−Removed: Some or all of the Guarantees may be released automatically.
+Added: Some or all of the Guarantees and any related collateral may be released automatically.
A subsidiary guarantor may be released from its Guarantee under certain circumstances.
−Removed: Such release may occur at any time upon, among other things, the sale of all or substantially all of the assets or capital stock of the subsidiary guarantor or upon the sale or release of the properties that are owned directly or indirectly by such subsidiary guarantor that serve as collateral for the 2029 Notes, in each case in compliance with the provisions of the indenture governing the 2029 Notes.
−Removed: Accordingly, the 2029 Notes may not at all times be guaranteed by some or all of the subsidiaries which guaranteed the 2029 Notes on the date they were initially issued.
+Added: Such release may occur at any time upon, among other things, the sale of all or substantially all of the assets or capital stock of the subsidiary guarantor or upon the sale or release of the properties that are owned directly or indirectly by such subsidiary guarantor that serve as collateral for the March 2027 Notes, the March 2029 Notes and/or the September 2029 Notes, or the Secured Notes, in each case in compliance with the provisions of the applicable indenture governing such series of Secured Notes.
+Added: Accordingly, the Secured Notes may not at all times be guaranteed by some or all of the subsidiaries which guaranteed such Secured Notes on the date they were initially issued.
+Added: Further, the aggregate value of the collateral that secures the Secured Notes will be reduced to the extent of the value of the released collateral.
+Added: The value of any released collateral could be significant and there can be no assurance that the value of the remaining collateral (if any) would be sufficient to satisfy all obligations owed by us to holders of the Secured Notes.
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.