What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-02-13 compared with 2024-02-15 · 190 added, 218 removed, 331 unchanged (55% of the section changed)

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We are a REIT organized under Maryland law.

As of December 31, 2023, our wholly owned properties were comprised of 152 properties and we had noncontrolling ownership interests of 51% and 50% in two unconsolidated joint ventures that owned three properties containing approximately 468,000 rentable square feet.

As of December 31, 2024, our wholly owned properties were comprised of 128 properties and we had a noncontrolling ownership interest of 51% in an unconsolidated joint venture that owned two properties containing approximately 346,000 rentable square feet.

As of December 31, 2024, our properties are located in 29 states and the District of Columbia and contain approximately 17,763,000 rentable square feet.

As of December 31, 2023, our properties were leased to 258 different tenants, with a weighted average remaining lease term (based on annualized rental

income) of approximately 6.4 years.

As of December 31, 2024, our properties were leased to 226 different tenants, with a weighted average remaining lease term (based on annualized rental income) of approximately 7.4 years.

government is our largest tenant, representing approximately 17.0% of our annualized rental income as of December 31, 2024.

Leases representing approximately 9.9% and 4.2% of our annual rental income are scheduled to expire in each of 2025 and 2026, respectively, and we may be unable to renew leases or find replacement tenants.

Certain changes in office space utilization, including increased remote work arrangements and tenants consolidating their real estate footprint, continue to impact the market.

The utilization and demand for office space continues to face headwinds and the duration and ultimate impact of current trends on the demands for office space at our properties remains uncertain and subject to change.

Accordingly, we do not yet know what the full extent of the impacts will be on our or our tenants’ businesses and operations or the long-term outlook for leasing our properties.

Higher interest rates, inflationary pressures, geopolitical hostilities and tensions, and concerns that the U.S.

Certain shifts in office space utilization, including increased remote 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 office sector and our portfolio.

The demand for office space continues to face headwinds and declining rents and increasing costs to relet space when tenants can be identified continue to impact the market.

The duration and ultimate impact of current trends on the demand for office space at our properties remains uncertain and subject to change.

Accordingly, we do not yet know what the full extent of the impacts will be on our or our tenants’ businesses and operations nor the long-term outlook for leasing at our properties.

Higher interest rates, inflationary pressures, government policies (including the potential reduction of U.S.

federal office leases), geopolitical hostilities and tensions, and concerns that the U.S.

economy may enter an economic recession have caused disruptions in the financial markets and these factors could adversely affect our and our tenants’ financial condition and the ability or willingness of our tenants to renew our leases or pay rent to us.

We have a significant amount of debt maturing in the next twelve months.

Deteriorating office fundamentals, high interest rates and market sentiment towards the office sector may restrict our access to, and likely increase our cost of, capital as we seek to refinance our debts.

We also have a significant amount of debt maturing in the next 18 months and we have limited debt and equity financing alternatives available to us to refinance our debt, and recent financing sources we have utilized to refinance debt have increased our cost of capital.

The duration and ultimate impact of these factors on our properties and our business remains uncertain and subject to change;

however, these conditions continue to have a significant negative impact on our results of operations, financial position and cash flows.

As of February 13, 2025, our total available liquidity was comprised of $113,000 of cash and our near-term obligations include lease obligations of $81,865 and principal debt repayments of $26,000 in 2025 and $291,488 in 2026.

Given the limited alternatives available to us to obtain debt or equity financing to refinance our maturing debt, the illiquid nature of our real estate assets and our limited ability to incur additional debt while maintaining compliance with the financial covenants in our existing debt agreements, we continue to work with our financial advisor, Moelis & Company LLC, to evaluate strategies to address our upcoming debt obligations, including through asset sales, debt exchanges, and/or equity sales.

However, we are not able to conclude that it is probable that these strategies will allow us to satisfy our upcoming debt obligations and maturities.

If we are unable to consummate transactions that allow us to refinance certain of our existing debt, our Board of Trustees may consider a reorganization in a bankruptcy court.

As a result of the foregoing, we have concluded that there is substantial doubt about our ability to continue as a going concern.

For more information about the risks relating to these dynamics and conditions and their impacts on us and our business, see elsewhere in this Annual Report on Form 10-K, including “Warning Concerning Forward-Looking Statements” and Part I, Item 1A, “Risk Factors”.

Property Operations

Unless otherwise noted, the data presented in this section includes properties classified as held for sale as of December 31, 2023 and excludes three properties owned by two unconsolidated joint ventures in which we owned 51% and 50% interests as of December 31, 2023.

For more information regarding our properties classified as held for sale and our two unconsolidated joint ventures, see Note 4 to the Notes to Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report on Form 10-K.

Unless otherwise noted, the data presented in this section includes properties classified as held for sale as of December 31, 2024 and excludes two properties owned by an unconsolidated joint venture in which we owned a 51% interest.

For more information regarding our properties classified as held for sale and our unconsolidated joint venture, see Note 4 to the Notes to Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report on Form 10-K.

Occupancy data for our properties as of December 31, 2024 and 2023 was as follows (square feet in thousands):

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(2) Based on properties we owned continuously since January 1, 2023;

excludes one property classified as held for sale, five properties undergoing significant redevelopment and three properties owned by two unconsolidated joint ventures in which we owned 51% and 50% interests as of December 31, 2023.

excludes five properties classified as held for sale, five properties affected by significant redevelopment activities and two properties owned by an unconsolidated joint venture in which we owned a 51% interest as of December 31, 2024.

(3) Subject to changes when space is remeasured or reconfigured for tenants.

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(3) Based on properties we owned continuously since January 1, 2023;

During the year ended December 31, 2024, changes in rentable square feet leased and available for lease at our properties were as follows (square feet in thousands):

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Lease expirations (3,602) 3,602 —

Redevelopment expansion (1)

Lease renewals (1)

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End of year 15,092 2,671 17,763

(1) Represents additional rentable square feet resulting from the redevelopment of a property in Washington, D.C., which was completed in June 2023.

(1) Based on leases entered during the year ended December 31, 2024.

(3) Rentable square feet are subject to changes when space is remeasured or reconfigured for tenants.

During the year ended December 31, 2024, we entered into new and renewal leases as summarized in the following table (square feet in thousands):

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Includes capitalized interest and other operating costs of $1,172 and $10,159 for the years ended December 31, 2024 and 2023, respectively.

In addition to the capital expenditures described above, we contributed $5,213 and $3,851 to one of our unconsolidated joint ventures during the years ended December 31, 2023 and 2022, respectively.

Also, as of December 31, 2023, we had estimated unspent leasing related obligations of $109,309, of which we expect to spend $67,705 over the next 12 months.

As of December 31, 2023, we had leases at our properties totaling approximately 2,983,000 rentable square feet that were scheduled to expire during 2024.

As of February 14, 2024, we expect tenants with leases totaling approxim ately 1,881,000 r entable square feet that are scheduled to expire during 2024, excluding space that has been re-leased and space for which we are in advanced negotiations to re-lease, not to renew or to downsize their leased space upon expiration, and we cannot be sure as to whether other tenants will renew their leases upon expiration.

However, we continue to proactively engage with our existing tenants and are focused on overall tenant retention.

Prevailing market conditions and our tenants’ needs at the time we negotiate and enter leases or lease renewals will generally determine rental rates and demand for leased space at our properties, all of which factors are beyond our control.

As of December 31, 2024, we had estimated unspent leasing related obligations of $81,865, of which we expect to spend $46,232 over the next 12 months.

As of December 31, 2024, we had leases at our properties totaling approximately 2,067,000 and 522,000 rentable square feet that were scheduled to expire during 2025 and 2026, respectively.

As of February 12, 2025, we expect tenants with leases totaling approxim ately 1,547,000 and 33,000 r entable square feet that are scheduled to expire during 2025 and 2026, respectively, excluding space that has been re-leased and space for which we are in advanced negotiations to re-lease, not to renew or to downsize their leased space upon expiration, and we cannot be sure as to whether other tenants will renew their leases upon expiration.

We continue to proactively engage with our existing tenants and are focused on overall tenant retention.

Prevailing market conditions and our tenants’ needs at the time we ne gotiate and enter leases or lease renewals will generally determine rental rates and demand for leased space at our properties, all of which are beyond our control.

Whenever we renew or enter into new leases for our properties, we intend to seek rents which are equal to or higher than our historical rents for the same properties;

however, our ability to maintain or increase the rents for our current properties will depend in large part upon market conditions, which are beyond our control.

however, our ability to maintain or increase the rents for our properties will depend in large part upon market conditions, which are beyond our control.

We cannot be sure of the rental rates that will result from our ongoing negotiations regarding lease renewals or any new or renewed leases we may enter.

Also, we may experience material declines in our rental income due to vacancies upon lease expirations or early terminations or lower rents upon lease renewal or reletting.

Additionally, we may incur significant costs and make significant concessions to renew our leases with current tenants or lease our properties to new tenants.

Also, we may experience material declines in our rental income due to vacancies upon lease expirations, early terminations or lower rents upon lease renewal or reletting.

Additionally, we may incur significant costs and make significant concessions to renew leases with current tenants or attract new tenants to our properties.

As of December 31, 2024, our lease expirations by year were as follows (square feet in thousands):

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2034 and thereafter

43 5,044 33.2% 100.0% 159,390 37.4% 100.0%

Total 292 15,092 100.0% $ 427,947 100.0%

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Also, in 2025, 2026, 2027, 2028, 2029, 2030, 2031, 2032, 2034, 2035, 2036, 2037 and 2040, early termination rights become exercisable by other tenants who occupied an additional approximately 1.7%, 1.5%, 1.7%, 5.1%, 3.1%, 1.9%, 1.0%, 3.5%, 0.3%, 1.0%, 0.2%, 0.2% and 0.4% of our rentable square feet, respectively, and contributed an additional approximately 2.1%, 2.3%, 2.4%, 5.7%, 2.7%, 2.1%, 1.1%, 4.6%, 0.8%, 1.5%, 0.3%, 0.2% and 0.5% of our annualized rental income, respectively, as of December 31, 2024.

In addition, as of December 31, 2023, pursuant to leases with eight of our tenants, these tenants had rights to terminate their leases if their respective legislature or other funding authority does not appropriate rent amounts in their respective annual budgets.

These eight tenants occupied approximately 4.2% of our rentable square feet and contributed approximately 4.4% of our annualized rental income as of December 31, 2023.

In addition, as of December 31, 2024, pursuant to leases with five of our tenants, these tenants had rights to terminate their leases if their respective legislature or other funding authority does not appropriate rent amounts in their respective annual budgets.

These five tenants occupied approximately 3.6% of our rentable square feet and contributed approximately 3.7% of our annualized rental income as of December 31, 2024.

(2) Leased square feet is pursuant to leases existing as of December 31, 2024, and includes (i) space being fitted out for tenant occupancy pursuant to our lease agreements, if any, and (ii) space which is leased, but is not occupied or is being offered for sublease by tenants, if any.

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We generally will seek to renew or extend the terms of leases at properties with tenants when they expire.

However, market and economic factors, along with increases in remote work, changes in space utilization and government spending and budget priorities may cause our tenants not to renew or extend their leases when they expire, or to seek to renew their leases for less space than they currently occupy.

If we are unable to extend or renew our leases, or we renew leases for reduced space, it may be time consuming and expensive to relet some of these properties.

However, market and economic factors, along with increases in remote work, changes in space utilization and government policies, spending and budget priorities, may cause our tenants not to renew or extend their leases when they expire, or to seek to renew their leases for less space than they currently occupy.

If we are unable to extend or renew our leases, or we renew leases for reduced space, it may be time consuming and expensive to relet our properties.

As of December 31, 2024, we derived 25.0% of our annualized rental income from our properties located in the metropolitan Washington, D.C.

market area, which includes Washington, D.C., Northern Virginia and suburban Maryland.

Current economic conditions in this area or a possible recession, including as a result of current inflationary conditions or otherwise, could reduce demand from tenants for our properties, reduce rents that our tenants in this area are willing to pay when our leases expire and increase lease concessions for new leases and renewals.

Additionally, there has been a decrease in demand for new leased office space by the U.S.

Current economic conditions in this area or a possible recession could reduce demand from tenants at our properties, reduce rents that our tenants are willing to pay when our leases expire or increase lease concessions for new leases and renewals.

Additionally, although the current administration has issued so called return to work mandates, there has been a decrease in demand for new leased office space by the U.S.

government, including in the metropolitan Washington, D.C.

market area, and that could increase competition for government tenants and adversely affect our ability to retain government tenants or maintain or increase our rents when our leases expire.

market area, which could increase competition for government tenants and adversely affect our ability to retain government tenants or maintain or increase our rents when leases expire.

Our manager, RMR, employs a tenant review process for us.

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Not Rated 596 3.9 % 19,604 4.6 %

4 Bank of America Corporation Investment Grade 577 3.2 % 18,159 3.5 %

4 IG Investments Holdings LLC Not Rated 339 2.2 % 18,303 4.3 %

6 State of California Investment Grade 467 2.6 % 14,021 2.7 %

7 Tyson Foods, Inc.

Investment Grade 248 1.4 % 11,954 2.3 %

5 Bank of America Corporation Investment Grade 577 3.8 % 17,290 4.0 %

6 Sonesta International Hotels Corporation (1)

Not Rated 240 1.6 % 10,828 2.5 %

7 Northrop Grumman Corporation Investment Grade 337 2.2 % 10,781 2.5 %

9 Sonesta International Hotels Corporation Not Rated 234 1.3 % 9,778 1.9 %

10 Micro Focus International plc Non Investment Grade 215 1.2 % 7,915 1.5 %

8 State of California Investment Grade 365 2.4 % 10,570 2.5 %

9 State of Georgia Investment Grade 308 2.0 % 7,713 1.8 %

10 Sonoma Biotherapeutics, Inc.

Not Rated 84 0.6 % 7,189 1.7 %

12 State of Georgia Investment Grade 308 1.7 % 7,345 1.4 %

13 Commonwealth of Massachusetts Investment Grade 212 1.2 % 7,269 1.4 %

14 CommScope Holding Company Inc.

Non Investment Grade 162 0.9 % 7,199 1.4 %

15 PNC Bank Investment Grade 441 2.5 % 6,960 1.4 %

16 Compass Group plc Investment Grade 267 1.5 % 6,697 1.3 %

17 ServiceNow, Inc.

Investment Grade 149 0.8 % 6,675 1.3 %

18 Allstate Insurance Corporation Investment Grade 468 2.6 % 6,484 1.3 %

11 Automatic Data Processing, Inc.

Investment Grade 289 1.9 % 6,346 1.5 %

12 Allstate Insurance Corporation Investment Grade 458 3.0 % 6,270 1.5 %

13 Compass Group plc Investment Grade 267 1.8 % 6,076 1.4 %

14 Church & Dwight Co., Inc.

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Investment Grade 344 2.3 % 5,734 1.3 %

23 Science Applications International Corp Non Investment Grade 159 0.9 % 5,228 1.0 %

17 Science Applications International Corp.

Non Investment Grade 159 1.1 % 5,254 1.2 %

Investment Grade 425 2.8 % 5,251 1.2 %

19 Berkshire Hathaway Inc.

Investment Grade 134 0.9 % 4,674 1.1 %

20 Rocky Mountain University of Health Professions, Inc.

Not Rated 170 1.1 % 4,606 1.1 %

21 CommScope Holding Company Inc.

Non Investment Grade 96 0.6 % 4,546 1.1 %

22 Day Pitney LLP

Not Rated 100 0.7 % 4,522 1.1 %

23 Hartford Financial Services Group Inc.

Investment Grade 143 0.9 % 4,518 1.1 %

24 BAE Systems plc Investment Grade 165 1.1 % 4,442 1.0 %

25 Greeneden U.S.

Holdings I, LLC Not Rated 275 1.8 % 4,380 1.0 %

9,174 60.7 % $ 276,498 64.7 %

(1) In July 2023, we received notice from Tyson Foods, Inc.

exercising its option to terminate its lease at a property we owned in Chicago, IL effective January 2025, prior to the stated lease expiration date of January 31, 2028.

We are amortizing termination fees of approximately $1,400 per quarter through January 2025 as a result of this early termination.

(2) In August 2022, we entered into an approximately 10-year lease with Sonoma Biotherapeutics, Inc.

at a property we own in Seattle, WA that is currently undergoing redevelopment.

The term of the lease is estimated to commence in the first quarter of 2024.

Acquisition Activities

During the year ended December 31, 2023, we acquired a vacant land parcel adjacent to an office park we own for a purchase price of $2,750, excluding acquisition related costs.

(1) Effective January 1, 2025, the existing lease with this tenant was terminated and replaced with a hotel management agreement.

Disposition Activities

During the year ended December 31, 2023, we sold eight properties containing approximately 553,000 rentable square feet for an aggregate sales price of $44,874, excluding closing costs.

The net proceeds from these sales were used to repay amounts outstanding under our prior $750,000 unsecured revolving credit facility, or our prior revolving credit facility.

During the year ended December 31, 2024, we sold 24 properties containing approximately 2,789,000 rentable square feet for an aggregate sales price of $199,351, excluding closing costs.

The net proceeds of these sales were used to repay debt and to increase our liquidity.

In February 2025, we sold one additional property with approximately 100,000 rentable square feet for a sale price of $5,750, excluding closing costs.

This property previously secured our March 2027 Notes.

Accordingly, we expect to use the net proceeds of this sale to redeem a portion of our March 2027 Notes in accordance with the terms of the indenture governing the March 2027 Notes.

W e continue to evaluate our portfolio and are currently in various stages of marketing certain of our properties for sale, and we may seek to sell additional properties in the future.

However, we cannot be sure we will sell any properties we are marketing for sale for prices in excess of their carrying values or otherwise.

As of February 14, 2024, we have entered into an agreement to sell one property containing approximately 248,000 rentable square feet for a sales price of $39,000, excluding closing costs.

We cannot be sure we will sell any properties we are marketing for sale for prices in excess of their carrying values or otherwise.

In addition, our pending sale is subject to conditions;

accordingly, we cannot be sure that we will complete this sale or that this sale will not be delayed or the terms will not change.

As of February 12, 2025 , we have entered into agreements to sell six properties containing approximately 581,000 rentable square feet for an aggregate sales price of $54,763 , excluding closing costs.

We cannot be sure we will sell any of the properties we are marketing for sale for prices in excess of their carrying values or otherwise.

In addition, our pending sales are subject to conditions;

accordingly, we cannot be sure that we will complete these sales or that these sales will not be delayed or the pricing will not change.

For more information about our disposition activities, see “Business —Disposition Policies” in Part I, Item 1 of this Annual Report on Form 10-K and Note 4 to the Notes to Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report on Form 10-K.

Financing Activities

Mortgage Note Repayment

In June 2023, we repaid at maturity, a mortgage note secured by one property with an outstanding principal balance of $50,000 and an annual interest rate of 3.70%, using cash on hand and borrowings under our prior revolving credit facility.

Mortgage Notes Issuances

During the year ended December 31, 2023, we issued six fixed rate, interest-only mortgage notes with an aggregate principal balance of $177,320 and a weighted average interest rate of 7.8%.

The net proceeds from these mortgage loans were used to repay amounts outstanding under our prior revolving credit facility.

Amended and Restated Credit Agreement

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

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

As collateral for all loans and other obligations under our credit agreement, certain of our subsidiaries pledged all of their respective equity interests in certain of our direct and indirect property owning subsidiaries, and our pledged subsidiaries provided first mortgage liens on 19 properties that had an undepreciated carrying value, including lease intangibles, other assets and other liabilities, of $941,937 as of December 31, 2023.

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

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

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

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

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

On January 29, 2024, we borrowed the full amount of our term loan and $132,000 under our revolving credit facility.

We used the proceeds from these borrowings to repay all outstanding borrowings under our prior revolving credit facility, to fund transaction related costs relating to our credit agreement and for general business purposes.

Senior Secured Notes Issuance

In February 2024, we issued $300,000 of the 2029 Notes.

The aggregate net proceeds from this offering were $271,500, after initial purchaser discounts and other estimated offering expenses.

The 2029 Notes are fully and unconditionally guaranteed on a joint, several and senior secured basis by certain of our subsidiaries and secured by a pledge of all of the respective equity interests of the subsidiary guarantors and first mortgage liens on 17 properties with an undepreciated carrying value, including lease intangibles, other assets and other liabilities, of $574,291 as of December 31, 2023.

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

Senior Unsecured Notes Redemption

In February 2024, we issued a notice of early redemption, at par plus accrued interest, of all of our $350,000 of 4.25% senior unsecured notes due May 2024.

The redemption is expected to take place in March 2024 using the net proceeds from the offering of the 2029 Notes and borrowings under our revolving credit facility and the redemption is conditioned upon our borrowing an amount under our revolving credit facility sufficient, together with the net proceeds from the offering of the 2029 Notes, to pay the redemption price on or prior to the redemption date.

For more information about our financing activities, see “Business —Our Financing Policies” in Part I, Item 1 of this Annual Report on Form 10-K and Note 9 to the Notes to Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report on Form 10-K.

Segment Information

We operate in one business segment:

ownership of real estate properties.

RESULTS OF OPERATIONS (amounts in thousands, except per share amounts)

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166,265 163,859 2,406 1.5 % 30,971 35,633 197,236 199,492 (2,256) (1.1 %)

Net operating income (loss) (2)

Net operating income (2)

$ 264,487 $ 277,954 $ (13,467) (4.8 %) $ 40,256 $ 56,107 304,743 334,061 (29,318) (8.8 %)

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Depreciation and amortization 194,737 209,254 (14,517) (6.9 %)

Loss on impairment of real estate 11,299 21,820 (10,521) (48.2 %)

Acquisition and transaction related costs 31,816 292 31,524 n/m

Loss on impairment of real estate 181,578 11,299 170,279 n/m

Transaction related costs 1,144 31,816 (30,672) (96.4 %)

General and administrative 21,128 22,731 (1,603) (7.1 %)

Total other expenses 398,587 275,100 123,487 44.9 %

Gain on sale of real estate 3,780 11,001 (7,221) (65.6 %)

(Loss) gain on sale of real estate (7,410) 3,780 (11,190) n/m

Interest and other income 3,668 1,039 2,629 n/m

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Gain on early extinguishment of debt 126,185 — 126,185 n/m

Loss before income tax expense and equity in net losses of investees (46,867) (2,330) (44,537) n/m

Loss before income tax expense and equity in net losses of investees (135,146) (46,867) (88,279) 188.4 %

Income tax expense (203) (351) 148 (42.2 %)

Equity in net losses of investees (758) (3,031) 2,273 (75.0 %)

Loss on impairment of equity method investment (19,183) — (19,183) n/m

Net loss $ (69,432) $ (6,109) $ (63,323) n/m

Loss on impairment of equity method investment — (19,183) 19,183 (100.0 %)

Net loss $ (136,107) $ (69,432) $ (66,675) 96.0 %

Weighted average common shares outstanding (basic and diluted) 51,806 48,389 3,417 7.1 %

Per common share amounts (basic and diluted):

Net loss $ (1.44) $ (0.14) $ (1.30) n/m

Net loss $ (2.63) $ (1.44) $ (1.19) 82.6 %

n/m - not meaningful

(1) Comparable properties consists of 146 properties we owned on December 31, 2023 and which we owned continuously since January 1, 2022 and excludes one property classified as held for sale, five properties undergoing significant redevelopment and three properties owned by two unconsolidated joint ventures in which we owned 51% and 50% interests as of December 31, 2023.

(1) Comparable properties consists of 118 properties we owned on December 31, 2024 and which we owned continuously since January 1, 2023 and excludes five properties classified as held for sale, five properties affected by significant redevelopment activities and two properties owned by an unconsolidated joint venture in which we own a 51% interest.

(2) Our definition of net operating income, or NOI, and our reconciliation of net loss to NOI are included below under the heading “Non-GAAP Financial Measures.”

References to changes in the income and expense categories below relate to the comparison of consolidated results for the year ended December 31, 2024 compared to the year ended December 31, 2023.

For a comparison of consolidated results for the year ended December 31, 2022 compared to the year ended December 31, 2021, see Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022.

Rental income.

Rental income for non-comparable properties declined $22,210 related to our property disposition activities and $2,388 for properties undergoing significant redevelopment due to termination fee revenue in 2022 and increased vacancy

at a property that began a redevelopment project in February 2022, partially offset by the lease-up of our 20 Mass Ave.

redevelopment in Washington, D.C.

Rental income for comparable properties increased $3,876 due to the impact of real estate tax appeals and the related reimbursement income in the 2022 period, partially offset by increased vacancies at certain of our properties in 2023 and lower termination fee revenue.

Rental income decreased $35,564 related to our property disposition activities and $11,061 for comparable properties as a result of increased vacancies and lower rents from lease renewals at certain of our properties in 2024, partially offset by an increase in rental income of $15,051 due to the lease-up of certain properties affected by significant redevelopment activities.

Rental income includes non-cash straight line rent adjustments totaling $31,102 in 2024 and $26,194 in 2023, and amortization of acquired real estate leases and assumed real estate lease obligations totaling $402 in 2024 and $252 in 2023.

Real estate taxes.

Real estate taxes for non-comparable properties declined $3,876 related to our property disposition activities and $339 as a result of successful tax appeals at certain properties undergoing significant redevelopment, partially offset by an increase of $9,202 for comparable properties due to the favorable impact of real estate tax appeals recorded in 2022.

Real estates taxes decreased $4,669 related to our property disposition activities and $781 for comparable properties primarily due to successful tax appeals at certain of our properties in 2024, partially offset by an increase of $4,988 due to the substantial completion of redevelopment activities at certain properties in 2024.

Utility expenses.

Utility expenses for non-comparable properties declined $1,842 related to our property disposition activities, partially offset by an increase of $334 for properties undergoing significant redevelopment due to the related lease-up of those properties.

Utility expenses for comparable properties increased $1,281 primarily due to the impact of inflation in 2023, as well as utility expenses that were previously paid directly by certain of our tenants that are now being paid by us.

Utility expenses increased $973 for comparable properties primarily due to the lease-up of certain previously vacant properties and increased utility expenses at newly vacant properties where tenants previously paid utility expenses directly in 2024 and $563 due to the substantial completion of redevelopment activities at certain properties, partially offset by a decline of $847 related to our property disposition activities.

Other operating expenses.

Other operating expenses for non-comparable properties declined $6,148 related to our property disposition activities, partially offset by an increase of $575 for properties undergoing significant redevelopment due to the lease-up of our 20 Mass Ave.

redevelopment in Washington, D.C.

Other operating expenses for comparable properties increased $5,090 due to higher repairs and maintenance costs and higher insurance costs, as well as other operating expenses that were previously paid directly by certain of our tenants that are now being paid by us.

Other operating expenses decreased $6,450 related to our property disposition activities, partially offset by increases of $2,214 for comparable properties due to higher repair and maintenance and snow removal costs in 2024 and $1,753 due to the substantial completion of redevelopment activities at certain properties.

Depreciation and amortization.

The decline in depreciation and amortization reflects a decrease of $12,043 for comparable properties due to certain leasing related assets becoming fully depreciated since January 1, 2022, partially offset by depreciation and amortization of improvements made to certain of our properties since January 1, 2022.

Depreciation and amortization for non-comparable properties declined $1,889 related to our property disposition activities, partially offset by an increase of $622 for properties undergoing significant redevelopment due to the substantial completion of our 20 Mass Ave.

redevelopment in Washington, D.C.

Depreciation and amortization declined $20,760 related to our property disposition activities and $5,483 for comparable properties due to certain leasing related assets becoming fully depreciated since January 1, 2023, partially offset by an increase of $11,726 due to the substantial completion of redevelopment activities at certain properties and depreciation and amortization of improvements made to certain of our properties since January 1, 2023.

Loss on impairment of real estate .

We recorded a $181,578 loss on impairment of real estate in the 2024 period to reduce the carrying value of 18 properties to t heir estimated fair value less costs to sell.

We recorded an $11,299 loss on impairment of real estate in 2023 to reduce the carrying value of one property to its estimated fair value less costs to sell.

We recorded a $21,820 loss on impairment of real estate in 2022 to reduce the carrying value of seven properties to their estimated fair values less costs to sell.

Acquisition and transaction related costs.

Acquisition and transaction related costs in 2023 are primarily related to our terminated merger with Diversified Healthcare Trust, or DHC, and related transactions.

For more information regarding our terminated merger with DHC, see Note 7 to the Notes to Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report on Form 10-K.

Transaction related costs.

Transaction related costs in 2024 consist of costs related to our evaluation of potential financing transactions.

Transaction related costs in 2023 consist of costs incurred in connection with our terminated merger with Diversified Healthcare Trust and related financings.

General and administrative.

The decrease in general and administrative expenses is primarily the result of a decrease in base business management fees resulting from a decrease in average total market capitalization and a decrease in share based compensation in 2023 compared to 2022, partially offset by a state franchise tax refund received in 2022.

Gain on sale of real estate.

The decrease in general and administrative expenses is primarily the result of a decrease in base business management fees resulting from a decrease in our average total market capitalization and a decrease in share based compensation in 2024 compared to 2023.

(Loss) gain on sale of real estate.

We recorded a $7,410 net loss on sale of real estate resulting from the sale of 24 properties in 2024.

We recorded a $3,780 net gain on sale of real estate resulting from the sale of eight properties in 2023.

We recorded a $11,001 net gain on sale of real estate in 2022 resulting from the sale of 18 properties, including one leasable land parcel.

Interest and other income.

The increase in interest and other income is primarily due to the effect of higher interest rates earned on cash balances invested in 2023 compared to 2022.

Inter est expense.

Th e increase in interest expense reflects higher average amounts outstanding and higher average interest rates on borrowings under our prior revolving credit facility, as well as the issuance of six mortgage notes with an aggregate principal balance of $177,320 and a weighted average interest rate of 7.8% during 2023, partially offset by the redemption of our $300,000 of senior unsecured notes with an interest rate of 4.0% in June 2022, higher capitalized interest in 2023 and the repayment of three mortgage notes since January 1, 2022 with an aggregate principal balance of $98,000 and a weighted average interest rate of 4.1%.

The increase in interest and other income is primarily due to the effect of higher cash balances invested in 2024 compared to 2023.

Inter est expens e.

The increase in interest expense is due to higher weighted average interest rates in the 2024 period as a result of debt incurred in 2024.

Gain on early extinguishment of debt .

We recorded a net gain on early extinguishment of debt of $682 in 2022 resulting from the prepayment of a mortgage note due in 2023 at a discounted principal amount and the write off of the unamortized

portion of certain premiums, discounts and debt issuance costs resulting from the prepayment of this mortgage note and the June 2022 redemption of our senior unsecured notes due July 2022.

We recorded a net gain on early extinguishment of debt of $126,185 in 2024 resulting from the series of debt exchanges we completed during 2024.

For more information about our financing activities, see “Liquidity and Capital Resources—Our Investment and Financing Liquidity and Resources” below and Note 9 to the Notes to Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report on Form 10-K.

Income tax expense.

Income tax expense is primarily the result of operating income earned in jurisdictions where we are subject to state income taxes and can fluctuate based on the timing of our income, including as a result of gains or losses on the sale of real estate.

Equity in net losses of investees.

Equity in net losses of investees represents our proportionate share of losses from our equity method investments in two unconsolidated joint ventures.

Equity in net losses of investees represents our proportionate share of losses from our investments in our unconsolidated joint ventures.

Loss on impairment of equity method investment .

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Non-GAAP Financial Measures

We present certain “non-GAAP financial measures” within the meaning of the applicable SEC rules, including the calculations below of NOI, funds from operations, or FFO, and Normalized FFO.

We present certain “non-GAAP financial measures” within the meaning of the applicable SEC rules, including the calculations below of NOI, FFO and Normalized FFO.

These measures do not represent cash generated by operating activities in accordance with GAAP and should not be considered alternatives to net loss as indicators of our operating performance or as measures of our liquidity.

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Interest and other income (3,668) (1,039)

Gain on sale of real estate (3,780) (11,001)

Loss (gain) on sale of real estate 7,410 (3,780)

General and administrative 21,128 22,731

Acquisition and transaction related costs 31,816 292

Transaction related costs 1,144 31,816

Loss on impairment of real estate 181,578 11,299

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Loss on impairment of equity method investment — 19,183

Gain on sale of real estate (3,780) (11,001)

Loss (gain) on sale of real estate 7,410 (3,780)

FFO 250,113 169,919

Acquisition and transaction related costs 31,816 292

Transaction related costs 1,144 31,816

Gain on early extinguishment of debt (126,185) —

Lease termination fees for sold property (10,524) —

Normalized FFO $ 114,548 $ 201,735

Weighted average common shares outstanding (basic and diluted) 51,806 48,389

FFO per common share (basic and diluted) $ 3.51 $ 4.77

Normalized FFO per common share (basic and diluted) $ 4.17 $ 4.76

Per common share amounts (basic and diluted):

Net loss $ (2.63) $ (1.44)

FFO $ 4.83 $ 3.51

Normalized FFO $ 2.21 $ 4.17

LIQUIDITY AND CAPITAL RESOURCES

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Our principal sources of funds to meet operating and capital expenses, pay debt service obligations and make distributions to our shareholders are the operating cash flows we generate from our properties, net proceeds from property sales and borrowings under our revolving credit facility.

We believe that these sources of funds will be sufficient to meet our operating and capital expenses, pay debt service obligations and make distributions to our shareholders for the next 12 months and for the foreseeable future thereafter.

Our future cash flows from operating activities will depend primarily upon:

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• our ability to develop, redevelop or reposition properties to produce cash flows in excess of our cost of capital and property operating and capital expenses.

• our ability to purchase additional properties which produce cash flows from operations in excess of our cost of acquisition capital and property operating and capital expenses.

We plan to selectively sell certain properties from time to time to manage leverage levels and to improve our asset diversification, our geographical footprint and the average age of our properties, lengthening the weighted average term of our leases and increasing tenant retention.

During the year ended December 31, 2023, we sold eight properties for an aggregate sales price of $44,874, excludin g closing costs.

The office industry has been adversely affected by shifts in office space utilization, including increased remote work arrangements and tenants consolidating their real estate footprint.

Demand for office space continues to face headwinds and the duration and ultimate impact of current trends on our properties remains uncertain and subject to change.

These conditions continue to have a significant negative impact on our results of operations, financial position and cash flows.

We are actively pursuing several strategic initiatives to improve liquidity, including asset sales, debt refinancing and equity issuance opportunities.

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 based, 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.

During the year ended December 31, 2024, we sold 24 properties for an aggregate sales price of $199,351, excludin g closing costs.

We continue to evaluate our portfolio and are currently in various stages of marketing certain of our properties for sale.

As of February 14, 2024, we have entered into an agreement to sell one property containing approximately 248,000 rentable square feet for a sales price of $39,000, excluding closing costs.

We cannot be sure we will sell any properties we are marketing for sale for prices in excess of their carrying values or otherwise.

In addition, our pending sale is subject to conditions;

accordingly, we cannot be sure that we will complete this sale or that this sale will not be delayed or the terms will not change.

In February 2025, we sold one additional property with approximately 100,000 rentable square feet for a sale price of $5,750, excluding closing costs.

This property previously secured our March 2027 Notes.

Accordingly, we expect to use the net proceeds of this sale to redeem a portion of our March 2027 Notes in accordance with the terms of the indenture governing the March 2027 Notes.

As of February 12, 2025 , we had six properties containing approximately 581,000 rentable square feet which are under agreement to sell for an aggregate sales price of $54,763 , excluding closing costs.

We cannot be sure we will sell any of the properties we are marketing for sale for prices in excess of their carrying values or otherwise.

In addition, our pending sales are subject to conditions;

accordingly, we cannot be sure that we will complete these sales or that these sales will not be delayed or the pricing will not change.

The following is a summary of our sources and uses of cash flows for the periods presented, as reflected in our consolidated statements of cash flows:

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Cash, cash equivalents and restricted cash at end of period $ 275,165 $ 26,714

The decrease in cash provided by operating activities in 2023 compared to 2022 was primarily due to decreases in NOI in 2023 due to property dispositions, reductions in occupied space at certain of our properties and an increase in costs incurred in connection with the terminated merger with DHC and related transactions.

The increase in cash used in investing activities in 2023 compared to 2022 is primarily due to lower proceeds received from property sales in 2023 and increased capital expenditures in 2023 related to our redevelopment activities.

The change from cash flows used in financing activities in 2022 to cash flows provided by financing activities in 2023 was primarily due to the redemption of $300,000 of our senior unsecured notes in 2022 as compared with the issuance of $177,320 of mortgage notes and decreased distributions to our common shareholders in 2023.

The decrease in cash provided by operating activities in 2024 compared to 2023 was primarily due to decreases in NOI as a result of property dispositions and reductions in occupied space at certain of our properties.

The change from cash used in investing activities in 2023 to cash provided by investing activities in 2024 is primarily due to higher proceeds received from property sales and decreased capital expenditures in 2024 related to our redevelopment activities.

The increase in cash flows provided by financing activities in 2024 was primarily due to higher net borrowings and decreased distributions to our shareholders, partially offset by the payment of debt issuance costs.

Our Investment and Financing Liquidity and Resources (dollar amounts in thousands, except per share amounts)

In order to meet cash needs that may result from our desire or need to make distributions or pay operating or capital expenses or to fund acquisitions, we maintain a revolving credit facility which is governed by our credit agreement.

In order to meet cash needs to pay operating or capital expenses and make distributions, we maintain a revolving credit facility.

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

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

Our obligations under our credit agreement are secured by a pledge by certain of our subsidiaries of all of their respective equity interests in certain of our direct and indirect property owning subsidiaries and first mortgage liens on 19 properties owned by the pledged subsidiaries with an undepreciated carrying value, including lease intangibles, other assets and other liabilities, of $941,937 as of December 31, 2023.

Our obligations under our credit agreement are secured by a pledge by certain of our subsidiaries of all of their respective equity interests in certain of our direct and indirect property owning subsidiaries and first mortgage liens on 19 properties owned by the pledged subsidiaries with a gross book value of real estate assets of value of $1,030,889 as of December 31, 2024.

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

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Availability of borrowings under our

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

Interest payable on borrowings under our credit agreement is based on a rate of SOFR plus a margin of 350 basis points.

We are also required to pay an unused facility fee on the amount of total lending commitments, which was 35 basis points per annum at February 14, 2024.

As of February 14, 2024, the annual interest rate payable on borrowings under our credit agreement was 8.8%.

As of February 14, 2024, we had $132,000 outstanding under our revolving credit facility, $100,000 outstanding under our term loan and $193,000 available for borrowing under our revolving credit facility.

Prior Revolving Credit Facility

Under our prior revolving credit facility, we were required to pay interest at a rate of SOFR plus a premium, which was 145 basis points per annum at December 31, 2023, on the amount outstanding under our prior revolving credit facility, as well as a facility fee on the total amount of lending commitments, which was 30 basis points per annum at December 31, 2023.

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

The weighted average annual interest rate for borrowings under our prior revolving credit facility was 6.5%, 4.0% and 1.2% for the years ended December 31, 2023, 2022 and 2021, respectively.

As of December 31, 2023, we had $205,000 outstanding under our prior revolving credit facility.

Mortgage Notes Issuances

During the year ended December 31, 2023, we issued six mortgage notes with an aggregate principal balance of $177,320 and a weighted average interest rate of 7.8%.

The net proceeds from these mortgage notes were used to repay amounts outstanding under our prior revolving credit facility.

See Note 9 to the Notes to Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report on Form 10-K for more information regarding our mortgage note issuances.

Mortgage Note Repayment

In June 2023, we repaid at maturity, a mortgage note secured by one property with an outstanding principal balance of $50,000 and an annual interest rate of 3.7% using cash on hand and borrowings under our prior revolving credit facility.

As of December 31, 2023, our debt maturities (other than our prior revolving credit facility), consisting of senior unsecured notes and mortgage notes, were as follows:

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

As of December 31, 2024, the annual interest rate payable on borrowings under our credit agreement was 7.9%.

As of December 31, 2024 and February 12, 2025, we had fully drawn our $325,000 revolving credit facility and $100,000 was outstanding under our term loan.

Senior Secured Notes Issuance and Senior Unsecured Notes Redemption

In February 2024, we issued $300,000 in aggregate principal amount of the March 2029 Notes.

The aggregate net proceeds from the offering of the March 2029 Notes were $270,712, after initial purchaser discounts and other offering expenses.

The March 2029 Notes are fully and unconditionally guaranteed on a joint, several and senior secured basis by certain of our subsidiaries and secured by a pledge of all of the respective equity interests of the subsidiary guarantors and first mortgage liens on 17 properties with a gross book value of real estate assets of $621,506 as of December 31, 2024.

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

In March 2024, we redeemed, at par plus accrued interest, all $350,000 of our 4.25% senior unsecured notes due 2024 using the proceeds from the March 2029 Notes and borrowings under our revolving credit facility.

Senior Notes Exchanges

During June and October 2024, through two exchange transactions, we exchanged $609,999 in aggregate principal amount of the September 2029 Notes and 1,406,952 of our common shares for an aggregate $895,373 of certain of our outstanding senior unsecured notes.

The September 2029 Notes are fully and unconditionally guaranteed on a joint, several and senior secured basis by certain of our subsidiaries and are secured by first mortgage liens on 19 properties with a gross book value of real estate assets of $721,375 as of December 31, 2024 and second mortgage liens on the 19 properties securing our credit agreement.

The September 2029 Notes require semi-annual payments of interest only and are prepayable, at par plus accrued interest, after June 3, 2028.

In December 2024, through an exchange transaction, we exchanged $444,992 of the March 2027 Notes, 11,532,794 of our common shares and cash premiums of $25,000 for $281,514 of the 2025 Notes and $58,486 in cash from certain existing noteholders.

This transaction is referred to herein as the 2027 Senior Note Exchange.

The March 2027 Notes require quarterly payments of interest and quarterly principal amortization payments of $6,500, and on March 1, 2026, require a mandatory principal payment of $125,000, which is subject to reduction for certain prior redemptions of the March 2027 Notes.

The March 2027 Notes are fully and unconditionally guaranteed on a joint, several and senior secured basis by certain of our subsidiaries and are secured by first mortgage liens on 37 properties with a gross book value of real estate assets of $1,279,487 as of December 31, 2024 and second mortgage liens on the 19 properties securing our September 2029 Notes and they are fully and unconditionally guaranteed, on a joint, secured and senior unsecured basis by certain of our other subsidiaries.

We redeemed, at par plus accrued interest, the remaining $171,586 of the 2025 Notes with the cash proceeds from the 2027 Senior Note Exchange and cash on hand, in January 2025.

During the year ended December 31, 2024, in a series of exchange transactions, we exchanged $15,900 in aggregate principal amount of the 2025 Notes for an aggregate amount of 7,565,722 of our common shares.

On February 7, 2025, we commenced a series of exchange offers, or the Exchange Offers, pursuant to which we are offering to issue up to $175,000 in aggregate principal amount of new 8.000% senior guaranteed unsecured notes due 2030, or the New 2030 Notes, and related guarantees in exchange for our outstanding (i) 2.650% senior unsecured notes due 2026, (ii) 2.400% senior unsecured notes due 2027 and (iii) 3.450% senior unsecured notes due 2031.

The Exchange Offers are being made subject to the terms and conditions set forth in an offering memorandum dated as of February 7, 2025.

For more information about our financing activities, see Note 9 to the Notes to Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report on Form 10-K.

As of December 31, 2024, our debt maturities (other than our revolving credit facility), consisting of senior notes, a term loan and mortgage notes, were as follows:

Year Debt Maturities

2024 $ 350,000

Thereafter 615,833

2030 and thereafter 329,909

Total $ 2,201,524

Senior Secured Notes Issuance

In February 2024, we issued $300,000 of the 2029 Notes.

The aggregate net proceeds from this offering were $271,500, after initial purchaser discounts and other estimated offering expenses.

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

Senior Unsecured Notes Redemption

In February 2024, we issued a notice of early redemption, at par plus accrued interest, of all of our $350,000 of 4.25% senior unsecured notes due 2024.

(1) Includes $171,586 of the 2025 Notes, which were redeemed in full in January 2025.

None of our unsecured debt obligations require sinking fund payments prior to their maturity dates.

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In addition to our debt obligations, as of December 31, 2024, we had estimated unspent leasing related obligations of $81,865, of which we expect to spend $46,232 over the next 12 months.

We are currently in the process of redeveloping a three-property campus located in Seattle, WA containing approximately 300,000 rentable square feet.

This project includes the repositioning of two properties from office to life science and maintaining the third property for office use.

We currently estimate the total project costs associated with this redevelopment will be approximately $162,000 and completion of the redevelopment in the first quarter of 2024.

As of December 31, 2023, we had incurred $133,270 related to this project.

In August 2022, we entered into an approximately 10-year lease for approximately 84,000 rentable square feet at one of the life science properties that is approximately 109.0% higher than the prior rental rate for the same space, making the redevelopment project 28% pre-leased.

We currently expect to use cash balances, borrowings under our revolving credit facility, net proceeds from property sales, incurrences or assumptions of mortgage debt and net proceeds from offerings of debt or equity securities to fund our future operations, capital expenditures, distributions to our shareholders and property acquisitions.

When significant amounts are outstanding under our credit agreement or the maturities of our indebtedness approach, we expect to explore refinancing alternatives.

Such alternatives may include incurring term debt, issuing debt or equity securities, extending the maturity date of our revolving credit facility and entering into a new credit facility.

We may assume additional mortgage debt in connection with our acquisitions or elect to place new mortgages on properties we own as a source of financing.

We may also seek to participate in additional joint ventures or other arrangements that may provide us with additional sources of financing.

Although we cannot be sure that we will be successful in consummating any particular type of financing, we believe that we will have access to financing, such as debt and equity offerings, to fund capital expenditures and to pay our obligations or fund future acquisitions.

We currently have an effective shelf registration statement that allows us to issue public securities on an expedited basis, but it does not assure that there will be buyers for such securities.

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

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

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

As of February 13, 2025, our total available liquidity was comprised of $113,000 of cash and our near-term obligations include outstanding lease obligations of $81,865 and principal debt repayments of $26,000 in 2025 and $291,488 in 2026.

We are currently seeking to refinance the 2026 Notes through the debt exchange described above, and we expect to sell certain properties to raise cash and may pursue other strategies to address our liquidity needs, including equity issuances.

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 debt.

If we are unable to obtain sufficient funds, our Board of Trustees may consider a reorganization in a bankruptcy court.

As a result of the foregoing, we have concluded that there is substantial doubt about our ability to continue as a going concern.

Our ability to obtain, and the costs of, our future debt financings will depend primarily on credit market conditions and our creditworthiness.

We have no control over market conditions.

Potential investors and lenders likely will evaluate our ability to pay distributions to shareholders, fund required debt service and repay debts when they become due by reviewing our business practices and plans to balance our use of debt and equity capital so that our financial profile and leverage ratios afford us flexibility to withstand any reasonably anticipated adverse changes.

Potential investors and lenders will likely evaluate our ability to fund required debt service, repay debts when they become due and pay distributions to shareholders by reviewing our business practices and plans to balance our use of debt and equity capital so that our financial profile and leverage ratios afford us flexibility to withstand any reasonably anticipated adverse changes.

Similarly, our ability to raise equity capital in the future will depend primarily upon equity capital market conditions and our ability to conduct our business to maintain and grow our operating cash flows.

We intend to conduct our business in a manner that will afford us reasonable access to capital for investment and financing activities, but we cannot be sure that we will be able to successfully carry out this intention.

For instance, it is uncertain what the ultimate impacts of inflationary pressures, sustained high interest rates or any economic recession will be.

A protracted and extensive economic recession or continued or intensified disruptions in capital markets could limit our access to financing from public sources and would likely increase our cost of capital.

During the year ended December 31, 2023, we paid quarterly cash distributions to our shareholders totaling $63,187 using cash on hand and borrowings under our prior revolving credit facility.

It is uncertain what the ultimate impacts of inflationary pressures, sustained high interest rates, deteriorating office fundamentals and market sentiment toward the office sector or any economic recession will be.

A protracted and extensive economic recession, further deterioration of office fundamentals or continued or intensified disruptions in capital markets could limit our access to financing, would likely increase our cost of capital and impact our ability to satisfy covenants and conditions under our credit agreement or senior notes.

During the year ended December 31, 2024, we paid quarterly distributions to our shareholders totaling $2,033 using cash on hand.

On January 16, 2025, we declared a quarterly cash distribution payable to shareholders of record on January 27, 2025 in the amount of $0.01 per share, or approximately $698.

We expect to pay this distribution on or about February 15, 2024 using cash on hand and borrowings under our revolving credit facility.

We expect to pay this distribution on or about February 20, 2025 using cash on hand.

We determine our distribution payout ratio with consideration for restrictions under our credit agreement, our expected capital expenditures, cash flows from operations and payment of debt obligations.

For more information regarding the distributions we paid during 2024, see Note 11 to the Notes to Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report on Form 10-K.

We owned 51% and 50% interests in two unconsolidated joint ventures which owned three properties at December 31, 2023.

As of December 31, 2023, the properties owned by these joint ventures were encumbered by an aggregate $82,000 principal amount of mortgage indebtedness, none of which was recourse to us.

In July 2023, the maturity date of the mortgage loan secured by one property owned by our 1750 H Street, NW joint venture, in which we had a 50% interest, was extended by three years at the same interest rate.

In October 2023, our joint venture partner that had a 50% equity interest in our 1750 H Street, NW joint venture failed to fund a $600 capital call and was in default of the joint venture agreement at December 31, 2023.

As of December 31, 2023, we did not control the activities that are most significant to these joint ventures and, as a result, we accounted for our investments in these joint ventures under the equity method of accounting.

We are currently in discussions with the lender to this joint venture regarding the property.

During the year ended December 31, 2023, we recorded an impairment charge of $19,183 to reduce the carrying value of our equity method investment in this joint venture to its estimated fair value.

For more information on the financial condition and results of operations of these joint ventures, see Note 4 to the Notes to Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report on Form 10-K.

Other than these joint ventures, as of December 31, 2023, we had no off balance sheet arrangements that have had or that we expect would be reasonably likely to have a material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

We owned a 51% interest in an unconsolidated joint venture which owned two properties at December 31, 2024.

As of December 31, 2024, the properties owned by this joint venture were encumbered by $50,000 principal amount of mortgage indebtedness, none of which was recourse to us.

As of December 31, 2024, we did not control the activities that are most significant to this joint venture and, as a result, we accounted for our investment in this joint venture under the equity method of accounting.

For more information on the financial condition and results of operations of this joint venture, see Note 4 to the Notes to Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report on Form 10-K.

Other than this joint venture, as of December 31, 2024, we had no off balance sheet arrangements that have had or that we expect would be reasonably likely to have a material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Debt Covenants (dollars in thousands)

Our principal debt obligations as of December 31, 2023 consisted of $205,000 of borrowings outstanding under our prior revolving credit facility, an outstanding principal balance of $2,212,000 of public issuances of senior notes and mortgage notes with an outstanding principal balance of $177,320.

Also, the three properties owned by two joint ventures in which we owned 51% and 50% interests secured two additional mortgage notes as of December 31, 2023.

Our publicly issued senior notes are governed by indentures and their supplements.

Our principal debt obligations as of December 31, 2024 consisted of $325,000 of borrowings outstanding under our revolving credit facility, $100,000 outstanding principal amount under our secured term loan, an outstanding principal balance of $2,024,204 of senior notes and mortgage notes with an outstanding principal balance of $177,320.

Also, the two properties owned by the joint venture in which we owned a 51% interest secured an additional mortgage note.

Our senior notes are governed by indentures and their supplements.

Our credit agreement and our senior notes indentures and their supplements provide for acceleration of payment of all amounts outstanding upon the occurrence and continuation of certain events of default, such as, in the case of our credit agreement, a change of control of us, which includes RMR ceasing to act as our business and property manager.

Our credit agreement and our senior notes indentures and their supplements also contain a number of covenants, including those that restrict our ability to incur debts, including debts secured by mortgages on our properties, in excess of calculated amounts, require us to comply with certain financial covenants and, in the case of our credit agreement, restrict our ability to increase our distribution rate above the current level of $0.01 per common share per quarter.

At December 31, 2023, we believe we were in compliance with the terms and conditions of our respective covenants under our credit agreement and our senior notes indentures and their supplements.

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

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

As of December 31, 2024, adjusted total assets for covenant purposes as defined in our senior notes indentures were $4,925,410.

Assets serving as collateral under our credit agreement, our senior secured notes or mortgage notes represented $4,083,629 of adjusted total assets, as defined in our senior notes indentures.

Our unencumbered assets represented $841,781 of adjusted total assets and we had $497,627 of unsecured debt giving pro forma effect for the redemption of the 2025 Notes in January 2025 as if such redemption had occurred as of December 31, 2024.

The following table presents the calculation of adjusted total assets to total assets in accordance with GAAP as of December 31, 2024:

Total assets (1)

accumulated depreciation 628,680

adjustments to reflect original cost of real estate assets 995,642

accounts receivable and intangibles (349,612)

Adjusted total assets (1)

(1) Calculation of public debt covenants is pro forma for the full redemption of the 2025 Notes.

Neither our credit agreement nor our senior notes indentures and their supplements contain provisions for acceleration which could be triggered by our credit ratings.

However, under our prior revolving credit facility, our highest senior credit rating was used to determine the fees and interest rates we paid.

Accordingly, if that credit rating was downgraded, our interest expense and related costs under our prior revolving credit facility would increase.

As a result of ratings downgrades in March 2023 by Moody’s Investor Service, or Moody’s, and S&P Global Ratings, or S&P, the interest rate premium under our prior revolving credit facility increased 35 basis points effective April 1, 2023.

On February 13, 2024, S&P assigned a rating of B- to our 2029 Notes.

As of February 14, 2024, our senior unsecured debt ratings were Caa1 and CCC from Moody’s and S&P, respectively.

Our credit agreement and our senior notes indentures and their supplements contain cross default provisions to any other debts of more than $25,000 (or more than $50,000 in certain circumstances).

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and others related to them.

For more information about these and other such relationships and related person transactions, see Notes 6 and 7 to the Notes to Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report on Form 10-K, which are incorporated herein by reference, and our other filings with the SEC, including our definitive Proxy Statement for our 2024 Annual Meeting of Shareholders, or our definitive Proxy Statement, to be filed with the SEC within 120 days after the fiscal year ended December 31, 2023.

For more information about these and other such relationships and related person transactions, see Notes 6 and 7 to the Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report on Form 10-K, which are incorporated herein by reference, and our other filings with the SEC, including our definitive Proxy Statement for our 2025 Annual Meeting of Shareholders, or our definitive Proxy Statement, to be filed with the SEC within 120 days after the fiscal year ended December 31, 2024.

For more information about the risks that may arise as a result of these and other related person transactions and relationships, see elsewhere in this Annual Report on Form 10-K, including “Warning Concerning Forward-Looking Statements,” Part I, Item 1, “Business” and Part I, Item 1A, “Risk Factors.” We may engage in additional transactions with related persons, including businesses to which RMR or its subsidiaries provide management services.

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We do not expect the direct impact of these increases to be material to our results of operations, because the increased costs either would be the responsibility of our tenants directly or in the longer term, passed through and paid by tenants of our properties.

Although we do not believe it is likely in the foreseeable future, laws enacted to mitigate climate change may make

some of our properties obsolete or cause us to make material investments in our properties, which could materially and adversely affect our financial condition or the financial condition of our tenants and their ability to pay rent to us.

Although we do not believe it is likely in the foreseeable future, laws enacted to mitigate climate change may make some of our properties obsolete or cause us to make material investments in our properties, which could materially and adversely affect our financial condition or the financial condition of our tenants and their ability to pay rent to us.

In an effort to reduce the effects of any increased energy costs in the future, we continuously study ways to improve the energy efficiency at all of our properties.

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Department of Energy that is focused on promoting energy efficiency at commercial properties through its “ENERGY STAR” program, and a member of the U.S.

Green Building Council, a nonprofit organization focused on promoting energy efficiency at commercial properties through its LEED® green building program.

Green Building Council, a nonprofit organization focused on promoting energy efficiency at commercial properties through its LEED® green building

RMR’s annual Sustainability Report summarizes the environmental, social and governance initiatives employed by RMR and its clients, including us.

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However, we cannot be sure that our mitigation efforts will be sufficient or that future storms, rising sea levels or other changes that may occur due to future climate change could not have a material adverse effect on our financial results.

Quantitative and Qualitative Disclosures About Market Risk

As a smaller reporting company, we are not required to make disclosures under this Item.

Financial Statements and Supplementary Data

The information required by this item is included in Item 15 of this Annual Report on Form 10-K.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis