What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-04-30 compared with 2024-10-30 · 187 added, 269 removed, 273 unchanged (63% of the section changed)

3 unchanged sentences

We are a REIT organized under Maryland law.

As of September 30, 2024, our wholly owned properties were comprised of 145 properties and we had a noncontrolling ownership interest of 51% in an unconsolidated joint venture that owned two properties containing approximately 346,000 rentable square feet.

As of September 30, 2024, our properties are located in 30 states and the District of Columbia and contain approximately 19,543,000 rentable square feet.

As of September 30, 2024, our properties were leased to 237 different tenants with a weighted average remaining lease term (based on annualized rental income) of approximately 7.2 years.

government is our largest tenant, representing approximately 16.6% of our annualized rental income as of September 30, 2024.

The term annualized rental income as used herein is defined as the annualized contractual base rents from our tenants pursuant to our lease agreements as of September 30, 2024, plus straight line rent adjustments and estimated recurring expense reimbursements to be paid to us, and excluding lease value amortization.

Leases representing approximately 4.4% and 9.8% of our annualized rental income are scheduled to expire during the remainder of 2024 and 2025, respectively, and we may be unable to renew leases or find replacement tenants.

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

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

As of March 31, 2025, our wholly owned properties were comprised of 125 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 March 31, 2025, our properties are located in 29 states and the District of Columbia and contain approximately 17,274,000 rentable square feet.

As of March 31, 2025, our properties were leased to 223 different tenants with a weighted average remaining lease term (based on annualized rental income) of approximately 6.9 years.

government is our largest tenant, representing approximately 16.8% of our annualized rental income as of March 31, 2025.

The term annualized rental income as used herein is defined as the annualized contractual base rents from our tenants pursuant to our lease agreements as of March 31, 2025, plus straight line rent adjustments and estimated recurring expense reimbursements to be paid to us, and excluding lease value amortization.

Leases representing approximately $28,929 and $16,103, or 7.1% and 4.0%, of our annualized rental income are scheduled to expire during the remainder of 2025 and 2026, respectively, and we may be unable to renew leases or find replacement tenants.

Certain shifts in office space utilization, including increased remote work arrangements and tenants consolidating their real estate footprint, as well as ongoing market and economic conditions, including government spending and budget priorities, continue to impact the office sector and our portfolio.

The demand for office space continues to face headwinds, including in markets where we have a concentration of properties, such as Washington, D.C., 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, geopolitical hostilities and tensions, and concerns that the U.S.

Higher interest rates, inflationary pressures, recent announcements regarding tariffs on a wide variety of imports, other 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 also have a significant amount of debt maturing in the next 12 months.

As of October 30, 2024, our total available liquidity was comprised of $146,448 of cash and, in addition to long-term debt, we had $456,700 of the 2025 Notes due on February 1, 2025.

Given the limited alternatives available to us to obtain debt or equity to refinance our maturing debt, the illiquid nature of our real estate assets and our ability to incur additional debt while maintaining compliance with the financial covenants in our existing debt agreements, we are currently in negotiations with certain holders of the 2025 Notes regarding a potential note exchange.

However, we are not able to conclude that it is probable that the negotiations will result in an exchange that refinances the 2025 Notes prior to their maturity.

Accordingly, we have concluded that there is substantial doubt about our ability to continue as a going concern for at least one year from the date of issuance of our Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q, or October 30, 2024.

Entities in the market for office space may delay their decision to lease space due to current economic conditions.

We also have a significant amount of debt maturing in the next 15 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 April 30, 2025, our total available liquidity was comprised of $73,071 of cash and, in addition to long-term debt, our near-term obligations include outstanding lease obligations of $78,499, and principal debt repayments of $19,500 in 2025 and $279,460 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 Part I, Item IA, “Risk Factors”, of our 2024 Annual Report.

Property Operations

Unless otherwise noted, the data presented in this section includes properties classified as held for sale as of September 30, 2024 and excludes two properties owned by an unconsolidated joint venture in which we owned a 51% interest.

Unless otherwise noted, the data presented in this section includes properties classified as held for sale as of March 31, 2025 and excludes two properties owned by an unconsolidated joint venture in which we owned a 51% interest and the hotel component of a mixed-use property in Washington, D.C.

For more information regarding our properties classified as held for sale and our unconsolidated joint venture, see Note 4 to our Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Occupancy data for our properties as of September 30, 2024 and 2023 was as follows (square feet in thousands):

Occupancy data for our properties as of March 31, 2025 and 2024 was as follows (square feet in thousands):

All Properties (1)

Comparable Properties (2)

September 30,

2025 2024 2025 2024

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81.3 % 85.6 % 85.4 % 91.4 %

(1) Based on properties we owned on September 30, 2024 and 2023, respectively.

(1) Based on properties we owned on March 31, 2025 and 2024, respectively.

(2) Based on properties we owned continuously since January 1, 2024;

excludes 17 properties classified as held for sale, five properties affected by significant redevelopment activities and two properties owned by an unconsolidated joint venture in which we owned a 51% interest.

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

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

(4) Percent leased includes (i) space being fitted out for tenant occupancy pursuant to our lease agreements, if any, and (ii) space which is leased, but is not occupied or is being offered for sublease by tenants, if any, as of the measurement date.

The average effective rental rate per square foot for our properties for the three and nine months ended September 30, 2024 and 2023 were as follows:

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

2024 2023 2024 2023

The average effective rental rate per square foot for our properties for the three months ended March 31, 2025 and 2024 were as follows:

Three Months Ended March 31,

Average effective rental rate per square foot (1) :

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(1) Average effective rental rate per square foot represents annualized total rental income during the period specified divided by the average rentable square feet leased during the period specified.

(2) Based on properties we owned on September 30, 2024 and 2023, respectively.

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

During the three and nine months ended September 30, 2024, changes in rentable square feet leased and available for lease at our properties were as follows (square feet in thousands):

Three Months Ended September 30, 2024 Nine Months Ended September 30, 2024

Leased Available for Lease Total Leased Available for Lease Total

(2) Based on properties we owned on March 31, 2025 and 2024, respectively.

(3) Based on properties we owned continuously since January 1, 2024;

During the three months ended March 31, 2025, changes in rentable square feet leased and available for lease at our properties were as follows (square feet in thousands):

Three Months Ended March 31, 2025

Leased Available for Lease Total

Beginning of period 15,092 2,671 17,763

3 unchanged sentences

Lease renewals (1)

947 (947) — 1,574 (1,574) —

New leases (1)

40 (40) — 109 (109) —

Lease conversion to managed hotel (240) — (240)

End of period 14,048 3,226 17,274

(1) Based on leases entered during the three and nine months ended September 30, 2024, respectively.

During the three and nine months ended September 30, 2024, we entered into new and renewal leases as summarized in the following table (square feet in thousands):

Three Months Ended September 30, 2024

New Leases Renewals Total

Rentable square feet leased 40 947 987

Weighted average rental rate change (by rentable square feet) 26.3 % 0.5 % 1.7 %

Tenant leasing costs and concession commitments (1)

$ 1,571 $ 64,345 $ 65,916

Tenant leasing costs and concession commitments per rentable square foot (1)

$ 38.64 $ 68.01 $ 66.80

Weighted (by square feet) average lease term (years) 8.9 10.2 10.2

Total leasing costs and concession commitments per rentable square foot per year (1)

$ 4.36 $ 6.65 $ 6.57

Nine Months Ended September 30, 2024

(1) Based on leases entered during the three months ended March 31, 2025.

During the three months ended March 31, 2025, we entered into new and renewal leases as summarized in the following table (square feet in thousands):

Three Months Ended March 31, 2025

New Leases Renewals Total

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(1) Includes commitments made for leasing expenditures and concessions, such as tenant improvements, leasing commissions, tenant reimbursements and free rent.

During the three and nine months ended September 30, 2024, changes in effective rental rates per square foot achieved for new leases and lease renewals at our properties that commenced during the three and nine months ended September 30, 2024, when compared to prior effective rental rates per square foot in effect for the same space (and excluding space acquired vacant), were as follows (square feet in thousands):

Three Months Ended September 30, 2024 Nine Months Ended September 30, 2024

During the three months ended March 31, 2025, changes in effective rental rates per square foot achieved for new leases and lease renewals at our properties that commenced during the three months ended March 31, 2025, when compared to prior effective rental rates per square foot in effect for the same space (and excluding space acquired vacant), were as follows (square feet in thousands):

Three Months Ended March 31, 2025

Old Effective Rent Per Square Foot (1)

New Effective Rent Per Square Foot (1)

Rentable Square Feet Old Effective Rent Per Square Foot (1)

New Effective Rent Per Square Foot (1)

Rentable Square Feet

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(1) Effective rental rates include contractual base rents from our tenants pursuant to our lease agreements, plus straight line rent adjustments and estimated expense reimbursements to be paid to us, and exclude lease value amortization.

During the three and nine months ended September 30, 2024 and 2023, amounts capitalized at our properties for lease related costs, building improvements and development, redevelopment and other activities were as follows:

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

2024 2023 2024 2023

During the three months ended March 31, 2025 and 2024, amounts capitalized at our properties for lease related costs, building improvements and development, redevelopment and other activities were as follows:

Three Months Ended March 31,

Lease related costs (1)

1 unchanged sentence

Building improvements (2)

5,225 8,516 13,784 18,453

Recurring capital expenditures 13,738 21,242

Development, redevelopment and other activities (3)

864 28,326 11,637 118,232

Total capital expenditures $ 13,821 $ 28,153

2 unchanged sentences

(3) Development, redevelopment and other activities generally include capital expenditure projects that reposition a property or result in new sources of revenue.

Includes capitalized interest and other operating costs of $1,172 for the nine months ended September 30, 2024 and $1,978 and $8,691 for the three and nine months ended September 30, 2023, respectively.

We did not capitalize any interest and other operating costs during the three months ended September 30, 2024.

As of September 30, 2024, we had estimated unspent leasing related obligations of $100,646, of which we expect to spend $66,949 over the next 12 months.

As of September 30, 2024, we had leases at our properties totaling approximately 3,090,000 rentable square feet that were scheduled to expire through December 31, 2025.

As of October 29, 2024, we expect tenants with leases totaling approximately 2,637,000 rentable square feet that are scheduled to expire through December 31, 2025, excluding space that has been re-leased and space for which we are in advanced negotiations to re-lease, not to renew or to downsize their leased space upon expiration, and we cannot be sure as to whether other tenants will renew their leases upon expiration.

Of the 2,637,000 rentable square feet leased to tenants known to be vacating, 1,765,000 rentable square feet relate to properties, excluding properties classified as held for sale, not encumbered by debt.

Includes capitalized interest and other operating costs of $1,172 for the three months ended March 31, 2024.

We did not capitalize any interest and other operating costs during the three months ended March 31, 2025.

As of March 31, 2025, we had estimated unspent leasing related obligations of $78,499, of which we expect to spend $46,133 over the next 12 months.

As of March 31, 2025, we had leases at our properties totaling approximately 1,194,000 and 437,000 rentable square feet that were scheduled to expire during 2025 and 2026, respectively.

As of April 29, 2025, we expect tenants with leases totaling approximately 723,000 and 60,000 rentable 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.

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;

2 unchanged sentences

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

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

As of September 30, 2024, our lease expirations by year were as follows (square feet in thousands):

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 March 31, 2025, our lease expirations by year were as follows (square feet in thousands):

Number of Leases Expiring Leased

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Some of our leases allow the tenants to vacate the leased premises before the stated expirations of their leases with little or no liability.

As of September 30, 2024, tenants occupying approximately 2.2% of our rentable square feet and responsible for approximately 2.6% of our annualized rental income as of September 30, 2024 had exercisable rights to terminate their leases before the stated terms of their leases expire.

Also, in 2025, 2026, 2027, 2028, 2029, 2030, 2031, 2032, 2034, 2035, 2036, 2037 and 2040, early termination rights become exercisable by other tenants who occupied an additional approximately 2.0%, 1.4%, 1.6%, 4.1%, 2.7%, 1.8%, 0.6%, 3.2%, 0.3%, 0.9%, 0.1%, 0.2% and 0.3% of our rentable square feet, respectively, and contributed an additional approximately 0.1%, 2.4%, 2.2%, 2.3%, 5.1%, 2.5%, 2.4%, 0.7%, 4.4%, 0.7%, 1.4%, 0.3%, 0.2% and 0.4% of our annualized rental income, respectively, as of September 30, 2024.

In addition, as of September 30, 2024, pursuant to leases with seven of our tenants, these tenants had rights to terminate their leases if their respective legislature or other funding authority does not appropriate rent amounts in their respective annual budgets.

These seven tenants occupied approximately 3.9% of our rentable square feet and contributed approximately 4.2% of our annualized rental income as of September 30, 2024.

(2) Leased square feet is pursuant to leases existing as of September 30, 2024, and includes (i) space being fitted out for tenant occupancy pursuant to our lease agreements, if any, and (ii) space which is leased, but is not occupied or is being offered for sublease by tenants, if any.

As of March 31, 2025, tenants occupying approximately 1.4% of our rentable square feet and responsible for approximately 1.8% of our annualized rental income as of March 31, 2025 had exercisable rights to terminate their leases before the stated terms of their leases expire.

Also, in 2025, 2026, 2027, 2028, 2029, 2030, 2031, 2032, 2034, 2035, 2036, 2037 and 2040, early termination rights become exercisable by other tenants who occupied an additional approximately 2.2%, 1.5%, 1.8%, 5.2%, 3.2%, 1.8%, 1.1%, 3.6%, 0.3%, 1.0%, 0.2%, 0.2% and 0.4% of our rentable square feet, respectively, and contributed an additional approximately 2.6%, 2.4%, 2.6%, 6.0%, 2.9%, 2.3%, 1.1%, 4.9%, 0.9%, 1.5%, 0.4%, 0.2% and 0.5% of our annualized rental income, respectively, as of March 31, 2025.

In addition, as of March 31, 2025, pursuant to leases with seven of our tenants, these tenants had rights to terminate their leases if their respective legislature or other funding authority does not appropriate rent amounts in their respective annual budgets.

These seven tenants occupied approximately 4.4% of our rentable square feet and contributed approximately 4.7% of our annualized rental income as of March 31, 2025.

(2) Leased square feet is pursuant to leases existing as of March 31, 2025, and includes (i) space being fitted out for tenant occupancy pursuant to our lease agreements, if any, and (ii) space which is leased, but is not occupied or is being offered for sublease by tenants, if any.

Square feet measurements are subject to changes when space is remeasured or reconfigured for new tenants.

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

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

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 September 30, 2024, we derived 24.1% of our annualized rental income from our properties located in the metropolitan Washington, D.C.

As of March 31, 2025, we derived 23.8% 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.

RMR assesses tenants on an individual basis based on various applicable credit criteria.

In general, depending on facts and circumstances, RMR evaluates the creditworthiness of a tenant based on information concerning the tenant that is provided by the tenant and, in some cases, information that is publicly available or obtained from third party sources.

In general, depending on facts and circumstances, RMR evaluates the creditworthiness of a tenant

based on information concerning the tenant that is provided by the tenant and, in some cases, information that is publicly available or obtained from third party sources.

We consider investment grade tenants to include:

2 unchanged sentences

and/or (c) tenants with investment grade rated parent entities that do not guarantee the tenant’s lease obligations.

As of September 30, 2024, tenants contributing 51.2% of annualized rental income were investment grade rated (or their payment obligations were guaranteed by an investment grade rated parent) and tenants contributing an additional 8.2% of annualized rental income were subsidiaries of an investment grade rated parent (although these parent entities were not liable for the payment of rents).

As of September 30, 2024, tenants representing 1% or more of our total annualized rental income were as follows (square feet in thousands):

As of March 31, 2025, tenants contributing 52.2% of annualized rental income were investment grade rated (or their payment obligations were guaranteed by an investment grade rated parent) and tenants contributing an additional 7.7% of annualized rental income were subsidiaries of an investment grade rated parent (although these parent entities were not liable for the payment of rents).

As of March 31, 2025, tenants representing 1% or more of our total annualized rental income were as follows (square feet in thousands):

Tenant Credit Rating Sq.

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(Google) Investment Grade 386 2.7 % 22,977 5.7 %

3 IG Investments Holdings LLC Not Rated 339 2.4 % 18,669 4.6 %

4 Bank of America Corporation Investment Grade 577 4.1 % 17,419 4.3 %

5 Shook, Hardy & Bacon L.L.P.

Not Rated 412 2.9 % 13,609 3.4 %

4 IG Investments Holdings LLC Not Rated 339 2.1 % 18,303 4.0 %

5 Bank of America Corporation

Investment Grade 577 3.6 % 17,290 3.8 %

6 State of California Investment Grade 431 2.7 % 12,745 2.8 %

7 Sonesta International Hotels Corporation Not Rated 240 1.5 % 10,828 2.4 %

6 Northrop Grumman Corporation Investment Grade 337 2.4 % 10,746 2.7 %

7 State of California Investment Grade 365 2.6 % 10,457 2.6 %

8 State of Georgia Investment Grade 308 2.2 % 7,924 2.0 %

1 unchanged sentence

Not Rated 84 0.6 % 7,402 1.8 %

11 PNC Bank Investment Grade 441 2.7 % 7,019 1.6 %

10 Allstate Insurance Corporation Investment Grade 458 3.3 % 6,270 1.5 %

11 Automatic Data Processing, Inc.

Investment Grade 289 2.1 % 6,253 1.5 %

13 Allstate Insurance Corporation Investment Grade 458 2.8 % 6,270 1.4 %

14 Open Text Corporation Non Investment Grade 166 1.0 % 6,178 1.4 %

12 Compass Group plc Investment Grade 267 1.9 % 6,076 1.5 %

1 unchanged sentence

Investment Grade 250 1.8 % 6,043 1.5 %

14 Genesys Cloud Services Holdings I, LLC Non Investment Grade 275 2.0 % 5,960 1.5 %

15 Leidos Holdings Inc.

3 unchanged sentences

17 Science Applications International Corp Non Investment Grade 159 1.1 % 5,151 1.3 %

20 Rocky Mountain University of Health Professions, Inc.

Not Rated 170 1.1 % 4,862 1.1 %

Investment Grade 425 3.0 % 5,131 1.3 %

19 Berkshire Hathaway Inc.

Investment Grade 134 1.0 % 4,716 1.2 %

20 Rocky Mountain University of Health Professions, Inc.

Not Rated 170 1.2 % 4,563 1.1 %

21 CommScope Holding Company Inc.

Non Investment Grade 96 0.7 % 4,513 1.1 %

22 Hartford Financial Services Group Inc Investment Grade 143 1.0 % 4,469 1.1 %

23 BAE Systems plc Investment Grade 165 1.2 % 4,441 1.1 %

Total 8,557 60.9 % $ 252,619 62.5 %

Disposition Activities

During the nine months ended September 30, 2024, we sold seven properties containing approximately 998,000 rentable square feet for a sales price of $84,810, excluding closing costs.

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

During the three months ended March 31, 2025, we sold three properties containing approximately 249,000 rentable square feet for an aggregate sales price of $26,900, excluding closing costs.

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

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

As of October 29, 2024, we have entered into agreements to sell 17 properties containing approximately 1,609,000 rentable square feet for an aggregate sales price of $119,152, excluding closing costs.

As of April 29, 2025, we have entered into agreements to sell three properties containing approximately 376,000 rentable square feet for an aggregate sales price of $28,863, 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.

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We operate in one business segment:

ownership of real estate properties.

ownership and leasing of real estate properties.

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

Three Months Ended September 30, 2024, Compared to Three Months Ended September 30, 2023

Three Months Ended March 31, 2025, Compared to Three Months Ended March 31, 2024

Comparable Properties (1) Results

Three Months Ended September 30,

Three Months Ended March 31,

Non-Comparable

Properties Results

Three Months Ended September 30,

Three Months Ended March 31,

Consolidated Results

Three Months Ended September 30,

Three Months Ended March 31,

2025 2024 $ Change % Change 2025 2024 2025 2024 $ Change % Change

9 unchanged sentences

Depreciation and amortization 43,733 50,341 (6,608) (13.1 %)

Loss on impairment of real estate 41,847 — 41,847 n/m

Transaction related costs 738 16,135 (15,397) (95.4 %)

Transaction related costs 876 233 643 n/m

General and administrative 5,058 5,644 (586) (10.4 %)

Total other expenses 49,667 56,218 (6,551) (11.7 %)

Gain on sale of real estate 8,456 244 8,212 n/m

Loss on sale of real estate (4,737) (2,384) (2,353) 98.7 %

Interest and other income 1,162 1,357 (195) (14.4 %)

Interest expense (53,378) (35,476) (17,902) 50.5 %

Gain on early extinguishment of debt 264 — 264 n/m

Loss before income tax expense and equity in earnings of unconsolidated joint venture (58,018) (18,733) (39,285) n/m

Net loss on early extinguishment of debt (243) (425) 182 (42.8 %)

Loss before income tax expense and equity in net losses of investees (45,478) (4,898) (40,580) n/m

Income tax expense (137) (56) (81) 144.6 %

Equity in net losses of investees (252) (230) (22) 9.6 %

Net loss $ (58,414) $ (19,593) $ (38,821) 198.1 %

Net loss $ (45,867) $ (5,184) $ (40,683) n/m

Weighted average common shares outstanding (basic and diluted) 69,257 48,466 20,791 42.9 %

Per common share amounts (basic and diluted):

Net loss $ (1.14) $ (0.41) $ (0.73) 178.0 %

Net loss $ (0.66) $ (0.11) $ (0.55) n/m

n/m - not meaningful

(1) Comparable properties consists of 123 properties we owned on September 30, 2024 and which we owned continuously since July 1, 2023 and excludes 17 properties classified as held for sale, five properties affected by significant redevelopment activities and two properties owned by an unconsolidated joint venture in which we own a 51% interest.

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

References to changes in the income and expense categories below relate to the comparison of consolidated results for the three months ended September 30, 2024, compared to the three months ended September 30, 2023.

(1) Comparable properties consists of 117 properties we owned on March 31, 2025 and which we owned continuously since January 1, 2024 and excludes three 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 three months ended March 31, 2025, compared to the three months ended March 31, 2024.

Rental income.

Rental income for non-comparable properties declined $14,129 related to our property disposition activities, partially offset by an increase in rental income of $4,546 due to the lease-up of certain properties affected by significant redevelopment activities.

Rental income for non-comparable properties declined $28,854 related to our property disposition activities, partially offset by an increase in rental income at properties affected by significant redevelopment activities of $5,757 related to the conversion of a lease at a mixed-use property to a hotel management agreement.

Rental income for comparable properties declined $2,723 as a result of increased vacancies and lower rents from lease renewals at certain of our properties in the 2025 period.

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Real estate taxes.

Real estate taxes increased $2,217 for redevelopment properties due to the substantial completion of redevelopment activities at certain properties and $1,535 for comparable properties resulting from successful tax appeals at certain of our properties in the 2023 period, partially offset by a decrease of $1,082 related to our property disposition activities.

Real estate taxes decreased $2,032 related to our property disposition activities, $182 for properties affected by significant redevelopment activities and $37 for comparable properties.

Utility expenses.

Utility expenses for comparable properties increased $465 primarily due to higher electricity costs in the 2024 period and $51 due to the substantial completion of redevelopment activities at certain properties, partially offset by a decrease of $107 related to our property disposition activities.

Utility expenses decreased $928 related to our property disposition activities and $67 for properties affected by significant redevelopment activities, partially offset by an increase in comparable properties of $411 primarily due to higher electricity costs.

Other operating expenses.

Other operating expenses for non-comparable properties declined $2,133 related to our property disposition activities, partially offset by an increase of $609 due to the substantial completion of redevelopment activities at certain properties.

Other operating expenses for comparable properties increased $197 due to higher repair and maintenance and salary costs in the 2024 period.

Other operating expenses for comparable properties increased $1,690 due to higher snow removal and repairs and maintenance costs in the 2025 period.

Other operating expenses for non-comparable properties increased $6,111 related to the conversion of a lease at a mixed-use property to a hotel management agreement and our recognition of operating expenses of the hotel, partially offset by a decline of $3,923 related to our property disposition activities.

Depreciation and amortization.

Depreciation and amortization for comparable properties declined $519 due to certain leasing related assets becoming fully depreciated since July 1, 2023, partially offset by depreciation and amortization of improvements made to certain of our properties since July 1, 2023.

Depreciation and amortization for non-comparable properties increased $2,551 due to the substantial completion of redevelopment activities at certain properties, partially offset by a decline of $8,251 related to our property disposition activities.

Loss on impairment of real estate.

We recorded a $41,847 loss on impairment of real estate in the 2024 period to reduce the carrying value of 10 properties to their estimated fair values less costs to sell.

Depreciation and amortization for non-comparable properties decreased $5,771 related to our property disposition activities, partially offset by an increase of $1,797 due to the substantial completion of redevelopment activities at certain properties in the 2024 period.

Depreciation and amortization for comparable properties declined $2,634 due to certain leasing related assets becoming fully depreciated since January 1, 2024, partially offset by depreciation and amortization of improvements made to certain of our properties since January 1, 2024.

Transaction related costs.

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

Transaction related costs in the 2023 period consist of costs incurred in connection with our terminated merger with Diversified Healthcare Trust, or DHC, and related financings.

Transaction related costs in the 2025 and 2024 period consist of costs related to our evaluation of potential financing transactions.

General and administrative.

The decrease in general and administrative expenses is primarily the result of a decrease in base business management fees resulting from a decrease in average total market capitalization and a decrease in share based compensation in the 2025 period compared to the 2024 period.

Gain on sale of real estate.

We recorded a $8,456 net gain on sale of real estate resulting from the sale of six properties in the 2024 period.

We recorded a $244 gain on sale of real estate resulting from the sale of one property in the 2023 period.

Loss on sale of real estate.

We recorded a $4,737 net loss on sale of real estate resulting from the sale of three properties in the 2025 period.

We recorded a $2,384 loss on sale of real estate resulting from the sale of one property in the 2024 period.

Interest and other income.

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

The decrease in interest and other income is primarily due to the effect of lower interest rates earned on cash balances invested, partially offset by higher cash balances invested in the 2025 period compared to the 2024 period.

Interest expense.

The increase in interest expense is due to higher weighted average interest rates in the 2024 period.

Gain on early extinguishment of debt .

We recorded a gain on early extinguishment of debt of $264 in the 2024 period resulting from the exchange of certain of the 2025 Notes for our common shares.

For more information regarding these exchanges, see Note 7 to our Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

The increase in interest expense is due to higher weighted average interest rates in the 2025 period as a result of our financing activities in 2024.

Net loss on early extinguishment of debt .

We recorded a net loss on early extinguishment of debt of $243 in the 2025 period related to the Senior Note Exchange and the write off of unamortized discounts and issuance costs related to the partial redemption of our senior secured notes due 2027.

We recorded a loss on early extinguishment of debt of $425 in the 2024 period related to the write off of unamortized discounts resulting from the early redemption of our $350,000 senior unsecured notes.

For more information regarding the Senior Note Exchange, see Note 7 to our Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Income tax expense.

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Equity in net losses of investees.

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

Equity in net losses of investees represents our proportionate share of losses from our investment in our unconsolidated joint venture.

Net loss and net loss per basic and diluted common share decreased in the 2025 period compared to the 2024 period primarily as a result of the changes noted above.

Nine Months Ended September 30, 2024, Compared to Nine Months Ended September 30, 2023

Comparable Properties (1) Results

Nine Months Ended September 30,

Non-Comparable

Properties Results

Nine Months Ended September 30,

Consolidated Results

Nine Months Ended September 30,

2024 2023 $ Change % Change 2024 2023 2024 2023 $ Change % Change

Rental income $ 329,763 $ 340,686 $ (10,923) (3.2 %) $ 53,978 $ 59,094 $ 383,741 $ 399,780 $ (16,039) (4.0 %)

Operating expenses:

Real estate taxes 38,740 38,017 723 1.9 % 8,623 7,474 47,363 45,491 1,872 4.1 %

Utility expenses 18,738 17,534 1,204 6.9 % 3,044 2,928 21,782 20,462 1,320 6.5 %

Other operating expenses 70,355 67,932 2,423 3.6 % 10,742 12,705 81,097 80,637 460 0.6 %

Total operating expenses 127,833 123,483 4,350 3.5 % 22,409 23,107 150,242 146,590 3,652 2.5 %

Net operating income (2)

$ 201,930 $ 217,203 $ (15,273) (7.0 %) $ 31,569 $ 35,987 233,499 253,190 (19,691) (7.8 %)

Other expenses:

Depreciation and amortization 146,779 155,559 (8,780) (5.6 %)

Loss on impairment of real estate 173,579 — 173,579 n/m

Transaction related costs 971 30,534 (29,563) (96.8 %)

General and administrative 15,861 17,430 (1,569) (9.0 %)

Total other expenses 337,190 203,523 133,667 65.7 %

Gain on sale of real estate 6,008 487 5,521 n/m

Interest and other income 1,779 782 997 127.5 %

Interest expense (116,405) (80,591) (35,814) 44.4 %

Gain on early extinguishment of debt 225,637 — 225,637 n/m

Income (loss) before income tax expense and equity in earnings of unconsolidated joint venture 13,328 (29,655) 42,983 (144.9 %)

Income tax expense (179) (336) 157 (46.7 %)

Equity in net losses of investees (576) (2,290) 1,714 (74.8 %)

Net income (loss) $ 12,573 $ (32,281) $ 44,854 (138.9 %)

Weighted average common shares outstanding (basic and diluted) 49,444 48,365 1,079 2.2 %

Per common share amounts (basic and diluted):

Net (loss) income $ 0.25 $ (0.67) $ 0.92 (137.3 %)

n/m - not meaningful

(1) Comparable properties consists of 123 properties we owned on September 30, 2024 and which we owned continuously since January 1, 2023 and excludes 17 properties classified as held for sale, five properties affected by significant redevelopment activities and two properties owned by an unconsolidated joint venture in which we own a 51% interest.

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

References to changes in the income and expense categories below relate to the comparison of consolidated results for the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023.

Rental income.

Rental income for non-comparable properties decreased $18,197 related to our property disposition activities, partially offset by an increase in rental income of $13,081 due to the lease-up of certain properties affected by significant redevelopment activities.

Rental income for comparable properties declined $10,923 as a result of increased vacancies and lower rents from lease renewals at certain of our properties in the 2024 period.

Rental income includes non-cash straight line rent adjustments totaling $23,796 in the 2024 period and $17,120 in the 2023 period, and amortization of acquired real estate leases and assumed real estate lease obligations totaling $30 in the 2024 period and $196 in the 2023 period.

Real estate taxes.

Real estate taxes for non-comparable properties increased $4,553 due to the substantial completion of redevelopment activities at certain properties, partially offset by a decrease of $3,404 related to our property disposition

Real estate taxes for comparable properties increased $723 primarily due to successful tax appeals at certain of our properties in the 2023 period.

Utility expenses.

Utility expenses increased $536 due to the substantial completion of redevelopment activities at certain properties and $1,204 for comparable properties primarily due to the lease-up of certain previously vacant properties and increased utility expenses at newly vacant properties where tenants previously paid utility expenses directly in the 2024 period, partially offset by a decline of $420 related to our property disposition activities.

Other operating expenses.

Other operating expenses for comparable properties increased $2,423 due to higher repair and maintenance costs, snow removal costs and insurance costs in the 2024 period and $1,778 due to the substantial completion of redevelopment activities at certain properties, partially offset by a decline of $3,741 related to our property disposition activities.

Depreciation and amortization.

Depreciation and amortization for comparable properties declined $6,103 due to certain leasing related assets becoming fully depreciated since January 1, 2023, partially offset by depreciation and amortization of improvements made to certain of our properties since January 1, 2023.

Depreciation and amortization for non-comparable properties increased $9,590 due to the substantial completion of redevelopment activities at certain properties, partially offset by a decline of $12,267 related to our property disposition activities.

Loss on impairment of real estate.

We recorded a $173,579 loss on impairment of real estate in the 2024 period to reduce the carrying value of 16 properties to their estimated fair values less costs to sell.

Transaction related costs.

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

Transaction related costs in the 2023 period consist of costs incurred in connection with our terminated merger with DHC and related financings.

General and administrative.

Gain on sale of real estate.

We recorded a $6,008 net gain on sale of real estate resulting from the sale of seven properties in the 2024 period.

We recorded a $487 net gain on sale of real estate resulting from the sale of six properties in the 2023 period.

Interest and other income.

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

Interest expense.

The increase in interest expense is due to higher weighted average interest rates in the 2024 period.

Gain on early extinguishment of debt.

We recorded a gain on early extinguishment of debt of $225,637 in the 2024 period resulting from the Senior Note Exchange and exchanges of certain of the 2025 Notes for our common shares.

For more information regarding the Senior Note Exchange and the exchanges of the 2025 Notes for our common shares, see Note 7 to our Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Income tax expense.

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

Equity in net losses of investees.

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

Net income (loss).

Net income (loss) and net income (loss) per basic and diluted common share increased in the 2024 period compared to the 2023 period primarily as a result of the changes noted above.

Non-GAAP Financial Measures

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

These measures should be considered in conjunction with net (loss) income as presented in our condensed consolidated statements of comprehensive net (loss) income.

These measures should be considered in conjunction with net (loss) income as presented in our condensed consolidated statements of comprehensive income (loss) .

We consider these non-GAAP measures to be appropriate supplemental measures of operating performance for a REIT, along with net (loss) income.

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Other real estate companies and REITs may calculate NOI differently than we do.

The following table presents the reconciliation of net income (loss) to NOI for the three and nine months ended September 30, 2024 and 2023:

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

2024 2023 2024 2023

Net (loss) income $ (58,414) $ (19,593) $ 12,573 $ (32,281)

The following table presents the reconciliation of net loss to NOI for the three months ended March 31, 2025 and 2024:

Three Months Ended March 31,

Net loss $ (45,867) $ (5,184)

Equity in net losses of investees 252 230

Income tax expense 137 56

(Loss) income before income tax expense and equity in net losses of investees (58,018) (18,733) 13,328 (29,655)

Gain on early extinguishment of debt (264) — (225,637) —

Loss before income tax expense and equity in net losses of investees (45,478) (4,898)

Net loss on early extinguishment of debt 243 425

Interest expense 53,378 35,476

Interest and other income (1,162) (1,357)

Gain on sale of real estate (8,456) (244) (6,008) (487)

Loss on sale of real estate 4,737 2,384

General and administrative 5,058 5,644

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Other real estate companies and REITs may calculate FFO and Normalized FFO differently than we do.

The following table presents the reconciliation of net (loss) income to FFO and Normalized FFO for the three and nine months ended September 30, 2024 and 2023:

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

2024 2023 2024 2023

Net (loss) income $ (58,414) $ (19,593) $ 12,573 $ (32,281)

The following table presents the reconciliation of net (loss) income to FFO and Normalized FFO for the three months ended March 31, 2025 and 2024:

Three Months Ended March 31,

Net loss $ (45,867) $ (5,184)

Depreciation and amortization:

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Loss on impairment of real estate — —

Gain on sale of real estate (8,456) (244) (6,008) (487)

Loss on sale of real estate 4,737 2,384

FFO 3,231 48,183

Transaction related costs

738 16,135 971 30,534

Gain on early extinguishment of debt (264) — (225,637) —

Net loss on early extinguishment of debt 243 425

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

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Weighted average common shares outstanding (basic and diluted) 69,257 48,466

FFO per common share (basic and diluted) $ 0.42 $ 0.69 $ 6.65 $ 2.59

Normalized FFO per common share (basic and diluted) $ 0.43 $ 1.02 $ 1.89 $ 3.22

Per common share amounts (basic and diluted):

Net loss $ (0.66) $ (0.11)

FFO $ 0.05 $ 0.99

Normalized FFO $ 0.06 $ 0.79

LIQUIDITY AND CAPITAL RESOURCES

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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.

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.

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, as well as ongoing market and economic conditions, including government spending and budget priorities.

Demand for office space continues to face headwinds, including in markets where we have a concentration of properties, such as Washington, D.C., and the duration and ultimate impact of current trends on our properties remains uncertain and subject to change.

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

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

We plan to selectively sell certain properties from time to time to manage leverage levels and to improve our asset diversification, our geographic make-up and the average age of our properties, lengthen the weighted average term of our leases and increase tenant retention.

During the nine months ended September 30, 2024 , we sold seven properties for an aggregate sales price of $84,810 , excluding closing costs.

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 improve our liquidity.

During the three months ended March 31, 2025 , we sold three properties for an aggregate sales price of $26,900 , excluding closing costs.

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

As of October 29, 2024, we had 17 properties containing approximately 1,609,000 rentable square feet which are under agreement to sell for an aggregate sales price of $119,152.

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

As of April 29, 2025, we had three properties containing approximately 376,000 rentable square feet which are under agreement to sell for an aggregate sales price of $28,863.

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;

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

Nine Months Ended September 30,

Three Months Ended March 31,

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

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Cash, cash equivalents and restricted cash at end of period $ 76,654 $ 44,106

The decrease in cash provided by operating activities for the 2024 period compared to the 2023 period was primarily due to higher interest expense and decreased NOI due to property dispositions and reductions in occupied space at certain of our properties in the 2024 period.

The decrease in cash used in investing activities in the 2024 period compared to the 2023 period was primarily due to decreased capital expenditures in the 2024 period, partially offset by higher proceeds received from property sales.

The change from cash provided by financing activities in the 2023 period to cash used in financing activities in the 2024 period was primarily due to lower net borrowings and payment of debt issuance costs, partially offset by decreased distributions to our common shareholders in the 2024 period.

The change from cash provided by operating activities in the 2024 period to cash used in operating activities in the 2025 period was primarily due to higher interest expense and decreased NOI due to property dispositions and reductions in occupied space at certain of our properties in the 2025 period.

The change from cash used in investing activities in the 2024 period to cash provided by investing activities in the 2025 period was primarily due to decreased capital expenditures in the 2025 period.

The increase in cash used in financing activities in the 2025 period was primarily due to the redemption of $171,586 of our 4.50% senior unsecured notes due 2025 in the 2025 period.

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

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

Our obligations under our credit agreement are secured by a pledge by certain of our subsidiaries of all of their respective equity interests in certain of our direct and indirect property owning subsidiaries and first mortgage liens on 19 properties owned by the pledged subsidiaries with a gross book value of real estate assets of $1,012,536 as of September 30, 2024.

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

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

We are also required to pay an unused facility fee on the amount of total lending commitments, which was 25 basis points per annum at September 30, 2024.

As of September 30, 2024, the annual interest rate payable on borrowings under our credit agreement was 8.4%.

As of September 30, 2024, we had $200,000 outstanding under our revolving credit facility, $100,000 outstanding under our term loan and $125,000 available for borrowing under our revolving credit facility.

In October 2024, we

borrowed $125,000 under our revolving credit facility to preserve financial flexibility.

As of October 29, 2024, we had fully drawn our $325,000 revolving credit facility and $100,000 was outstanding under our term loan.

Senior Secured Notes Issuance and Senior Unsecured Notes Redemption

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

The aggregate net proceeds from this offering were $270,712, after initial purchaser discounts and other offering expenses.

The 2029 Notes are fully and unconditionally guaranteed on a joint, several and senior secured basis by certain of our subsidiaries and secured by a pledge of all of the respective equity interests of the subsidiary guarantors and first mortgage liens on 17 properties with a gross book value of real estate assets of $619,467 as of September 30, 2024.

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

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

Senior Notes Exchanges

In June 2024, in connection with the Senior Note Exchange, we exchanged $567,429 of the New 2029 Notes for $865,219 aggregate principal of the Existing Notes.

The New 2029 Notes are fully and unconditionally guaranteed on a joint, several and senior secured basis by certain of our subsidiaries and are secured by first mortgage liens on 19 properties with a gross book value of real estate assets of $716,969 as of September 30, 2024 and second mortgage liens on the 19 properties securing our credit agreement.

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

During the three and nine months ended September 30, 2024, in a series of exchange transactions, we exchanged an aggregate principal amount of $8,300 of the 2025 Notes for an aggregate 3,184,432 of our common shares.

In October 2024, in a series of exchange transactions, we exchanged an additional aggregate principal amount of $34,154 of the 2025 Notes for an aggregate principal amount of $42,570 of new 9.0% senior secured notes due 2029 on substantially similar terms as the New 2029 Notes and 1,870,238 of our common shares.

For more information regarding the Senior Note Exchange, our subsequent senior note exchanges and the New 2029 Notes, see Note 7 to our Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

As of September 30, 2024, our debt maturities (other than our revolving credit facility), consisting of senior notes, a term loan and mortgage notes, were as follows:

We are also required to pay an unused facility fee on the amount of total lending commitments, which was 25 basis points per annum at March 31, 2025.

As of March 31, 2025, the annual interest rate payable on borrowings under our credit agreement was 7.9%.

As of March 31, 2025, and April 29, 2025, we had fully drawn our $325,000 revolving credit facility and $100,000 was outstanding under our term loan.

Senior Notes Redemptions

In January 2025, we redeemed, at par plus accrued interest, all $171,586 of our 4.50% senior unsecured notes due 2025 using the proceeds from the issuance of our senior secured notes due 2027 and cash on hand.

In February 2025, in connection with the sale of a collateral property, we redeemed, at par plus accrued interest, $5,469 of our senior secured notes due 2027.

As a result, we recorded a loss on early extinguishment of debt of $928 during the three months ended March 31, 2025, which represented unamortized discounts and issuance costs related to these notes.

Senior Note Exchange

In March 2025, in connection with the Senior Note Exchange, we exchanged $14,439 of New 2030 Notes for an aggregate $20,990 of the Existing Notes.

The New 2030 Notes are fully and unconditionally guaranteed on a joint, several and unsecured basis by certain of our subsidiaries which also guarantee our senior secured notes due 2027.

The New 2030 Notes require semi-annual payments of interest only and are prepayable, at par plus accrued interest, after March 12, 2029.

For more information regarding the Senior Note Exchange and the New 2030 Notes, see Note 7 to our Condensed Consolidated Financial Statements included in Part I, Item I of this Quarterly Report on Form 10-Q.

As of March 31, 2025, 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

2025 $ 19,500

2030 and thereafter 332,395

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

Our senior secured notes due 2027 require quarterly principal amortization payments of $6,500 and an additional $119,531 principal repayment in March 2026.

Our mortgage notes currently require monthly payments of interest only;

however, certain of our mortgage notes will require payments of principal and interest after a specified date through maturity.

In addition to our debt obligations, as of September 30, 2024, we had estimated unspent leasing related obligations of $100,646, of which we expect to spend $66,949 over the next 12 months.

As of October 30, 2024, our total available liquidity was comprised of $146,448 of cash and, in addition to long-term debt, the 2025 Notes are due within one year from the date of issuance of these financial statements.

We are currently in negotiations with certain holders of the 2025 Notes for a potential note exchange.

While we believe a note exchange with certain holders of the 2025 Notes would alleviate the substantial doubt about our ability to continue as going concern, we are not able to conclude that it is probable that the negotiations will result in an exchange that satisfies the 2025 Notes prior to their maturity.

If we are unable to consummate a transaction that refinances the 2025 Notes on terms which, in our view, allow us to continue as a going

concern, our Board of Trustees may consider a reorganization in a bankruptcy court.

As a result of the foregoing, we have concluded that there is substantial doubt about our ability to continue as a going concern for at least one year from the date of issuance of our Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q, or October 30, 2024.

In addition to our debt obligations, as of March 31, 2025, we had estimated unspent leasing related obligations of $78,499, of which we expect to spend $46,133 over the next 12 months.

Share Issuances

In March 2025, we entered into a sales agreement with the Agent pursuant to which we may issue and sell our common shares from time to time in transactions that are deemed to be an “at the market offering” as defined in Rule 415 under the Securities Act of 1933, as amended, for up to an aggregate sales price of $100,000.

We are required to pay the Agent a cash commission of 3% of the gross sales prices of any common shares we sell under the ATM program.

During the three months ended March 31, 2025, we sold an aggregate 238,343 of our common shares under the ATM program valued at a weighted average share price of $0.61 for net proceeds of $145 after deducting Agent commissions.

In April 2025, we sold an additional aggregate 837,164 of our common shares under the ATM program valued at a weighted average share price of $0.40 for net proceeds of $334 after deducting Agent commissions.

As of April 30, 2025, our total available liquidity was comprised of $73,071 of cash and our near-term obligations include outstanding lease obligations of $78,499 and principal debt repayments of $19,500 in 2025 and $279,460 in 2026.

We are evaluating strategies to address our upcoming debt obligations, including through asset sales, future debt exchanges or 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.

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

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

During the nine months ended September 30, 2024, we paid quarterly distributions to our shareholders totaling $1,477 using cash on hand.

On October 16, 2024, we declared a regular quarterly distribution payable to shareholders of record on October 28, 2024 of $0.01 per share, or approximately $555.

We expect to pay this distribution on or about November 14, 2024 using cash on hand.

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 three months ended March 31, 2025, we paid quarterly distributions to our shareholders totaling $698 using cash on hand.

On April 10, 2025, we declared a regular quarterly distribution payable to shareholders of record on April 22, 2025 of $0.01 per share, or approximately $701.

We expect to pay this distribution on or about May 15, 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 and declared during 2024, see Note 9 to our Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

We owned a 51% interest in an unconsolidated joint venture which owned two properties at September 30, 2024.

As of September 30, 2024, the properties owned by this joint venture were encumbered by $50,000 principal amount of mortgage indebtedness, none of which is recourse to us.

As of September 30, 2024, we did not control the activities that are most significant to this joint venture and, as a result, we accounted for our investment in this joint venture under the equity method of accounting.

We owned a 51% interest in an unconsolidated joint venture which owned two properties at March 31, 2025.

As of March 31, 2025, the properties owned by this joint venture were encumbered by $49,780 principal amount of mortgage indebtedness, none of which is recourse to us.

As of March 31, 2025, we did not control the activities that are most significant to this joint venture and, as a result, we accounted for our investment in this joint venture under the equity method of accounting.

For more information on the financial condition and results of operations of this joint venture, see Note 4 to our Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Other than this joint venture, as of September 30, 2024, we had no off balance sheet arrangements that have had or that we expect would be reasonably likely to have a material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Other than this joint venture, as of March 31, 2025, we had no off balance sheet arrangements that have had or that we expect would be reasonably likely to have a material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Debt Covenants (dollars in thousands)

Our principal debt obligations as of September 30, 2024 consisted of $200,000 of borrowings outstanding under our revolving credit facility, $100,000 outstanding principal amount under our secured term loan, an outstanding principal balance of $1,855,910 of senior notes and mortgage notes with an outstanding principal balance of $177,320.

Our principal debt obligations as of March 31, 2025 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 $1,834,098 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.

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

As of September 30, 2024, we believe we were in compliance with the terms and conditions of our respective covenants under our credit agreement and our senior notes indentures and their supplements.

As of March 31, 2025, our ratio of secured debt to adjusted total assets was above the maximum level under our revolving credit facility and our senior notes indentures and their supplements, and as a result, we are unable to incur additional secured debt unless this ratio is at or below the required level on a pro forma basis as a result of any contemplated secured debt transaction.

As of March 31, 2025, we believe we were in compliance with all of the other terms and conditions of our respective covenants under our credit agreement and our senior notes indentures and their supplements.

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

As of September 30, 2024, adjusted total assets for covenant purposes as defined in our senior notes indentures were $5,173,078.

The following table presents our senior notes and credit agreement covenants as of March 31, 2025:

Maintenance Covenant

Total unencumbered assets / unsecured debt (minimum 150.0%) 159.0 %

Incurrence Covenants

Total debt / adjusted total assets (maximum 60.0%) 50.2 %

Secured debt / adjusted total assets (maximum 40.0%) (1)

Consolidated income available for debt service / debt service (minimum 1.50x) 1.54x

(1) As of March 31, 2025, our ratio of secured debt to adjusted total assets was above the requirement under our credit agreement and its senior notes indentures and their supplements, and as a result, we are unable to incur additional secured debt unless this ratio is at or below the required level on a pro forma basis as a result of any contemplated secured debt transaction.

As of March 31, 2025, adjusted total assets for covenant purposes as defined in our senior notes indentures were $4,858,048.

Assets serving as collateral under our credit agreement, our secured senior notes or mortgage notes represented $4,077,179 of adjusted total assets, as defined in our senior notes indentures.

Our unencumbered assets represented $780,869 of adjusted total assets.

The following table presents the calculation of adjusted total assets to total assets in accordance with GAAP as of September 30, 2024:

The following table presents the calculation of adjusted total assets to total assets in accordance with GAAP as of March 31, 2025:

Total assets $ 3,569,759

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and others related to them.

For more information about these and other such relationships and related person transactions, see Notes 10 and 11 to our Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q, our 2023 Annual Report, our definitive Proxy Statement for our 2024 Annual Meeting of Shareholders and our other filings with the SEC.

For more information about these and other such relationships and related person transactions, see Notes 10 and 11 to our

Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q, our 2024 Annual Report, our definitive Proxy Statement for our 2025 Annual Meeting of Shareholders and our other filings with the SEC.

In addition, see the section captioned “Risk Factors” in Part I, Item 1A of our 2024 Annual Report for a description of risks that may arise as a result of these and other related person transactions and relationships.

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There have been no significant changes in our critical accounting estimates since the year ended December 31, 2024.

Quantitative and Qualitative Disclosures About Market Risk

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

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis