Item 1. Financial Statements
Item 1. Financial Statements
OFFICE PROPERTIES INCOME TRUST
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except per share data)
(unaudited)
September 30, 2025 December 31, 2024
ASSETS
Real estate properties:
Land $ 706,623 $ 711,039
Buildings and improvements 2,960,000 2,946,520
Total real estate properties, gross 3,666,623 3,657,559
Accumulated depreciation ( 698,898 ) ( 618,650 )
Total real estate properties, net 2,967,725 3,038,909
Assets of properties held for sale 6,015 32,199
Investment in unconsolidated joint venture 16,875 17,370
Acquired real estate leases, net 160,345 193,739
Cash and cash equivalents 44,609 261,318
Restricted cash 14,550 13,847
Rents receivable 162,630 155,668
Deferred leasing costs, net 95,538 97,642
Other assets, net 33,098 11,594
Total assets $ 3,501,385 $ 3,822,286
LIABILITIES AND SHAREHOLDERS’ EQUITY
Unsecured debt, net $ 488,708 $ 662,277
Secured debt, net 1,879,478 1,872,357
Liabilities of properties held for sale 712 765
Accounts payable and other liabilities 119,561 118,689
Due to related persons 4,477 5,869
Assumed real estate lease obligations, net 8,649 9,525
Total liabilities 2,501,585 2,669,482
Commitments and contingencies
Shareholders’ equity:
Common shares of beneficial interest, $ .01 par value: 250,000,000 shares authorized, 73,943,439 and 69,824,743 shares issued and outstanding, respectively
739 698
Additional paid in capital 2,658,302 2,656,548
Cumulative net loss ( 189,325 ) ( 35,933 )
Cumulative common distributions ( 1,469,916 ) ( 1,468,509 )
Total shareholders’ equity 999,800 1,152,804
Total liabilities and shareholders’ equity $ 3,501,385 $ 3,822,286
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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OFFICE PROPERTIES INCOME TRUST
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(amounts in thousands, except per share data)
(unaudited)
Three Months Ended September 30, Nine Months Ended September 30,
2025 2024 2025 2024
Rental income $ 109,127 $ 120,620 $ 337,241 $ 383,741
Expenses:
Real estate taxes 13,648 16,927 39,217 47,363
Utility expenses 7,718 7,869 20,968 21,782
Other operating expenses 30,739 26,619 93,181 81,097
Depreciation and amortization 42,834 46,047 130,405 146,779
Loss on impairment of real estate — 41,847 2,426 173,579
Transaction related costs 22,904 738 27,720 971
General and administrative 4,964 4,927 14,838 15,861
Total expenses 122,807 144,974 328,755 487,432
Gain (loss) on sale of real estate 6 8,456 ( 4,572 ) 6,008
Interest and other income 802 196 2,752 1,779
Interest expense (including net amortization of debt premiums, discounts and issuance costs of $ 11,986 , $ 2,183 , $ 35,269 and $ 9,261 respectively)
( 53,259 ) ( 42,580 ) ( 159,144 ) ( 116,405 )
Net (loss) gain on early extinguishment of debt ( 354 ) 264 ( 449 ) 225,637
(Loss) income before income tax benefit (expense) and equity in net losses of investees ( 66,485 ) ( 58,018 ) ( 152,927 ) 13,328
Income tax benefit (expense) 261 ( 230 ) 30 ( 179 )
Equity in net losses of investees ( 115 ) ( 166 ) ( 495 ) ( 576 )
Net (loss) income $ ( 66,339 ) $ ( 58,414 ) $ ( 153,392 ) $ 12,573
Weighted average common shares outstanding (basic and diluted) 73,480 51,197 71,355 49,444
Per common share amounts (basic and diluted):
Net (loss) income
$ ( 0.90 ) $ ( 1.14 ) $ ( 2.15 ) $ 0.25
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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OFFICE PROPERTIES INCOME TRUST
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(dollars in thousands)
(unaudited)
Number
of Shares Common Shares Additional
Paid In Capital Cumulative
Net Loss Cumulative
Common
Distributions Total Shareholders’ Equity
Balance at December 31, 2024 69,824,743 $ 698 $ 2,656,548 $ ( 35,933 ) $ ( 1,468,509 ) $ 1,152,804
Issuance of common shares, net 238,343 3 142 — — 145
Common share grants — — 279 — — 279
Net loss — — — ( 45,867 ) — ( 45,867 )
Distributions to common shareholders — — — — ( 698 ) ( 698 )
Balance at March 31, 2025 70,063,086 701 2,656,969 ( 81,800 ) ( 1,469,207 ) 1,106,663
Issuance of common shares, net 3,933,346 39 922 — — 961
Common share grants — — 205 — — 205
Common share forfeitures and repurchases ( 20,242 ) — ( 6 ) — — ( 6 )
Net loss — — — ( 41,186 ) — ( 41,186 )
Distributions to common shareholders — — — — ( 709 ) ( 709 )
Balance at June 30, 2025 73,976,190 740 2,658,090 ( 122,986 ) ( 1,469,916 ) 1,065,928
Common share grants — — 238 — — 238
Common share repurchases ( 32,751 ) ( 1 ) ( 26 ) — — ( 27 )
Net loss — — — ( 66,339 ) — ( 66,339 )
Balance at September 30, 2025 73,943,439 $ 739 $ 2,658,302 $ ( 189,325 ) $ ( 1,469,916 ) $ 999,800
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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OFFICE PROPERTIES INCOME TRUST
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(dollars in thousands)
(unaudited)
Number
of Shares Common Shares Additional
Paid In Capital Cumulative
Net Income Cumulative
Common
Distributions Total Shareholders’ Equity
Balance at December 31, 2023 48,755,415 $ 488 $ 2,621,493 $ 100,174 $ ( 1,466,476 ) $ 1,255,679
Common share grants — — 362 — — 362
Common share repurchases ( 869 ) — ( 6 ) — — ( 6 )
Net loss — — — ( 5,184 ) — ( 5,184 )
Distributions to common shareholders — — — — ( 487 ) ( 487 )
Balance at March 31, 2024 48,754,546 488 2,621,849 94,990 ( 1,466,963 ) 1,250,364
Issuance of common shares 1,406,952 14 3,166 — — 3,180
Common share grants 104,643 1 486 — — 487
Common share repurchases ( 7,505 ) — ( 15 ) — — ( 15 )
Net income — — — 76,171 — 76,171
Distributions to common shareholders — — — — ( 488 ) ( 488 )
Balance at June 30, 2024 50,258,636 503 2,625,486 171,161 ( 1,467,451 ) 1,329,699
Issuance of common shares 3,184,432 32 7,416 — — 7,448
Common share grants 544,555 5 520 — — 525
Common share repurchases ( 76,642 ) ( 1 ) ( 169 ) — — ( 170 )
Net loss — — — ( 58,414 ) — ( 58,414 )
Distributions to common shareholders — — — — ( 502 ) ( 502 )
Balance at September 30, 2024 53,910,981 $ 539 $ 2,633,253 $ 112,747 $ ( 1,467,953 ) $ 1,278,586
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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OFFICE PROPERTIES INCOME TRUST
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
(unaudited)
Nine Months Ended September 30,
2025 2024
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income $ ( 153,392 ) $ 12,573
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation 90,224 89,587
Net amortization of debt premiums, discounts and issuance costs 35,269 9,261
Amortization of acquired real estate leases and assumed real estate lease obligations, net 31,336 49,055
Amortization of deferred leasing costs 10,539 9,562
Loss (gain) on sale of real estate 4,572 ( 6,008 )
Loss on impairment of real estate 2,426 173,579
Net gain on early extinguishment of debt ( 1,134 ) ( 238,008 )
Straight line rental income ( 18,242 ) ( 23,796 )
Other non-cash expenses, net 231 587
Equity in net losses of investees 495 576
Change in assets and liabilities:
Rents receivable ( 943 ) 6,830
Deferred leasing costs ( 12,471 ) ( 18,231 )
Other assets ( 10,601 ) ( 4,320 )
Accounts payable and other liabilities 14,719 ( 18,686 )
Due to related persons ( 1,393 ) ( 1,119 )
Net cash (used in) provided by operating activities ( 8,365 ) 41,442
CASH FLOWS FROM INVESTING ACTIVITIES:
Real estate improvements ( 35,781 ) ( 93,081 )
Proceeds from sale of property, net 28,266 79,830
Net cash used in investing activities ( 7,515 ) ( 13,251 )
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of senior unsecured notes ( 171,600 ) ( 350,242 )
Proceeds from issuance of senior secured notes — 280,500
Repayment of senior secured notes ( 26,998 ) —
Borrowings on revolving credit facility — 327,000
Repayments on revolving credit facility — ( 332,000 )
Borrowings on secured term loan — 100,000
Payment of debt issuance costs ( 1,195 ) ( 42,226 )
Proceeds from issuance of common shares, net 1,106 —
Repurchases of common shares ( 32 ) ( 191 )
Distributions to common shareholders ( 1,407 ) ( 1,477 )
Net cash used in financing activities ( 200,126 ) ( 18,636 )
(Decrease) increase in cash, cash equivalents and restricted cash ( 216,006 ) 9,555
Cash, cash equivalents and restricted cash at beginning of period 275,165 26,714
Cash, cash equivalents and restricted cash at end of period $ 59,159 $ 36,269
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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OFFICE PROPERTIES INCOME TRUST
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(dollars in thousands)
(unaudited)
Nine Months Ended September 30,
2025 2024
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $ 115,390 $ 121,651
Income taxes paid $ 151 $ 302
NON-CASH INVESTING ACTIVITIES:
Real estate improvements accrued, not paid $ 8,872 $ 16,595
Capitalized interest $ — $ 969
NON-CASH FINANCING ACTIVITIES:
Extinguishment of unsecured senior notes in exchange for senior priority guaranteed unsecured notes $ ( 6,537 ) $ —
Extinguishment of unsecured senior notes in exchange for senior secured notes and common shares $ — $ ( 295,462 )
SUPPLEMENTAL DISCLOSURE OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH:
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the condensed consolidated balance sheets to the amounts shown in the condensed consolidated statements of cash flows:
As of September 30,
2025 2024
Cash and cash equivalents $ 44,609 $ 22,363
Restricted cash (1)
14,550 13,906
Total cash, cash equivalents and restricted cash shown in the condensed consolidated statements of cash flows $ 59,159 $ 36,269
(1) Restricted cash consists of cash held for operations and amounts escrowed for future real estate taxes, insurance, leasing costs, capital expenditures and debt service, as required by certain of our debt agreements.
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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OFFICE PROPERTIES INCOME TRUST
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share data)
(unaudited)
Note 1. Basis of Presentation
The accompanying condensed consolidated financial statements of Office Properties Income Trust and its subsidiaries, or OPI, we, us or our, are unaudited. Certain information and disclosures required by U.S. generally accepted accounting principles, or GAAP, for complete financial statements have been condensed or omitted. We believe the disclosures made are adequate to make the information presented not misleading. However, the accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes contained in our Annual Report on Form 10-K for the year ended December 31, 2024, or our 2024 Annual Report. In the opinion of management, all adjustments, consisting of normal recurring accruals considered necessary for a fair statement of results for the interim period have been included. All intercompany transactions and balances with or among our consolidated subsidiaries have been eliminated. Our operating results for interim periods are not necessarily indicative of the results that may be expected for the full year.
The preparation of these financial statements in conformity with GAAP requires us to make estimates and assumptions that affect reported amounts. Actual results could differ from those estimates. Significant estimates in the condensed consolidated financial statements include purchase price allocations, useful lives of fixed assets and assessment of impairment of real estate and the related intangibles.
Chapter 11 Bankruptcy Proceedings
On October 30, 2025, or the Petition Date, OPI and certain of its subsidiaries, or the Debtors, voluntarily commenced cases, or the Chapter 11 Cases, under chapter 11 of title 11, or Chapter 11, of the United States Code, or the Bankruptcy Code, in the United States Bankruptcy Court for the Southern District of Texas, Houston Division, or the Bankruptcy Court. In connection with the filing of the Chapter 11 Cases, OPI entered into a Restructuring Support Agreement, or the RSA, with certain holders of our 9.00 % senior secured notes due September 2029, or the September 2029 Notes, to implement a court-supervised financial restructuring pursuant to the transactions contemplated in the RSA. In connection with the Chapter 11 Cases, certain holders of the September 2029 Notes provided OPI with a $ 125,000 debtor-in-possession financing (as described further below), or the DIP Facility, which was approved by the Bankruptcy Court on a final basis on February 4, 2026.
The Debtors continue to operate their businesses as debtors-in-possession under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court. As debtors-in-possession, the Debtors are authorized to pay all debts and honor all obligations arising in the ordinary course of our business after the Petition Date. However, generally, the Debtors may not pay third-party claims or creditors on account of obligations arising before the Petition Date or engage in transactions outside the ordinary course of business without prior approval of the Bankruptcy Court.
While the commencement of the Chapter 11 Cases constituted an event of default under certain of our debt agreements, enforcement of any remedies in respect of which is automatically stayed during the pendency of the Chapter 11 Cases. There are a number of risks and uncertainties associated with our bankruptcy proceedings, including, among others, that our prearranged plan of reorganization may not become effective.
On April 21, 2026, the Debtors filed the Fourth Amended Joint Chapter 11 Plan of Reorganization of Office Properties Income Trust and Its Debtor Affiliates, or the Plan. On April 22, 2026, the Bankruptcy Court entered the Order Confirming Fourth Amended Joint Chapter 11 Plan of Reorganization of Office Properties Income Trust and Its Debtor Affiliates confirming the Plan. After the satisfaction or waiver of the conditions precedent to the effectiveness of the Plan, the Debtors intend to effect the transactions contemplated by the Plan and emerge from Chapter 11 protection. There are a number of risks and uncertainties associated with our bankruptcy proceedings, including, among others, that the Plan may not become effective.
The Plan generally contemplates, among other things, that the following transactions and creditor treatment will be implemented:
• Holders of the September 2029 Notes will convert their debt into (i) $ 300,000 in newly issued 10.000 % senior secured notes due 2031, or the Secured Exit Notes, and (ii) up to $ 120,000 of Secured Exit Notes and $ 98,000 in newly issued shares of the reorganized common equity (subject to dilution pursuant to the Plan), or the Recovery Pool, certain holders of the September 2029 Notes will be able to elect any combination of Secured Exit Notes and reorganized
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OFFICE PROPERTIES INCOME TRUST
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(dollars in thousands, except per share data)(unaudited)
common equity up to their pro rata portion of the Recovery Pool, while the non-electing holders will receive their fixed pro rata portion of the Recovery Pool;
• Holders of our 3.25 % Senior Secured Notes due 2027 will convert their debt into $ 385,000 in newly issued 8.375 % senior secured notes due 2029, to be issued by a wholly owned subsidiary of OPI;
• Holders of our 8.00 % senior priority guaranteed unsecured notes due 2030, or the 2030 Notes, will receive 100 % of their claims in newly issued shares of the reorganized common equity (subject to dilution pursuant to the Plan);
• Our existing secured revolving credit facility and term loan will be amended and restated;
• Our 9.00 % Senior Secured Notes due March 2029 will be reinstated and rendered unimpaired;
• Any claims under our mortgage notes will be unimpaired;
• Holders of DIP Facility claims will receive (x) newly issued shares of the reorganized common equity (subject to dilution pursuant to the Plan) at a discount to Plan value of 37 %; (y) in respect of the upfront fee under the DIP Facility, reorganized common equity (subject to dilution pursuant to the Plan) to be issued at a discount to Plan value of 37 % and (z) in respect of the anchor capital commitment fee and the exit fee under the DIP Facility, reorganized common equity (subject to dilution pursuant to the Plan) to be issued at Plan value;
• Holders of our other series of unsecured notes and certain unsecured deficiency claims will be treated as follows:
◦ Holders of our other series of unsecured notes will receive their pro rata share of 6.3 % of newly issued shares of the reorganized common equity (subject to dilution pursuant to the Plan), new warrants and the opportunity to participate in an equity rights offering in the aggregate amount of $ 35,000 ;
◦ Holders of unsecured deficiency claims relating to the September 2029 Notes will receive their pro rata share of 5.3 % of newly issued shares of the reorganized common equity (subject to dilution pursuant to the Plan);
• Allowed administrative claims, priority tax claims, other secured claims, trade and vendor claims and other priority claims will be paid in full in cash or receive such other treatment reinstating such claims or rendering such claims unimpaired;
• Other general unsecured claims that are allowed for $ 25 or less will be paid in full in cash and other general unsecured claims that are allowed for more than $ 25 may receive $ 25 in cash; and
• Holders of our common shares prior to the effective date of the Plan will not receive any distribution and such common shares will be cancelled, released and discharged on the effective date of the Plan.
The Plan also contemplates a new business management agreement and new property management agreements with The RMR Group LLC, or RMR, which agreements would take effect upon effectiveness of the Plan. The initial term of the new management agreements will be five years , with the annual fee under the business management agreement set at $ 14,000 per year for the first two years and the fees under our property management agreements being consistent with the fees under the existing property management agreement. In addition to the management fees, the Plan contemplates that we will issue to RMR, on the effective date of the Plan, 2 % of the reorganized common equity, and, following the effective date of the Plan, we may issue up to an additional 8 % of the reorganized common equity based on the satisfaction of certain financial tests. Our current management agreements with RMR will remain in effect during the pendency of the Chapter 11 Cases, and RMR will continue to manage our business in the ordinary course. See Note 9 for more information regarding our existing management agreements with RMR.
DIP Term Loan Credit Agreement
On November 5, 2025, the Bankruptcy Court entered an interim order allowing us to enter into a secured debtor-in-possession term loan credit agreement, or the Initial DIP Credit Agreement. The Initial DIP Credit Agreement provided for a multiple draw secured debtor-in-possession term loan facility in an aggregate principal amount of up to $ 125,000 . An initial borrowing of $ 10,000 was made following the entry of the interim order and our entry into the Initial DIP Credit Agreement on November 6, 2025.
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OFFICE PROPERTIES INCOME TRUST
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(dollars in thousands, except per share data)(unaudited)
On February 5, 2026, we entered into an amended and restated DIP term loan credit agreement, or the A&R DIP Credit Agreement pursuant to a final order entered by the Bankruptcy Court on February 4, 2026. The A&R DIP Credit Agreement provides for the DIP Facility, a multiple draw secured debtor-in-possession term loan facility in an aggregate principal amount of up to $ 125,000 , of which: (a) we borrowed $ 10,000 on November 6, 2025 pursuant to an interim order entered by the Bankruptcy Court; (b) $ 75,000 was made available to us and drawn as follows: (i) we borrowed $ 64,300 on February 5, 2026, and (ii) we borrowed $ 10,700 on March 13, 2026; and (c) we borrowed $ 40,000 , or the Tranche B Term Loan, on April 7, 2026. The DIP Facility had an original maturity date of May 4, 2026, with the option to extend under circumstances. In May 2026, the maturity date was extended to May 31, 2026. Borrowings under the DIP Facility may be repaid in reorganized common equity or cash, at the Debtors’ election. On April 5, 2026, the Debtors filed a notice of their intent to equitize the DIP Facility with the Bankruptcy Court.
Borrowings under the DIP Facility bear interest, payable in cash, at a rate of 12.00 % per annum. Fees and expenses under the DIP Facility include: (a) an upfront fee equal to (i) cash at 2.25 % of the lenders’ commitments or (ii) common equity of the reorganized OPI in an aggregate amount equal to 3.60 % of the commitments, which fee was earned upon the initial funding of each loan under the DIP Facility and is payable in kind; (b) an anchor capital commitment fee of 10.00 % of the lenders’ commitments under the DIP Facility payable to certain backstop parties, which was earned upon the initial funding of the DIP Facility, and may be paid, at our election, in cash or common equity of the reorganized company; and (c) an exit fee of 4.50 % of the aggregate borrowings under the DIP Facility, which is due and payable upon the repayment of any loans under the DIP Facility, at our election, in cash or common equity of the reorganized company. In the event of a voluntary prepayment, we are required to pay, for the ratable account of each lender, in cash a prepayment premium equal to 1.0 % multiplied by the sum of the principal amount of the borrowings that are being repaid at such time. A commitment fee is also due for the ratable account of each Tranche B Term Loan lender, in an aggregate amount equal to 0.75 % per annum times the actual daily amount of the aggregate undrawn Tranche B Term Loan commitments.
The DIP Facility contains customary conditions precedent, representations and warranties, affirmative and negative covenants, milestones for the Chapter 11 Cases, events of default, and other terms and conditions customary for financings of this type. The DIP Facility obligations are entitled to superpriority administrative expense claims and secured by first-priority liens on certain of our unencumbered assets and junior-priority liens on certain of our encumbered assets.
Under the Bankruptcy Code, we may assume, modify, assign or reject certain executory contracts and unexpired leases, including, without limitation, leases of real property and equipment, subject to the approval of the Bankruptcy Court and to certain other conditions. Generally, the rejection of an executory contract or unexpired lease is treated as a pre-petition breach of such executory contract or unexpired lease and, subject to certain exceptions, relieves us from performing the future obligations under such executory contract or unexpired lease but entitles the contract counterparty or lessor to a pre-petition general unsecured claim for damages caused by such deemed breach. Generally, the assumption of an executory contract or unexpired lease requires us to cure existing monetary defaults under such executory contract or unexpired lease and provide adequate assurance of future performance. Accordingly, any description of an executory contract or unexpired lease in these financial statements including, where applicable, the express termination rights thereunder or a quantification of their obligations, must be read in conjunction with, and is qualified by, any overriding rejection rights we have under the Bankruptcy Code.
The Plan has not yet become effective as of the date of filing of this Quarterly Report on Form 10-Q. Effectiveness of the Plan is subject to a number of conditions precedent. There can be no assurance that all conditions to the effectiveness of the Plan will be satisfied or waived, or that the Plan will become effective on the timeline currently contemplated, or at all.
Going Concern
Substantial doubt about our ability to continue as a going concern exists due to (1) insufficient liquidity to satisfy our obligations as they come due, (2) limited alternatives available to us to obtain debt or equity financing, (3) inability to refinance our maturing debt, and (4) the resulting Chapter 11 Cases. Our ability to continue as a going concern is contingent upon, among other things, our ability to implement the Plan and generate sufficient liquidity following the reorganization to meet our obligations, restructured debt obligations and operating needs.
The transactions contemplated by the Plan are subject to certain conditions. Accordingly, no assurance can be given that the transactions described therein will be consummated. As a result, we have concluded that management’s plans at this stage do not alleviate substantial doubt about our ability to continue as a going concern.
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OFFICE PROPERTIES INCOME TRUST
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(dollars in thousands, except per share data)(unaudited)
The accompanying unaudited condensed consolidated financial statements are prepared in accordance with GAAP applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business, and do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty.
Bankruptcy Accounting
The accompanying unaudited condensed consolidated financial statements do not reflect the effects of the Chapter 11 Cases. Effective on the Petition Date, we began applying Financial Accounting Standards Board Accounting Standards Codification Topic 852, Reorganizations, or ASC 852, which specifies the accounting and financial reporting requirements for entities reorganizing through Chapter 11 bankruptcy proceedings. These requirements include distinguishing certain liabilities subject to compromise, or LSTC, in the condensed consolidated balance sheet. In addition, the condensed consolidated statement of comprehensive income (loss) must distinguish transactions directly associated with the reorganization separately as reorganization items, net. These items include the write off of unamortized discounts, premiums and issuance costs related to debt classified as LSTC, which amounted to $ 25,429 as of the Petition Date. We did not meet the conditions for the application of ASC 852 as of September 30, 2025, as the Chapter 11 Cases occurred subsequent to that date.
Upon emergence from bankruptcy on the effective date of the Plan, we expect to qualify for fresh-start reporting. In order to qualify for fresh-start reporting (i) the holders of existing voting shares of OPI prior to its emergence must receive less than 50 % of the outstanding voting shares of the reorganized company following its emergence from bankruptcy and (ii) the reorganization value of OPI’s assets immediately prior to confirmation of the Plan must be less than the post-petition liabilities and allowed claims. Under the principles of fresh-start reporting, a new reporting entity, or the Successor, will be considered to have been created, and, as a result, the Successor will allocate the reorganization value of the Successor to its individual assets based on their estimated fair values.
Note 2. Per Common Share Amounts
We calculate basic earnings per common share using the two class method. We calculate diluted earnings per common share using the more dilutive of the two class method or the treasury stock method. Unvested share awards and other potentially dilutive common shares, together with the related impact on earnings, are considered when calculating diluted earnings per common share. The calculation of basic and diluted earnings per common share is as follows (amounts in thousands, except per share data):
Three Months Ended September 30, Nine Months Ended September 30,
2025 2024 2025 2024
Numerators:
Net (loss) income $ ( 66,339 ) $ ( 58,414 ) $ ( 153,392 ) $ 12,573
Income attributable to unvested participating securities — ( 2 ) ( 12 ) ( 74 )
Net (loss) income used in calculating earnings per common share $ ( 66,339 ) $ ( 58,416 ) $ ( 153,404 ) $ 12,499
Denominators:
Weighted average common shares outstanding - basic and diluted 73,480 51,197 71,355 49,444
Net (loss) income per common share - basic and diluted $ ( 0.90 ) $ ( 1.14 ) $ ( 2.15 ) $ 0.25
Note 3. Real Estate Properties
As of September 30, 2025, our 124 wholly owned properties contained approximately 17,214,000 rentable square feet, with an undepreciated carrying value of $ 3,674,139 , including $ 7,516 classified as held for sale. We also had a noncontrolling ownership interest of 51 % in an unconsolidated joint venture that owned two properties containing approximately 346,000 rentable square feet. We generally lease space at our properties on a gross lease, modified gross lease or net lease basis pursuant to fixed term contracts expiring between 2025 and 2044. Some of our leases generally require us to pay all or some property operating expenses and to provide all or most property management services. During the three months ended September 30,
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OFFICE PROPERTIES INCOME TRUST
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(dollars in thousands, except per share data)(unaudited)
2025, we entered into 11 leases for approximately 182,000 rentable square feet for a weighted (by rentable square feet) average lease term of 4.3 years, and we made commitments of $ 2,509 for leasing related costs. During the nine months ended September 30, 2025, we entered into 37 leases for approximately 821,000 rentable square feet for a weighted (by rentable square feet) average lease term of 6.5 years, and we made commitments of $ 21,106 for leasing related costs. As of September 30, 2025, we had estimated unspent leasing related obligations of $ 67,223 .
We regularly evaluate whether events or changes in circumstances have occurred that could indicate an impairment in the value of long lived assets. Impairment indicators may include declining tenant occupancy, lack of progress re-leasing vacant space, tenant bankruptcies, low long term prospects for improvement in property performance, weak or declining tenant profitability, cash flow or liquidity, our decision to dispose of an asset before the end of its estimated useful life and legislative, market or industry changes that could permanently reduce the value of a property. If there is an indication that the carrying value of an asset is not recoverable, we estimate the projected undiscounted cash flows to determine if an impairment loss should be recognized. The future net undiscounted cash flows are subjective and are based in part on assumptions regarding hold periods, market rents and terminal capitalization rates. We determine the amount of any impairment loss by comparing the historical carrying value to estimated fair value. We estimate fair value through an evaluation of recent financial performance and projected discounted cash flows using standard industry valuation techniques. In addition to consideration of impairment upon the events or changes in circumstances described above, we regularly evaluate the remaining useful lives of our long lived assets. If we change our estimate of the remaining useful lives, we allocate the carrying value of the affected assets over their revised remaining useful lives.
Disposition Activities
During the nine months ended September 30, 2025, we sold four properties containing approximately 305,000 rentable square feet for an aggregate sales price of $ 29,050 , excluding closing costs. The sales of these properties, as presented in the table below, do not represent a strategic shift in our business. As a result, the results of operations of these properties are included in continuing operations through the date of sale in our condensed consolidated statements of comprehensive income (loss).
Date of Sale Number of Properties Location Rentable Square Feet Gross Sales Price (1)
Gain (Loss) on Sale of Real Estate Loss on Impairment of Real Estate
February 2025 1 Parsippany, NJ 100,000 $ 5,750 $ ( 4,641 ) $ —
February 2025 2 Santa Clara, CA 149,000 21,150 42 —
July 2025 1 Detroit, MI 56,000 2,150 27 ( 2,426 )
4 305,000 $ 29,050 $ ( 4,572 ) $ ( 2,426 )
(1) Gross sales price is the contract price, excluding closing costs.
As of September 30, 2025, we had three properties, including two properties classified as held for sale, under agreement to sell for an aggregate sales price of $ 28,863 , excluding closing costs, as summarized below:
Date of Sale Agreement Number of Properties Location Rentable Square Feet Gross Sales Price (1)
October 2024 2 Tempe, AZ (2)
101,000 $ 10,738
December 2024 1 Reston, VA (3)
275,000 18,125
3 376,000 $ 28,863
(1) Gross sales price is the contract price, excluding closing costs.
(2) Classified as held for sale as of September 30, 2025. These properties were sold in December 2025 for a gross sales price of $ 11,038 , excluding closing costs.
(3) Property did not meet held for sale criteria as of September 30, 2025.
The pending sales in the preceding table 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. See Note 8 for more information regarding our properties held for sale.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(dollars in thousands, except per share data)(unaudited)
Unconsolidated Joint Venture
As of September 30, 2025, we owned an interest in one joint venture that owned two properties. We accounted for this investment under the equity method of accounting.
As of September 30, 2025 and December 31, 2024, our investment in our unconsolidated joint venture is as follows:
OPI Carrying Value of Investment at
Joint Venture OPI Ownership September 30, 2025 December 31, 2024 Number of Properties Location Rentable Square Feet
Prosperity Metro Plaza 51 % $ 16,875 $ 17,370 2 Fairfax, VA 346
As of September 30, 2025 and December 31, 2024, the mortgage debt of our unconsolidated joint venture is as follows:
Joint Venture Interest Rate (1)
Maturity Date Principal Balance at September 30, 2025 (2)
Principal Balance at December 31, 2024 (2)
Prosperity Metro Plaza 4.09 % 12/1/2029 $ 49,333 $ 50,000
(1) Includes the effect of mark to market purchase accounting.
(2) Reflects the entire balance of the debt secured by the properties and is not adjusted to reflect the interest in the joint venture we did not own. None of the debt is recourse to us.
The filing of the Chapter 11 Cases constituted an event of default under the mortgage note secured by the properties owned by the Prosperity Metro Plaza joint venture. The Prosperity Metro Plaza joint venture remains current on debt service under this mortgage note and continues to own, operate and lease the collateral properties.
As of September 30, 2025, the unamortized basis difference of our joint venture of $ 652 was primarily attributable to the difference between the amount we paid to purchase our interest in the joint venture, including transaction costs, and the historical carrying value of the net assets of the joint venture. The difference is being amortized over the remaining useful life of the related property and the resulting amortization expense is included in equity in net losses of investees in our condensed consolidated statements of comprehensive income (loss).
Note 4. Leases
Our leases provide for base rent payments and, in addition, may include variable payments. Rental income from operating leases, including any payments derived by index or market-based indices, is recognized on a straight line basis over the lease term once we have determined that the collectability of substantially all of the lease payments is probable. Some of our leases have options to extend or terminate the lease exercisable at the option of our tenants, which are considered when determining the lease term. Allowances for bad debts are recognized as a direct reduction of rental income. In certain circumstances, some leases provide the tenant with the right to terminate if the legislature or other funding authority does not appropriate the funding necessary for the tenant to meet its lease obligations; we have determined the fixed non-cancelable lease term of these leases to be the full term of the lease because we believe the occurrence of early terminations to be a remote contingency based on both our historical experience and our assessments of the likelihood of lease cancellation on a separate lease basis.
We recorded rental income under our leases of $ 103,049 and $ 120,620 during the three months ended September 30, 2025 and 2024, respectively, and $ 314,593 and $ 383,741 during the nine months ended September 30, 2025 and 2024, respectively, including adjustments to increase rental income to record revenue on a straight line basis by $ 4,750 and $ 8,854 during the three months ended September 30, 2025 and 2024, respectively, and $ 18,242 and $ 23,796 during the nine months ended September 30, 2025 and 2024, respectively. Rents receivable, excluding properties classified as held for sale, included $ 146,693 and $ 140,132 of straight line rent receivables at September 30, 2025 and December 31, 2024, respectively.
We do not include in our measurement of our lease receivables certain variable payments, including payments determined by changes in the index or market-based indices after the inception of the lease, certain tenant reimbursements and other income until the specific events that trigger the variable payments have occurred. Such payments totaled $ 19,947 and $ 58,717 for the three and nine months ended September 30, 2025, respectively, of which tenant reimbursements totaled $ 19,161 and $ 56,417 ,
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(dollars in thousands, except per share data)(unaudited)
respectively. For the three and nine months ended September 30, 2024, such payments totaled $ 22,291 and $ 65,120 , respectively, of which tenant reimbursements totaled $ 21,271 and $ 61,667 , respectively.
Note 5. Concentration
Tenant and Credit Concentration
As of September 30, 2025 and 2024, the U.S. government and certain state and other government tenants combined were responsible for approximately 25.5 % and 24.5 %, respectively, of our annualized rental income. The U.S. government is our largest tenant by annualized rental income and represented approximately 17.0 % and 16.6 % of our annualized rental income as of September 30, 2025 and 2024, respectively. We define annualized rental income as the annualized contractual base rents from our tenants pursuant to our lease agreements as of the measurement date, plus straight line rent adjustments and estimated recurring expense reimbursements to be paid to us, and excluding lease value amortization.
Geographic Concentration
As of September 30, 2025, our 124 wholly owned properties were located in 29 states and the District of Columbia. Properties located in Virginia, California, Illinois, Georgia and Texas were responsible for approximately 14.2 %, 11.6 %, 11.1 %, 10.6 % and 10.1 % of our annualized rental income as of September 30, 2025, respectively.
Note 6. Indebtedness
Credit Agreement, Senior Notes and Mortgage Notes
Our principal debt obligations as of September 30, 2025 were: (1) $ 325,000 of outstanding borrowings under our $ 325,000 secured revolving credit facility; (2) $ 100,000 outstanding principal amount under our secured term loan; (3) $ 1,819,069 aggregate outstanding principal amount of senior notes and (4) $ 177,320 aggregate outstanding principal amount of mortgage notes.
Our $ 325,000 secured revolving credit facility and $ 100,000 secured term loan are governed by a credit agreement, or our credit agreement, with a syndicate of institutional lenders. 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 a gross book value of real estate assets of $ 1,034,776 as of September 30, 2025. The maturity date of our credit agreement is January 29, 2027. 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 $ 0.01 per common share per quarter and enter into share repurchases. Availability of borrowings under our credit agreement is subject to ongoing minimum performance and market values of the 19 collateral properties, our satisfying certain financial covenants and other credit facility conditions.
Interest payable on borrowings under our credit agreement through the Petition Date was at a rate of the secured overnight financing rate plus a margin of 350 basis points. Effective on the Petition Date, interest payable on borrowings under our credit agreement changed to a rate of the U.S. federal prime rate plus a margin of 250 basis points. Effective February 4, 2026, in accordance with an order entered by the Bankruptcy Court, the margin increased to 450 basis points pursuant to the default rate stipulated in our credit agreement. We are also required to pay an unused facility fee on the amount of total lending commitments of 25 to 35 basis points per annum based on amounts outstanding. As of September 30, 2025 and May 18, 2026, our $ 325,000 revolving credit facility was fully drawn and $ 100,000 was outstanding under our term loan. As of September 30, 2025, the annual interest rate payable on borrowings under our credit agreement was 7.7 %. The weighted average annual interest rate for borrowings under our credit agreement for both the three and nine months ended September 30, 2025 was 7.9 % and for the three and nine months ended September 30, 2024 was 8.9 %.
Senior Notes Redemptions and Repayments
In January 2025, we redeemed, at par plus accrued interest, all of the remaining $ 171,586 of our 4.50 % senior unsecured notes due 2025.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(dollars in thousands, except per share data)(unaudited)
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 nine months ended September 30, 2025, which represented the unamortized discounts and issuance costs related to these notes.
In July 2025, in connection with the sale of a collateral property, we redeemed, at par plus accrued interest, $ 2,029 of our senior secured notes due 2027. As a result, we recorded a loss on early extinguishment of debt of $ 285 during the nine months ended September 30, 2025 which represented the unamortized discounts and issuance costs related to these notes.
Our senior secured notes due 2027 require quarterly principal repayments of $ 6,500 and an additional $ 117,502 principal repayment in March 2026. During the nine months ended September 30, 2025, we made $ 19,500 of scheduled quarterly principal repayments on these notes. We did not make any required principal payments following the Petition Date.
Senior Notes Exchange
In March 2025, we exchanged $ 14,439 of new 8.00 % senior priority guaranteed unsecured notes, or the 2030 Notes, for an aggregate $ 20,990 of our outstanding unsecured senior notes, or the Existing Notes, and such transaction, the Senior Note Exchange, as follows:
Existing Notes Exchanged Aggregate Principal Amount of Existing Notes Accepted for Exchange Aggregate Principal Amount of New Notes Delivered
Existing 2.650 % 2026 Notes
$ 6,559 $ 5,836
Existing 2.400 % 2027 Notes
2,478 1,882
Existing 3.450 % 2031 Notes
11,953 6,721
Total $ 20,990 $ 14,439
The 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 2030 Notes require semi-annual payments of interest only and are prepayable, at par plus accrued interest, after March 12, 2029. During the nine months ended September 30, 2025, we recorded an aggregate gain related to the Senior Note Exchange of $ 764 , or $ 0.01 per common share, which is included in net (loss) gain on early extinguishment of debt in our condensed consolidated statements of comprehensive income (loss).
Our credit agreement and senior notes indentures and their supplements provide for acceleration of payment of all amounts due thereunder 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 senior notes indentures and their supplements also contain covenants, including covenants that restrict our ability to incur debts, 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 level of $ 0.01 per common share per quarter. As of September 30, 2025, 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.
The filing of the Chapter 11 Cases constituted an event of default under our credit agreement and senior notes indentures and their supplements which accelerated amounts due under the applicable agreements. Efforts to enforce financial obligations under the applicable agreements are stayed as a result of the filing of the Chapter 11 Cases and the creditors’ rights of enforcement are subject to the applicable provisions of the Bankruptcy Code. Our credit agreement is being amended and restated pursuant to the Plan to resolve any defaults thereunder and address certain terms to facilitate the Debtors’ restructuring. The amended and restated credit agreement will become effective on the effective date of the Plan.
As of September 30, 2025, seven of our properties with an aggregate gross book value of real estate assets of $ 305,809 were encumbered by mortgage notes, or our Mortgage Notes, with an aggregate principal amount of $ 177,320 . Our Mortgage Notes are non-recourse, subject to certain limited exceptions and do not contain any material financial covenants. The borrowers under our Mortgage Notes, or the Mortgage Note Borrowers, are certain of our subsidiaries that are not included in the Chapter 11 Cases. However, we provide certain guarantees under our Mortgage Notes, and as a result, the filing of the Chapter 11 Cases constituted an event of default under our Mortgage Notes and each Mortgage Note was transferred to special servicing. The Mortgage Note Borrowers continue to own, operate and lease the applicable collateral properties and remain current on their debt service obligations. As of May 18, 2026, two of the Mortgage Note Borrowers have entered into waiver
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(dollars in thousands, except per share data)(unaudited)
agreements with their respective lenders. We remain in negotiation with the special servicers and lenders of our other Mortgage Notes regarding potential waiver agreements.
Note 7. Fair Value of Assets and Liabilities
Our financial instruments include our cash and cash equivalents, restricted cash, rents receivable, amounts due from related persons, accounts payable, a revolving credit facility, a term loan, senior notes, mortgage notes payable, amounts due to related persons, other accrued expenses and security deposits. At September 30, 2025 and December 31, 2024, the fair values of our financial instruments approximated their carrying values in our condensed consolidated financial statements, due to their short term nature or floating interest rates, except as follows:
As of September 30, 2025 As of December 31, 2024
Financial Instrument Carrying Value (1)
Fair Value Carrying Value (1)
Fair Value
Senior unsecured notes, 4.500 % interest rate, due in 2025 (2)
$ — $ — $ 171,607 $ 169,302
Senior unsecured notes, 2.650 % interest rate, due in 2026
133,497 27,213 139,578 106,078
Senior unsecured notes, 2.400 % interest rate, due in 2027
78,109 14,800 80,486 49,475
Senior secured notes, 3.250 % interest rate, due in 2027
369,303 347,466 363,432 383,806
Senior secured notes, 9.000 % interest rate, due in March 2029
279,932 305,754 275,632 293,100
Senior secured notes, 9.000 % interest rate, due in September 2029
632,710 390,399 637,052 529,436
Senior priority guaranteed unsecured notes, 8.000 % interest rate, due in 2030 (3)
18,139 10,752 — —
Senior unsecured notes, 3.450 % interest rate, due in 2031
101,723 19,375 113,511 49,688
Senior unsecured notes, 6.375 % interest rate, due in 2050
157,241 27,540 157,096 80,676
Mortgage notes payable 173,610 182,291 172,912 177,295
Total $ 1,944,264 $ 1,325,590 $ 2,111,306 $ 1,838,856
(1) Includes net unamortized debt premiums, discounts and issuance costs totaling $ 52,128 and $ 90,218 as of September 30, 2025 and December 31, 2024, respectively.
(2) These senior notes were redeemed in January 2025.
(3) These senior notes were issued in March 2025.
We estimated the fair values of our senior notes (except for our senior priority guaranteed unsecured notes due 2030 and senior unsecured notes due 2050) using an average of the bid and ask price of the notes (Level 2 inputs as defined in the fair value hierarchy under GAAP) as of the measurement date. We estimated the fair value of our senior unsecured notes due 2050 based on the closing price on The Nasdaq Stock Market LLC, or Nasdaq, (Level 1 inputs as defined in the fair value hierarchy under GAAP) as of the measurement date. We estimated the fair values of our senior priority guaranteed unsecured notes due 2030 and our mortgage notes payable using discounted cash flow analyses and currently prevailing market rates (Level 3 inputs as defined in the fair value hierarchy under GAAP) as of the measurement date. Because Level 3 inputs are unobservable, our estimated fair values may differ materially from the actual fair values. The fair values presented are estimates and may not represent what investors may expect to receive as a result of the Chapter 11 Cases.
Note 8. Shareholders’ Equity
Share Purchases
During the nine months ended September 30, 2025, we purchased 50,816 of our common shares, valued at a weighted average share price of $ 0.65 , from a former officer of ours and certain current and former officers and employees of RMR in satisfaction of tax withholding and payment obligations in connection with the vesting of prior awards of our common shares. We withheld and purchased these common shares at their fair market values based upon the trading price of our common shares at the close of trading on Nasdaq on the applicable purchase dates.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(dollars in thousands, except per share data)(unaudited)
Distributions
During the nine months ended September 30, 2025, we declared and paid regular quarterly distributions to common shareholders as follows:
Declaration Date Record Date Paid Date Distributions Per Common Share Total Distributions
January 16, 2025 January 27, 2025 February 20, 2025 $ 0.01 $ 698
April 10, 2025 April 22, 2025 May 15, 2025 0.01 709
$ 0.02 $ 1,407
In July 2025, we announced the suspension of our quarterly distribution on our common shares in order to preserve our cash. We do not expect to pay any future distributions prior to the conclusion of the Chapter 11 Cases.
Share Issuances
In March 2025, we entered into a sales agreement with Clear Street LLC, or 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 , or the ATM Program. 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 nine months ended September 30, 2025, we sold an aggregate 4,171,689 of our common shares under the ATM Program valued at a weighted average share price of $ 0.27 for net proceeds of $ 1,106 after deducting Agent commissions and other offering costs. We did not sell any common shares under the ATM Program subsequent to June 30, 2025.
Note 9. Business and Property Management Agreements with RMR
We have no employees. The personnel and various services we require to operate our business are provided to us by RMR. We have two agreements with RMR to provide management services to us: (1) a business management agreement, which relates to our business generally; and (2) a property management agreement, which relates to our property level operations.
We are generally responsible for all of our operating expenses, including certain expenses incurred or arranged by RMR on our behalf. We are generally not responsible for payment of RMR’s employment, office or administrative expenses incurred to provide management services to us, except for the employment and related expenses of RMR’s employees assigned to work exclusively or partly at our properties, our share of the wages, benefits and other related costs of RMR’s centralized accounting personnel, our share of RMR’s costs for providing our internal audit function and as otherwise agreed. Our property level operating expenses are generally incorporated into the rents charged to our tenants, including certain payroll and related costs incurred by RMR.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(dollars in thousands, except per share data)(unaudited)
For the three and nine months ended September 30, 2025 and 2024, the business management fees, property management fees and construction supervision fees and expense reimbursements recognized in our condensed consolidated financial statements were as follows:
Financial Statement Three Months Ended September 30, Nine Months Ended September 30,
Line Item 2025 2024 2025 2024
Pursuant to business management agreement:
Business management fees (1)
General and administrative expenses $ 3,063 $ 3,052 $ 9,214 $ 9,919
Pursuant to property management agreement:
Property management fees (2)
Other operating expenses $ 2,890 $ 3,234 $ 8,586 $ 10,391
Construction supervision fees Buildings and improvements (3)
325 478 974 2,284
$ 3,215 $ 3,712 $ 9,560 $ 12,675
Expense reimbursement:
Property level expenses Other operating expenses $ 4,584 $ 6,651 $ 15,753 $ 19,455
Other reimbursed expenses General and administrative expenses 51 83 152 248
$ 4,635 $ 6,734 $ 15,905 $ 19,703
(1) The net business management fees we recognized for the three months ended September 30, 2025 and 2024 each reflect a reduction of $ 150 and for the nine months ended September 30, 2025 and 2024 each reflect a reduction of $ 452 for the amortization of the liability we recorded in connection with our former investment in The RMR Group Inc., or RMR Inc.
(2) The net property management fees we recognized for the three months ended September 30, 2025 and 2024 each reflect a reduction of $ 121 and for the nine months ended September 30, 2025 and 2024 each reflect a reduction of $ 363 for the amortization of the liability we recorded in connection with our former investment in RMR Inc.
(3) Amounts capitalized as buildings and improvements are depreciated over the estimated useful lives of the related assets.
Based on our common share total return, as defined in our business management agreement, as of September 30, 2025, no estimated incentive fees are included in the net business management fees we recognized for the three and nine months ended September 30, 2025. The actual amount of annual incentive fees for 2025, if any, will be based on our common share total return for the three year period ending December 31, 2025, and will be payable in January 2026. We did no t incur an incentive fee payable to RMR for the year ended December 31, 2024. See Note 1 for further information regarding our agreements with RMR as it relates to the Plan.
In January 2025, in connection with a $ 100,000 credit agreement and related security agreement entered into by RMR and certain of its subsidiaries with Citibank, N.A., or Citibank, and the other lenders party thereto, we consented to the pledge and assignment of RMR’s interest in our management agreements under the security agreement. Pursuant to the consent, we agreed, among other things, that upon notice that an event of default under the RMR credit agreement has occurred and is continuing, we will continue to make all payments under our management agreements in accordance with the instructions of Citibank, and that if there is an event of default by RMR under our management agreements that would allow us to terminate or suspend our obligations, we will not terminate or suspend without notice to Citibank and providing Citibank 30 days to cure the default on RMR’s behalf. The consent was approved by our Independent Trustees.
Management Agreement Between Our Joint Venture and RMR . RMR provides management services to our unconsolidated joint venture. We are not obligated to pay management fees to RMR under our management agreement with RMR for the services it provides regarding the joint venture. The joint venture pays management fees directly to RMR.
Note 10. Related Person Transactions
We have relationships and historical and continuing transactions with RMR, RMR Inc. and others related to them, including other companies to which RMR or its subsidiaries provide management services and some of which have trustees, directors or officers who are also our Trustees or officers. RMR is a majority owned subsidiary of RMR Inc. The Chair of our Board of Trustees and one of our Managing Trustees, Adam Portnoy, is the sole trustee, an officer and the controlling shareholder of ABP Trust, which is the controlling shareholder of RMR Inc., the chair of the board of directors, a managing director and the president and chief executive officer of RMR Inc. and an officer and employee of RMR. Jennifer Clark, our other Managing Trustee until December 31, 2025, was a managing director and the executive vice president, general counsel
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(dollars in thousands, except per share data)(unaudited)
and secretary of RMR Inc., an officer and employee of RMR and an officer of ABP Trust. Yael Duffy, our other Managing Trustee since January 1, 2026, and our President and Chief Executive Officer, is also an executive vice president of RMR Inc. and a managing trustee and president and chief executive officer of Industrial Logistics Properties Trust, one of the other public companies managed by RMR. Each of our other officers is also an officer and employee of RMR. Some of our Independent Trustees also serve as independent trustees of other public companies to which RMR or its subsidiaries provide management services. Mr. Portnoy serves as chair of the boards and as a managing trustee of these public companies. Other officers of RMR, including Ms. Duffy, serve as managing trustees or officers of certain of these public companies.
Our Manager, RMR. We have two agreements with RMR to provide management services to us. RMR also provides management services to our unconsolidated joint venture. See Note 10 for more information regarding our and our unconsolidated joint venture’s management agreement with RMR.
Leases with RMR. We lease office space to RMR in certain of our properties for RMR’s property management offices. Pursuant to our lease agreements with RMR, we recognized rental income from RMR for leased office space of $ 211 and $ 644 for the three and nine months ended September 30, 2025, respectively, and $ 193 and $ 592 for the three and nine months ended September 30, 2024, respectively.
Sonesta. Prior to January 1, 2025, we leased 240,000 rentable square feet of a mixed-use property in Washington, D.C. pursuant to a lease, or the Sonesta Lease, with a subsidiary of Sonesta International Hotels Corporation, or Sonesta. We terminated the Sonesta Lease effective January 1, 2025. The Sonesta Lease commenced in August 2023 and was amended in September 2024 to expand the premises by 5,900 rentable square feet. Pursuant to the amended Sonesta Lease, Sonesta was required to pay us annual base rent of approximately $ 6,724 beginning February 2025, and the annual base rent would have increased by 10 % every five years throughout the term. Sonesta was also obligated to pay its pro rata share of the operating costs for the property. We recognized rental income of $ 3,119 and $ 8,989 during the three and nine months ended September 30, 2024, respectively, under the Sonesta Lease.
Effective January 1, 2025, we entered into a management agreement with Sonesta, or the Sonesta Management Agreement, to replace the Sonesta Lease. The Sonesta Management Agreement expires on December 31, 2040, and includes two 10-year renewal options. The Sonesta Management Agreement provides that we are paid an annual owner’s priority return if gross revenues of the hotel, after payment of hotel operating expenses and management and related fees (other than Sonesta’s incentive fee, if applicable), are sufficient to do so. The Sonesta Management Agreement further provides that we are paid an additional return of the operating profits, as defined therein, after paying the owner’s priority return, reimbursing owner or manager advances, funding furniture, fixtures and equipment, or FF&E, reserves and paying Sonesta’s incentive fee, if applicable. The stated annual owner’s priority return is $ 7,500 and increases by 8.0 % of our out-of-pocket capital expenditures and will increase annually to 102 % of our prior year’s annual owner’s priority return. We recognized $ 6,077 and $ 22,647 of hotel operating revenues for the three and nine months ended September 30, 2025, respectively, which is included in rental income in our condensed consolidated statements of comprehensive income (loss). We realized returns under the Sonesta Management Agreement of $ 53 and $ 3,223 during the three and nine months ended September 30, 2025, respectively. We are responsible for any capital expenditures in excess of available funds in the FF&E reserve. Our annual priority return under the Sonesta Management Agreement as of September 30, 2025 was $ 7,500 . The Sonesta Management Agreement requires that 1.0 % of gross revenues for 2025, 3.0 % of gross revenues for 2026 and 4.0 % of gross revenues for each calendar year thereafter be escrowed for future capital expenditures as FF&E reser ves. FF&E escrow deposits of $ 44 and $ 226 were required during the three and nine months ended September 30, 2025 , respectively. We owed Sonesta $ 173 for other reimbursements under the Sonesta Management Agreement as of September 30, 2025. Amounts owed to Sonesta are included in due to related persons in our condensed consolidated balance sheets.
Pursuant to the Sonesta Management Agreement, we are required to pay Sonesta, after p ayment of hotel operating expenses, a base management fee equal to 1.5 % of gross revenues, as defined in the Sonesta Management Agreement, for 2025 and 3.0 % of gross revenues each calendar year thereafter. Additionally, we are required to pay (i) an incentive fee equal to 20 % of net operating profit, as defined in the Sonesta Management Agreement, in excess of the annual owner’s priority; (ii) a brand promotion fee of 1.75 % of gross revenues for 2025 and 3.5 % of gross revenues for each calendar year thereafter; and (iii) a loyalty fee of the greater of 1.0 % of room revenues or 4.5 % of qualified room revenues from guests participating in certain loyalty programs. Sonesta’s incentive management fee, but not its other fees, is earned only after our annual owner’s priority return is paid. The Sonesta Management Agreement also provides that the pro rata costs Sonesta incurs for advertising, marketing, promotional and public relations programs and campaigns, including its Rewards Program, for the benefit of this hotel are subject to reimbursement by us or are otherwise treated as hotel operating expenses.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(dollars in thousands, except per share data)(unaudited)
We incurred management, brand promotion and loyalty fees of $ 341 and $ 1,278 for the three and nine months ended September 30, 2025, respectively. These fees and costs are included in other operating expenses in our condensed consolidated statements of comprehensive income (loss). We are required to maintain working capital under the Sonesta Management Agreement and advanced $ 548 of working capital in April 2025 to meet the cash needs for hotel operations.
As of December 31, 2024, we had a straight line rent receivable related to the Sonesta Lease totaling $ 12,343 . Due to our ongoing relationship with Sonesta under the Sonesta Management Agreement, upon termination of the Sonesta Lease, we reclassified this receivable to other assets, net in our condensed consolidated balance sheet. We are amortizing this receivable through the original Sonesta Lease expiration date, or July 2053, as an increase to other operating expenses in our condensed consolidated statements of comprehensive income (loss). We recognized $ 108 and $ 324 of amortization expense during the three and nine months ended September 30, 2025, respectively, and as of September 30, 2025, the remaining unamortized balance of this receivable was $ 12,019 .
Mr. Portnoy is a director and controlling shareholder of Sonesta. Another officer and employee of RMR is co-president and co-chief executive officer of Sonesta.
For more information about these and other such relationships and certain other related person transactions, refer to our 2024 Annual Report.
Note 11. Segment Reporting
We manage our business on a consolidated basis and therefore have one reportable segment: ownership and leasing of real estate properties. The chief operating decision maker, or CODM, is our President and Chief Executive Officer. The CODM assesses performance, allocates resources and makes strategic decisions based on net income (loss) as shown in our condensed consolidated statements of comprehensive income (loss). The CODM is also regularly provided with information on expenses related to our management agreements with RMR, which are detailed in Note 10. The measure of segment assets is reported as total assets in our condensed consolidated balance sheets.
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Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.