PART I. Financial Information [Financial Statements (unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20%28unaudited%29) Q1 2025 unaudited financials show increased net loss, decreased assets, negative operating cash flow, and going concern doubt [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of March 31, 2025, total assets decreased to **$3.57 billion**, with liabilities also falling, leading to lower shareholders' equity Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Total Assets** | **$3,569,759** | **$3,822,286** | | Total real estate properties, net | $3,009,671 | $3,038,909 | | Cash and cash equivalents | $63,745 | $261,318 | | **Total Liabilities** | **$2,463,096** | **$2,669,482** | | Unsecured debt, net | $488,556 | $662,277 | | Secured debt, net | $1,872,355 | $1,872,357 | | **Total Shareholders' Equity** | **$1,106,663** | **$1,152,804** | [Condensed Consolidated Statements of Comprehensive Income (Loss)](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income%20%28Loss%29) Q1 2025 net loss widened significantly to **$45.9 million** due to decreased rental income and increased interest expense Statement of Comprehensive Income (Loss) Highlights (in thousands, except per share data) | Account | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Rental income | $113,615 | $139,435 | | Total expenses | $101,897 | $107,405 | | Interest expense | ($53,378) | ($35,476) | | **Net loss** | **($45,867)** | **($5,184)** | | **Net loss per share** | **($0.66)** | **($0.11)** | [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Q1 2025 saw **$28.6 million** net cash used in operations and **$185.0 million** in financing, significantly decreasing total cash Cash Flow Summary (in thousands) | Activity | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | ($28,588) | $26,632 | | Net cash provided by (used in) investing activities | $15,034 | ($4,362) | | Net cash used in financing activities | ($184,957) | ($4,878) | | **(Decrease) increase in cash** | **($198,511)** | **$17,392** | | **Cash at end of period** | **$76,654** | **$44,106** | [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Notes highlight a "Going Concern" warning due to debt maturities, property sales, tenant concentration, and new equity programs - The company has concluded there is **substantial doubt** about its ability to continue as a **going concern** due to **upcoming debt obligations**, **limited financing alternatives**, and the **illiquid nature** of its real estate assets. The Board may consider a **bankruptcy reorganization** if refinancing is unsuccessful[23](index=23&type=chunk) - During Q1 2025, the company sold three properties for an aggregate price of **$26.9 million**, resulting in a net loss on sale of **$4.7 million**[29](index=29&type=chunk)[30](index=30&type=chunk) - The U.S. government remains the largest tenant, representing **16.8%** of annualized rental income as of March 31, 2025, down from **20.2%** a year prior[39](index=39&type=chunk) - In March 2025, the company initiated an 'at the market' (ATM) program to sell up to **$100 million** in common shares. In Q1, it sold **238,343 shares** for net proceeds of **$145,000**[55](index=55&type=chunk) - Effective January 1, 2025, the company **terminated its lease** with related party Sonesta and entered into a long-term **management agreement** for the same mixed-use property[66](index=66&type=chunk)[67](index=67&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=18&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management highlights severe office sector headwinds, declining occupancy, a **30.4%** NOI drop, and going concern doubt - Management reiterates that there is **substantial doubt** about the company's ability to continue as a **going concern** due to **limited financing alternatives** to refinance maturing debt. The Board may consider **bankruptcy** if these efforts fail[77](index=77&type=chunk) Key Performance Indicators (in millions, except percentages and per share data) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Percent Leased (All Properties) | 81.3% | 85.6% | | Percent Leased (Comparable) | 85.4% | 91.4% | | Net Operating Income (NOI) | $61.4M | $88.2M | | Normalized FFO | $4.4M | $38.3M | | Normalized FFO per share | $0.06 | $0.79 | - The company faces significant lease expirations, with **8.5%** of leased square feet expiring in 2025 and another **3.1%** in 2026[93](index=93&type=chunk) [Property Operations](index=18&type=section&id=Property%20Operations) Q1 2025 portfolio occupancy declined to **81.3%**, with new leases seeing a **3.5%** rental rate decrease despite **19.3%** increases in renewals Portfolio Occupancy (in thousands of square feet, except percentages) | Metric | March 31, 2025 | March 31, 2024 | | :--- | :--- | :--- | | Total Properties | 125 | 151 | | Total Rentable Square Feet (thousands) | 17,274 | 20,293 | | Percent Leased (All Properties) | 81.3% | 85.6% | | Percent Leased (Comparable Properties) | 85.4% | 91.4% | Q1 2025 Leasing Activity (in thousands of square feet, except percentages and years) | Leasing Metric | New Leases | Renewals | Total | | :--- | :--- | :--- | :--- | | Rentable square feet leased (thousands) | 50 | 173 | 223 | | Weighted average rental rate change | (3.5%) | 19.3% | 13.5% | | Weighted average lease term (years) | 10.3 | 10.3 | 10.3 | - Capital expenditures for the quarter totaled **$13.8 million**, a significant decrease from **$28.2 million** in the prior-year period, primarily due to lower spending on lease-related costs and development activities[87](index=87&type=chunk) [Results of Operations](index=24&type=section&id=Results%20of%20Operations) Q1 2025 rental income decreased **18.5%**, NOI fell **30.4%**, and interest expense surged **50.5%**, leading to a **$45.9 million** net loss Results of Operations Comparison (in thousands) | Account | Q1 2025 | Q1 2024 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Rental income | $113,615 | $139,435 | ($25,820) | (18.5%) | | Total operating expenses | $52,230 | $51,187 | $1,043 | 2.0% | | Net operating income (NOI) | $61,385 | $88,248 | ($26,863) | (30.4%) | | Interest expense | ($53,378) | ($35,476) | ($17,902) | 50.5% | | **Net loss** | **($45,867)** | **($5,184)** | **($40,683)** | n/m | - The decrease in rental income was primarily driven by **property dispositions** (non-comparable properties) and **increased vacancies** at comparable properties[106](index=106&type=chunk) - The increase in interest expense was due to **higher weighted average interest rates** resulting from **financing activities** undertaken in 2024[112](index=112&type=chunk) [Non-GAAP Financial Measures](index=26&type=section&id=Non-GAAP%20Financial%20Measures) Key non-GAAP metrics deteriorated in Q1 2025, with NOI decreasing **30.4%** to **$61.4 million** and Normalized FFO falling sharply Reconciliation of Net Loss to NOI (in thousands) | Line Item | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net loss | ($45,867) | ($5,184) | | Add back various non-property level items... | ... | ... | | **NOI** | **$61,385** | **$88,248** | FFO and Normalized FFO Reconciliation (in thousands, except per share data) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net loss | ($45,867) | ($5,184) | | Depreciation and amortization | $44,361 | $50,983 | | Loss on sale of real estate | $4,737 | $2,384 | | **FFO** | **$3,231** | **$48,183** | | Adjustments | $1,119 | ($9,866) | | **Normalized FFO** | **$4,350** | **$38,317** | | **Normalized FFO per share** | **$0.06** | **$0.79** | [Liquidity and Capital Resources](index=27&type=section&id=Liquidity%20and%20Capital%20Resources) The company faces severe liquidity pressure with **$73.1 million** cash and significant debt maturities, leading to a "going concern" warning - As of April 30, 2025, total available liquidity was **$73.1 million** in cash, with the revolving credit facility **fully drawn**[134](index=134&type=chunk) Debt Maturities (in thousands) | Year | Debt Maturities | | :--- | :--- | | 2025 | $19,500 | | 2026 | $279,460 | | 2027 | $346,298 | | 2028 | $123,487 | | 2029 | $910,278 | | 2030 and thereafter | $332,395 | | **Total** | **$2,011,418** | - The company is actively pursuing strategies to address debt obligations, including **asset sales**, **debt exchanges**, and **equity issuances**, but warns there is **substantial doubt** about its ability to continue as a **going concern**[134](index=134&type=chunk) [Debt Covenants](index=32&type=section&id=Debt%20Covenants) As of March 31, 2025, the company complied with most debt covenants but reached the maximum **40.0%** secured debt ratio, restricting additional secured debt Debt Covenant Compliance as of March 31, 2025 | Covenant | Requirement | Actual | | :--- | :--- | :--- | | Total unencumbered assets / unsecured debt | >= 150.0% | 159.0% | | Total debt / adjusted total assets | <= 60.0% | 50.2% | | **Secured debt / adjusted total assets** | **<= 40.0%** | **40.0%** | | Debt service coverage ratio | >= 1.50x | 1.54x | - Because the secured debt to adjusted total assets ratio is at the **maximum level**, the company is **unable to incur additional secured debt**, **restricting** a key avenue for refinancing[139](index=139&type=chunk)[140](index=140&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=33&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is exempt from providing market risk disclosures as it qualifies as a smaller reporting company - The company is **exempt** from this disclosure requirement as it qualifies as a **smaller reporting company**[149](index=149&type=chunk) [Controls and Procedures](index=33&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls were effective as of March 31, 2025, with no material changes to internal control - Management concluded that the company's disclosure controls and procedures are **effective** as of the end of the reporting period[150](index=150&type=chunk) - **No material changes** were made to the internal control over financial reporting during the first quarter of 2025[151](index=151&type=chunk) PART II. Other Information [Risk Factors](index=36&type=section&id=Item%201A.%20Risk%20Factors) No material changes to the company's risk factors have occurred since the filing of its 2024 Annual Report on Form 10-K - **No material changes** to risk factors have occurred since the filing of the 2024 Annual Report[161](index=161&type=chunk) [Exhibits](index=36&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including corporate governance documents, debt indentures, and officer certifications - The exhibits include various **legal and financial documents**, such as **indentures for senior notes**, the **ATM sales agreement**, and **required certifications** by company officers[162](index=162&type=chunk)[164](index=164&type=chunk)

[Quarterly Results](index=3&type=section&id=QUARTERLY%20RESULTS) [First Quarter 2025 Financial Results Announcement](index=4&type=section&id=Office%20Properties%20Income%20Trust%20Announces%20First%20Quarter%202025%20Financial%20Results) OPI reported significant Q1 2025 operational challenges, including tenant non-renewals and increased debt service costs, while executing leasing and property dispositions - Management acknowledges ongoing operational challenges from tenant non-renewals, headwinds in key markets, and increased debt service costs from re-financing activities[7](index=7&type=chunk) - Completed **223,000 square feet** of new and renewal leasing at a **13.5% roll-up in rent** and a weighted average lease term of over 10 years[8](index=8&type=chunk) - Sold **three properties** for **$26.9 million** and has agreements to sell three more for **$28.9 million**[8](index=8&type=chunk) - Declared a quarterly common share distribution of **$0.01 per share**[10](index=10&type=chunk) [First Quarter 2025 Summary](index=5&type=section&id=First%20Quarter%202025%20Summary) Q1 2025 highlights include a **$45.9 million net loss**, **$26.9 million in property sales**, and reiterated substantial doubt about OPI's going concern due to limited liquidity Q1 2025 Key Financial Results | Metric | Value | | :--- | :--- | | Net Loss | $45.9 million ($0.66/share) | | Normalized FFO | $4.4 million ($0.06/share) | | Same property Cash Basis NOI | $52.9 million | - Financing activities included redeeming **$113.3 million** of 4.50% senior unsecured notes due 2025 and exchanging **$21.0 million** of existing notes for new 8.0% senior priority guaranteed unsecured notes due 2030[13](index=13&type=chunk) - As of April 30, 2025, total available liquidity was **$73.1 million** in cash. The company continues to conclude there is substantial doubt about its ability to continue as a going concern[13](index=13&type=chunk) [Financials](index=6&type=section&id=FINANCIALS) [Key Financial Data](index=7&type=section&id=Key%20Financial%20Data) Key financial data for the last five quarters ending March 31, 2025, shows declining performance metrics and constrained liquidity with the revolving credit facility fully drawn Selected Financial Data (Q1 2024 vs Q1 2025) | Metric | Q1 2024 (thousands) | Q1 2025 (thousands) | | :--- | :--- | :--- | | Rental Income | $139,435 | $113,615 | | Net (Loss) Income | ($5,184) | ($45,867) | | Normalized FFO | $38,317 | $4,350 | | CAD | $22,340 | ($11,209) | - Total liquidity as of March 31, 2025, consisted of **$63.7 million** in cash and cash equivalents, with no availability under the **$325 million** secured revolving credit facility as it was fully drawn[16](index=16&type=chunk) [Condensed Consolidated Statements of Income (Loss)](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income%20(Loss)) Q1 2025 condensed consolidated income statement shows a significant increase in net loss to **$45.9 million** from **$5.2 million** year-over-year, driven by decreased rental income and increased interest expense Income Statement Comparison (in thousands) | Line Item | Q1 2025 (thousands) | Q1 2024 (thousands) | | :--- | :--- | :--- | | Rental income | $113,615 | $139,435 | | Total expenses | $101,897 | $107,405 | | Interest expense | ($53,378) | ($35,476) | | **Net loss** | **($45,867)** | **($5,184)** | | Net loss per share | ($0.66) | ($0.11) | [Condensed Consolidated Balance Sheets](index=9&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The March 31, 2025, balance sheet reflects a reduction in assets and liquidity, with total assets decreasing to **$3.57 billion** and cash declining from **$261.3 million** to **$63.7 million** Balance Sheet Comparison (in thousands) | Line Item | March 31, 2025 (thousands) | December 31, 2024 (thousands) | | :--- | :--- | :--- | | Total assets | $3,569,759 | $3,822,286 | | Cash and cash equivalents | $63,745 | $261,318 | | Total liabilities | $2,463,096 | $2,669,482 | | Total shareholders' equity | $1,106,663 | $1,152,804 | [Debt Summary](index=10&type=section&id=Debt%20Summary) As of March 31, 2025, OPI's total debt principal balance was **$2.44 billion** with an **8.407%** weighted average interest rate and **4.8 years** weighted average maturity, with the revolving credit facility fully drawn Debt Overview as of March 31, 2025 | Metric | Value | | :--- | :--- | | Total Principal Balance | $2,436,418 thousand | | Weighted Average Interest Rate | 8.407% | | Weighted Average Years to Maturity | 4.8 years | - The company's **$325 million** secured revolving credit facility and **$100 million** secured term loan both mature in January 2027[23](index=23&type=chunk) - As of March 31, 2025, OPI was fully drawn on its revolving credit facility[24](index=24&type=chunk) [Debt Maturity Schedule](index=11&type=section&id=Debt%20Maturity%20Schedule) The debt maturity schedule highlights significant upcoming obligations, particularly in 2027, with the company's debt predominantly secured (**79.8%**) and fixed-rate (**82.6%**) - A large portion of debt matures in 2027, totaling approximately **$910 million**[26](index=26&type=chunk) Debt Composition | Type | Percentage | | :--- | :--- | | Secured Debt | 79.8% | | Unsecured Debt | 20.2% | | Fixed Rate Debt | 82.6% | | Variable Rate Debt | 17.4% | [Leverage Ratios, Coverage Ratios and Public Debt Covenants](index=12&type=section&id=Leverage%20Ratios%2C%20Coverage%20Ratios%20and%20Public%20Debt%20Covenants) Key leverage and coverage ratios deteriorated in Q1 2025, with Net Debt to Adjusted EBITDAre at **9.0x** and secured debt to adjusted total assets reaching its **40.0%** covenant limit, restricting additional secured debt Key Ratio Trends | Ratio | 3/31/2024 | 3/31/2025 | | :--- | :--- | :--- | | Net debt / rolling four quarter Adjusted EBITDAre | 8.4x | 9.0x | | Secured debt / total assets | 19.4% | 54.5% | | Total unencumbered assets / unsecured debt | 178.1% | 159.0% | - As of March 31, 2025, OPI's ratio of secured debt to adjusted total assets was at the **40.0%** maximum allowed under its debt covenants, restricting its ability to incur additional secured debt[28](index=28&type=chunk)[30](index=30&type=chunk) [Capital Expenditures Summary](index=13&type=section&id=Capital%20Expenditures%20Summary) Total capital expenditures for Q1 2025 amounted to **$13.8 million**, a significant decrease from **$36.1 million** in Q4 2024, with the majority allocated to recurring capital expenditures Capital Expenditures (in thousands) | Category | Q1 2025 (thousands) | Q4 2024 (thousands) | | :--- | :--- | :--- | | Recurring capital expenditures | $13,738 | $33,336 | | Development, redevelopment and other | $83 | $2,813 | | **Total capital expenditures** | **$13,821** | **$36,149** | [Property Dispositions](index=14&type=section&id=Property%20Dispositions) Since January 1, 2025, OPI sold two properties totaling **249,000 square feet** for gross sales proceeds of **$26.9 million** Dispositions Since January 1, 2025 | Date Sold | Location | Sq. Ft. (thousands) | Gross Sales Price (thousands) | | :--- | :--- | :--- | :--- | | 2/7/2025 | Parsippany, NJ | 100 | $5,750 | | 2/26/2025 | Santa Clara, CA | 149 | $21,150 | | **Total** | | **249** | **$26,900** | [Investment in Unconsolidated Joint Venture](index=15&type=section&id=Investment%20in%20Unconsolidated%20Joint%20Venture) OPI holds a **51%** ownership in the Prosperity Metro Plaza joint venture, with the property having **77.6%** occupancy and **$49.8 million** in outstanding debt - OPI has a **51%** ownership in the Prosperity Metro Plaza joint venture, with an investment value of **$17.1 million**[39](index=39&type=chunk) - The joint venture's property has an occupancy of **77.6%** and is encumbered by a **$49.8 million** mortgage note maturing in December 2029[39](index=39&type=chunk)[40](index=40&type=chunk) [Portfolio Information](index=16&type=section&id=PORTFOLIO%20INFORMATION) [Summary Same Property Results](index=17&type=section&id=Summary%20Same%20Property%20Results) The same-property portfolio experienced a decline in Q1 2025 performance, with occupancy dropping from **91.4%** to **85.4%**, leading to a **7.3%** decrease in Same Property NOI Same Property Results Comparison | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Percent leased | 85.4% | 91.4% | | Same Property NOI (thousands) | $60,482 | $65,269 | | Same Property Cash Basis NOI (thousands) | $52,904 | $59,115 | | Same Property NOI % change | (7.3%) | N/A | | Same Property Cash Basis NOI % change | (10.5%) | N/A | [Occupancy and Leasing Summary](index=18&type=section&id=Occupancy%20and%20Leasing%20Summary) As of Q1 2025, OPI's portfolio occupancy was **81.3%**, a decrease from **85.6%** year-over-year, with **223,000 square feet** of new and renewal leases executed at a **13.5%** GAAP rent increase Portfolio Occupancy Trend | Quarter | Percentage Leased | | :--- | :--- | | 3/31/2024 | 85.6% | | 6/30/2024 | 83.5% | | 9/30/2024 | 82.8% | | 12/31/2024 | 85.0% | | 3/31/2025 | 81.3% | - In Q1 2025, total leasing activity was **223,000 sq. ft.**, with a **13.5%** positive change in GAAP rent and a weighted average lease term of **10.3 years**[48](index=48&type=chunk) [Tenant Diversity and Credit Characteristics](index=19&type=section&id=Tenant%20Diversity%20and%20Credit%20Characteristics) As of March 31, 2025, OPI's portfolio has a strong credit profile with **59.9%** of annualized rental income from investment-grade tenants, diversified across industries including Real Estate & Financial (**17.1%**) and U.S. Government (**16.8%**) - Investment grade tenants account for **59.9%** of total annualized rental income[51](index=51&type=chunk) - The top three tenant industries by annualized rental income are Real Estate & Financial (**17.1%**), U.S. Government (**16.8%**), and Technology & Communications (**15.5%**)[51](index=51&type=chunk) [Top Tenants](index=20&type=section&id=Tenants%20Representing%201%25%20or%20More%20of%20Total%20Annualized%20Rental%20Income) Revenue is concentrated among top tenants, with the **23 largest** accounting for **62.5%** of total annualized rental income, led by the U.S. Government at **16.8%** and Alphabet Inc. (Google) at **5.7%** Top 5 Tenants by Annualized Rental Income | Tenant | Credit Rating | % of Annualized Rental Income | | :--- | :--- | :--- | | U.S. Government | Investment Grade | 16.8% | | Alphabet Inc. (Google) | Investment Grade | 5.7% | | IG Investments Holdings LLC | Not Rated | 4.6% | | Bank of America Corporation | Investment Grade | 4.3% | | Shook, Hardy & Bacon L.L.P. | Not Rated | 3.4% | - The top **23 tenants** collectively represent **62.5%** of the total annualized rental income[52](index=52&type=chunk) [Lease Expiration Schedule](index=21&type=section&id=Lease%20Expiration%20Schedule) The lease expiration schedule indicates significant rollover risk, with a cumulative **24.3%** of leased square footage (**22.9%** of annualized rental income) expiring by the end of 2027 - A cumulative **24.3%** of leased square footage (**22.9%** of annualized rental income) expires by the end of 2027[54](index=54&type=chunk) Upcoming Lease Expirations (% of Total Leased Sq. Ft.) | Year | % Expiring | | :--- | :--- | | 2025 | 8.5% | | 2026 | 3.1% | | 2027 | 12.7% | - The weighted average remaining lease term is **6.9 years** by annualized rental income[54](index=54&type=chunk) [Appendix](index=22&type=section&id=APPENDIX) [Company Profile and Governance Information](index=23&type=section&id=Company%20Profile%20and%20Governance%20Information) This section provides corporate details, noting OPI is managed by The RMR Group, and lists Board members, executive officers, and credit rating agencies - OPI is managed by The RMR Group (Nasdaq: RMR), which had approximately **$40 billion** of real estate assets under management as of March 31, 2025[60](index=60&type=chunk) [Calculation and Reconciliation of NOI and Cash Basis NOI](index=24&type=section&id=Calculation%20and%20Reconciliation%20of%20NOI%20and%20Cash%20Basis%20NOI) This section reconciles Net Income (Loss) to non-GAAP NOI and Cash Basis NOI, showing Q1 2025 NOI of **$61.4 million** and Cash Basis NOI of **$53.8 million** from a **$45.9 million** net loss Q1 2025 NOI Reconciliation (in thousands) | Metric | Value (thousands) | | :--- | :--- | | Net (loss) income | ($45,867) | | ... adjustments ... | ... | | **NOI** | **$61,385** | | ... non-cash adjustments ... | ... | | **Cash Basis NOI** | **$53,834** | [Reconciliation and Calculation of Same Property NOI and Same Property Cash Basis NOI](index=25&type=section&id=Reconciliation%20and%20Calculation%20of%20Same%20Property%20NOI%20and%20Same%20Property%20Cash%20Basis%20NOI) This section details the calculation of Same Property NOI and Same Property Cash Basis NOI, showing Q1 2025 Same Property NOI of **$60.5 million** and Same Property Cash Basis NOI of **$52.9 million** Q1 2025 Same Property NOI Calculation (in thousands) | Metric | Value (thousands) | | :--- | :--- | | NOI | $61,385 | | Less: NOI of properties not in same property results | ($903) | | **Same Property NOI** | **$60,482** | | ... non-cash adjustments ... | ... | | **Same Property Cash Basis NOI** | **$52,904** | [Property Details (by Collateral Pool)](index=26&type=section&id=Property%20Details%20(by%20Collateral%20Pool)) This section provides a detailed breakdown of OPI's **125 properties**, organized by the debt they collateralize, including data on square footage, occupancy, lease terms, and gross book value - The property portfolio is detailed by the specific debt instruments they secure, providing transparency into which assets are encumbered[68](index=68&type=chunk)[69](index=69&type=chunk)[72](index=72&type=chunk) Portfolio Summary by Collateral Status | Category | Number of Properties | Total Sq. Ft. (thousands) | Gross Book Value (thousands) | | :--- | :--- | :--- | :--- | | Subtotal Secured | 98 | 14,462 | $3,938,141 | | Subtotal Unencumbered | 27 | 2,812 | $674,854 | | **Total** | **125** | **17,274** | **$4,612,995** | [Calculation of EBITDA, EBITDAre and Adjusted EBITDAre](index=34&type=section&id=Calculation%20of%20EBITDA%2C%20EBITDAre%20and%20Adjusted%20EBITDAre) This section details the calculation of EBITDA, EBITDAre, and Adjusted EBITDAre, showing Q1 2025 Adjusted EBITDAre at **$57.8 million**, a decrease from **$73.8 million** in Q1 2024 Adjusted EBITDAre Trend (in thousands) | Quarter | Adjusted EBITDAre (thousands) | | :--- | :--- | | 3/31/2024 | $73,799 | | 6/30/2024 | $71,469 | | 9/30/2024 | $65,001 | | 12/31/2024 | $68,152 | | 3/31/2025 | $57,768 | [Calculation of FFO, Normalized FFO and CAD](index=35&type=section&id=Calculation%20of%20FFO%2C%20Normalized%20FFO%20and%20CAD) This section details the calculation of FFO, Normalized FFO, and CAD, showing Q1 2025 Normalized FFO of **$4.4 million** (**$0.06 per share**) and a negative CAD of **-$11.2 million** (**-$0.16 per share**) Q1 2025 FFO and CAD Calculation (in thousands) | Metric | Per Share | Total (thousands) | | :--- | :--- | :--- | | Net (loss) income | ($0.66) | ($45,867) | | FFO | $0.05 | $3,231 | | Normalized FFO | $0.06 | $4,350 | | CAD | ($0.16) | ($11,209) | [Non-GAAP Financial Measures and Certain Definitions](index=36&type=section&id=Non-GAAP%20Financial%20Measures%20and%20Certain%20Definitions) This section defines non-GAAP financial measures used in the report, including NOI, EBITDAre, FFO, and CAD, explaining their purpose and calculation methodologies - Provides definitions and calculation methodologies for key non-GAAP metrics including NOI, EBITDAre, FFO, and CAD, clarifying how they differ from GAAP net income[82](index=82&type=chunk)[83](index=83&type=chunk)[84](index=84&type=chunk)[85](index=85&type=chunk) [Warning Concerning Forward-Looking Statements](index=38&type=section&id=WARNING%20CONCERNING%20FORWARD-LOOKING%20STATEMENTS) This section contains a standard safe harbor statement, highlighting key risks related to OPI's ability to continue as a going concern, manage debt maturities, liquidity constraints, and tenant retention - The forward-looking statements highlight significant risks, including the company's ability to continue as a going concern, manage debt maturities and liquidity, and address challenges in tenant retention and leasing[99](index=99&type=chunk)[100](index=100&type=chunk)

Financial Data and Key Metrics Changes - For Q4 2024, the company reported normalized FFO of $20.9 million or $0.36 per share, which was $0.01 above guidance, compared to $22.1 million or $0.43 per share in Q3 2024 [30] - Same property cash basis NOI was $60.9 million, representing a 4.9% increase compared to Q4 2023, driven by lower operating expenses and the sale of certain vacant properties [31] Business Line Data and Key Metrics Changes - The portfolio consisted of 128 properties totaling 17.8 million square feet, generating $428 million of annualized revenue, down from $513 million a year ago [13] - Total leasing volume increased more than 20% year-over-year, with 52 leases signed for over 2 million square feet at a weighted average lease term of nearly nine years and a rental rate increase of 6.3% [19] Market Data and Key Metrics Changes - In Washington, D.C., the company's largest MSA, vacancy is nearly 33%, with leasing conditions remaining challenging [16] - The company anticipates that at least one agency, the Department of Safety and Environmental Enforcement, may terminate its lease in Q2 2025, impacting revenue [17] Company Strategy and Development Direction - The company has taken steps to address debt maturities and liquidity constraints, completing $1.8 billion in secured financings and reducing total debt principal by nearly $200 million compared to the prior year [9][10] - The company is evaluating additional disposition opportunities to mitigate occupancy risk and associated carry costs of vacant properties [28] Management's Comments on Operating Environment and Future Outlook - Management noted that while there are positive trends in the office sector, these have not yet materialized in the company's portfolio [14] - The company expects normalized FFO for Q1 2025 to be between $0.08 and $0.10 per share, primarily driven by lower NOI due to asset sales and tenant vacancies [32] Other Important Information - The company has launched a debt exchange offer for up to $175 million of new senior guaranteed unsecured notes to address upcoming debt maturities [12][38] - The company reported a total liquidity of $113 million in cash and projected a cash burn of $60 million to $70 million from operations in 2025 [37] Summary of Q&A Session - The company did not take questions during the call due to the ongoing debt exchange offer [8][40]

Financial Performance - Office Properties Income Trust (OPI) reported a net loss of $148.7 million, or $2.52 per common share, for Q4 2024[16] - Normalized FFO was $20.9 million, or $0.36 per common share[16] - Same property cash basis NOI increased by 4.9% year-over-year, reaching $60.9 million[9, 16] - Total liquidity as of February 13, 2025, was $113.0 million in cash[16] Portfolio & Leasing - Same-property portfolio occupancy grew to 89.4%[9] - OPI completed 359,000 square feet of new and renewal leasing with a 24.3% roll-up in rent and a weighted average lease term of 7.1 years[9] - Lease renewals accounted for 91% of leased square footage[16] - Approximately 58% of OPI's revenues were from investment grade rated tenants as of December 31, 2024[14] Debt & Disposition - OPI sold 17 office properties for approximately $114 million[8] - OPI exchanged $37.8 million of outstanding senior unsecured notes due 2025 for $42.6 million of new 9.0% senior secured notes due 2029 and 4.4 million common shares[16] - OPI issued $445.0 million of new 3.25% senior secured notes due 2027 and 11.5 million common shares in exchange for $340.0 million of the 2025 Notes[16] Covenants - Total unencumbered assets / unsecured debt was 169.2%[33] - Total debt / adjusted total assets was 49.8%[33] - Secured debt / adjusted total assets was 39.7%[33] - Consolidated income available for debt service / debt service was 1.6x[33]

REIT Qualification and Taxation - The company must distribute at least 90% of its annual REIT taxable income to qualify for taxation as a REIT, limiting its ability to retain cash for operations and investments[37] - The company has elected to be taxed as a REIT under Sections 856 through 860 of the IRC, effective from the 2009 taxable year[64] - The company believes it has operated in a manner that qualifies it for REIT taxation since 2009 and will continue to do so[66] - If the company fails to qualify as a REIT, it would be subject to federal income tax as a C corporation, potentially leading to significant tax liabilities and reduced cash available for distribution[68] - The company must distribute at least 85% of its REIT ordinary income and 95% of its REIT capital gain net income to avoid a 4% nondeductible excise tax[70] - The company is subject to various qualification tests under the IRC, and failure to meet these could result in significant tax liabilities[68] - The company’s subsidiaries that are C corporations will be required to pay federal corporate income tax on their earnings[72] - The company has not received a ruling from the IRS regarding its REIT status, which could lead to differing interpretations and potential tax liabilities[60] - The company’s counsel believes it will continue to meet the requirements for qualification and taxation as a REIT based on current operations and investments[66] - Future legislative or regulatory changes could impact the company’s REIT status and tax obligations[61] - The company must derive at least 75% of its gross income from real property-related investments to maintain REIT qualification[84] - At least 95% of the company's gross income must consist of qualifying income for the 75% gross income test[84] - The company is permitted to own up to 20% of the total value of its assets in taxable REIT subsidiaries (TRSs) at the end of each quarter[81] - The company has made protective TRS elections to avoid cascading REIT failures if subsidiary REITs do not qualify[80] - The company is subject to a $50,000 penalty for each excused failure to meet REIT qualification conditions, rather than disqualification[76] - The company must comply with Treasury regulations regarding share ownership to maintain REIT status[74] - The company has invested in real estate through partnerships, treating its proportionate share of income and assets as its own[78] - The company’s TRSs can perform services for tenants without disqualifying rental income under the gross income tests[82] - The company’s subsidiary REITs must meet various qualification requirements to avoid regular U.S. corporate income tax[79] - The company is required to request annual ownership information from significant shareholders to comply with share ownership requirements[74] - The company believes that all or substantially all of its rents and related service charges have qualified as "rents from real property" for purposes of Section 856 of the IRC[87] - The company intends to own its assets for investment with a view to long-term income production and capital appreciation[92] - The company aims to satisfy the 75% and 95% gross income tests on a continuing basis beginning with its first taxable year as a REIT[94] - At least 75% of the value of the company's total assets must consist of "real estate assets" as defined by the IRC[96] - Not more than 25% of the value of the company's total assets may be represented by securities other than those that count favorably toward the 75% asset test[96] - The company may utilize its TRSs in transactions to avoid recognizing dealer gains subject to a 100% penalty tax[89] - The company believes that any gain recognized in connection with asset dispositions will generally qualify as income satisfying the 75% and 95% gross income tests[90] - The company must satisfy asset percentage tests at the close of each calendar quarter to qualify for taxation as a REIT[94] - The company has established restrictions to maintain its qualification for taxation as a REIT under the IRC[86] - The company cannot guarantee that it will be able to monitor and enforce ownership restrictions effectively[86] - The company has maintained records of asset values to comply with REIT asset tests and intends to take corrective actions within thirty days if tests are not satisfied[99] - To qualify as a REIT, the company must distribute at least 90% of its "real estate investment trust taxable income" to shareholders, which is defined under Section 857 of the IRC[100] - The company has made an election to be treated as a real property trade or business, thus not subject to limitations on net interest expense deductions[101] - If the company fails to meet distribution requirements, it may be subject to a 4% nondeductible excise tax on undistributed amounts[102] - The company may need to arrange new debt or equity financing to meet distribution requirements if it lacks sufficient cash or liquid assets[104] - The company can rectify a failure to pay sufficient dividends by issuing "deficiency dividends" in a later year, which may incur an interest charge[105] - Following a corporate acquisition, the company must distribute all inherited C corporation earnings and profits by the end of the taxable year[110] - The company may elect to retain some net capital gain and pay income tax on retained amounts, allowing shareholders to include their share in taxable income[107] - The company expects to make distributions that may include cash and property, with tax treatment varying based on shareholder status[114] - Distributions not designated as capital gain dividends will generally be treated as ordinary income dividends to the extent of available earnings and profits[117] Environmental and Sustainability Efforts - As of December 31, 2024, the company had 50 properties with LEED designations, totaling 7.6 million rentable square feet, representing 37.6% of total properties[51] - The company achieved approximately $2.1 million in annual savings through its real-time energy monitoring program, which covers 42 properties and accounts for 73% of its annual electricity spend[48] - The company was recognized as an Energy Star Partner of the Year for the seventh consecutive year and a Sustained Excellence honoree for the fifth consecutive year as of December 31, 2024[49] - The company focuses on minimizing its environmental impact and enhancing operational efficiency through sustainability practices[46] Corporate Governance - The Board of Trustees consists of nine members, with seven independent trustees, four (approximately 44%) being female, and one (approximately 11%) from under-represented communities[52] - The company relies on RMR for management and administrative services, with RMR employing approximately 1,000 full-time employees as of December 31, 2024[41] Market Competition - The company competes against various public and private REITs and financial institutions, with no dominant position in any geographic market[53] Lease Agreements - The company has leases with government entities, including the U.S. government, which may allow tenants to vacate leased premises early under certain conditions[54] Shareholder Tax Implications - Distributions to shareholders are generally included in their income as dividends, with no portion eligible for the dividends received deduction for corporate shareholders[65] - U.S. shareholders recognizing a loss exceeding $10 million in a single year may trigger reporting requirements to the IRS[125] - Non-U.S. shareholders generally will not be subject to U.S. federal income taxation on gains from the sale of shares if the shares are listed on a U.S. national securities exchange[137] - A distribution to a non-U.S. shareholder not designated as a capital gain dividend will be treated as ordinary income and subject to a 30% withholding tax[131] - Tax-exempt U.S. shareholders receiving distributions from the company should not have those amounts treated as UBTI if certain conditions are met[128] - U.S. shareholders are subject to a 3.8% Medicare tax on net investment income, including dividends and gains from the sale of shares[122] - Noncorporate U.S. shareholders may face limitations on interest deductions related to borrowed funds for acquiring shares[126] - The company expects to maintain its status as a "domestically controlled" REIT, ensuring non-U.S. shareholders are not taxed on gains from share sales[139] - Shareholders recognizing capital gains will increase their adjusted basis in shares by the amount of retained net capital gains[123] - The maximum penalty for failing to disclose a reportable transaction is $10,000 for individuals and $50,000 for other entities[125] - Non-U.S. shareholders may seek refunds from the IRS for amounts withheld on distributions exceeding their allocable share of current and accumulated earnings[132] - Non-U.S. shareholders may be subject to backup withholding unless they certify their non-U.S. status using IRS Form W-8[143] - A 30% U.S. withholding tax may apply to payments to non-U.S. persons if they fail to comply with reporting and certification requirements[144] - Legislative changes could retroactively affect tax treatment for the company and its shareholders, impacting REIT qualification[145] ERISA Compliance - Fiduciaries of ERISA Plans must ensure investments in the company's shares meet diversification and prudence requirements[147] - The company’s shares are expected to remain "widely held" and "freely transferable," satisfying regulatory definitions[152][156] - The company is not an investment company registered under the Investment Company Act of 1940, which affects asset classification[150] - The company’s shares have been registered under the Exchange Act within the required timeframe, ensuring compliance[151] - Restrictions on share transfer do not impede the shares from being considered "freely transferable" under regulations[154] - The company’s counsel believes that its shares will not be deemed "plan assets" for ERISA Plans or Non-ERISA Plans acquiring shares in a public offering[156] - As a smaller reporting company, the company is not required to disclose quantitative and qualitative market risk information[352]

[Quarterly Results](index=3&type=section&id=Quarterly%20Results) OPI announced Q4 2024 financial results, showing progress in asset disposition and refinancing despite ongoing sector headwinds and liquidity concerns [Fourth Quarter 2024 Financial Results Announcement](index=4&type=section&id=Office%20Properties%20Income%20Trust%20Announces%20Fourth%20Quarter%202024%20Financial%20Results) OPI announced Q4 2024 financial results, highlighting asset disposition, debt refinancing, and leasing progress amidst sector headwinds - OPI advanced asset disposition and refinancing objectives by selling 17 office properties for approximately **$114 million** and closing private debt exchanges for all 2025 debt maturities[7](index=7&type=chunk) - During Q4 2024, OPI completed **359,000 square feet** of new and renewal leasing at a **24.3% roll-up in rent** and a weighted average lease term of **7.1 years**[8](index=8&type=chunk) - Same-property portfolio occupancy grew to **89.4%**, and same-property cash basis NOI increased **4.9% year over year**[8](index=8&type=chunk) - OPI continues to face sector headwinds and pending debt maturities, remaining focused on tenant retention, attracting new tenants, and evaluating strategies for future debt maturities amidst liquidity concerns and debt covenant constraints[9](index=9&type=chunk) [Fourth Quarter 2024 Highlights](index=5&type=section&id=Fourth%20Quarter%202024%20Highlights) OPI's Q4 2024 highlights include significant leasing activity, improved same-property occupancy, a net loss, and substantial debt exchanges - Executed **359,000 square feet** of total leasing at a weighted average lease term of **7.1 years**, with lease renewals accounting for **91%** of leased square footage[15](index=15&type=chunk) - Ended the quarter with same property portfolio occupancy of **89.4%** and a weighted average lease term of **7.4 years** (by annualized revenue)[15](index=15&type=chunk) Q4 2024 Financial Results Highlights | Metric | Value | | :-------------------------------- | :------------------- | | Net loss | $(148.7) million | | Net loss per common share | $(2.52) | | Normalized FFO | $20.9 million | | Normalized FFO per common share | $0.36 | | Same property cash basis NOI | $60.9 million | | Same property cash basis NOI YoY increase | 4.9% | - Sold **17 properties**, totaling approximately **1,791,000 square feet**, for an aggregate sales price of **$114.5 million**[15](index=15&type=chunk) - As of February 13, 2025, OPI's total available liquidity was **$113.0 million** of cash, and the company continues to conclude there is substantial doubt about its ability to continue as a going concern[15](index=15&type=chunk) - Exchanged **$37.8 million** of 2025 senior unsecured notes for **$42.6 million** of new 9.0% senior secured notes due 2029 and **4.4 million** common shares[15](index=15&type=chunk) - Issued **$445.0 million** of new 3.25% senior secured notes due 2027 and **11.5 million** common shares in exchange for **$340.0 million** of 2025 notes[15](index=15&type=chunk) [Financials](index=6&type=section&id=FINANCIALS) OPI's financial performance for Q4 2024 reflects significant losses, increased debt, and a shift in debt structure, alongside reduced asset values [Key Financial Data](index=7&type=section&id=Key%20Financial%20Data) OPI's Q4 2024 key financial data indicates a net loss, negative FFO and CAD, decreased assets, and substantial liabilities Selected Income Statement Data (Q4 2024 vs. Q4 2023, in thousands) | Metric | 12/31/2024 | 12/31/2023 | | :-------------------- | :------------------------ | :------------------------ | | Rental income | $118,238 | $133,773 | | Net (loss) income | $(148,680) | $(37,151) | | NOI | $71,244 | $80,871 | | Adjusted EBITDAre | $68,152 | $76,216 | | FFO | $(78,679) | $44,590 | | Normalized FFO | $20,946 | $45,872 | | CAD | $(16,296) | $8,560 | Selected Per Common Share Data (Q4 2024 vs. Q4 2023) | Metric | 12/31/2024 | 12/31/2023 | | :-------------------- | :--------- | :--------- | | Net (loss) income | $(2.52) | $(0.77) | | FFO | $(1.34) | $0.92 | | Normalized FFO | $0.36 | $0.95 | | CAD | $(0.28) | $0.18 | Selected Balance Sheet Data (as of 12/31/2024 vs. 12/31/2023, in thousands) | Metric | 12/31/2024 | 12/31/2023 | | :-------------------- | :------------------------ | :------------------------ | | Total assets | $3,822,286 | $3,989,669 | | Total liabilities | $2,669,482 | $2,733,990 | | Total shareholders' equity | $1,152,804 | $1,255,679 | | Cash and cash equivalents | $261,318 | $12,315 | [Consolidated Statements of Income (Loss)](index=8&type=section&id=Consolidated%20Statements%20of%20Income%20(Loss)) OPI reported a significant net loss of **$148.7 million** for Q4 2024, primarily due to debt extinguishment and real estate sales losses, with declining rental income Consolidated Statements of Income (Loss) (in thousands) | Metric | Three Months Ended Dec 31, 2024 | Three Months Ended Dec 31, 2023 | Year Ended Dec 31, 2024 | Year Ended Dec 31, 2023 | | :------------------------------------------------------------------------------------------------ | :------------------------------ | :------------------------------ | :---------------------- | :---------------------- | | Rental income | $118,238 | $133,773 | $501,979 | $533,553 | | Total expenses | $108,391 | $124,479 | $595,823 | $474,592 | | (Loss) gain on sale of real estate | $(13,418) | $3,293 | $(7,410) | $3,780 | | Interest expense | $(47,340) | $(30,056) | $(163,745) | $(110,647) | | (Loss) gain on early extinguishment of debt | $(99,452) | $- | $126,185 | $- | | Net loss | $(148,680) | $(37,151) | $(136,107) | $(69,432) | | Weighted average common shares outstanding (basic and diluted) | 58,888 | 48,463 | 51,806 | 48,389 | | Net loss per common share | $(2.52) | $(0.77) | $(2.63) | $(1.44) | [Consolidated Balance Sheets](index=9&type=section&id=Consolidated%20Balance%20Sheets) OPI's balance sheet shows total assets decreased to **$3.82 billion**, a significant shift from unsecured to secured debt, and a decline in shareholders' equity Consolidated Balance Sheets (in thousands) | Metric | December 31, 2024 | December 31, 2023 | | :-------------------------------- | :------------------ | :------------------ | | Total real estate properties, gross | $3,657,559 | $4,065,679 | | Total real estate properties, net | $3,038,909 | $3,415,500 | | Cash and cash equivalents | $261,318 | $12,315 | | Total assets | $3,822,286 | $3,989,669 | | Unsecured debt, net | $662,277 | $2,400,478 | | Secured debt, net | $1,872,357 | $172,131 | | Total liabilities | $2,669,482 | $2,733,990 | | Total shareholders' equity | $1,152,804 | $1,255,679 | [Debt Summary](index=10&type=section&id=Debt%20Summary) As of December 31, 2024, OPI's total debt was **$2.45 billion** with a **6.67%** weighted average coupon, showing a significant shift towards secured debt Debt Summary as of December 31, 2024 (in thousands) | Debt Type | Principal Balance | Weighted Average Coupon Rate | Weighted Average Years to Maturity | | :-------------------------- | :------------------ | :--------------------------- | :-------------------------------- | | Secured Floating Rate Debt | $425,000 | 7.910% | 2.1 | | Secured Fixed Rate Debt | $1,532,311 | 7.190% | 4.0 | | Unsecured Fixed Rate Debt | $497,627 | 4.006% | 10.6 | | **Total / Weighted Average** | **$2,454,938** | **6.669%** | **4.8** | [Debt Maturity Schedule](index=11&type=section&id=Debt%20Maturity%20Schedule) OPI's debt maturity schedule reveals substantial maturities in **2027** and **2029**, primarily secured fixed rate debt, indicating concentrated refinancing risk Debt Maturity Schedule (in thousands) | Year | Secured Floating Rate Debt | Secured Fixed Rate Debt | Unsecured Fixed Rate Debt | Total | | :--- | :------------------------- | :---------------------- | :------------------------ | :---------- | | 2025 | $- | $- | $140,488 | $140,488 | | 2026 | $- | $- | $80,784 | $80,784 | | 2027 | $425,000 | $267,992 | $217,286 | $910,278 | | 2028 | $- | $123,487 | $- | $123,487 | | 2029 | $- | $910,278 | $- | $910,278 | | 2030 and thereafter | $- | $151,000 | $276,355 | $427,355 | [Leverage Ratios, Coverage Ratios and Public Debt Covenants](index=12&type=section&id=Leverage%20Ratios,%20Coverage%20Ratios%20and%20Public%20Debt%20Covenants) OPI's leverage ratios show increased secured debt and declining coverage ratios, yet the company remains compliant with public debt covenants Leverage Ratios (as of 12/31/2024) | Metric | 12/31/2024 | 12/31/2023 | | :----------------------------------- | :--------- | :--------- | | Net debt / total gross assets | 53.3% | 55.6% | | Net debt / gross book value of real estate assets | 50.7% | 49.3% | | Secured debt / total assets | 51.2% | 4.4% | | Variable rate debt / net debt | 18.0% | 7.9% | Coverage Ratios (as of 12/31/2024) | Metric | 12/31/2024 | 12/31/2023 | | :------------------------------------------------------ | :--------- | :--------- | | Rolling four quarter Adjusted EBITDAre / rolling four quarter interest expense | 1.7x | 2.8x | | Net debt / rolling four quarter Adjusted EBITDAre | 8.5x | 8.2x | Public Debt Covenants (as of 12/31/2024) | Covenant | 12/31/2024 | Minimum/Maximum | | :------------------------------------------------ | :--------- | :-------------- | | Total unencumbered assets / unsecured debt | 169.2% | 150.0% (minimum) | | Total debt / adjusted total assets | 49.8% | 60.0% (maximum) | | Secured debt / adjusted total assets | 39.7% | 40.0% (maximum) | | Consolidated income available for debt service / debt service | 1.6x | 1.50x (minimum) | [Capital Expenditures Summary](index=13&type=section&id=Capital%20Expenditures%20Summary) OPI's Q4 2024 capital expenditures decreased to **$36.1 million**, with lease-related costs as the largest component, alongside reduced rentable square footage Capital Expenditures Summary (in thousands) | Category | For the Three Months Ended 12/31/2024 | For the Three Months Ended 12/31/2023 | | :----------------------------------- | :------------------------------------ | :------------------------------------ | | Lease related costs | $27,107 | $18,497 | | Building improvements | $6,229 | $10,877 | | Recurring capital expenditures | $33,336 | $29,374 | | Development, redevelopment and other activities | $2,813 | $19,371 | | **Total capital expenditures** | **$36,149** | **$48,745** | | Average rentable sq. ft. during period | 18,653 | 20,623 | [Property Dispositions](index=14&type=section&id=Property%20Dispositions) Since January 1, 2024, OPI disposed of **25 properties** totaling **2.89 million square feet** for **$205.1 million**, averaging **$70.99 per square foot** Property Dispositions Since January 1, 2024 (in thousands) | Metric | Value | | :-------------------- | :------------------ | | Total Number of Properties Sold | 25 | | Total Sq. Ft. Sold | 2,889 | | Aggregate Gross Sales Price | $205,101 | | Average Gross Sales Price Per Sq. Ft. | $70.99 | - Key dispositions include properties in Chicago, IL (**248k sq. ft.** for **$38.5M**), Colorado Springs, CO (**156k sq. ft.** for **$26.2M**), and Sacramento, CA (**338k sq. ft.** for **$21.0M**)[31](index=31&type=chunk) [Investment in Unconsolidated Joint Venture](index=15&type=section&id=Investment%20in%20Unconsolidated%20Joint%20Venture) OPI holds a **51%** stake in the Prosperity Metro Plaza joint venture, reporting **$17.37 million** investment, **73.5%** occupancy, and Q4 2024 equity in losses Unconsolidated Joint Venture Details (as of 12/31/2024) | Metric | Value | | :-------------------------- | :------------------ | | Joint Venture | Prosperity Metro Plaza | | OPI Ownership | 51% | | OPI Investment | $17,370 (in thousands) | | Sq. Ft. | 346 (in thousands) | | Occupancy | 73.5% | | Weighted Average Remaining Lease Term | 3.1 years | | Outstanding Unconsolidated Debt (Principal Balance) | $50,000 (in thousands) | | OPI Share of Principal Balance | $25,500 (in thousands) | Results of Operations - Prosperity Metro Plaza (in thousands) | Metric | For the Three Months Ended Dec 31, 2024 | For the Year Ended Dec 31, 2024 | | :-------------------------- | :------------------------------------ | :---------------------------- | | Equity in losses | $(182) | $(758) | | NOI | $676 | $2,662 | | Cash Basis NOI | $670 | $2,549 | [Portfolio Information](index=16&type=section&id=PORTFOLIO%20INFORMATION) OPI's portfolio information details same-property performance, occupancy, leasing trends, tenant diversity, and lease expiration schedules [Summary Same Property Results](index=17&type=section&id=Summary%20Same%20Property%20Results) OPI's same-property portfolio experienced a slight decrease in occupancy to **89.4%**, with quarterly NOI and Cash Basis NOI increases, but full-year declines Summary Same Property Results (in thousands, except percentages) | Metric | For the Three Months Ended 12/31/2024 | For the Three Months Ended 12/31/2023 | For the Year Ended 12/31/2024 | For the Year Ended 12/31/2023 | | :-------------------------- | :------------------------------------ | :------------------------------------ | :---------------------------- | :---------------------------- | | Properties (end of period) | 118 | 118 | 118 | 118 | | Rentable sq. ft. | 16,455 | 16,444 | 16,455 | 16,444 | | Percent leased | 89.4% | 91.7% | 89.4% | 91.7% | | Rental income | $108,771 | $109,930 | $430,752 | $441,813 | | Same Property NOI | $67,308 | $66,295 | $264,487 | $277,954 | | Same Property Cash Basis NOI | $60,873 | $58,007 | $241,194 | $249,008 | | Same Property NOI % change | 1.5% | - | (4.8%) | - | | Same Property Cash Basis NOI % change | 4.9% | - | (3.1%) | - | [Occupancy and Leasing Summary](index=18&type=section&id=Occupancy%20and%20Leasing%20Summary) OPI's Q4 2024 leasing activity totaled **359,000 square feet**, with **91%** renewals, an overall portfolio occupancy of **85.0%**, and a **24.3%** increase in GAAP rent Occupancy and Leasing Summary (Q4 2024 vs. Q4 2023) | Metric | 12/31/2024 | 12/31/2023 | | :------------------------------------------ | :--------- | :--------- | | Properties (end of period) | 128 | 152 | | Rentable sq. ft. (in thousands) | 17,763 | 20,541 | | Percentage leased | 85.0% | 86.9% | | Leasing Activity (Sq. Ft. in thousands): | | | | New leases | 33 | 11 | | Renewals | 326 | 185 | | Total | 359 | 196 | | % Change in GAAP Rent (Total) | 24.3% | 0.6% | | Weighted Average Lease Term by Sq. Ft. (years) (Total) | 7.1 | 7.0 | | Leasing Cost and Concession Commitments (Total in thousands) | $15,060 | $7,458 | [Tenant Diversity and Credit Characteristics](index=19&type=section&id=Tenant%20Diversity%20and%20Credit%20Characteristics) OPI's annualized rental income is diversified across industries, with **57.9%** from investment-grade tenants and significant exposure to Real Estate & Financial, Legal, and Technology sectors Percentage of Total Annualized Rental Income by Tenant Credit Character (as of 12/31/2024) | Credit Character | Percentage | | :----------------------- | :--------- | | Investment Grade | 57.9% | | Not Rated | 37.1% | | Non-Investment Grade | 5.0% | - Top tenant industries by annualized rental income include U.S. Government (**17.0%**), Real Estate & Financial (**16.3%**), Legal & Other Professional Services (**15.1%**), Technology & Communications (**14.4%**), and Government Contractors (**8.2%**)[40](index=40&type=chunk) [Tenants Representing 1% or More of Total Annualized Rental Income](index=20&type=section&id=Tenants%20Representing%201%25%20or%20More%20of%20Total%20Annualized%20Rental%20Income) The U.S. Government is OPI's largest tenant at **16.6%** of leased square footage, with the top **25 tenants** accounting for **60.7%** of the portfolio Top Tenants by Leased Square Footage (as of 12/31/2024) | Tenant | Credit Rating | % of Leased Sq. Ft. | | :------------------------------------------ | :-------------- | :------------------ | | U.S. Government | Investment Grade | 16.6% | | Alphabet Inc. (Google) | Investment Grade | 2.6% | | Shook, Hardy & Bacon L.L.P. | Not Rated | 3.9% | | Bank of America Corporation | Investment Grade | 3.8% | | Northrop Grumman Corporation | Investment Grade | 2.2% | | State of California | Investment Grade | 2.4% | | State of Georgia | Investment Grade | 2.0% | | Automatic Data Processing, Inc. | Investment Grade | 1.9% | | Allstate Insurance Corporation | Investment Grade | 3.0% | | Compass Group plc | Investment Grade | 1.8% | | Church & Dwight Co., Inc. | Investment Grade | 1.7% | | Leidos Holdings Inc. | Investment Grade | 1.1% | | Primerica, Inc. | Investment Grade | 2.3% | | BAE Systems plc | Investment Grade | 1.1% | | **Total for Top 25 Tenants** | | **60.7%** | [Lease Expiration Schedule](index=21&type=section&id=Lease%20Expiration%20Schedule) OPI faces significant lease expirations in **2025** (**13.7%** of leased square feet), with a weighted average remaining lease term of **7.4 years** by rental income Lease Expiration Schedule (as of 12/31/2024) | Year | % of Total Leased Square Feet Expiring | % of Total Annualized Rental Income Expiring | | :--- | :------------------------------------- | :------------------------------------------- | | 2025 | 13.7% | 9.9% | | 2026 | 3.5% | 4.2% | | 2027 | 11.9% | 10.8% | | 2028 | 3.8% | 6.8% | | 2029 | 7.1% | 7.6% | | 2030 | 6.8% | 6.3% | | 2031 | 9.6% | 8.1% | | 2032 | 3.3% | 4.1% | | 2033 | 7.1% | 4.8% | | 2034 and thereafter | 33.2% | 37.4% | | **Total** | **100.0%** | **100.0%** | | Weighted average remaining lease term (in years) | 6.9 (by Sq. Ft.) | 7.4 (by Rental Income) | [Appendix](index=22&type=section&id=APPENDIX) The appendix provides detailed calculations for non-GAAP financial measures, property collateral pool information, company profile, and forward-looking statement warnings [Company Profile and Governance Information](index=23&type=section&id=Company%20Profile%20and%20Governance%20Information) OPI is managed by The RMR Group, with a Board of Trustees and executive officers, and its credit is rated by Moody's and S&P Global - OPI is managed by The RMR Group, an alternative asset management company focused on commercial real estate with over **$40 billion** in assets under management as of December 31, 2024[47](index=47&type=chunk) - The Board of Trustees includes Donna D. Fraiche, William A. Lamkin, Mark A. Talley, Barbara D. Gilmore, Elena B. Poptodorova (Lead Independent Trustee), and Jennifer B. Clark (Managing Trustee)[48](index=48&type=chunk) - Executive Officers are Yael Duffy (President and Chief Operating Officer) and Brian E. Donley (Chief Financial Officer)[48](index=48&type=chunk) - OPI's credit is rated by Moody's Investors Service and S&P Global[48](index=48&type=chunk)[49](index=49&type=chunk) [Calculation and Reconciliation of NOI and Cash Basis NOI](index=24&type=section&id=Calculation%20and%20Reconciliation%20of%20NOI%20and%20Cash%20Basis%20NOI) For Q4 2024, OPI reported **NOI of $71.2 million** and **Cash Basis NOI of $62.7 million**, reconciled from net loss by adjusting for non-cash expenses Calculation of NOI and Cash Basis NOI (in thousands) | Metric | For the Three Months Ended 12/31/2024 | | :------------------------------------------------------ | :------------------------------------ | | Rental income | $118,238 | | Property operating expenses | $(46,994) | | **NOI** | **$71,244** | | Non-cash straight line rent adjustments included in rental income | $(7,306) | | Lease value amortization included in rental income | $(372) | | Lease termination fees included in rental income | $(744) | | Non-cash amortization included in other operating expenses | $(121) | | **Cash Basis NOI** | **$62,701** | Reconciliation of Net (Loss) Income to NOI and Cash Basis NOI (in thousands) | Metric | For the Three Months Ended 12/31/2024 | | :------------------------------------------------------ | :------------------------------------ | | Net (loss) income | $(148,680) | | Add back: Interest expense | $47,340 | | Add back: Loss on early extinguishment of debt | $99,452 | | Add back: Loss on impairment of real estate | $7,999 | | Add back: Depreciation and amortization | $47,958 | | **NOI** | **$71,244** | | Adjustments for Cash Basis NOI | $(8,543) | | **Cash Basis NOI** | **$62,701** | [Reconciliation and Calculation of Same Property NOI and Same Property Cash Basis NOI](index=25&type=section&id=Reconciliation%20and%20Calculation%20of%20Same%20Property%20NOI%20and%20Same%20Property%20Cash%20Basis%20NOI) For Q4 2024, OPI's Same Property NOI was **$67.3 million** and Same Property Cash Basis NOI was **$60.9 million**, derived by excluding non-same-property NOI and adjusting for non-cash items Reconciliation of NOI to Same Property NOI (in thousands) | Metric | For the Three Months Ended 12/31/2024 | For the Year Ended 12/31/2024 | | :------------------------------------------------------ | :------------------------------------ | :---------------------------- | | NOI | $71,244 | $304,743 | | Less: NOI of properties not included in same property results | $(3,936) | $(40,256) | | **Same Property NOI** | **$67,308** | **$264,487** | Calculation of Same Property Cash Basis NOI (in thousands) | Metric | For the Three Months Ended 12/31/2024 | For the Year Ended 12/31/2024 | | :------------------------------------------------------ | :------------------------------------ | :---------------------------- | | Same Property NOI | $67,308 | $264,487 | | Adjustments for Cash Basis NOI | $(6,435) | $(23,293) | | **Same Property Cash Basis NOI** | **$60,873** | **$241,194** | [Property Details (by Collateral Pool)](index=26&type=section&id=Property%20Details%20(by%20Collateral%20Pool)) OPI's property portfolio, totaling **128 properties** and **17.76 million square feet** with **85.0%** occupancy, is detailed by various secured and unencumbered collateral pools Summary of Properties by Collateral Pool (as of 12/31/2024) | Collateral Pool | Number of Properties | Sq. Ft. (in thousands) | Occupancy | Annualized Rental Income (in thousands) | | :-------------------------------- | :------------------- | :--------------------- | :-------- | :------------------------------------ | | Credit Agreement | 19 | 3,603 | 98.4% | $117,566 | | $445M Senior Notes due 2027 | 37 | 4,521 | 83.8% | $97,331 | | $300M Senior Notes due 2029 | 17 | 2,126 | 97.5% | $67,630 | | $610M Senior Notes due 2029 | 19 | 3,218 | 82.8% | $65,628 | | Mortgage Notes | 7 | 1,334 | 100.0% | $34,284 | | **Subtotal Secured** | **99** | **14,802** | **90.6%** | **$382,439** | | Unencumbered Properties | 25 | 2,712 | 62.2% | $45,508 | | Unencumbered Properties Held for Sale | 4 | 249 | 0.0% | $- | | **Subtotal Unencumbered** | **29** | **2,961** | **57.0%** | **$45,508** | | **Total / Weighted Average** | **128** | **17,763** | **85.0%** | **$427,947** | [Encumbered Properties - Credit Agreement](index=26&type=section&id=Encumbered%20Properties%20-%20Credit%20Agreement) Properties under the Credit Agreement collateral pool comprise **19 properties** with **3.6 million square feet** and **98.4%** occupancy Credit Agreement Properties (as of 12/31/2024) | Metric | Value | | :-------------------------- | :------------------ | | Number of Properties | 19 | | Sq. Ft. (in thousands) | 3,603 | | Occupancy | 98.4% | | Weighted Average Remaining Lease Term | 6.8 years | | Annualized Rental Income (in thousands) | $117,566 | | Trailing Twelve Months NOI (in thousands) | $70,671 | [Encumbered Properties - $445M Senior Notes due 2027](index=27&type=section&id=Encumbered%20Properties%20-%20%24445M%20Senior%20Notes%20due%202027) Properties collateralizing the **$445 million** Senior Notes due 2027 include **37 properties** totaling **4.52 million square feet** with **83.8%** occupancy $445M Senior Notes due 2027 Properties (as of 12/31/2024) | Metric | Value | | :-------------------------- | :------------------ | | Number of Properties | 37 | | Sq. Ft. (in thousands) | 4,521 | | Occupancy | 83.8% | | Weighted Average Remaining Lease Term | 6.9 years | | Annualized Rental Income (in thousands) | $97,331 | | Trailing Twelve Months NOI (in thousands) | $63,241 | [Encumbered Properties - $300M Senior Notes due 2029](index=29&type=section&id=Encumbered%20Properties%20-%20%24300M%20Senior%20Notes%20due%202029) Properties collateralizing the **$300 million** Senior Notes due 2029 consist of **17 properties** totaling **2.13 million square feet** with **97.5%** occupancy $300M Senior Notes due 2029 Properties (as of 12/31/2024) | Metric | Value | | :-------------------------- | :------------------ | | Number of Properties | 17 | | Sq. Ft. (in thousands) | 2,126 | | Occupancy | 97.5% | | Weighted Average Remaining Lease Term | 9.1 years | | Annualized Rental Income (in thousands) | $67,630 | | Trailing Twelve Months NOI (in thousands) | $46,005 | [Encumbered Properties - $610M Senior Notes due 2029](index=30&type=section&id=Encumbered%20Properties%20-%20%24610M%20Senior%20Notes%20due%202029) Properties collateralizing the **$610 million** Senior Notes due 2029 include **19 properties** totaling **3.22 million square feet** with **82.8%** occupancy $610M Senior Notes due 2029 Properties (as of 12/31/2024) | Metric | Value | | :-------------------------- | :------------------ | | Number of Properties | 19 | | Sq. Ft. (in thousands) | 3,218 | | Occupancy | 82.8% | | Weighted Average Remaining Lease Term | 7.7 years | | Annualized Rental Income (in thousands) | $65,628 | | Trailing Twelve Months NOI (in thousands) | $42,569 | [Encumbered Properties - Mortgage Notes](index=31&type=section&id=Encumbered%20Properties%20-%20Mortgage%20Notes) Properties under Mortgage Notes collateral comprise **7 properties** totaling **1.33 million square feet** with **100.0%** occupancy Mortgage Notes Properties (as of 12/31/2024) | Metric | Value | | :-------------------------- | :------------------ | | Number of Properties | 7 | | Sq. Ft. (in thousands) | 1,334 | | Occupancy | 100.0% | | Weighted Average Remaining Lease Term | 11.8 years | | Annualized Rental Income (in thousands) | $34,284 | | Trailing Twelve Months NOI (in thousands) | $25,094 | [Unencumbered Properties](index=31&type=section&id=Unencumbered%20Properties) Unencumbered properties consist of **25 properties** totaling **2.71 million square feet** with **62.2%** occupancy Unencumbered Properties (as of 12/31/2024) | Metric | Value | | :-------------------------- | :------------------ | | Number of Properties | 25 | | Sq. Ft. (in thousands) | 2,712 | | Occupancy | 62.2% | | Weighted Average Remaining Lease Term | 3.5 years | | Annualized Rental Income (in thousands) | $45,508 | | Trailing Twelve Months NOI (in thousands) | $26,892 | [Unencumbered Properties Held for Sale](index=33&type=section&id=Unencumbered%20Properties%20Held%20for%20Sale) Unencumbered properties held for sale include **4 properties** totaling **249,000 square feet** with **0.0%** occupancy Unencumbered Properties Held for Sale (as of 12/31/2024) | Metric | Value | | :-------------------------- | :------------------ | | Number of Properties | 4 | | Sq. Ft. (in thousands) | 249 | | Occupancy | 0.0% | | Annualized Rental Income (in thousands) | $- | | Trailing Twelve Months NOI (in thousands) | $(199) | [Calculation of EBITDA, EBITDAre and Adjusted EBITDAre](index=34&type=section&id=Calculation%20of%20EBITDA,%20EBITDAre%20and%20Adjusted%20EBITDAre) For Q4 2024, OPI reported negative EBITDA of **$53.4 million**, EBITDAre of **$31.8 million**, and Adjusted EBITDAre of **$68.2 million**, reconciled from net loss Calculation of EBITDA, EBITDAre and Adjusted EBITDAre (in thousands) | Metric | For the Three Months Ended 12/31/2024 | | :------------------------------------------------------ | :------------------------------------ | | Net (loss) income | $(148,680) | | Add: Interest expense | $47,340 | | Add: Income tax expense (benefit) | $24 | | Add: Depreciation and amortization | $47,958 | | **EBITDA** | **$(53,358)** | | Add (less): Loss on impairment of real estate | $7,999 | | Add (less): Loss (gain) on sale of real estate | $13,418 | | Add (less): Equity in net losses of investees | $182 | | **EBITDAre** | **$(31,759)** | | Add (less): Transaction related costs | $173 | | Add (less): General and administrative expense paid in common shares | $286 | | Add (less): Loss (gain) on early extinguishment of debt | $99,452 | | **Adjusted EBITDAre** | **$68,152** | [Calculation of FFO, Normalized FFO and CAD](index=35&type=section&id=Calculation%20of%20FFO,%20Normalized%20FFO%20and%20CAD) For Q4 2024, OPI reported negative FFO of **$78.7 million**, Normalized FFO of **$20.9 million**, and negative CAD of **$16.3 million**, with full-year figures also provided Calculation of FFO, Normalized FFO and CAD (in thousands) | Metric | For the Three Months Ended 12/31/2024 | For the Year Ended 12/31/2024 | | :------------------------------------------------------ | :------------------------------------ | :---------------------------- | | Net (loss) income | $(148,680) | $(136,107) | | Add (less): Depreciation and amortization (consolidated) | $47,958 | $194,737 | | Add (less): Depreciation and amortization (unconsolidated JV) | $626 | $2,495 | | Add (less): Loss on impairment of real estate | $7,999 | $181,578 | | Add (less): Loss (gain) on sale of real estate | $13,418 | $7,410 | | **FFO** | **$(78,679)** | **$250,113** | | Add (less): Transaction related costs | $173 | $1,144 | | Add (less): Loss (gain) on early extinguishment of debt | $99,452 | $(126,185) | | **Normalized FFO** | **$20,946** | **$114,548** | | Add (less): Non-cash expenses | $14 | $(394) | | Add (less): Non-cash straight line rent adjustments | $(7,306) | $(31,102) | | Add (less): Net amortization of debt premiums, discounts and issuance costs | $4,202 | $13,463 | | Add (less): Recurring capital expenditures | $(33,336) | $(119,001) | | **CAD** | **$(16,296)** | **$(14,101)** | [Non-GAAP Financial Measures and Certain Definitions](index=36&type=section&id=Non-GAAP%20Financial%20Measures%20and%20Certain%20Definitions) This section defines OPI's non-GAAP financial measures (NOI, FFO, CAD, EBITDAre) and key terms, explaining their calculation and purpose as supplemental REIT performance indicators - OPI presents non-GAAP financial measures (NOI, Cash Basis NOI, EBITDAre, Adjusted EBITDAre, FFO, Normalized FFO, CAD) as supplemental indicators of operating performance for a REIT, not as alternatives to net income (loss) or liquidity measures[73](index=73&type=chunk) - NOI and Cash Basis NOI exclude certain components of net income (loss) to focus on property-level operations, with Cash Basis NOI further excluding non-cash straight-line rent adjustments, lease value amortization, and lease termination fees[74](index=74&type=chunk) - FFO and Normalized FFO are calculated based on Nareit's definition, adjusting net income (loss) for depreciation, amortization, and gains/losses on real estate sales, with Normalized FFO further adjusting for transaction-related costs and early debt extinguishment[76](index=76&type=chunk) - CAD (Cash Available for Distribution) is defined as Normalized FFO minus real estate-related capital expenditures and adjusted for certain recurring items and cash-settled amounts excluded from Normalized FFO[77](index=77&type=chunk) - Investment grade tenants include those with investment-grade ratings or investment-grade parent entities, accounting for **57.9%** of annualized rental income as of December 31, 2024[82](index=82&type=chunk) - Net debt is defined as total debt less cash[82](index=82&type=chunk) - Weighted average remaining lease term is the average remaining lease term in years, weighted based on annualized rental income[85](index=85&type=chunk) [Warning Concerning Forward-Looking Statements](index=38&type=section&id=WARNING%20CONCERNING%20FORWARD-LOOKING%20STATEMENTS) This section warns that the presentation contains forward-looking statements subject to inherent uncertainties and risks, including OPI's ability to address going concern doubts and manage liquidity - The presentation contains forward-looking statements subject to inherent uncertainties and risks, which could cause OPI's actual results to differ materially from expectations[86](index=86&type=chunk)[87](index=87&type=chunk) - Key risks include OPI's ability to address substantial doubt about its going concern, comply with debt agreements and meet financial covenants, make required debt payments, maintain sufficient liquidity, and effectively raise and balance debt and equity capital[87](index=87&type=chunk) - Other risks involve tenant retention, future leasing activity, demand for office space, asset dispositions, unfavorable market and commercial real estate industry conditions, competition, and the impact of economic downturns or changes in real estate utilization[87](index=87&type=chunk) - Readers should not place undue reliance on forward-looking statements, and OPI does not intend to update or change them unless required by law[89](index=89&type=chunk)

Core Viewpoint - Office Properties Income Trust (OPI) reported quarterly funds from operations (FFO) of $0.43 per share, missing the Zacks Consensus Estimate of $0.47 per share, and down from $1.02 per share a year ago, indicating a significant decline in performance [1] Financial Performance - OPI's revenues for the quarter ended September 2024 were $120.62 million, surpassing the Zacks Consensus Estimate by 0.58%, but down from $133.36 million year-over-year [2] - The company has surpassed consensus revenue estimates four times over the last four quarters [2] - The current consensus FFO estimate for the coming quarter is $0.43 on revenues of $115.82 million, and for the current fiscal year, it is $2.35 on revenues of $498.87 million [7] Stock Performance - OPI shares have lost approximately 74.3% since the beginning of the year, contrasting with the S&P 500's gain of 22.3% [3] - The estimate revisions trend for OPI is currently unfavorable, resulting in a Zacks Rank 5 (Strong Sell) for the stock, indicating expected underperformance in the near future [6] Industry Outlook - The REIT and Equity Trust - Residential industry, to which OPI belongs, is currently in the top 37% of over 250 Zacks industries, suggesting a relatively strong industry performance [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in estimate revisions, which could impact OPI's stock performance [5]

Core Viewpoint - Office Properties Income Trust (OPI) faces a significant $500 million debt repayment due in February 2025, which constitutes 21% of its total debt of $2.14 billion, marking it as one of the largest single-year debt maturities for the REIT [1][2] Debt Profile - The February 2025 debt repayment has decreased by $150 million due to a private debt exchange, which allowed bondholders to swap existing debt for new 9% senior secured notes due in 2029 [2][3] - Only 23% of existing 2025 bondholders accepted the exchange offer, indicating a low acceptance rate compared to other tranches [2] Financial Performance - OPI reported fiscal 2024 second-quarter revenue of $123.68 million, a decline of 7.7% year-over-year but in line with consensus expectations [5] - Funds from Operations (FFO) were $0.68 per share, down from $1.11 per share a year ago, although it beat consensus estimates [7] Leasing Activity - The REIT's total occupancy rate fell to 88.5% from 90.6% a year ago, with 13% of leases set to expire by the end of 2024 [7] - OPI leased 208,000 square feet during the second quarter, but anticipates a dip in operating performance due to upcoming lease expirations [8] Cash and Interest Expenses - OPI held only $13.5 million in cash and cash equivalents at the end of the quarter, while quarterly interest expenses surged to $38.3 million, a 45% increase from the previous year [8] - The new quarterly interest expense is projected to reach $51 million, nearly double the prior expense of $27.4 million [8] Market Sentiment - Despite a recent rally where OPI's stock rose 35% from summer lows, concerns remain regarding the looming February maturity and the REIT's overall risk profile [4][5] - The current trading price of OPINL is at 52 cents on the dollar, reflecting a 12.2% yield, which may not sufficiently compensate for the increased solvency risk compared to the previous year [9]

Core Viewpoint - Office Properties Income Trust (OPI) has faced significant financial challenges, with a substantial drop in stock price and concerns over its ability to manage debt and generate cash flow [1][2][18]. Financial Results - For Q2-2024, OPI reported a net income of $76.2 million, or $1.56 per common share, largely due to financial maneuvers involving debt restructuring [3][4]. - Normalized Funds from Operations (FFO) were $33.2 million, or $0.68 per common share, indicating ongoing operational struggles [4]. - Same property cash basis Net Operating Income (NOI) was $65.1 million, reflecting a decline in property performance [4][11]. Debt Management - OPI exchanged $865 million of senior unsecured notes for a lower amount of senior secured notes, which resulted in a gain but increased the overall debt burden with higher interest rates [3][4]. - The company has a total debt of approximately $2.32 billion, with a debt-to-EBITDA ratio around 9.0X, raising concerns about financial sustainability [12][13][14]. Portfolio and Leasing Activity - OPI executed 208,000 square feet of leases in Q2-2024, with a weighted average lease term of 4.0 years, but occupancy rates dropped to 89.9% from 95.3% year-over-year [4][15]. - The company is under agreement to sell 12 properties totaling approximately 1.4 million square feet for $93.5 million, which may help alleviate some debt pressures [4][19]. Cash Flow and Dividends - The rolling four-quarter Cash Available for Distribution (CAD) fell to $0.97 per share, with negative CAD reported for the current quarter [11][18]. - Despite ongoing financial difficulties, OPI continues to pay a nominal dividend of $0.01 per share, which may not be sustainable given the rising interest expenses [18][20]. Market Outlook - The market perceives significant refinancing risks for OPI, with speculation that common shares may face a decline of over 95% [18][19]. - Unsecured bonds are yielding high returns, indicating investor skepticism about OPI's ability to manage its debt effectively [19][20].

Group 1 - Office Properties Income Trust (OPI) reported quarterly funds from operations (FFO) of $0.68 per share, exceeding the Zacks Consensus Estimate of $0.64 per share, but down from $1.11 per share a year ago, representing an FFO surprise of 6.25% [1] - The company posted revenues of $123.69 million for the quarter ended June 2024, surpassing the Zacks Consensus Estimate by 0.20%, but down from $134 million year-over-year [2] - OPI shares have declined approximately 66.1% since the beginning of the year, contrasting with the S&P 500's gain of 14% [3] Group 2 - The current consensus FFO estimate for the upcoming quarter is $0.52 on revenues of $122.25 million, and for the current fiscal year, it is $2.42 on revenues of $505.28 million [7] - The estimate revisions trend for OPI is currently unfavorable, resulting in a Zacks Rank 5 (Strong Sell), indicating expected underperformance in the near future [6] - The REIT and Equity Trust - Residential industry is ranked in the top 24% of over 250 Zacks industries, suggesting that the industry outlook can significantly impact stock performance [8]