Financial Data and Key Metrics Changes - Normalized FFO for Q1 2023 was $52.7 million or $1.09 per share, down from $54.5 million or $1.13 per share in Q4 2022, primarily due to higher utility and interest expenses [21] - Same-property cash basis NOI decreased by 4% compared to Q1 2022, driven mainly by elevated free rent [21][22] - CAD decreased by approximately 16% to $2.21 per share, resulting in a payout ratio of 99.5%, indicating unsustainable dividend levels [22][51] Business Line Data and Key Metrics Changes - Leasing activity showed a decline with weighted average rent spreads down 18.5%, influenced by concessions at a property in Greater Washington, D.C. [15] - Portfolio occupancy increased by 170 basis points year-over-year to 90.5%, with 203,000 square feet of leasing completed [43] - The leasing pipeline includes approximately 2.7 million square feet of potential leasing activity, with a projected rent roll-up of 6% to 8% [45] Market Data and Key Metrics Changes - National office leasing volume declined for the third consecutive quarter, with negative absorption impacting occupancy gains [10] - The office sector faces challenges from corporate cost-cutting, elevated sublease space, and macroeconomic uncertainty, leading to declining cash flows and asset values [38] Company Strategy and Development Direction - The company announced a merger with Diversified Healthcare Trust to create a larger, scalable, and diversified REIT, expected to enhance cash flow stability and competitive positioning [41][42] - A reduction in the quarterly dividend to $0.25 per share was made to enhance liquidity and financial flexibility, reflecting a focus on capital preservation [11][51] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenging outlook for the office sector, citing tenant retention risks and a rising CAD payout ratio [11][39] - The company expects normalized FFO for Q2 2023 to be between $1.07 and $1.09 per share, with same-property cash basis NOI expected to decline by 5% to 7% compared to Q2 2022 [23][52] Other Important Information - The company is committed to enhancing corporate sustainability practices, as highlighted in the RMR Group's Annual Sustainability Report [19] - The company plans to recast its existing $750 million revolving credit facility in connection with the proposed merger [53] Q&A Session Summary Question: Occupancy outlook for the year - Management indicated that most known vacates are scheduled for the back half of the year, impacting performance heavily towards that period [58] Question: Update on the credit facility - A recast or amended revolver is a condition to closing the merger, with preliminary discussions already underway [59][66] Question: Development updates for Seattle and 20 Mass Ave - The hotel at 20 Mass Ave is expected to deliver at the end of Q2, with lease commencement in early Q3, including 18 months of free rent [71] Question: Leasing activity expectations - Management confirmed that the leasing pipeline includes over 700,000 square feet in advanced stages, with expectations for a good portion to mature in Q2 [72]

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q 617-219-1440 ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 1-34364 OFFICE PROPERTIES INCOME TRUST (Exact Name of Registrant as Specified in Its Charter) (State or Other Jurisdiction of Incorporation or Org ...

Financial Data and Key Metrics Changes - The company reported normalized FFO of $1.13 per share, exceeding the high end of guidance, compared to $1.11 per share in the previous quarter [62] - Same-property cash basis NOI decreased by 1.4% compared to Q4 2021, driven by higher free rent and operating expenses [45] - G&A expense for Q4 was $5.8 million, down from $6.6 million in Q3, reflecting a reduction in business management fees [18] Business Line Data and Key Metrics Changes - New leasing activity included 705,000 square feet, a 16% increase from Q3, with a weighted average lease term of 10.1 years [33] - The company completed 2.6 million square feet of leasing in 2022, achieving a roll-up in rent of 5.6% [29] - The weighted average rent spread for Q4 declined by 6.7%, primarily due to a significant renewal with a defense contractor [11] Market Data and Key Metrics Changes - Total portfolio occupancy increased by approximately 110 basis points to 90.6%, above the national office market average [9] - The company is tracking approximately 2.7 million square feet of activity in its pipeline, with over 1.1 million square feet attributable to new leasing [37] - Industry utilization is currently trending near 50%, indicating gradual improvements in office space demand [41] Company Strategy and Development Direction - Capital recycling remains a principal strategy, focusing on portfolio enhancement and reducing leverage [31] - The company has two redevelopment projects underway, with anticipated stabilization yields of 8% to 10% for Washington, D.C. and 10% to 12% for Seattle [40] - The company aims to manage through economic uncertainty by enhancing tenant experiences and sustainability initiatives [17] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism regarding leasing activity in 2023, expecting a gradual pace as tenants evaluate their real estate needs [12] - The company anticipates macroeconomic uncertainty in commercial real estate financing to continue impacting market activity [10] - Management highlighted the importance of retaining tenants amid economic challenges, emphasizing the value of long-term leases [76] Other Important Information - The company ended the year with 160 properties and approximately 63% of annualized rental income from investment-grade rated tenants [32] - The company has nearly $570 million of liquidity, with 92% of its debt at fixed rates [32] - The regular quarterly dividend declared was $0.55 per share, resulting in a normalized FFO payout ratio of 49% [66] Q&A Session Summary Question: Can you elaborate on the capital recycling plan and outlook for 2023? - Management indicated that capital recycling will be somewhat muted in 2023 due to uncertainty in capital markets, with a focus on $100 million to $300 million in activity as part of a long-term strategy [50][51] Question: What are the known vacates and their prospects? - Management clarified that known vacates represent 5% to 6% of annualized rental income, with some properties likely to be re-leased while others may be sold [52][73] Question: Any updates on the redevelopment project in Downtown Boston? - Management stated that while they are focused on the project, there are no significant updates or capital expenditures expected in the near term [56] Question: How are tenant negotiations progressing amid the work-from-home trend? - Management noted that while tenants may feel they have leverage, the focus remains on retaining tenants and managing inflationary costs [76]

Financial Structure and Taxation - The company has a $750.0 million unsecured revolving credit facility for working capital and general business purposes, including funding acquisitions and development efforts[47]. - The company intends to manage leverage to achieve and maintain "investment grade" ratings from recognized rating organizations[48]. - The company has no preferred shares outstanding at this time, and distributions are allocated first to common shares[77]. - The company may be subject to a 4% nondeductible excise tax if it fails to distribute at least 85% of its REIT ordinary income for the year[81]. - The company has not received a ruling from the IRS regarding its REIT status, and future legislative changes could impact its tax treatment[73]. - The company may face tax on undistributed REIT taxable income, including ordinary income and net capital gains[81]. - If the company acquires a REIT asset with a tax basis determined by a C corporation, it may be subject to federal income taxation on built-in gains[82]. - The company must meet specific REIT qualification requirements, including conditions related to share ownership and income sources, to avoid federal income tax as a regular C corporation[84]. - If the company fails to qualify as a REIT for any year, it may reduce or eliminate distributions to shareholders or incur substantial indebtedness to pay corporate-level income taxes[83]. - At least 75% of the company's gross income must be derived from real property investments to maintain REIT status[97]. - The company believes it has complied with the REIT qualification requirements during the requisite periods and will continue to do so in the future[84]. - The company must distribute all inherited C corporation earnings and profits from acquisitions to maintain REIT qualification[84]. - The company believes that all or substantially all of its rents and related service charges qualify as "rents from real property" under the IRC[100]. - The company must satisfy the asset percentage tests at the close of each calendar quarter to maintain REIT status[108]. - The company must make annual distributions to shareholders at least equal to the excess of its real estate investment trust taxable income[113]. - The company generally depreciates real property on a straight-line basis over 40 years and personal property over shorter applicable periods[124]. - The company may elect to retain some or all of its net capital gain and pay income tax on such gain, affecting shareholders' tax basis[131]. - If a dividend is declared in the last quarter and paid in January, it is treated as paid on December 31 of the prior taxable year for tax purposes[132]. - U.S. shareholders are subject to a 3.8% Medicare tax on net investment income, including dividends and gains from share dispositions, if their total adjusted income exceeds applicable thresholds[134]. - Non-U.S. shareholders' distributions not designated as capital gain dividends are subject to a 30% U.S. federal income tax withholding rate[141]. - Non-U.S. shareholders may seek a refund from the IRS for amounts withheld in excess of their allocable share of current and accumulated earnings and profits[141]. - If shares are not listed on a U.S. national securities exchange, distributions attributable to gain from the sale of U.S. real property interests may be taxed as effectively connected income[145]. - Non-U.S. shareholders may be subject to U.S. federal income tax reporting requirements if their shares are not classified as USRPIs[149]. - Backup withholding may apply to distributions or proceeds paid to shareholders if they do not provide correct taxpayer identification[151]. - Information reporting requirements apply to distributions made to non-U.S. shareholders regardless of withholding status[152]. Environmental and Sustainability Initiatives - As of December 31, 2022, 43 properties, totaling 6.6 million rentable square feet, are ENERGY STAR certified, representing 28.5% of eligible properties[59]. - The company aims to reduce scope 1 and 2 emissions by 50% by 2030 from a 2019 baseline as part of its zero emissions goal[55]. - RMR's real-time energy monitoring program has captured data from 38 properties, generating $1.7 million in cumulative savings, with $0.2 million saved in 2022[56]. - The company has implemented restrictions to prevent concentrated ownership positions that could jeopardize REIT qualification[84]. - RMR announced a zero emissions goal to reduce scope 1 and 2 emissions to net zero by 2050, with a 50% reduction commitment by 2030 from a 2019 baseline[206]. - The company may incur significant costs in complying with ESG policies or third-party expectations, which could negatively impact financial results[206]. - Environmental risks and liabilities, including those from climate change, pose significant risks to the company's real estate holdings[168]. - The company is exposed to risks from adverse weather and climate change, which could significantly impact its properties and financial condition[202]. Operational Risks and Market Conditions - The company recognizes the competitive nature of the real estate market, competing against various entities with potentially greater resources[66]. - The company performs environmental site assessments before acquiring properties to mitigate risks associated with environmental matters[64]. - The company is subject to risks related to high interest rates, inflation, and potential economic downturns that may adversely affect its operations and tenants' ability to meet lease obligations[168]. - The company may face challenges in renewing leases due to rising remote work arrangements and economic conditions, which could lead to tenants seeking to renew for less space[170]. - The company faces risks related to rising interest rates, high inflation, and supply chain challenges, which could adversely affect its financial condition and ability to pay distributions to shareholders[172]. - The company is exposed to risks associated with property development, redevelopment, and repositioning, including cost overruns and delays due to supply chain constraints[183]. - A prolonged U.S. government shutdown could impair the company's ability to fund operations and pay distributions, as tenants may not pay rent during the shutdown[181]. - The company’s capital recycling program aims to improve asset quality and increase cash available for distribution, but its success is uncertain due to market conditions[182]. - Changes in space utilization and remote work arrangements may reduce demand for office leasing, impacting tenant retention and rental income[176]. - Government budgetary pressures and trends in government employment may adversely impact the demand for leased space[179]. - The company faces significant competition for acquisition opportunities from other investors, which may limit its ability to acquire desirable properties[188]. - The company may incur significant costs for leasing commissions, tenant improvements, or other tenant inducements when renewing leases or leasing to new tenants[171]. - The company’s ability to access capital may be limited due to covenants in debt agreements and potential credit rating downgrades[168]. - Rising market interest rates have significantly increased the company's interest expense, impacting cash flows and the ability to pay distributions to shareholders[197]. - The company may incur additional debt financing in the future, which could have more restrictive covenants than existing agreements[196]. - A downgrade in the company's credit ratings could increase its cost of capital and adversely affect its business and financial condition[199]. - The company may face challenges in complying with debt covenants, which could limit its ability to grow or meet obligations[195]. Governance and Management Structure - Approximately 44% of the Board of Trustees are female, and 11% are members of underrepresented communities as of December 31, 2022[65]. - The company has no employees; services are provided by RMR and its Managing Trustees and officers[50]. - The management agreements with RMR were not negotiated on an arm's length basis, which may increase the risk of investment in the company's common shares[216]. - Termination of management agreements with RMR may require substantial termination fees, limiting the company's ability to end its relationship with RMR[217]. - The company is subject to risks related to conflicts of interest due to its management structure and relationships with RMR and its affiliates[219]. - Ownership limitations in the declaration of trust restrict any shareholder, other than RMR and its affiliates, from owning more than 9.8% of the company's shares, potentially deterring unsolicited acquisition proposals[222]. - RMR has broad discretion in operating the company's day-to-day business, which may lead to investment returns that are substantially below expectations[210]. - The company may change its operational and investment policies without shareholder approval, potentially affecting distributions to shareholders[169]. - The company may change its operational, financing, and investment policies without shareholder approval, potentially increasing leverage and risk of default on debt obligations[230]. - The company’s bylaws designate the Circuit Court for Baltimore City, Maryland as the exclusive forum for certain shareholder actions, potentially limiting favorable judicial options[229]. - Shareholder litigation may be subject to mandatory arbitration, which could restrict shareholders' rights compared to traditional court litigation[225]. - The company’s declaration of trust limits the liability of its Trustees and officers, potentially reducing shareholder recourse in certain situations[224]. Shareholder and Distribution Policies - The company must distribute at least 90% of its REIT taxable income annually to maintain its REIT status, which could limit growth opportunities and affect market price[235]. - If the company fails to qualify as a REIT, it may face significant federal and state income taxes, reducing cash available for distribution to shareholders[233]. - The company may elect to pay distributions in forms other than cash, such as issuing additional common shares, to preserve liquidity[240]. - The company may face tax liabilities even if it remains qualified as a REIT, which could decrease cash available for distribution[237]. - Changes in tax laws could materially and adversely affect the company and its shareholders, impacting REIT qualification and tax consequences[238]. - Distributions to shareholders may include cash, property, and deemed distributions, with tax treatment varying based on shareholder status[126]. - Shareholders will recognize gain or loss based on the difference between the amount realized and their adjusted basis in the shares sold or exchanged[133]. - Noncorporate U.S. shareholders can only deduct interest on borrowed funds to the extent of their net investment income, which includes ordinary income dividends received[136]. - Tax-exempt U.S. shareholders receiving distributions or proceeds from share sales are generally not treated as UBTI if they have not financed their acquisition with debt[138].

Financial Data and Key Metrics Changes - Normalized FFO for Q3 2022 was $53.8 million or $1.11 per share, which was $0.01 below the low end of guidance due to timing of property dispositions [24] - Same property cash basis NOI increased by 30 basis points compared to Q3 2021, reaching the high end of guidance [25] - The normalized FFO payout ratio was 50%, with a rolling 4-quarter CAD payout ratio of 67% [24] Business Line Data and Key Metrics Changes - The company completed 606,000 square feet of new and renewal leasing, with a 21.6% weighted average roll-up in rent and a 7.2-year weighted average lease term [12] - Year-to-date, the company completed over 1.8 million square feet of leasing with an 11% roll-up in rent [13] - Portfolio occupancy improved to 90.7%, a 130 basis points increase from Q2 and a 170 basis points increase from the prior year [10] Market Data and Key Metrics Changes - Overall U.S. leasing activity is trending at just over 70% of pre-pandemic levels, with gateway markets lagging behind secondary growth markets [13] - Investor interest remains mixed due to higher inflation and interest rates, leading to a thinning pool of buyers [11] Company Strategy and Development Direction - The company plans to continue capital recycling efforts into 2023, focusing on leasing, operational efficiencies, and completion of existing development projects [11][22] - The leasing pipeline remains strong with approximately 3.2 million square feet of active prospects [20] - The company is strategically allocating capital to improve common areas and expand the amenity base, resulting in increased occupancy [15] Management's Comments on Operating Environment and Future Outlook - Management noted that aggressive monetary policy and inflation are weighing on market fundamentals, which will continue to be a factor in 2023 [22] - The company remains cautious about the overall economic environment but is pleased with its portfolio position, which includes 63% of rental income from investment-grade tenants [23] Other Important Information - The company sold 10 properties containing 1.3 million square feet for $118 million at a weighted average cap rate of approximately 6.2% [10] - The balance sheet is well positioned with $2.4 billion of outstanding debt at a weighted average interest rate below 4% [27] Q&A Session Summary Question: Confidence in closing on the 5 properties discussed - Management expressed confidence in closing the properties as they are in advanced stages under PSA or LOI [33] Question: Outlook for property dispositions in 2023 - Management indicated a fluid list of assets for potential dispositions in 2023, with a focus on being disciplined in the market [34] Question: Target leverage ratio and capital deployment in 2023 - Management aims to reduce leverage to between 6x and 6.5x, while remaining investment-grade rated [36] Question: Sustainability of the dividend given market perceptions - Management remains comfortable with the current dividend coverage, citing low payout ratios and external factors affecting the office market [40] Question: Expected cash and GAAP NOI from upcoming developments - Management projected cash-on-cash stabilized returns of 8% to 10% for 20 Mass Ave and 10% to 12% for Seattle [42] Question: Plans for debt maturities and potential pay down with dispositions - Management plans to use cash on hand and the line of credit to pay off maturing mortgages, with no immediate plans to accelerate debt pay down [47]

FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 For the quarterly period ended September 30, 2022 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 1-34364 OFFICE PROPERTIES INCOME TRUST (Exact Name of Registrant as Specified in Its Charter) Maryland 26-4273474 (State or Other Jurisdiction of Incorpora ...

Financial Data and Key Metrics Changes - Normalized FFO increased 6% year-over-year to $58.9 million or $1.22 per share, exceeding the high end of guidance by $0.09 [28] - CAD increased 12% year-over-year to $37.8 million or $0.78 per share, with a rolling 4-quarter CAD payout ratio of 66% [29] - Same-property cash basis NOI increased 1% compared to Q2 2021, beating guidance expectations [30] Business Line Data and Key Metrics Changes - Leasing activity increased to 679,000 square feet, with a 4.9% weighted average roll-up in rent and a 9.2-year weighted average lease term [15] - Government agencies accounted for approximately 30% of total leasing volume, followed by government contractors, life sciences, and medical industries [15] Market Data and Key Metrics Changes - National vacancy remains elevated, and office utilization continues at a modest pace, indicating a transitional period for broader office fundamentals [10] - Approximately 4% of total annualized revenue is scheduled to expire in the second half of 2022, with 13.5% scheduled for 2023 [19][21] Company Strategy and Development Direction - The company is focused on capital recycling efforts to reduce capital expenditures and improve portfolio quality [12] - Ongoing redevelopment projects in Washington, D.C. and Seattle are on track, with expected stabilized returns of 8% to 10% and 10% to 12% respectively [25] Management's Comments on Operating Environment and Future Outlook - Management anticipates that market fundamentals will remain in transition over the next several quarters [10] - Positive renewal conversations with tenants are expected to continue, with strong leasing momentum anticipated for the remainder of the year [22] Other Important Information - The company sold or agreed to sell noncore properties for aggregate proceeds of $167.9 million, containing over 1.7 million square feet [13] - The company was recognized as an ENERGY STAR Partner of the Year for the fifth consecutive year and a Gold Level 2022 Green Lease Leader [26] Q&A Session Summary Question: On the $3 million plus of active pipeline for listing, how much do you think comes to fruition over the next 3 to 4 quarters? - Management indicated that tenant urgency to lock in leases is tied to overall office space plans rather than just rate concerns, with 4.2% of annualized revenue expiring in 2022 [36][37] Question: What kind of discounts were potential buyers looking for on some of the properties? - Management noted that discounts vary, with a specific example of a 10% discount requested on a stabilized asset [42][43] Question: Can you provide an update on recurring CapEx guidance? - Management reaffirmed a full-year guidance of $100 million for recurring capital, with an increase driven by leasing activity and preparation for 2023 [47] Question: Can you provide color on the $0.05 termination fee? - The fee was related to a tenant contraction in Columbia, Maryland, where the tenant downsized but signed an 8-year renewal [50][51] Question: How confident is management about lease renewals for 2023? - Management expressed confidence in renewal discussions, noting that most expirations are in the latter half of the year, allowing ample time for negotiations [53][54] Question: Can you give an update on leasing activity at 20 Mass Ave and Seattle? - Management reported about 250,000 square feet of activity, with significant interest from a large user in Seattle and 54% pre-leased status at 20 Mass Ave [56][58]

[PART I. Financial Information](index=3&type=section&id=PART%20I.%20Financial%20Information) This section presents the unaudited condensed consolidated financial statements and management's discussion and analysis of the company's financial condition and results of operations [Item 1. Financial Statements (unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(unaudited)) This section presents the unaudited condensed consolidated financial statements and their accompanying notes, providing a snapshot of the company's financial position and performance [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets%20%E2%80%94%20June%2030%2C%202022%20and%20December%2031%2C%202021) Total assets, liabilities, and shareholders' equity all decreased from December 31, 2021, to June 30, 2022, primarily due to reductions in real estate and senior unsecured notes | Metric (in thousands) | Dec 31, 2021 | Jun 30, 2022 | Change | | :-------------------- | :----------- | :----------- | :----- | | Total Assets | $4,241,683 | $4,062,658 | $(179,025) | | Total Liabilities | $2,744,974 | $2,647,208 | $(97,766) | | Total Shareholders' Equity | $1,496,709 | $1,415,450 | $(81,259) | | Real Estate Properties, net | $3,415,174 | $3,307,750 | $(107,424) | | Cash and cash equivalents | $83,026 | $26,006 | $(57,020) | | Senior unsecured notes, net | $2,479,772 | $2,184,073 | $(295,699) | [Condensed Consolidated Statements of Comprehensive Income (Loss)](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)%20%E2%80%94%20Three%20and%20Six%20Months%20Ended%20June%2030%2C%202022%20and%202021) Net loss significantly improved for the three months ended June 30, 2022, driven by reduced impairment losses, while the six-month net loss slightly increased | Metric (in thousands) | 3 Months Ended Jun 30, 2022 | 3 Months Ended Jun 30, 2021 | Change | 6 Months Ended Jun 30, 2022 | 6 Months Ended Jun 30, 2021 | Change | | :-------------------- | :-------------------------- | :-------------------------- | :----- | :-------------------------- | :-------------------------- | :----- | | Rental income | $141,316 | $137,099 | $4,217 | $288,670 | $281,623 | $7,047 | | Total expenses | $118,516 | $162,658 | $(44,142) | $252,611 | $293,702 | $(41,091) | | Loss on impairment of real estate | $4,773 | $48,197 | $(43,424) | $21,820 | $55,857 | $(34,037) | | General and administrative | $7,083 | $12,970 | $(5,887) | $12,789 | $24,242 | $(11,453) | | Net loss | $(16,056) | $(66,697) | $50,641 | $(29,463) | $(28,837) | $(626) | | Net loss per common share (basic and diluted) | $(0.33) | $(1.38) | $1.05 | $(0.61) | $(0.60) | $(0.01) | [Condensed Consolidated Statements of Shareholders' Equity](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Shareholders'%20Equity%20%E2%80%94%20Three%20and%20Six%20Months%20Ended%20June%2030%2C%202022%20and%202021) Total shareholders' equity decreased from December 31, 2021, to June 30, 2022, primarily due to net losses and common shareholder distributions | Metric (in thousands) | Dec 31, 2021 | Jun 30, 2022 | Change | | :-------------------- | :----------- | :----------- | :----- | | Balance at period start | $1,496,709 | $1,496,709 | $0 | | Net loss | - | $(29,463) | $(29,463) | | Distributions to common shareholders | $(53,268) | $(53,268) | $0 | | Share grants | $1,494 | $1,494 | $0 | | Balance at period end | $1,496,709 | $1,415,450 | $(81,259) | [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows%20%E2%80%94%20Six%20Months%20Ended%20June%2030%2C%202022%20and%202021) Operating cash flow slightly decreased, investing cash flow significantly improved due to lower acquisitions, and financing cash flow shifted to a net use due to debt repayments | Metric (in thousands) | 6 Months Ended Jun 30, 2022 | 6 Months Ended Jun 30, 2021 | Change | | :-------------------- | :-------------------------- | :-------------------------- | :----- | | Net cash provided by operating activities | $108,913 | $117,376 | $(8,463) | | Net cash used in investing activities | $(17,112) | $(400,467) | $383,355 | | Net cash (used in) provided by financing activities | $(148,567) | $246,317 | $(394,884) | | Decrease in cash, cash equivalents and restricted cash | $(56,766) | $(36,774) | $(19,992) | | Cash, cash equivalents and restricted cash at end of period | $27,749 | $20,081 | $7,668 | [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) These notes provide essential details and context for the condensed consolidated financial statements, covering key accounting policies, property information, and financial instrument specifics [Note 1. Basis of Presentation](index=9&type=section&id=Note%201.%20Basis%20of%20Presentation) The financial statements are unaudited, condensed, and rely on management estimates, with interim results not necessarily indicative of full-year performance - Financial statements are unaudited and condensed, requiring estimates and assumptions, and interim results may not predict full-year performance[20](index=20&type=chunk)[21](index=21&type=chunk) [Note 2. Per Common Share Amounts](index=9&type=section&id=Note%202.%20Per%20Common%20Share%20Amounts) Basic EPS uses the two-class method, diluted EPS uses the more dilutive of two-class or treasury stock, with no dilutive shares for the reported periods - Basic EPS uses the two-class method; diluted EPS uses the more dilutive of two-class or treasury stock. No dilutive common shares for Q2/H1 2022 and 2021[22](index=22&type=chunk) [Note 3. Real Estate Properties](index=9&type=section&id=Note%203.%20Real%20Estate%20Properties) OPI owned 172 properties and interests in two joint ventures as of June 30, 2022, with significant leasing and disposition activities occurring in the first half of the year - As of June 30, 2022, OPI owned **172 wholly-owned properties** (22.491M rentable square feet) and noncontrolling interests of 51% and 50% in two unconsolidated joint ventures that own three properties (444k rentable square feet)[23](index=23&type=chunk) - During the six months ended June 30, 2022, OPI entered into **39 leases** for approximately **1,251,000 rentable square feet** for a weighted average lease term of **9.9 years**, committing approximately **$70,117 thousand** of leasing related costs[23](index=23&type=chunk) Disposition Activity (H1 2022) | Disposition Activity (H1 2022) | Number of Properties | Rentable Square Feet | Sales Price (in thousands) | Gain (Loss) on Sale (in thousands) | | :----------------------------- | :------------------- | :------------------- | :------------------------- | :--------------------------------- | | Properties Sold | 6 | 778,000 | $77,720 | $(9,488) | | Properties Held for Sale (under agreement) | 10 | 1,322,000 | $119,600 | $19,636 (Loss on Impairment) | [Note 4. Leases](index=11&type=section&id=Note%204.%20Leases) Rental income from operating leases is recognized straight-line, with adjustments and variable payments contributing to total rental income for the reported periods | Metric (in thousands) | 3 Months Ended Jun 30, 2022 | 3 Months Ended Jun 30, 2021 | 6 Months Ended Jun 30, 2022 | 6 Months Ended Jun 30, 2021 | | :-------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Straight line rent adjustments | $2,775 | $3,847 | $5,461 | $9,204 | | Variable payments (total) | $22,101 | $17,488 | $44,637 | $36,348 | | Tenant reimbursements | $21,009 | $16,639 | $42,484 | $34,442 | [Note 5. Concentration](index=12&type=section&id=Note%205.%20Concentration) Government tenants, particularly the U.S. government, represent a significant portion of annualized rental income, with geographic concentrations in key states Tenant Type Concentration | Tenant Type | % of Annualized Rental Income (Jun 30, 2022) | % of Annualized Rental Income (Jun 30, 2021) | | :---------- | :------------------------------------------- | :------------------------------------------- | | U.S. Government, 11 state governments, and 4 other government tenants | 28.4% | 31.9% | | U.S. Government only | 18.5% | 22.0% | - Top 5 geographic concentrations by annualized rental income as of June 30, 2022: **Virginia (11.8%)**, **California (11.3%)**, **Illinois (10.5%)**, the **District of Columbia (10.2%)**, and **Georgia (8.7%)**[37](index=37&type=chunk) [Note 6. Indebtedness](index=12&type=section&id=Note%206.%20Indebtedness) OPI's debt portfolio includes revolving credit, senior unsecured notes, and mortgage notes, with significant debt prepayments and redemptions occurring in the first half of 2022 Debt Type (in thousands) | Debt Type (in thousands) | Jun 30, 2022 | Dec 31, 2021 | | :----------------------- | :----------- | :----------- | | Unsecured revolving credit facility | $230,000 | $0 | | Senior unsecured notes, net | $2,184,073 | $2,479,772 | | Mortgage notes payable, net | $72,936 | $98,178 | - In April 2022, OPI prepaid a mortgage note secured by one property with an outstanding principal balance of **$24,863 thousand**, an annual interest rate of **4.22%**, and a maturity date in July 2022[41](index=41&type=chunk) - In June 2022, OPI redeemed all **$300,000 thousand** of its **4.00% senior unsecured notes** due July 2022, resulting in a loss on early extinguishment of debt of **$77 thousand**[42](index=42&type=chunk) [Note 7. Fair Value of Assets and Liabilities](index=13&type=section&id=Note%207.%20Fair%20Value%20of%20Assets%20and%20Liabilities) Fair values of most financial instruments approximated carrying values, though senior unsecured and mortgage notes showed differences, and impairment charges were recorded for properties held for sale Financial Instrument Fair Values (in thousands) | Financial Instrument (in thousands) | Carrying Value (Jun 30, 2022) | Fair Value (Jun 30, 2022) | Carrying Value (Dec 31, 2021) | Fair Value (Dec 31, 2021) | | :---------------------------------- | :------------------------------ | :------------------------ | :------------------------------ | :------------------------ | | Senior unsecured notes, 4.25% due 2024 | $345,722 | $340,008 | $344,581 | $365,449 | | Senior unsecured notes, 4.50% due 2025 | $641,094 | $623,292 | $639,370 | $687,749 | | Senior unsecured notes, 2.650% due 2026 | $297,526 | $255,234 | $297,213 | $298,502 | | Senior unsecured notes, 2.400% due 2027 | $347,156 | $287,004 | $346,845 | $339,764 | | Senior unsecured notes, 3.450% due 2031 | $395,961 | $300,416 | $395,744 | $388,458 | | Senior unsecured notes, 6.375% due 2050 | $156,614 | $158,760 | $156,519 | $177,098 | | Mortgage notes payable | $72,936 | $72,313 | $98,178 | $100,294 | - OPI recorded impairment charges totaling **$19,636 thousand** and **$2,184 thousand** to reduce the carrying value of properties classified as held for sale to their estimated fair value less costs to sell[44](index=44&type=chunk)[45](index=45&type=chunk) [Note 8. Shareholders' Equity](index=14&type=section&id=Note%208.%20Shareholders'%20Equity) OPI declared and paid regular quarterly distributions totaling **$53,268 thousand** in H1 2022 and purchased common shares to satisfy tax withholding obligations Distributions to Common Shareholders | Distribution Period | Distributions Per Common Share | Total Distributions (in thousands) | | :------------------ | :----------------------------- | :--------------------------------- | | H1 2022 | $1.10 | $53,268 | | July 2022 (declared) | $0.55 | ~$26,700 | - During the six months ended June 30, 2022, OPI purchased an aggregate of **790 common shares** at a weighted average share price of **$20.59 per share** to satisfy tax withholding and payment obligations[51](index=51&type=chunk) [Note 9. Business and Property Management Agreements with RMR](index=14&type=section&id=Note%209.%20Business%20and%20Property%20Management%20Agreements%20with%20RMR) OPI relies on RMR for management services, with net business management fees decreasing due to the absence of incentive fees, while property management fees increased Management Fees (in thousands) | Fee Type (in thousands) | 3 Months Ended Jun 30, 2022 | 3 Months Ended Jun 30, 2021 | 6 Months Ended Jun 30, 2022 | 6 Months Ended Jun 30, 2021 | | :---------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net business management fees | $4,492 | $10,551 | $9,202 | $20,025 | | Accrued estimated incentive fees (included above) | $0 | $5,911 | $0 | $11,111 | | Net property management and construction supervision fees | $6,394 | $4,914 | $12,522 | $9,526 | [Note 10. Related Person Transactions](index=15&type=section&id=Note%2010.%20Related%20Person%20Transactions) OPI maintains ongoing related person transactions with RMR and its affiliates, including rental income from RMR and a significant lease agreement with a Sonesta subsidiary - OPI has relationships and historical and continuing transactions with RMR, The RMR Group Inc., and others related to them, including other companies with shared trustees, directors, or officers[58](index=58&type=chunk) Related Party Rental Income (in thousands) | Related Party Transaction | 3 Months Ended Jun 30, 2022 (in thousands) | 6 Months Ended Jun 30, 2022 (in thousands) | | :------------------------ | :----------------------------------------- | :----------------------------------------- | | Rental income from RMR | $285 | $569 | - In June 2021, OPI entered into a **30-year lease agreement** with a subsidiary of Sonesta International Hotels Corporation for a planned full-service hotel component of a redeveloped property in Washington, D.C., with estimated annual base rent of approximately **$6,436 thousand** commencing in Q2 2023[61](index=61&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=17&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section analyzes OPI's financial condition and results of operations, covering property portfolio, market conditions, and strategic activities, highlighting economic impacts [OVERVIEW](index=17&type=section&id=OVERVIEW) OPI, a REIT, owns 172 properties and joint venture interests, with the U.S. government as its largest tenant, facing risks from rising interest rates and potential recession - As of June 30, 2022, OPI's wholly owned properties comprised **172 properties** (approximately **22,491,000 rentable square feet**) and noncontrolling ownership interests in two unconsolidated joint ventures that own three properties (approximately **444,000 rentable square feet**)[65](index=65&type=chunk) - The U.S. government is OPI's largest tenant, representing approximately **18.5% of annualized rental income** as of June 30, 2022[65](index=65&type=chunk) - The COVID-19 pandemic has not had a significant adverse impact on OPI's business to date, but rising interest rates and a potential recession could adversely affect financial condition, tenant rent payments, and property values[66](index=66&type=chunk)[67](index=67&type=chunk) [Property Operations](index=17&type=section&id=Property%20Operations) Portfolio occupancy remained stable, comparable properties' leased percentage increased, rental rates improved, and capital expenditures significantly rose due to development activities Property Portfolio Metrics | Metric | Jun 30, 2022 | Jun 30, 2021 | Change | | :----- | :----------- | :----------- | :----- | | All Properties - Total rentable square feet | 22,491,000 | 24,091,000 | (1,600,000) | | All Properties - Percent leased | 89.4% | 89.5% | (0.1%) | | Comparable Properties - Percent leased | 94.3% | 93.0% | 1.3% | Average Effective Rental Rate per Square Foot | Metric | Q2 2022 | Q2 2021 | H1 2022 | H1 2021 | | :----- | :------ | :------ | :------ | :------ | | Average effective rental rate per square foot (All properties) | $28.80 | $26.46 | $29.11 | $26.20 | | Average effective rental rate per square foot (Comparable properties) | $27.71 | $26.85 | $27.57 | $27.09 | Leasing Activity (Q2 2022) | Leasing Activity (Q2 2022) | New Leases | Renewals | Total | | :------------------------- | :--------- | :------- | :---- | | Rentable square feet leased (in thousands) | 126 | 553 | 679 | | Weighted average rental rate change | 8.7% | 4.0% | 4.9% | | Weighted average lease term (years) | 8.3 | 9.4 | 9.2 | Capital Expenditures (in thousands) | Capital Expenditures (in thousands) | 3 Months Ended Jun 30, 2022 | 3 Months Ended Jun 30, 2021 | 6 Months Ended Jun 30, 2022 | 6 Months Ended Jun 30, 2021 | | :---------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Lease related costs | $16,131 | $11,215 | $24,795 | $18,185 | | Building improvements | $4,702 | $7,765 | $7,485 | $12,291 | | Development, redevelopment and other activities | $40,302 | $12,738 | $77,826 | $17,644 | | Total capital expenditures | $61,135 | $31,718 | $110,106 | $48,120 | - As of June 30, 2022, OPI had estimated unspent leasing related obligations of **$130,726 thousand**, of which **$82,543 thousand** is expected to be spent over the next 12 months[80](index=80&type=chunk) - Approximately **1,913,000 rentable square feet** are scheduled to expire through June 30, 2023, with **817,000 rentable square feet** expected not to renew[81](index=81&type=chunk) [Disposition Activities](index=22&type=section&id=Disposition%20Activities) OPI sold six properties in H1 2022 and has agreements to sell nine more by Q3 2022, though the pace of dispositions is expected to moderate due to rising interest rates - During the six months ended June 30, 2022, OPI sold **six properties** containing approximately **778,000 rentable square feet** for an aggregate sales price of **$77,720 thousand**, excluding closing costs[90](index=90&type=chunk) - As of July 27, 2022, OPI has entered into agreements to sell **nine properties** containing approximately **1,116,000 rentable square feet** for an aggregate sales price of **$109,800 thousand**, excluding closing costs, with sales expected to occur before the end of Q3 2022[91](index=91&type=chunk) [Financing Activities](index=23&type=section&id=Financing%20Activities) OPI prepaid a mortgage note in April 2022 and redeemed **$300,000 thousand** of senior unsecured notes in June 2022 using cash and revolving credit - In April 2022, OPI prepaid a mortgage note secured by one property with an outstanding principal balance of **$24,863 thousand**[93](index=93&type=chunk) - In June 2022, OPI redeemed all **$300,000 thousand** of its **4.00% senior unsecured notes** due July 2022 using cash on hand and borrowings under its revolving credit facility[93](index=93&type=chunk) [Segment Information](index=23&type=section&id=Segment%20Information) OPI operates solely within the business segment of real estate property ownership - OPI operates in one business segment: ownership of real estate properties[94](index=94&type=chunk) [RESULTS OF OPERATIONS (Q2 2022 vs. Q2 2021)](index=24&type=section&id=RESULTS%20OF%20OPERATIONS%20(Three%20Months%20Ended%20June%2030%2C%202022%2C%20Compared%20to%20Three%20Months%20Ended%20June%2030%2C%202021)) Net loss significantly decreased in Q2 2022, driven by reduced impairment losses and lower general and administrative expenses, despite a net loss on property sales Results of Operations (Q2, in thousands) | Metric (in thousands) | Q2 2022 | Q2 2021 | Change ($) | Change (%) | | :-------------------- | :------ | :------ | :--------- | :--------- | | Rental income | $141,316 | $137,099 | $4,217 | 3.1% | | Total expenses | $118,516 | $162,658 | $(44,142) | (27.1%) | | Loss on impairment of real estate | $4,773 | $48,197 | $(43,424) | (90.1%) | | General and administrative | $7,083 | $12,970 | $(5,887) | (45.4%) | | Gain (loss) on sale of real estate | $(11,637) | $114 | $(11,751) | n/m | | Net loss | $(16,056) | $(66,697) | $50,641 | (75.9%) | | Net loss per common share | $(0.33) | $(1.38) | $1.05 | (76.1%) | - The increase in rental income reflects an increase of **$11,637 thousand** related to acquired properties and **$3,399 thousand** related to comparable properties, offset by decreases from property disposition activities and properties undergoing significant redevelopment[98](index=98&type=chunk) - The decrease in general and administrative expenses is primarily the result of **$5,911 thousand** of estimated business management incentive fees recorded in the 2021 period, which were not present in 2022[105](index=105&type=chunk) [RESULTS OF OPERATIONS (H1 2022 vs. H1 2021)](index=27&type=section&id=RESULTS%20OF%20OPERATIONS%20(Six%20Months%20Ended%20June%2030%2C%202022%2C%20Compared%20to%20Six%20Months%20Ended%20June%2030%2C%202021)) Net loss slightly increased in H1 2022, primarily due to a net loss on property sales and higher equity losses, partially offset by reduced impairment and administrative expenses Results of Operations (H1, in thousands) | Metric (in thousands) | H1 2022 | H1 2021 | Change ($) | Change (%) | | :-------------------- | :------ | :------ | :--------- | :--------- | | Rental income | $288,670 | $281,623 | $7,047 | 2.5% | | Total expenses | $252,611 | $293,702 | $(41,091) | (14.0%) | | Loss on impairment of real estate | $21,820 | $55,857 | $(34,037) | (60.9%) | | General and administrative | $12,789 | $24,242 | $(11,453) | (47.2%) | | Gain (loss) on sale of real estate | $(9,488) | $54,118 | $(63,606) | (117.5%) | | Net loss | $(29,463) | $(28,837) | $(626) | 2.2% | | Net loss per common share | $(0.61) | $(0.60) | $(0.01) | 1.7% | - The increase in rental income reflects increases of **$23,479 thousand** for acquired properties and **$2,830 thousand** for comparable properties, offset by decreases related to property disposition activities and properties undergoing significant redevelopment[115](index=115&type=chunk) - The decrease in general and administrative expenses is primarily due to **$11,111 thousand** of estimated business management incentive fees recorded in the 2021 period, a state franchise tax refund received in 2022, and the expiration of an office lease[123](index=123&type=chunk) [Non-GAAP Financial Measures](index=29&type=section&id=Non-GAAP%20Financial%20Measures) This section presents non-GAAP financial measures like NOI, FFO, and Normalized FFO, used to evaluate operating performance and inform distribution decisions [Net Operating Income (NOI)](index=29&type=section&id=Net%20Operating%20Income) NOI, a non-GAAP measure for property-level performance, increased for both Q2 and H1 2022 compared to prior periods Net Operating Income (in thousands) | Metric (in thousands) | Q2 2022 | Q2 2021 | H1 2022 | H1 2021 | | :-------------------- | :------ | :------ | :------ | :------ | | NOI | $92,416 | $90,979 | $188,897 | $187,478 | - NOI is a non-GAAP measure defined as income from rental of real estate less property operating expenses, used to evaluate individual and company-wide property level performance[132](index=132&type=chunk) [Funds From Operations (FFO) and Normalized Funds From Operations](index=30&type=section&id=Funds%20From%20Operations%20and%20Normalized%20Funds%20From%20Operations) FFO and Normalized FFO, non-GAAP measures adjusting net loss for real estate items, both increased for Q2 and H1 2022, indicating improved operating performance FFO and Normalized FFO (in thousands) | Metric (in thousands) | Q2 2022 | Q2 2021 | H1 2022 | H1 2021 | | :-------------------- | :------ | :------ | :------ | :------ | | FFO | $58,622 | $37,680 | $121,344 | $94,289 | | Normalized FFO | $58,923 | $55,385 | $121,645 | $117,194 | | FFO per common share | $1.21 | $0.78 | $2.52 | $1.96 | | Normalized FFO per common share | $1.22 | $1.15 | $2.52 | $2.43 | - FFO and Normalized FFO are non-GAAP measures that adjust net income (loss) for real estate depreciation and amortization, impairment charges, and gains/losses on sale of real estate, with Normalized FFO further adjusting for acquisition costs, early debt extinguishment, and business management incentive fees[135](index=135&type=chunk) [LIQUIDITY AND CAPITAL RESOURCES](index=30&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) OPI's liquidity, primarily from operating cash flows, property sales, and its revolving credit facility, supports ongoing operations, capital recycling, and redevelopment projects [Our Operating Liquidity and Resources](index=30&type=section&id=Our%20Operating%20Liquidity%20and%20Resources) OPI's operating liquidity, derived from cash flows, property sales, and credit facilities, is deemed sufficient for future needs and supports a capital recycling program - OPI's principal sources of funds are operating cash flows, net proceeds from property sales, and borrowings under its revolving credit facility, which are believed to be sufficient for operating and capital expenses, debt service, and distributions for the next 12 months and foreseeable future[137](index=137&type=chunk) - OPI expects to accretively grow its property portfolio through a capital recycling program, involving selective property sales to fund future acquisitions, improve asset quality, lengthen lease terms, and increase cash available for distribution[140](index=140&type=chunk) Cash Flow Activity (in thousands) | Cash Flow Activity (in thousands) | H1 2022 | H1 2021 | Change | | :-------------------------------- | :------ | :------ | :----- | | Net cash provided by operating activities | $108,913 | $117,376 | $(8,463) | | Net cash used in investing activities | $(17,112) | $(400,467) | $383,355 | | Net cash (used in) provided by financing activities | $(148,567) | $246,317 | $(394,884) | [Our Investment and Financing Liquidity and Resources](index=31&type=section&id=Our%20Investment%20and%20Financing%20Liquidity%20and%20Resources) OPI maintains a **$750,000 thousand** revolving credit facility and faces upcoming debt maturities, while also undertaking significant redevelopment projects in Washington, D.C. and Seattle - OPI maintains a **$750,000 thousand** revolving credit facility, with **$230,000 thousand** outstanding and **$520,000 thousand** available for borrowing as of June 30, 2022[143](index=143&type=chunk) Debt Maturities (in thousands) | Year | Debt Maturities (in thousands) | | :--- | :----------------------------- | | 2022 | $234 | | 2023 | $72,784 | | 2024 | $350,000 | | 2025 | $650,000 | | 2026 | $300,000 | | 2027 and thereafter | $912,000 | | Total | $2,285,018 | - OPI is redeveloping a property in Washington, D.C. (estimated total project costs of **$215,000 thousand**, **$103,198 thousand** incurred as of June 30, 2022) and a three-property campus in Seattle, WA (estimated total project costs of **$144,000 thousand**, **$16,707 thousand** incurred as of June 30, 2022), both expected to complete in Q2 2023[149](index=149&type=chunk)[150](index=150&type=chunk) [Debt Covenants](index=34&type=section&id=Debt%20Covenants) OPI's debt obligations are subject to financial covenants, with the company believing it was in compliance as of June 30, 2022, and credit ratings influencing interest rates - OPI's principal debt obligations are subject to covenants that restrict the ability to incur debts and require compliance with certain financial covenants[156](index=156&type=chunk) - OPI believes it was in compliance with the terms and conditions of the respective covenants under its credit agreement and senior unsecured notes indentures and their supplements at June 30, 2022[156](index=156&type=chunk) - Credit ratings determine the fees and interest rates paid under the credit agreement, but do not contain provisions for acceleration triggered by credit ratings[157](index=157&type=chunk) [Related Person Transactions](index=34&type=section&id=Related%20Person%20Transactions) OPI maintains ongoing relationships and transactions with RMR, RMR Inc., and other affiliated entities, as detailed in the financial statement notes - OPI has relationships and historical and continuing transactions with RMR, RMR Inc., and others related to them[159](index=159&type=chunk) [Critical Accounting Estimates](index=34&type=section&id=Critical%20Accounting%20Estimates) Significant accounting estimates include purchase price allocations, asset useful lives, and real estate impairment, with no material changes since December 31, 2021 - 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[160](index=160&type=chunk) - There have been no significant changes in OPI's critical accounting estimates since the year ended December 31, 2021[161](index=161&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=34&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section details OPI's exposure to interest rate market risk, analyzing the impact of fluctuations on fixed and floating-rate debt, and addressing the LIBOR phase-out [Fixed Rate Debt](index=35&type=section&id=Fixed%20Rate%20Debt) OPI held **$2,285,018 thousand** in fixed-rate debt as of June 30, 2022, with a hypothetical one percentage point interest rate increase impacting annual costs and fair value Fixed Rate Debt Portfolio | Debt Type | Principal Balance (in thousands) | Annual Interest Rate | Maturity | | :-------- | :------------------------------- | :------------------- | :------- | | Senior unsecured notes | $2,212,000 | Varies | 2024-2050 | | Mortgage notes | $73,018 | Varies | 2023 | | Total | $2,285,018 | | | - If fixed-rate debts were refinanced at interest rates one percentage point higher, annual interest cost would increase by approximately **$22,850 thousand**[164](index=164&type=chunk) - A hypothetical immediate one percentage point increase in interest rates would change the fair value of fixed-rate debt obligations by approximately **$(97,584) thousand**[165](index=165&type=chunk) [Floating Rate Debt](index=35&type=section&id=Floating%20Rate%20Debt) OPI had **$230,000 thousand** outstanding on its revolving credit facility, with a one percentage point interest rate increase significantly impacting annual interest expense and EPS Floating Rate Debt Impact (in thousands) | Scenario | Outstanding Debt (in thousands) | Annual Interest Rate | Total Interest Expense Per Year (in thousands) | Annual Earnings Per Share Impact | | :------- | :------------------------------ | :------------------- | :--------------------------------------------- | :------------------------------- | | Jun 30, 2022 | $230,000 | 2.4% | $5,520 | $0.11 | | One percentage point increase | $230,000 | 3.4% | $7,820 | $0.16 | | Fully drawn (Jun 30, 2022) | $750,000 | 2.4% | $18,000 | $0.37 | | Fully drawn (one percentage point increase) | $750,000 | 3.4% | $25,500 | $0.53 | [LIBOR Phase Out](index=36&type=section&id=LIBOR%20Phase%20Out) LIBOR is phasing out by June 30, 2023, and OPI expects its revolving credit facility's interest rate determination to be revised, though the outcome and potential cost impact are uncertain - LIBOR is being phased out for new contracts and is expected to be phased out for pre-existing contracts by June 30, 2023[176](index=176&type=chunk) - OPI expects the determination of interest under its revolving credit facility to be revised to approximate the existing LIBOR-based interest rate, but cannot be sure that any changes will approximate the current calculation or that an alternative index will not result in increased interest[176](index=176&type=chunk) [Item 4. Controls and Procedures](index=36&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of June 30, 2022, with no material changes to internal control over financial reporting during the quarter - Management, under the supervision and with the participation of Managing Trustees and officers, concluded that disclosure controls and procedures were effective as of June 30, 2022[177](index=177&type=chunk) - There have been no changes in internal control over financial reporting during the quarter ended June 30, 2022, that have materially affected, or are reasonably likely to materially affect, internal control over financial reporting[178](index=178&type=chunk) [Warning Concerning Forward-Looking Statements](index=37&type=section&id=Warning%20Concerning%20Forward-Looking%20Statements) This section warns that forward-looking statements in the report are not guaranteed, and actual results may differ materially due to various known and unknown risks and uncertainties - This Quarterly Report contains statements that constitute forward-looking statements based upon present intent, beliefs, or expectations, but these statements are not guaranteed to occur and may not occur[180](index=180&type=chunk) - Actual results may differ materially from forward-looking statements due to known and unknown risks, uncertainties, and other factors, including the impact of conditions in the economy (COVID-19, increasing interest rates, inflation, possible recession) and capital markets[183](index=183&type=chunk)[191](index=191&type=chunk) [Statement Concerning Limited Liability](index=41&type=section&id=Statement%20Concerning%20Limited%20Liability) The declaration of trust states that no individual associated with Office Properties Income Trust shall be personally liable for its obligations, with recourse limited to Trust assets - The amended and restated declaration of trust provides that no trustee, officer, shareholder, employee, or agent of Office Properties Income Trust shall be held to any personal liability for any obligation of, or claim against, the Trust; all persons dealing with the Trust shall look only to its assets for payment[195](index=195&type=chunk) [PART II. Other Information](index=40&type=section&id=PART%20II.%20Other%20Information) This section provides additional information, including risk factors, equity security sales, and a list of exhibits filed with the report [Item 1A. Risk Factors](index=40&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the risk factors previously disclosed in the company's 2021 Annual Report - There have been no material changes to the risk factors from those previously disclosed in OPI's 2021 Annual Report[196](index=196&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=40&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During Q2 2022, OPI purchased **790 common shares** at a weighted average price of **$20.59 per share** to satisfy tax withholding obligations related to share awards Common Share Purchases (Q2 2022) | Calendar Month | Number of Shares Purchased | Average Price Paid per Share | | :------------- | :------------------------- | :--------------------------- | | April 2022 | 265 | $24.07 | | June 2022 | 525 | $18.84 | | Total | 790 | $20.59 | - These common share withholdings and purchases were made to satisfy tax withholding and payment obligations of one of OPI's Trustees and a former employee of RMR in connection with the vesting of awards of common shares[197](index=197&type=chunk) [Item 6. Exhibits](index=41&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including organizational documents, debt indentures, compensation summaries, and various certifications - Exhibits include the Composite Copy of Amended and Restated Declaration of Trust, Amended and Restated Bylaws, various Indentures for Senior Notes, Summary of Trustee Compensation, Rule 13a-14(a) Certifications, Section 1350 Certification, and XBRL Instance, Schema, Calculation, Definition, and Label Linkbase Documents[198](index=198&type=chunk)[200](index=200&type=chunk)[202](index=202&type=chunk) [SIGNATURES](index=43&type=section&id=SIGNATURES) This section contains the official signatures of the company's President, COO, CFO, and Treasurer, certifying the report's submission [Signatures](index=43&type=section&id=Signatures) The report was signed by the President, COO, CFO, and Treasurer on July 28, 2022, certifying its submission under the Securities Exchange Act of 1934 - The report was signed by Christopher J. Bilotto, President and Chief Operating Officer, and Matthew C. Brown, Chief Financial Officer and Treasurer, on July 28, 2022[205](index=205&type=chunk)

Financial Data and Key Metrics Changes - Normalized FFO for Q1 2022 was $62.7 million or $1.30 per share, exceeding the high end of guidance by $0.01, compared to $58.1 million or $1.20 per share in Q4 2021 [29] - CAD increased by 20% sequentially to $51 million or $1.06 per share for Q1 2022, with a rolling four-quarter CAD payout ratio of 67% [31] - Same property cash basis NOI was essentially flat compared to Q1 2021, in line with guidance [32] Business Line Data and Key Metrics Changes - OPI signed 21 deals for 572,000 square feet of new and renewal leasing with a weighted average rent roll-up of 5.1% and a lease term of over 10 years [12] - Government agencies accounted for approximately 40% of total leasing volume, with investment-grade rated tenants representing about 64% of annualized rent revenues [17] Market Data and Key Metrics Changes - Same property occupancy was flat at 91% compared to the prior quarter, with a nominal decrease of 50 basis points year-over-year [13] - The leasing pipeline includes over 3.6 million square feet of activity, with nearly 1 million square feet in advanced negotiation stages [24] Company Strategy and Development Direction - The company is focused on capital recycling to enhance the portfolio, targeting growing markets with sustained NOI growth and newer buildings [14] - OPI plans to maintain its disposition guidance for 2022 at approximately $400 million to $500 million in total proceeds [15] - The company is actively engaging with tenants to evaluate early renewals and maintain positive tenant retention trends [22] Management Comments on Operating Environment and Future Outlook - Management noted gradual improvement in office fundamentals, supported by growing utilization and improved leasing volumes [9] - The company is well-positioned for stability and growth during transitionary periods due to its strengthened balance sheet and portfolio reshaping [10] - Management expects year-end 2022 occupancy of 89% to 90% and rent roll-ups of 5% to 7% [24] Other Important Information - The company is making progress on redevelopment projects in Washington, DC, and Seattle, with both projects expected to deliver in early 2023 [25] - The company welcomed a new board member with extensive experience in commercial real estate [28] Q&A Session Summary Question: Characteristics of properties planned for sale in 2022 - Management indicated the focus is on properties with near lease term expirations, higher CapEx needs, and occupancy challenges, typically around 80% [41][42] Question: Redeployment of proceeds from asset sales - Proceeds will be used for paying off $300 million in notes due in July, focusing on redevelopment projects while considering acquisitions [44] Question: Impact of F5 termination on occupancy - The F5 termination represented 2% of annualized revenue, but the net impact on occupancy was nominal due to new leasing activity [45] Question: Full year CapEx estimate - The full year CapEx estimate is around $100 million, plus or minus $10 million [46] Question: Update on return to office trends - Utilization has improved to over 40%, with expectations for continued progress in tenant re-entry [50][51] Question: Future development opportunities - The company is exploring redevelopment opportunities within its existing portfolio and considering potential conversions to life science or other uses [54]

Chicago, IL OFFICE PROPERTIES FIRST QUARTER 2022 Supplemental Operating and Financial Data ALL AMOUNTS IN THIS REPORT ARE UNAUDITED. Table of Contents lease refer to Non-GAAP Financial Measures and Certain Definitions for terms used throughout this document. | --- | --- | |----------------------------------------------------------------------------------------|-------| | | | | CORPORATE INFORMATION | | | Company Profile | 3 | | Investor Information . | | | Research Coverage . | | | FINANCIALS | | | Key Fina ...