Financial Data and Key Metrics Changes - Normalized FFO for Q4 2021 was $58.1 million or $1.20 per share, slightly down from $59.6 million or $1.24 per share in Q3 2021, primarily due to higher interest expenses [30][31] - CAD for Q4 2021 was $42.6 million or $0.88 per share, resulting in a full-year CAD payout ratio of 69% [31] - Same-property cash basis NOI remained relatively unchanged compared to Q4 2020, exceeding guidance expectations [33] Business Line Data and Key Metrics Changes - Leasing volumes for 2021 reached 2.5 million square feet, a 26% increase over 2020, with a weighted average lease term of 9.5 years and a roll-up in rent of 6.3% [15][18] - Q4 2021 leasing activity included 702,000 square feet of new and renewal leasing, with a weighted average lease term of six years and a roll-up in rent of 4% [18] - Same property occupancy increased to 91.2% in Q4 2021, with consolidated occupancy at 89.5%, a 50 basis points increase from the previous quarter [19] Market Data and Key Metrics Changes - More than 60% of Q4 leasing activity was driven by tenants in technology, communication, manufacturing, and transportation sectors [18] - Government tenants accounted for approximately 25% of Q4 leasing volume [19] Company Strategy and Development Direction - The company is focused on capital recycling, planning to dispose of non-core properties with targeted proceeds of $400 million to $500 million in 2022 [16][39] - The company aims to enhance its portfolio through strategic acquisitions and redevelopment projects, including two core properties in Atlanta and Chicago [17][39] - The company is dedicated to sustainability, having achieved ENERGY STAR Partner of the Year for the fourth consecutive year and plans to expand its sustainability efforts [28] Management's Comments on Operating Environment and Future Outlook - Management expects tenant utilization to improve as they navigate reentry plans, although timing remains uncertain [13][56] - The company anticipates an increase in expenses in 2022 due to higher utilization, inflation, and a lease restructure [59] - Management is optimistic about the leasing pipeline, which remains robust with discussions covering more than 3.4 million square feet [22] Other Important Information - The company completed the issuance of $1.1 billion of senior notes in 2021, reducing its cost of debt and increasing average debt maturity [17][38] - The company plans to redeploy proceeds from property sales into acquisitions and redevelopment projects [39] Q&A Session Summary Question: Why was the Brookhaven property transaction terminated? - Management indicated that the Brookhaven properties were not originally part of the capital recycling program and the buyer pivoted to another direction after evaluating their business plan [45][46] Question: What are the characteristics of the properties targeted for sale in 2022? - Management stated that the focus is asset-specific rather than geography-specific, with properties in the D.C. MSA and other markets being evaluated [47] Question: What is the expected capital expenditure for 2022? - Management expects recurring capital expenditures to be around $100 million, influenced by lease expirations and early renewals [48][63] Question: How will increased utilization affect expenses? - Management forecasts an increase in expenses due to higher utilization, inflation, and a lease restructure that shifts management responsibilities [59] Question: What is the outlook for acquisitions in 2022? - Management indicated a focus on dispositions and leasing, with potential acquisitions being considered but primarily as net sellers for the year [51][52]

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2021 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 of Organization) (IRS Employer Identificati ...

OFFICE PROPERTIES THIRD QUARTER 2021 Supplemental Operating and Financial Data ALL AMOUNTS IN THIS REPORT ARE UNAUDITED. Washington, DC 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 Financi ...

Office Properties Income Trust (NASDAQ:OPI) Q3 2021 Earnings Conference Call October 29, 2021 10:00 AM ET Company Participants Kevin Barry - Director, IR Chris Bilotto - President and COO Matt Brown - CFO and Treasurer Conference Call Participants Bryan Maher - B. Riley Ronald Kamden - Morgan Stanley Operator Good morning and welcome to the Office Properties Income Trust Third Quarter 2021 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] Please note this even ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 1-34364 Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act ...

Office Properties Income Trust (NASDAQ:OPI) Q2 2021 Earnings Conference Call July 30, 2021 10:00 AM ET Company Participants Olivia Snyder - Manager, Investor Relations Chris Bilotto - President and Chief Operating Officer Matt Brown - Chief Financial Officer and Treasurer Conference Call Participants Bryan Maher - B. Riley FBR Vikram Malhotra - Morgan Stanley Jason Idoine - RBC Capital Markets Operator Good day and welcome to the Office Properties Income Trust Second Quarter 2021 Earnings Conference Call. [ ...

PART I. Financial Information [Financial Statements (unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(unaudited)) This section presents the unaudited condensed consolidated financial statements, detailing balance sheets, income, and cash flows, with key insights into asset changes and net loss [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets increased to **$4.21 billion** as of June 30, 2021, driven by real estate, while liabilities grew and equity decreased Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | **Total real estate properties, net** | $3,392,829 | $3,070,229 | | **Total assets** | **$4,211,213** | **$3,946,436** | | Unsecured revolving credit facility | $385,000 | $— | | Senior unsecured notes, net | $2,032,764 | $2,033,242 | | **Total liabilities** | **$2,682,663** | **$2,337,044** | | **Total shareholders' equity** | **$1,528,550** | **$1,609,392** | [Condensed Consolidated Statements of Comprehensive Income (Loss)](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)) The company reported a net loss of **$66.7 million** for Q2 2021, primarily due to a **$48.2 million** real estate impairment and debt extinguishment losses Quarterly Performance Comparison (in thousands, except per share data) | Metric | Q2 2021 | Q2 2020 | | :--- | :--- | :--- | | Rental Income | $137,099 | $145,603 | | Loss on impairment of real estate | $48,197 | $— | | Net Income (Loss) | $(66,697) | $1,299 | | Net Income (Loss) per Share | $(1.38) | $0.03 | Six-Month Performance Comparison (in thousands, except per share data) | Metric | H1 2021 | H1 2020 | | :--- | :--- | :--- | | Rental Income | $281,623 | $295,488 | | Gain on sale of real estate | $54,118 | $10,822 | | Net Income (Loss) | $(28,837) | $12,139 | | Net Income (Loss) per Share | $(0.60) | $0.25 | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operating activities was **$117.4 million** for H1 2021, with **$400.5 million** used in investing for acquisitions, and **$246.3 million** provided by financing Cash Flow Summary - Six Months Ended June 30 (in thousands) | Activity | 2021 | 2020 | | :--- | :--- | :--- | | Net cash provided by operating activities | $117,376 | $111,190 | | Net cash (used in) provided by investing activities | $(400,467) | $40,934 | | Net cash provided by (used in) financing activities | $246,317 | $(222,719) | | **Decrease in cash, cash equivalents and restricted cash** | **$(36,774)** | **$(70,595)** | [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) The notes detail significant accounting policies, property acquisitions and sales, debt financing activities, and the U.S. government's tenant contribution - During the first six months of 2021, OPI acquired two properties for an aggregate purchase price of **$548.9 million** and sold two properties and a warehouse facility for an aggregate sales price of **$169.8 million**[26](index=26&type=chunk)[29](index=29&type=chunk) - The U.S. government is the largest tenant, representing **22.0%** of annualized rental income as of June 30, 2021, down from **25.2%** a year prior[41](index=41&type=chunk) - In May 2021, the company issued **$300 million** of **2.650%** senior notes due 2026. In June 2021, it redeemed all **$310 million** of its **5.875%** senior notes due 2046, resulting in a loss on early extinguishment of debt of **$8.6 million**[46](index=46&type=chunk)[47](index=47&type=chunk) - The company declared and paid two quarterly distributions of **$0.55 per common share** during the first six months of 2021, totaling **$53.15 million**[57](index=57&type=chunk) [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) Management discusses the company's performance, property operations, and financial condition, highlighting portfolio occupancy, limited COVID-19 impact, capital recycling, and non-GAAP measures [Overview](index=17&type=section&id=Overview) As of June 30, 2021, OPI owned **181 properties** totaling **24.1 million** square feet, with the U.S. government as the largest tenant and limited COVID-19 impact - As of June 30, 2021, OPI's portfolio comprised **181 wholly-owned properties** with approximately **24.1 million rentable square feet**[71](index=71&type=chunk) - The impact of the COVID-19 pandemic has been limited. As of July 27, 2021, the company granted temporary rent deferrals totaling **$2,483 thousand** to 18 tenants, and has collected **$2,259 thousand (91.0%)** of this amount[72](index=72&type=chunk) [Property Operations](index=17&type=section&id=Property%20Operations) Portfolio occupancy was **89.5%** as of June 30, 2021, with **1.12 million** square feet leased in H1 2021 at an **11.2%** rental rate increase, and **54.1%** of income from investment-grade tenants Occupancy Data (All Properties) | Metric | June 30, 2021 | June 30, 2020 | | :--- | :--- | :--- | | Total properties | 181 | 184 | | Total rentable square feet (thousands) | 24,091 | 24,909 | | Percent leased | 89.5% | 91.7% | Leasing Activity - Six Months Ended June 30, 2021 | Leasing Type | Rentable Square Feet (thousands) | Weighted Avg. Rental Rate Change | Weighted Avg. Lease Term (Years) | | :--- | :--- | :--- | :--- | | New Leases | 302 | +23.3% | 24.3 | | Renewals | 821 | +5.3% | 6.0 | | **Total** | **1,123** | **+11.2%** | **10.9** | - As of June 30, 2021, **54.1%** of annualized rental income came from investment-grade rated tenants[94](index=94&type=chunk) [Results of Operations](index=25&type=section&id=Results%20of%20Operations) Q2 2021 saw a **5.8%** decrease in rental income and a net loss of **$66.7 million**, primarily due to a **$48.2 million** impairment charge and an **80.0%** rise in G&A expenses Consolidated Results - Three Months Ended June 30 (in thousands) | Line Item | 2021 | 2020 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Rental income | $137,099 | $145,603 | $(8,504) | (5.8%) | | Net operating income (NOI) | $90,979 | $98,834 | $(7,855) | (7.9%) | | Loss on impairment of real estate | $48,197 | $— | $48,197 | n/m | | General and administrative | $12,970 | $7,204 | $5,766 | 80.0% | | Net income (loss) | $(66,697) | $1,299 | $(67,996) | n/m | - The decrease in rental income for Q2 2021 was primarily due to property dispositions (**$4.7 million**) and properties undergoing redevelopment (**$4.2 million**)[110](index=110&type=chunk) - The increase in G&A expenses for Q2 2021 was mainly due to recording **$5.9 million** of estimated business management incentive fees, which were not recorded in the 2020 period[116](index=116&type=chunk) [Non-GAAP Financial Measures](index=29&type=section&id=Non-GAAP%20Financial%20Measures) The company uses non-GAAP measures like FFO and Normalized FFO, with Q2 2021 Normalized FFO at **$1.15 per share**, down from **$1.40 per share** in Q2 2020 due to lower NOI FFO and Normalized FFO Reconciliation - Q2 (in thousands, except per share) | Metric | Q2 2021 | Q2 2020 | | :--- | :--- | :--- | | Net income (loss) | $(66,697) | $1,299 | | **FFO** | **$37,680** | **$66,640** | | **Normalized FFO** | **$55,385** | **$67,197** | | FFO per common share | $0.78 | $1.39 | | Normalized FFO per common share | $1.15 | $1.40 | FFO and Normalized FFO Reconciliation - H1 (in thousands, except per share) | Metric | H1 2021 | H1 2020 | | :--- | :--- | :--- | | Net income (loss) | $(28,837) | $12,139 | | **FFO** | **$94,289** | **$130,908** | | **Normalized FFO** | **$117,194** | **$134,747** | | FFO per common share | $1.96 | $2.72 | | Normalized FFO per common share | $2.43 | $2.80 | [Liquidity and Capital Resources](index=30&type=section&id=Liquidity%20and%20Capital%20Resources) The company's liquidity relies on operating cash flow, property sales, and its **$750 million** revolving credit facility, with **$365 million** available and manageable debt maturities - The company maintains a **$750 million** revolving credit facility. As of July 28, 2021, **$380 million** was outstanding, with **$370 million** available for borrowing[150](index=150&type=chunk)[151](index=151&type=chunk) - The company has estimated unspent leasing-related obligations of **$113.1 million**, with **$67.3 million** expected to be spent over the next 12 months[157](index=157&type=chunk) - A redevelopment project in Washington, D.C. is estimated to cost **$200 million**, with completion expected in Q1 2023. The project is **54%** pre-leased[158](index=158&type=chunk) - The company believes it was in compliance with all debt covenants as of June 30, 2021[164](index=164&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=34&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk is interest rate risk, with **$2.16 billion** in fixed-rate debt and **$385 million** in floating-rate debt, and is monitoring the LIBOR phase-out - As of June 30, 2021, the company had **$2.16 billion** of fixed-rate debt. A hypothetical **1%** increase in interest rates would decrease the fair value of this debt by approximately **$76.9 million**[169](index=169&type=chunk)[171](index=171&type=chunk) - The company had **$385 million** of floating-rate debt outstanding. A **1%** increase in interest rates would increase annual interest expense by **$3.85 million**, impacting annual EPS by approximately **$0.08**[175](index=175&type=chunk)[177](index=177&type=chunk) - The company is monitoring the planned phase-out of LIBOR, which is the benchmark for its revolving credit facility, and expects the agreement to be amended to provide for a comparable replacement rate[181](index=181&type=chunk) [Controls and Procedures](index=36&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2021, with no material changes in internal control over financial reporting during the quarter - Management concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report[182](index=182&type=chunk) - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[183](index=183&type=chunk) PART II. Other Information [Risk Factors](index=40&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the risk factors from those previously disclosed in the 2020 Annual Report on Form 10-K - There have been no material changes to the risk factors from those previously disclosed in the 2020 Annual Report[199](index=199&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=41&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During Q2 2021, the company purchased **12,009** common shares at an average price of **$29.33 per share** to satisfy tax withholding obligations for share awards Issuer Purchases of Equity Securities - June 2021 | Calendar Month | Number of Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | June 2021 | 12,009 | $29.33 | [Exhibits](index=41&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including supplemental indentures for new debt, officer certifications, and XBRL data files - Key exhibits filed include the Third Supplemental Indenture for the **2.650%** Senior Notes due 2026, Rule 13a-14(a) certifications, and the Section 1350 certification[202](index=202&type=chunk)[204](index=204&type=chunk)

OFFICE PROPERTIES FIRST QUARTER 2021 Supplemental Operating and Financial Data ALL AMOUNTS IN THIS REPORT ARE UNAUDITED. Atlanta, GA Table of Contents Please refer to Non-GAAP Financial Measures and Certain Definitions for terms used throughout this document. | --- | --- | |--------------------------------------------------------------------------------------|-------| | | | | CORPORATE INFORMATION | | | Company Profile | | | Investor Information. | | | Research Coverage | | | FINANCIALS | | | Key Financial ...

Financial Data and Key Metrics Changes - Normalized FFO for Q1 2021 was $61.8 million or $1.28 per share, exceeding expectations and consensus estimates by $0.04 due to higher than forecasted NOI [27] - CAD for Q1 2021 was $47.7 million or $0.99 per share, with a rolling four-quarter CAD payout ratio of 59% [27] - G&A expense for Q1 was $11.3 million, including $5.2 million of estimated business management incentive fees, down from $7.1 million in the same period last year [28] Business Line Data and Key Metrics Changes - Same property cash basis NOI decreased by $1.6 million or 1.8% compared to Q1 2020, slightly outperforming guidance [32] - Leasing results included 575,000 square feet of new and renewal leasing with a 3.2% roll-up in rent and a consolidated occupancy of 90.8% at the end of the quarter [16][27] Market Data and Key Metrics Changes - Current building utilization is at 30% of portfolio square footage, with expectations for tenants to advance re-entry plans into Q3 and Q4 [15] - The overall leasing pipeline remains robust with discussions covering 3.1 million square feet, including 106,000 square feet of new and renewal leasing signed since quarter end [18] Company Strategy and Development Direction - The company is focused on capital recycling, with a plan to dispose of $100 million to $300 million of properties to invest in newer, less capital-intensive buildings [13] - The acquisition pipeline is trending in excess of $400 million, with an active market for acquisitions and a disciplined approach to transactions [11][10] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the portfolio's performance despite challenges from the COVID-19 pandemic, with rent collections trending above 99% [9] - The company anticipates a decline in same property cash basis NOI for Q2 2021 between 3.5% and 5.5% compared to Q2 2020, driven by known vacancies and lease expirations [33] Other Important Information - The company received the 2021 ENERGY STAR Partner of the Year Sustained Excellence Award, marking the fourth consecutive year of recognition [25] - Interest expense for Q1 was $28.8 million, flat sequentially but up $1.6 million from the prior year due to previous unsecured senior notes issuance [31] Q&A Session Summary Question: On the Boston property that you bought, is there any opportunity to increase occupancy? - Management indicated the goal is to pursue short-term leases while evaluating a larger plan for the consolidated assets in Boston [38] Question: Is the occupancy decline due to the Boston project? - Management clarified that the decline was primarily driven by known move-outs in the Chicago submarket, not the Boston project [39] Question: What are the updated costs and timing for the redevelopment of the vacated property? - The plan is to move forward with redevelopment, targeting Q1 2023 for delivery, with total construction costs around $150 million [41] Question: How competitive is the acquisition pipeline? - Management noted that cap rates for targeted assets remain competitive, with many buyers chasing similar types of assets [42][43] Question: Was the tenant that moved out included in the occupancy numbers? - Management confirmed that the tenant was included in the numbers and will reflect in Q2 [48] Question: What is the expected trajectory for occupancy throughout the year? - Management anticipates occupancy to end the year around 89% to 90%, depending on various factors including asset dispositions [50] Question: Can you break down the leasing pipeline in terms of new leasing versus renewals? - Management indicated that the pipeline is approximately 60% renewal and 40% new leasing [66] Question: What is the coverage of the dividend post-incentive fees? - The year-end projection, including the incentive fee, would result in a payout ratio of about 84% [61]

PART I. Financial Information [Financial Statements (unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(unaudited)) Presents unaudited condensed consolidated financial statements for Office Properties Income Trust, including Balance Sheets, Income, Equity, and Cash Flow Statements, with essential notes Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2021 | December 31, 2020 | | :--- | :--- | :--- | | **Total real estate properties, net** | $3,007,696 | $3,070,229 | | **Cash and cash equivalents** | $184,462 | $42,045 | | **Total assets** | $3,952,579 | $3,946,436 | | **Senior unsecured notes, net** | $2,035,304 | $2,033,242 | | **Total liabilities** | $2,331,581 | $2,337,044 | | **Total shareholders' equity** | $1,620,998 | $1,609,392 | Condensed Consolidated Statements of Comprehensive Income Highlights (in thousands) | Account | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--- | :--- | :--- | | **Rental income** | $144,524 | $149,885 | | **Total expenses** | $131,044 | $119,751 | | **Gain on sale of real estate** | $54,004 | $10,756 | | **Net income** | $37,860 | $10,840 | | **Net income per share (basic and diluted)** | $0.78 | $0.23 | Condensed Consolidated Statements of Cash Flows Highlights (in thousands) | Activity | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--- | :--- | :--- | | **Net cash provided by operating activities** | $57,942 | $37,601 | | **Net cash provided by investing activities** | $113,896 | $42,095 | | **Net cash used in financing activities** | ($27,218) | ($146,386) | | **Increase (decrease) in cash** | $144,620 | ($66,690) | [Notes to Financial Statements - Real Estate Properties (Note 3)](index=9&type=section&id=Note%203.%20Real%20Estate%20Properties) Details the company's **180-property** portfolio, Q1 **2021** dispositions totaling **$130.8 million** with a **$54.0 million** gain, a **$7.7 million** impairment loss, and a planned **$27.0 million** acquisition - As of March 31, **2021**, the portfolio consisted of **180 wholly-owned properties** with approximately **24.6 million rentable square feet**[22](index=22&type=chunk) - During Q1 **2021**, the company entered into **20 leases** for approximately **575,000 rentable square feet** with a weighted average lease term of **5.4 years**[22](index=22&type=chunk) Q1 2021 Disposition and Impairment Activity (in thousands) | Activity | Details | Amount | | :--- | :--- | :--- | | **Dispositions** | Sale of 2 properties (321,000 sq. ft.) | $130,845 (Sales Price) | | | | $54,004 (Gain on Sale) | | **Impairment** | Impairment on 2 properties held for sale | $7,660 (Loss) | - The company has an agreement to acquire a property in Boston, MA for **$27.0 million**, with the acquisition expected to occur before the end of Q2 **2021**[25](index=25&type=chunk) [Notes to Financial Statements - Leases and Concentration (Notes 4 & 5)](index=11&type=section&id=Note%204.%20Leases%20%26%20Note%205.%20Concentration) The company granted **$2,483,000** in COVID-19 rent assistance, while the portfolio shows concentration with the U.S. government as the largest tenant (**25.9% of annualized rental income**) and **36.3%** of income from California, Virginia, and D.C - As of April 26, **2021**, the company granted temporary rent assistance of **$2,483,000** to **18 tenants** impacted by the COVID-19 pandemic, generally structured as 12-month deferral plans[38](index=38&type=chunk)[39](index=39&type=chunk) - The U.S. government is the largest tenant, representing approximately **25.9% of annualized rental income** as of March 31, **2021**, up from **25.0% a year prior**[40](index=40&type=chunk) - The portfolio has geographic concentration, with properties in California (**12.7%**), Virginia (**12.7%**), and the District of Columbia (**10.9%**) accounting for a significant portion of annualized rental income[41](index=41&type=chunk) [Notes to Financial Statements - Indebtedness (Note 6)](index=12&type=section&id=Note%206.%20Indebtedness) Total debt was **$2.24 billion** (**$2.07 billion** unsecured notes, **$170.2 million** mortgages), with **$750 million** available on the credit facility and no outstanding borrowings, and compliance with all debt covenants - Principal debt obligations at March 31, **2021**, were **$2.07 billion** in senior unsecured notes and **$170.2 million** in mortgage notes[42](index=42&type=chunk) - As of March 31, **2021**, there were no amounts outstanding under the **$750 million** revolving credit facility, which matures in January **2023**[44](index=44&type=chunk) - The company believes it was in compliance with all covenants under its credit agreement and senior unsecured notes indentures as of March 31, **2021**[46](index=46&type=chunk) [Notes to Financial Statements - Shareholders' Equity (Note 8)](index=14&type=section&id=Note%208.%20Shareholders'%20Equity) In Q1 **2021**, the company declared and paid a **$0.55 per share** common share distribution, totaling **$26,575**, with a similar distribution declared for Q2 Q1 2021 Common Share Distribution | Declaration Date | Record Date | Paid Date | Per Share | Total (in thousands) | | :--- | :--- | :--- | :--- | :--- | | Jan 14, 2021 | Jan 25, 2021 | Feb 18, 2021 | $0.55 | $26,575 | - On April 15, **2021**, a further quarterly distribution of **$0.55 per share** was declared, payable in May **2021**[51](index=51&type=chunk) [Notes to Financial Statements - Related Party Transactions (Notes 9 & 10)](index=14&type=section&id=Note%209.%20Business%20and%20Property%20Management%20Agreements%20with%20RMR%20LLC%20%26%20Note%2010.%20Related%20Person%20Transactions) The company, managed by RMR LLC, recognized **$9,474,000** in Q1 **2021** business management fees (including **$5,200,000** incentive fee) and **$4,612,000** in property management fees - The company has no employees and is managed by RMR LLC under separate business and property management agreements[52](index=52&type=chunk) - Net business management fees for Q1 **2021** were **$9,474,000**, including **$5,200,000** of estimated business management incentive fees This compares to **$4,699,000** in Q1 **2020**, which had no incentive fee[53](index=53&type=chunk) - Property management and construction supervision fees paid to RMR LLC totaled **$4,612,000** for Q1 **2021**, down from **$5,064,000** in Q1 **2020**[54](index=54&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=16&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q1 **2021** performance, noting stable operations, capital recycling, and strong liquidity, with net income up due to property sales, though Normalized FFO per share decreased from **$1.40** to **$1.28** [Overview and Property Operations](index=16&type=section&id=Overview%20and%20Property%20Operations) The **180-property** portfolio was **90.8%** leased, with **$2,483,000** in COVID-19 rent deferrals; Q1 leasing totaled **575,000 rentable square feet** with a **3.2%** rent roll-up, and the U.S. government is the largest tenant (**25.9% of annualized rental income**) - The COVID-19 pandemic has not had a significant impact on business to date The company granted temporary rent assistance of **$2,483,000** to **18 tenants**, with **$2,118,000 (85.3%)** collected as of April 26, **2021**[63](index=63&type=chunk) Portfolio Occupancy | Metric | March 31, 2021 | March 31, 2020 | | :--- | :--- | :--- | | Total Properties | 180 | 184 | | Total Rentable Sq. Ft. (thousands) | 24,568 | 24,906 | | Percent Leased | **90.8%** | **91.5%** | - In Q1 **2021**, the company executed leases for **575,000 rentable square feet** The weighted average rent increase was **3.2%** above prior rents for the same space, with a weighted average lease term of **5.4 years**[73](index=73&type=chunk) - Tenants with investment-grade credit ratings (or guarantees from investment-grade parents) accounted for **56.1%** of annualized rental income as of March 31, **2021**[87](index=87&type=chunk) [Results of Operations](index=22&type=section&id=Results%20of%20Operations) Q1 **2021** rental income decreased **3.6%** to **$144,524** due to dispositions, while net income surged to **$37,860** from **$10,840** due to a **$54,004** gain on sales, and G&A rose **58.6%** to **$11,272** Financial Performance Comparison (in thousands) | Metric | Q1 2021 | Q1 2020 | Change (%) | | :--- | :--- | :--- | :--- | | Rental Income | $144,524 | $149,885 | (3.6%) | | Net Operating Income (NOI) | $96,499 | $100,186 | (3.7%) | | General & Administrative | $11,272 | $7,109 | 58.6% | | Gain on sale of real estate | $54,004 | $10,756 | n/m | | Net Income | $37,860 | $10,840 | n/m | - The decrease in rental income was primarily due to property disposition activities[98](index=98&type=chunk) - The increase in G&A expenses was primarily the result of **$5.2 million** of estimated business management incentive fees recorded in the **2021** period[104](index=104&type=chunk) [Non-GAAP Financial Measures](index=24&type=section&id=Non-GAAP%20Financial%20Measures) Q1 **2021** NOI was **$96,499** (down from **$100,186**), FFO per diluted share was **$1.17** (down from **$1.34**), and Normalized FFO per diluted share was **$1.28** (down from **$1.40**) NOI Reconciliation (in thousands) | | Q1 2021 | Q1 2020 | | :--- | :--- | :--- | | Net Income | $37,860 | $10,840 | | *Reconciling Items* | ... | ... | | **NOI** | **$96,499** | **$100,186** | FFO and Normalized FFO Reconciliation (in thousands, except per share) | | Q1 2021 | Q1 2020 | | :--- | :--- | :--- | | Net Income | $37,860 | $10,840 | | **FFO** | **$56,609** | **$64,268** | | **Normalized FFO** | **$61,809** | **$67,550** | | FFO per diluted share | $1.17 | $1.34 | | Normalized FFO per diluted share | $1.28 | $1.40 | [Liquidity and Capital Resources](index=25&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains strong liquidity with **$750 million** available on its credit facility and no debt maturities until **2022**; Q1 operating cash flow was **$57,942**, and **$130.8 million** in property sales funded capital recycling - As of April 28, **2021**, the company had **$750 million** available under its revolving credit facility and no debt maturities until **2022**[121](index=121&type=chunk) - The capital recycling program is a key strategy, with two properties sold in Q1 **2021** for **$130.8 million** and another sold in April **2021** for **$39.0 million**[123](index=123&type=chunk) Debt Maturities as of March 31, 2021 (in thousands) | Year | Debt Maturities | | :--- | :--- | | 2021 | $896 | | 2022 | $625,518 | | 2023 | $143,784 | | 2024 | $350,000 | | 2025 | $650,000 | | Thereafter | $472,000 | | **Total** | **$2,242,198** | [Quantitative and Qualitative Disclosures About Market Risk](index=30&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk is interest rate exposure, managed by **$2.24 billion** in fixed-rate debt; the **$750 million** revolving credit facility is LIBOR-tied, and the company monitors LIBOR's phase-out - At March 31, **2021**, total outstanding fixed-rate debt was **$2.24 billion**[141](index=141&type=chunk) - A hypothetical immediate one percentage point increase in interest rates would decrease the fair value of the company's fixed-rate debt obligations by approximately **$103.6 million**[143](index=143&type=chunk) - At March 31, **2021**, the company had no outstanding floating-rate debt Its **$750 million** revolving credit facility is tied to LIBOR, which is expected to be phased out[147](index=147&type=chunk)[152](index=152&type=chunk) [Controls and Procedures](index=32&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of March 31, **2021**, with no material changes to internal control over financial reporting during the quarter - Management concluded that the company's disclosure controls and procedures are effective as of March 31, **2021**[153](index=153&type=chunk) - There were no material changes in internal control over financial reporting during the first quarter of **2021**[154](index=154&type=chunk) PART II. Other Information [Risk Factors](index=34&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the risk factors previously disclosed in the company's **2020** Annual Report on Form 10-K - There have been no material changes to the risk factors from those previously disclosed in our **2020** Annual Report[170](index=170&type=chunk) [Exhibits](index=34&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including corporate governance documents, debt indentures, officer certifications, and XBRL data files - The report includes a list of filed exhibits, such as the Amended and Restated Declaration of Trust, various debt indentures, and required officer certifications[171](index=171&type=chunk)[173](index=173&type=chunk)