Property and Occupancy - As of March 31, 2022, the company owned 174 properties with a total of approximately 22,941,000 rentable square feet, leased to 298 tenants[60] - The occupancy rate for all properties was 88.8% as of March 31, 2022, down from 90.8% in 2021[64] - During Q1 2022, the company experienced lease expirations totaling approximately 853,000 rentable square feet, with new and renewal leases totaling 572,000 square feet[70] - As of March 31, 2022, the company has 392 leases expiring, totaling 20,373 thousand square feet, with an annualized rental income of $572,029 thousand[78] - Approximately 4.2% of rentable square feet and 4.6% of annualized rental income are from tenants with exercisable rights to terminate their leases early[78] - The weighted average remaining lease term is 5.9 years for square feet and 6.1 years for rental income[78] Rental Income and Financial Performance - Rental income for the three months ended March 31, 2022, was $125,387, a decrease of $607 or 0.5% compared to $125,994 in the same period of 2021[92] - Net operating income (NOI) for the three months ended March 31, 2022, was $96,481, a slight decrease of $18 or 0.02% compared to $96,499 in the same period of 2021[109] - The company reported a net loss of $13,407 for the three months ended March 31, 2022, compared to a net income of $37,860 in the same period of 2021, representing a decrease of $51,267 or 135.4%[92] - Total operating expenses increased to $50,873 for the three months ended March 31, 2022, up by $2,848 or 5.9% from $48,025 in the same period of 2021[92] - General and administrative expenses decreased by $5,566 or 49.4% to $5,706 in the three months ended March 31, 2022, compared to $11,272 in the same period of 2021[100] - The company recorded a loss on impairment of real estate totaling $17,047 in the three months ended March 31, 2022, compared to a loss of $7,660 in the same period of 2021, representing an increase of 122.5%[99] - Interest expense decreased to $27,439 for the three months ended March 31, 2022, down by $1,359 or 4.7% from $28,798 in the same period of 2021[103] - The company recorded a net gain on the sale of real estate of $2,149 in the three months ended March 31, 2022, compared to a net gain of $54,004 in the same period of 2021, a decrease of 96.0%[101] - Funds From Operations (FFO) for Q1 2022 was $62,722,000, an increase of 10.4% from $56,609,000 in Q1 2021[112] - Normalized FFO for Q1 2022 was $62,722,000, slightly up from $61,809,000 in Q1 2021, resulting in a Normalized FFO per share of $1.30[112] Capital Expenditures and Investments - The total capital expenditures for Q1 2022 were $48.971 million, significantly higher than $16.402 million in Q1 2021[73] - The company has estimated unspent leasing-related obligations of $128.009 million, with $78.134 million expected to be spent over the next 12 months[75] - Estimated total project costs for the redevelopment of a property in Washington, D.C. are approximately $215,000,000, with 54% of the project pre-leased[124] - The company expects to incur approximately $144,000,000 in costs for the redevelopment of a three-property campus in Seattle, WA, with completion anticipated in Q2 2023[125] - The company is currently marketing over 30 properties containing over 3,000,000 rentable square feet for sale[88] - The company sold four properties during the three months ended March 31, 2022, for an aggregate sales price of $29,470 thousand[87] - The company has entered into agreements to sell two properties containing approximately 470,000 rentable square feet for an aggregate sales price of $38,300 thousand[88] Debt and Liquidity - As of March 31, 2022, the company had debt maturities totaling $2,609,996,000, with significant maturities in 2025 and thereafter[121] - The company maintains estimated unspent leasing-related obligations of $128,009,000, with $78,134,000 expected to be spent over the next 12 months[123] - As of March 31, 2022, the company had an aggregate outstanding principal balance of $2,512,000 in public senior unsecured notes and $97,996 in mortgage notes[130] - The company’s fixed rate debt totaled $2,609,996, with an annual interest expense of $100,612[136] - A hypothetical one percentage point increase in interest rates would increase the annual interest cost by approximately $26,100[138] - The company had no outstanding floating rate debt as of March 31, 2022, but its revolving credit facility matures on January 31, 2023[143] - If fully drawn on the revolving credit facility, a one percentage point increase in interest rates would raise annual interest expense from $12,000 to $19,500[145] - The company has a $750,000,000 revolving credit facility with no amounts outstanding as of March 31, 2022, providing significant liquidity for future acquisitions[118] Market and Economic Conditions - The company continues to monitor the impact of the COVID-19 pandemic on its operations, noting that it has not had a significant adverse impact to date[61] - The company expects to face risks related to the COVID-19 pandemic affecting tenants' ability to pay rent and overall leasing activity[153] - The company believes that recent shifts in workplace practices may impact lease renewals and space utilization by tenants[80] - The company anticipates that overall new leasing volume may remain volatile, particularly due to the ongoing effects of the COVID-19 pandemic and inflationary pressures[160] - The company believes it is well positioned to weather current economic conditions, but the future impact of the COVID-19 pandemic remains uncertain[160] Shareholder Distributions - Quarterly distributions to shareholders totaled $26,634,000 for the three months ended March 31, 2022, with a declared distribution of $0.55 per share for Q2 2022[128] - The company believes it is in a position to maintain or increase distributions to shareholders[153] - The company’s ability to sustain distributions to shareholders and meet debt obligations is influenced by factors such as tenant rent receipts, future earnings, and capital costs[156] Credit and Compliance - The company’s credit agreement includes cross default provisions for other debts exceeding $25,000[132] - The company is currently in compliance with the terms of its credit agreement and senior unsecured notes indentures[130] - The company’s credit ratings will impact borrowing costs, and any downgrade could increase the cost of debt capital[160] Management and Governance - The company’s business and property management agreements with RMR have 20-year terms but allow for early termination under certain circumstances[160] - The company expects to benefit from RMR's Environmental, Social and Governance (ESG) initiatives, but the realization of these benefits is uncertain[160]

INVESTOR PRESENTATION | Q3 2021 San Jose, CA OFFICE PROPERTIES INCOME TRUST WARNING REGARDING FORWARD LOOKING STATEMENTS, DISCLAIMERS AND NON-GAAP FINANCIAL MEASURES This presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other securities laws. Also, whenever we use words such as "believe", "expect", "anticipate", "intend", "plan", "estimate", "will", "may" and negatives or derivatives of these or similar expressions, we are making ...

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 ...

[PART I. Financial Information](index=4&type=section&id=PART%20I.%20Financial%20Information) [Item 1. Financial Statements (unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(unaudited)) This section presents the unaudited condensed consolidated financial statements and accompanying notes for the periods ended September 30, 2021 [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) | Metric | Sep 30, 2021 (in thousands) | Dec 31, 2020 (in thousands) | Change | | :-------------------------------- | :-------------------------- | :-------------------------- | :----- | | Total Assets | $4,239,878 | $3,946,436 | +$293,442 | | Total Liabilities | $2,733,898 | $2,337,044 | +$396,854 | | Total Shareholders' Equity | $1,505,980 | $1,609,392 | -$103,412 | | Real Estate Properties, net | $3,378,357 | $3,070,229 | +$308,128 | | Senior Unsecured Notes, net | $2,477,730 | $2,033,242 | +$444,488 | [Condensed Consolidated Statements of Comprehensive Income (Loss)](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)) | Metric (in thousands) | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | Change (YoY) | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | Change (YoY) | | :-------------------------------- | :-------------------------- | :-------------------------- | :----------- | :-------------------------- | :-------------------------- | :----------- | | Rental income | $147,572 | $145,806 | +1.2% | $429,195 | $441,294 | -2.7% | | Total expenses | $113,971 | $122,283 | -6.8% | $407,673 | $360,177 | +13.2% | | Loss on impairment of real estate | $(3) | $2,954 | -100.1% | $55,854 | $2,954 | +1789.4% | | Net income (loss) | $3,712 | $(3,797) | +197.8% | $(25,125) | $8,342 | -401.7% | | Net income (loss) per share (basic & diluted) | $0.08 | $(0.08) | +200.0% | $(0.52) | $0.17 | -405.9% | [Condensed Consolidated Statements of Shareholders' Equity](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Shareholders%27%20Equity) | Metric (in thousands) | Dec 31, 2020 | Sep 30, 2021 | Change | | :-------------------------------- | :----------- | :----------- | :----- | | Total Shareholders' Equity | $1,609,392 | $1,505,980 | -$103,412 | | Cumulative Net Income | $183,895 | $158,770 | -$25,125 | | Cumulative Common Distributions | $(1,190,291) | $(1,270,025) | -$79,734 | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) | Metric (in thousands) | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | Change | | :-------------------------------- | :-------------------------- | :-------------------------- | :----- | | Net cash provided by operating activities | $158,682 | $166,098 | -$7,416 | | Net cash (used in) provided by investing activities | $(435,698) | $18,104 | -$453,802 | | Net cash provided by (used in) financing activities | $276,181 | $(227,259) | +$503,440 | | Cash, cash equivalents and restricted cash at end of period | $56,020 | $57,639 | -$1,619 | - Investing activities saw a significant increase in real estate acquisitions (**$563,447 thousand in 2021** vs $11,864 thousand in 2020) and real estate improvements (**$65,186 thousand in 2021** vs $55,135 thousand in 2020)[18](index=18&type=chunk) - Financing activities were boosted by proceeds from issuance of senior unsecured notes (**$1,041,809 thousand in 2021** vs $408,932 thousand in 2020), partially offset by higher repayments of senior unsecured notes (**$610,000 thousand in 2021** vs $400,000 thousand in 2020) and mortgage notes payable (**$72,238 thousand in 2021** vs $154,734 thousand in 2020)[18](index=18&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) The notes provide essential context for the financial statements, covering accounting policies, real estate, debt, and related person transactions [Note 1. Basis of Presentation](index=10&type=section&id=Note%201.%20Basis%20of%20Presentation) - Financial statements are unaudited and condensed, prepared in conformity with GAAP, and rely on estimates and assumptions[24](index=24&type=chunk)[25](index=25&type=chunk) [Note 2. Per Common Share Amounts](index=10&type=section&id=Note%202.%20Per%20Common%20Share%20Amounts) | Metric (in thousands) | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Weighted average common shares for basic earnings per share | 48,211 | 48,132 | 48,179 | 48,111 | | Weighted average common shares for diluted earnings per share | 48,244 | 48,132 | 48,179 | 48,111 | [Note 3. Real Estate Properties](index=10&type=section&id=Note%203.%20Real%20Estate%20Properties) - As of September 30, 2021, the company's portfolio included **178 wholly-owned properties** (23,274,000 rentable square feet) and noncontrolling interests in two unconsolidated joint ventures owning three properties (444,000 rentable square feet)[27](index=27&type=chunk) - During the nine months ended September 30, 2021, the company entered into **65 leases** for approximately 1,782,000 rentable square feet with a weighted average lease term of **10.9 years**, committing approximately **$129,980 thousand** in leasing-related costs[27](index=27&type=chunk) [Acquisition Activities](index=11&type=section&id=Acquisition%20Activities) | Acquisition Date | Location | Number of Properties | Rentable Square Feet | Purchase Price (in thousands) | | :--------------- | :------- | :------------------- | :------------------- | :---------------------------- | | June 2021 | Chicago, IL | 1 | 531,000 | $368,331 | | June 2021 | Atlanta, GA | 1 | 346,000 | $180,602 | | August 2021 | Boston, MA | 1 | 49,000 | $27,545 | | **Total** | | **3** | **926,000** | **$576,478** | [Disposition Activities](index=11&type=section&id=Disposition%20Activities) - Sold six properties and one warehouse facility (2,565,000 rentable square feet) for **$198,415 thousand**, resulting in a **$54,154 thousand gain on sale**[31](index=31&type=chunk)[32](index=32&type=chunk) - As of September 30, 2021, five properties and two land parcels were classified as held for sale, with an aggregate sales price of **$84,500 thousand**[34](index=34&type=chunk) - Recorded a **$10,658 thousand impairment loss** on three properties classified as held for sale[36](index=36&type=chunk) [Unconsolidated Joint Ventures](index=12&type=section&id=Unconsolidated%20Joint%20Ventures) | Joint Venture | OPI Ownership | OPI Carrying Value (Sep 30, 2021, in thousands) | Number of Properties | Rentable Square Feet | Mortgage Debt (in thousands) | | :-------------------- | :------------ | :-------------------------------------------- | :------------------- | :------------------- | :--------------------------- | | Prosperity Metro Plaza | 51% | $21,142 | 2 | 329,000 | $50,000 | | 1750 H Street, NW | 50% | $14,686 | 1 | 115,000 | $32,000 | | **Total** | | **$35,828** | **3** | **444,000** | **$82,000** | - The mortgage debt of unconsolidated joint ventures is **non-recourse** to OPI[39](index=39&type=chunk) [Note 4. Leases](index=13&type=section&id=Note%204.%20Leases) - Rental income from operating leases is recognized on a **straight-line basis**[41](index=41&type=chunk) | Metric (in thousands) | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Straight line rent adjustments | $3,924 | $3,912 | $13,128 | $12,963 | | Variable payments (incl. reimbursements) | $24,098 | $18,606 | $60,446 | $56,654 | [Note 5. Concentration](index=13&type=section&id=Note%205.%20Concentration) | Tenant Type | % of Annualized Rental Income (Sep 30, 2021) | % of Annualized Rental Income (Sep 30, 2020) | | :-------------------- | :------------------------------------------- | :------------------------------------------- | | U.S. Government | 19.7% | 25.2% | | All Government Tenants | 29.8% | 35.6% | - Geographic concentration: **21.5% of annualized rental income** is derived from properties located in the metropolitan Washington, D.C. market area[100](index=100&type=chunk) - As of September 30, 2021, **52.3% of annualized rental income** came from investment-grade rated tenants (or those with investment-grade parent guarantees), with an additional 10.2% from subsidiaries of investment-grade parents without guarantees[101](index=101&type=chunk) [Note 6. Indebtedness](index=13&type=section&id=Note%206.%20Indebtedness) | Debt Type | Outstanding Principal (Sep 30, 2021, in thousands) | | :-------------------- | :------------------------------------------- | | Senior unsecured notes | $2,512,000 | | Mortgage notes | $98,604 | - The company has a **$750,000 thousand revolving credit facility**, with no outstanding amounts as of September 30, 2021, and October 27, 2021[47](index=47&type=chunk)[48](index=48&type=chunk) [Senior Unsecured Note Issuances](index=14&type=section&id=Senior%20Unsecured%20Note%20Issuances) | Issue Date | Amount (in thousands) | Interest Rate | Maturity Date | Net Proceeds (in thousands) | | :--------- | :-------------------- | :------------ | :------------ | :-------------------------- | | May 2021 | $300,000 | 2.650% | June 15, 2026 | $296,826 | | August 2021 | $350,000 | 2.400% | Feb 1, 2027 | $346,630 | | Sept 2021 | $400,000 | 3.450% | Oct 15, 2031 | $395,698 | [Senior Unsecured Note Redemptions](index=14&type=section&id=Senior%20Unsecured%20Note%20Redemptions) - Redeemed **$310,000 thousand** of 5.875% senior unsecured notes due 2046 in June 2021, recognizing an **$8,581 thousand loss** on early extinguishment of debt[53](index=53&type=chunk) - Redeemed **$300,000 thousand** of 4.15% senior unsecured notes due 2022 in September 2021, recognizing a **$2,274 thousand loss** on early extinguishment of debt[54](index=54&type=chunk) [Mortgage Note Repayment](index=14&type=section&id=Mortgage%20Note%20Repayment) - Prepaid a **$71,000 thousand mortgage note** in June 2021, resulting in a **$3,213 thousand loss** on early extinguishment of debt[55](index=55&type=chunk) [Note 7. Fair Value of Assets and Liabilities](index=15&type=section&id=Note%207.%20Fair%20Value%20of%20Assets%20and%20Liabilities) | Financial Instrument (in thousands) | Carrying Value (Sep 30, 2021) | Fair Value (Sep 30, 2021) | Carrying Value (Dec 31, 2020) | Fair Value (Dec 31, 2020) | | :-------------------------------- | :---------------------------- | :------------------------ | :---------------------------- | :------------------------ | | Senior unsecured notes, total | $2,477,730 (net) | $2,609,692 (est) | $2,033,242 (net) | $2,159,900 (est) | | Mortgage notes payable | $98,460 | $101,351 | $169,729 | $174,952 | - Recorded impairment charges of **$10,658 thousand** to reduce the carrying value of three properties held for sale to their estimated fair value less costs to sell[57](index=57&type=chunk) [Note 8. Shareholders' Equity](index=16&type=section&id=Note%208.%20Shareholders%27%20Equity) - Awarded **3,500 common shares** to eight Trustees on June 17, 2021, valued at $29.88 per share[61](index=61&type=chunk) - Awarded **117,800 common shares** to officers and RMR LLC employees on September 15, 2021, valued at $25.42 per share[62](index=62&type=chunk) - Purchased **25,533 common shares** during Q3 2021 and **37,542 shares** during the nine months ended September 30, 2021, at weighted average prices of $25.24 and $26.55 per share, respectively, to satisfy tax withholding obligations[63](index=63&type=chunk) [Distributions](index=16&type=section&id=Distributions) | Declaration Date | Record Date | Paid Date | Distributions Per Common Share | Total Distributions (in thousands) | | :--------------- | :---------- | :-------- | :----------------------------- | :--------------------------------- | | Jan 14, 2021 | Jan 25, 2021 | Feb 18, 2021 | $0.55 | $26,575 | | April 15, 2021 | April 26, 2021 | May 20, 2021 | $0.55 | $26,575 | | July 15, 2021 | July 26, 2021 | Aug 19, 2021 | $0.55 | $26,584 | | **Total (9 months)** | | | **$1.65** | **$79,734** | [Note 9. Business and Property Management Agreements with RMR LLC](index=16&type=section&id=Note%209.%20Business%20and%20Property%20Management%20Agreements%20with%20RMR%20LLC) - OPI has **no employees** and relies on RMR LLC for all management services[65](index=65&type=chunk) | Metric (in thousands) | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net business management fees | $(1,738) | $4,236 | $18,287 | $13,237 | | Net property management & construction supervision fees | $5,519 | $5,189 | $15,045 | $15,381 | - The business management agreement was amended effective August 1, 2021, to replace the SNL U.S. REIT Office Index with the **MSCI U.S. REIT/Office REIT Index** for incentive management fee calculation[67](index=67&type=chunk) [Note 10. Related Person Transactions](index=17&type=section&id=Note%2010.%20Related%20Person%20Transactions) - Adam Portnoy, Chair of OPI's Board, is also the controlling shareholder of RMR Inc. (parent of RMR LLC) and a director/controlling shareholder of Sonesta. Other OPI officers are also RMR LLC employees[70](index=70&type=chunk) [Leases with RMR LLC](index=18&type=section&id=Leases%20with%20RMR%20LLC) | Metric (in thousands) | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Rental income from RMR LLC | $275 | $282 | $850 | $836 | [Sonesta](index=18&type=section&id=Sonesta) - Entered a **30-year lease** with Sonesta for a hotel component in a Washington, D.C. redevelopment, with an estimated annual base rent of **$6,436 thousand** starting Q1 2023[74](index=74&type=chunk) - Estimated total cost to build the hotel space is approximately **$66,000 thousand**[74](index=74&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=19&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on financial condition, operating results, performance drivers, and liquidity [OVERVIEW](index=19&type=section&id=OVERVIEW) The overview details the company's property portfolio, tenant base, and recent acquisition, disposition, and financing activities - OPI is a REIT with **178 wholly-owned properties** and interests in two unconsolidated joint ventures, totaling approximately **23,274,000 rentable square feet** across 33 states and D.C[78](index=78&type=chunk) - Weighted average remaining lease term is approximately **6.0 years**, with the U.S. government as the largest tenant, representing **19.7% of annualized rental income**[78](index=78&type=chunk) [COVID-19 Pandemic](index=19&type=section&id=COVID-19%20Pandemic) - COVID-19 pandemic has **not had a significant impact** on OPI's business to date[79](index=79&type=chunk) - Granted **$2,483 thousand** in temporary rent assistance to 18 tenants (3.3% of annualized rental income), with **over 95% of deferred rents collected** as of October 26, 2021[79](index=79&type=chunk) [Property Operations](index=19&type=section&id=Property%20Operations) | Metric | Sep 30, 2021 | Sep 30, 2020 | Change | | :-------------------- | :----------- | :----------- | :----- | | Total rentable square feet | 23,274,000 | 24,909,000 | -6.6% | | Percent leased | 89.0% | 91.2% | -2.2 pp | | Metric | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Average effective rental rate per sq ft (All properties) | $28.86 | $25.85 | $27.12 | $25.89 | | Average effective rental rate per sq ft (Comparable properties) | $27.40 | $27.26 | $27.37 | $27.22 | | Leasing Activity (9 Months Ended Sep 30, 2021) | New Leases | Renewals | Total | | :------------------------------------------- | :--------- | :--------- | :---- | | Rentable square feet leased (in thousands) | 576 | 1,206 | 1,782 | | Weighted average rental rate change | 9.8% | 5.3% | 7.0% | | Weighted average lease term (years) | 18.9 | 7.1 | 10.9 | - As of September 30, 2021, **2,317,000 rentable square feet** are scheduled to expire through December 31, 2022, with **758,000 square feet expected not to renew**[93](index=93&type=chunk) - Tenants with early termination rights occupy approximately **5.6% of rentable square feet** and contribute **5.5% of annualized rental income**[95](index=95&type=chunk) - 14 government tenants (**6.0% of rentable square feet**, 6.6% of annualized rental income) have termination rights if funding is not appropriated[95](index=95&type=chunk) [Acquisition Activities](index=25&type=section&id=Acquisition%20Activities) - Acquired three properties (926,000 rentable square feet) for **$576,975 thousand** during the nine months ended September 30, 2021[104](index=104&type=chunk) [Disposition Activities](index=26&type=section&id=Disposition%20Activities) - Sold six properties and one warehouse facility (2,565,000 rentable square feet) for **$198,415 thousand** during the nine months ended September 30, 2021[105](index=105&type=chunk) - Sold two vacant land parcels for **$28,500 thousand** in October 2021[105](index=105&type=chunk) - Agreement to sell five properties for **$56,000 thousand** is pending; 17 properties (2,161,000 rentable square feet) are currently marketed for sale, expected to generate **$200,000 thousand** in gross proceeds by mid-2022[106](index=106&type=chunk) [Financing Activities](index=26&type=section&id=Financing%20Activities) - Engaged in significant debt refinancing, issuing new senior unsecured notes and redeeming existing ones to manage interest rates and maturities[108](index=108&type=chunk)[109](index=109&type=chunk)[110](index=110&type=chunk)[111](index=111&type=chunk)[112](index=112&type=chunk) [Senior Unsecured Note Issuances](index=26&type=section&id=Senior%20Unsecured%20Note%20Issuances) - Issued **$300,000 thousand** of 2.650% notes due 2026, **$350,000 thousand** of 2.400% notes due 2027, and **$400,000 thousand** of 3.450% notes due 2031[108](index=108&type=chunk)[109](index=109&type=chunk)[110](index=110&type=chunk) [Senior Unsecured Note Redemptions](index=26&type=section&id=Senior%20Unsecured%20Note%20Redemptions) - Redeemed **$310,000 thousand** of 5.875% senior unsecured notes due 2046 in June 2021[111](index=111&type=chunk) - Redeemed **$300,000 thousand** of 4.15% senior unsecured notes due 2022 in September 2021[111](index=111&type=chunk) [Mortgage Note Repayment](index=26&type=section&id=Mortgage%20Note%20Repayment) - Prepaid a **$71,000 thousand mortgage note** in June 2021[112](index=112&type=chunk) [Segment Information](index=26&type=section&id=Segment%20Information) - OPI operates in one business segment: **ownership of real estate properties**[113](index=113&type=chunk) [RESULTS OF OPERATIONS](index=27&type=section&id=RESULTS%20OF%20OPERATIONS) This section analyzes financial performance for the three and nine months ended September 30, 2021, compared to the prior year [Three Months Ended September 30, 2021, Compared to Three Months Ended September 30, 2020](index=27&type=section&id=Three%20Months%20Ended%20September%2030%2C%202021%2C%20Compared%20to%20Three%20Months%20Ended%20September%2030%2C%202020) | Metric (in thousands) | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | $ Change | % Change | | :-------------------------------- | :-------------------------- | :-------------------------- | :------- | :------- | | Rental income | $147,572 | $145,806 | $1,766 | 1.2% | | Total expenses | $113,971 | $122,283 | $(8,312) | -6.8% | | Loss on impairment of real estate | $(3) | $2,954 | $(2,957) | -100.1% | | General and administrative | $448 | $7,059 | $(6,611) | -93.7% | | Net income (loss) | $3,712 | $(3,797) | $7,509 | -197.8% | - General and administrative expenses decreased significantly due to a **$6,627 thousand reversal** of previously accrued estimated business management incentive fees[124](index=124&type=chunk) - Interest expense decreased due to **lower weighted average interest rates** incurred on outstanding balances as a result of financing activities since July 1, 2020[127](index=127&type=chunk) [Nine Months Ended September 30, 2021, Compared to Nine Months Ended September 30, 2020](index=29&type=section&id=Nine%20Months%20Ended%20September%2030%2C%202021%2C%20Compared%20to%20Nine%20Months%20Ended%20September%2030%2C%202020) | Metric (in thousands) | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | $ Change | % Change | | :-------------------------------- | :-------------------------- | :-------------------------- | :------- | :------- | | Rental income | $429,195 | $441,294 | $(12,099) | -2.7% | | Total operating expenses | $148,138 | $146,511 | $1,627 | 1.1% | | Loss on impairment of real estate | $55,854 | $2,954 | $52,900 | n/m | | General and administrative | $24,690 | $21,372 | $3,318 | 15.5% | | Gain on sale of real estate | $54,154 | $10,822 | $43,332 | n/m | | Interest expense | $(84,728) | $(79,461) | $(5,267) | 6.6% | | Net income (loss) | $(25,125) | $8,342 | $(33,467) | n/m | - Loss on impairment of real estate increased significantly to **$55,854 thousand** (from $2,954 thousand), including **$45,196 thousand** related to sold properties and **$10,658 thousand** for properties held for sale[139](index=139&type=chunk) - Interest expense increased due to **higher average outstanding debt balances** from new senior unsecured note issuances, partially offset by lower interest rates on outstanding amounts[143](index=143&type=chunk) [Non-GAAP Financial Measures](index=31&type=section&id=Non-GAAP%20Financial%20Measures) This section presents and reconciles non-GAAP measures like NOI and FFO used by management to evaluate operating performance [Net Operating Income](index=31&type=section&id=Net%20Operating%20Income) - NOI is a non-GAAP measure used to evaluate property-level performance, excluding depreciation, amortization, impairment, and gains/losses on real estate sales[147](index=147&type=chunk)[148](index=148&type=chunk) | Metric (in thousands) | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | Change (YoY) | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | Change (YoY) | | :-------------------- | :-------------------------- | :-------------------------- | :----------- | :-------------------------- | :-------------------------- | :----------- | | NOI | $93,579 | $95,763 | -2.3% | $281,057 | $294,783 | -4.7% | [Funds From Operations and Normalized Funds From Operations](index=32&type=section&id=Funds%20From%20Operations%20and%20Normalized%20Funds%20From%20Operations) - FFO and Normalized FFO are non-GAAP measures used to assess operating performance and inform distribution decisions[151](index=151&type=chunk) | Metric (in thousands) | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | Change (YoY) | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | Change (YoY) | | :-------------------------------- | :-------------------------- | :-------------------------- | :----------- | :-------------------------- | :-------------------------- | :----------- | | FFO | $63,951 | $62,628 | +2.1% | $158,240 | $193,536 | -18.2% | | Normalized FFO | $59,598 | $62,628 | -4.9% | $176,792 | $197,375 | -10.4% | | FFO per common share | $1.33 | $1.30 | +2.3% | $3.28 | $4.02 | -18.4% | | Normalized FFO per common share | $1.24 | $1.30 | -4.6% | $3.67 | $4.10 | -10.5% | [LIQUIDITY AND CAPITAL RESOURCES](index=32&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) This section discusses the company's ability to meet financial obligations, detailing its sources of cash and capital recycling strategy - Principal sources of funds include operating cash flows, net proceeds from property sales, and borrowings under the **$750,000 thousand revolving credit facility**[154](index=154&type=chunk)[159](index=159&type=chunk) - The company expects to accretively grow its portfolio through a **capital recycling program**, selling properties to fund acquisitions and maintain investment-grade ratings[157](index=157&type=chunk) [Our Operating Liquidity and Resources](index=32&type=section&id=Our%20Operating%20Liquidity%20and%20Resources) - Net cash provided by operating activities decreased to **$158,682 thousand** for the nine months ended September 30, 2021, from $166,098 thousand in the prior year, primarily due to a decline in NOI[158](index=158&type=chunk) - Declared a regular quarterly cash distribution of **$0.55 per common share** ($2.20 per common share per year)[156](index=156&type=chunk) [Our Investment and Financing Liquidity and Resources](index=33&type=section&id=Our%20Investment%20and%20Financing%20Liquidity%20and%20Resources) - **$750,000 thousand revolving credit facility** available for borrowing, with no outstanding amounts as of September 30, 2021, and October 27, 2021[160](index=160&type=chunk) - The maximum borrowing availability under the revolving credit facility can be increased to up to **$1,950,000 thousand** in certain circumstances[161](index=161&type=chunk) - Estimated unspent leasing related obligations of **$129,369 thousand** as of September 30, 2021, with **$69,248 thousand** expected to be spent in the next 12 months[170](index=170&type=chunk) - Redeveloping a property in Washington, D.C., with estimated total project costs of **$200,000 thousand** and completion in Q1 2023; **54% pre-leased**[171](index=171&type=chunk) [Senior Unsecured Note Issuances](index=34&type=section&id=Senior%20Unsecured%20Note%20Issuances) - Issued **$300,000 thousand** of 2.650% notes due 2026, **$350,000 thousand** of 2.400% notes due 2027, and **$400,000 thousand** of 3.450% notes due 2031[163](index=163&type=chunk)[164](index=164&type=chunk)[165](index=165&type=chunk) [Senior Unsecured Note Redemptions](index=34&type=section&id=Senior%20Unsecured%20Note%20Redemptions) - Redeemed **$310,000 thousand** of 5.875% senior unsecured notes due 2046 in June 2021[166](index=166&type=chunk) - Redeemed **$300,000 thousand** of 4.15% senior unsecured notes due 2022 in September 2021[166](index=166&type=chunk) [Mortgage Note Repayment](index=34&type=section&id=Mortgage%20Note%20Repayment) - Prepaid a **$71,000 thousand mortgage note** in June 2021[167](index=167&type=chunk) [U.S. Government Funding](index=36&type=section&id=U.S.%20Government%20Funding) - U.S. government debt ceiling increased, providing funding until December 3, 2021; future increases are uncertain and could impact rent payments[177](index=177&type=chunk) [Debt Covenants](index=36&type=section&id=Debt%20Covenants) - OPI was **in compliance with all debt covenants** under its credit agreement and senior unsecured notes indentures as of September 30, 2021[178](index=178&type=chunk) - Covenants restrict debt incurrence and distributions, and a downgrade in credit rating would increase interest expense and costs under the credit agreement[178](index=178&type=chunk)[179](index=179&type=chunk) [Related Person Transactions](index=36&type=section&id=Related%20Person%20Transactions) - OPI has ongoing relationships and transactions with RMR LLC, RMR Inc., and other related parties, as detailed in Notes 9 and 10[181](index=181&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=36&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section outlines the company's exposure to market risks, primarily interest rate fluctuations, and its management strategies - OPI manages interest rate exposure by monitoring financing alternatives, with **no material change in strategy** since December 31, 2020[182](index=182&type=chunk) [Fixed Rate Debt](index=37&type=section&id=Fixed%20Rate%20Debt) | Debt Type | Principal Balance (Sep 30, 2021, in thousands) | Annual Interest Rate | | :-------------------- | :------------------------------------------- | :------------------- | | Senior unsecured notes | $2,512,000 | 2.400% - 6.375% | | Mortgage notes | $98,604 | 3.700% - 4.800% | | **Total** | **$2,610,604** | | - A hypothetical one percentage point increase in interest rates would increase annual interest cost by approximately **$26,106 thousand** if fixed-rate debt were refinanced[184](index=184&type=chunk) - A hypothetical one percentage point increase in interest rates would decrease the fair value of fixed-rate debt obligations by approximately **$119,658 thousand**[185](index=185&type=chunk) [Floating Rate Debt](index=38&type=section&id=Floating%20Rate%20Debt) - **No outstanding floating rate debt** as of September 30, 2021[189](index=189&type=chunk) | Scenario | Outstanding Debt (in thousands) | Annual Interest Expense (in thousands) | Annual Earnings Per Share Impact | | :-------------------------------- | :------------------------------ | :------------------------------------- | :------------------------------- | | Fully drawn revolving credit facility (Sep 30, 2021) | $750,000 | $9,000 (at 1.2%) | $0.19 | | +1% interest rate increase | $750,000 | $16,500 (at 2.2%) | $0.34 | [LIBOR Phase Out](index=38&type=section&id=LIBOR%20Phase%20Out) - LIBOR is expected to be phased out by **June 30, 2023**, for pre-existing contracts[194](index=194&type=chunk) - The company expects its revolving credit facility's interest rate determination to be revised to approximate existing LIBOR-based rates, but cannot be sure of the outcome[194](index=194&type=chunk) [Item 4. Controls and Procedures](index=38&type=section&id=Item%204.%20Controls%20and%20Procedures) This section confirms management's evaluation of disclosure controls and procedures, concluding they are effective - Disclosure controls and procedures were evaluated and **deemed effective** as of September 30, 2021[195](index=195&type=chunk) - **No material changes** in internal control over financial reporting occurred during the quarter ended September 30, 2021[196](index=196&type=chunk) [Warning Concerning Forward-Looking Statements](index=39&type=section&id=Warning%20Concerning%20Forward-Looking%20Statements) This section cautions that the report contains forward-looking statements and actual results may differ materially due to various risks - The report contains forward-looking statements regarding business aspects like COVID-19 impact, tenant strength, leasing, capital recycling, and financial performance[198](index=198&type=chunk)[199](index=199&type=chunk) - Actual results may differ materially due to known and unknown risks, uncertainties, and other factors, many of which are beyond the company's control[201](index=201&type=chunk)[206](index=206&type=chunk) [Statement Concerning Limited Liability](index=43&type=section&id=Statement%20Concerning%20Limited%20Liability) This statement clarifies that the company's declaration of trust limits the personal liability of its trustees, officers, and agents - The declaration of trust limits personal liability for trustees, officers, shareholders, employees, or agents, directing all claims solely to the assets of Office Properties Income Trust[210](index=210&type=chunk) [PART II. Other Information](index=42&type=section&id=PART%20II.%20Other%20Information) [Item 1A. Risk Factors](index=43&type=section&id=Item%201A.%20Risk%20Factors) This section states there have been no material changes to the risk factors previously disclosed in the 2020 Annual Report - **No material changes** to risk factors from the 2020 Annual Report[211](index=211&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=43&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details the company's purchases of its own equity securities during the quarter to satisfy tax withholding obligations | Calendar Month | Number of Shares Purchased | Average Price Paid per Share | | :------------- | :------------------------- | :--------------------------- | | September 2021 | 25,533 | $25.24 | - Share purchases were made to satisfy tax withholding and payment obligations for share awards to Trustees, officers, and RMR LLC employees[212](index=212&type=chunk) [Item 6. Exhibits](index=43&type=section&id=Item%206.%20Exhibits) This section provides a comprehensive list of all exhibits filed as part of the Form 10-Q - Lists various exhibits, including organizational documents, indentures for senior unsecured notes, management agreements, and certifications[213](index=213&type=chunk)[215](index=215&type=chunk)[217](index=217&type=chunk) [SIGNATURES](index=46&type=section&id=SIGNATURES) [SIGNATURES](index=46&type=section&id=SIGNATURES) This section contains the official signatures of the company's officers, certifying the filing of the report - The report was signed by Christopher J. Bilotto (President and Chief Operating Officer) and Matthew C. Brown (Chief Financial Officer and Treasurer) on October 28, 2021[220](index=220&type=chunk)

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 ...