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

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

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

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)