UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, ~~2021~~2022

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 1-34364

OFFICE PROPERTIES INCOME TRUST

(Exact Name of Registrant as Specified in Its Charter)


Maryland						26-4273474
(State or Other Jurisdiction of Incorporation or Organization)						(IRS Employer Identification No.)

Two Newton Place, 255 Washington Street, Suite 300, Newton, Massachusetts 02458-1634

(Address of Principal Executive Offices) (Zip Code)

617-219-1440

(Registrant’s Telephone Number, Including Area Code)

Securities Registered Pursuant to Section 12(b) of the Act:

Title of Each Class

Trading Symbol(s)

Name Of Each Exchange On Which Registered

Common Shares of Beneficial Interest

OPI

The Nasdaq Stock Market LLC

6.375% Senior Notes due 2050

OPINL

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Number of registrant’s common shares of beneficial interest, $.01 par value per share, outstanding as of October ~~27, 2021: 48,425,665~~26, 2022: 48,566,059

Table of Contents

OFFICE PROPERTIES INCOME TRUST

FORM 10-Q

September 30, ~~2021~~2022

INDEX


		Page
PART I.	Financial Information

Item 1.	Financial Statements (unaudited)

	Condensed Consolidated Balance Sheets — September 30, ~~2021~~2022 and December 31, ~~2020~~2021	3

	Condensed Consolidated Statements of Comprehensive Income (Loss) — Three and Nine Months Ended September 30, ~~2021~~2022 and ~~2020~~2021	4

	Condensed Consolidated Statements of Shareholders’ Equity — Three and Nine Months Ended September 30, ~~2021~~2022 and ~~2020~~2021	5

	Condensed Consolidated Statements of Cash Flows — Nine Months Ended September 30, ~~2021~~2022 and ~~2020~~2021	7

	Notes to Condensed Consolidated Financial Statements	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1817

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3533

Item 4.	Controls and Procedures	3735

	Warning Concerning Forward-Looking Statements	3836

	Statement Concerning Limited Liability	4240

PART II.	Other Information

Item 1A.	Risk Factors	4240

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4240

Item 6.	Exhibits	4240

	Signatures	4543

References in this Quarterly Report on Form 10-Q to “the Company”, “OPI”, “we”, “us” or “our” include Office Properties Income Trust and its consolidated subsidiaries unless otherwise expressly stated or the context indicates otherwise.

Table of Contents

PART I. Financial Information

Item 1. Financial Statements

OFFICE PROPERTIES INCOME TRUST

CONDENSED CONSOLIDATED BALANCE SHEETS

(dollars in thousands, except per share data)

(unaudited)


		September 30, 2021		December 31, 2020			September 30, 2022		December 31, 2021
ASSETS	ASSETS					ASSETS
Real estate properties:	Real estate properties:					Real estate properties:
Land	Land	$	873,488	$	830,884	Land	$	826,948	$	874,108
Buildings and improvements	Buildings and improvements	2,964,277		2,691,259		Buildings and improvements	3,049,397		3,036,978
Total real estate properties, gross	Total real estate properties, gross	3,837,765		3,522,143		Total real estate properties, gross	3,876,345		3,911,086
Accumulated depreciation	Accumulated depreciation	(459,408)		(451,914)		Accumulated depreciation	(538,436)		(495,912)
Total real estate properties, net	Total real estate properties, net	3,378,357		3,070,229		Total real estate properties, net	3,337,909		3,415,174
Assets of properties held for sale	Assets of properties held for sale	71,873		75,177		Assets of properties held for sale	4,498		26,598
Investments in unconsolidated joint ventures	Investments in unconsolidated joint ventures	35,828		37,951		Investments in unconsolidated joint ventures	35,070		34,838
Acquired real estate leases, net	Acquired real estate leases, net	536,772		548,943		Acquired real estate leases, net	396,263		505,629
Cash and cash equivalents	Cash and cash equivalents	54,881		42,045		Cash and cash equivalents	14,005		83,026
Restricted cash	Restricted cash	1,139		14,810		Restricted cash	1,520		1,489
Rents receivable	Rents receivable	97,507		101,766		Rents receivable	105,391		112,886
Due from related persons						Due from related persons	464		—
Deferred leasing costs, net	Deferred leasing costs, net	52,182		42,626		Deferred leasing costs, net	63,951		53,883
Other assets, net	Other assets, net	11,339		12,889		Other assets, net	9,915		8,160
Total assets	Total assets	$	4,239,878	$	3,946,436	Total assets	$	3,968,986	$	4,241,683

LIABILITIES AND SHAREHOLDERS’ EQUITY	LIABILITIES AND SHAREHOLDERS’ EQUITY					LIABILITIES AND SHAREHOLDERS’ EQUITY
Unsecured revolving credit facility	Unsecured revolving credit facility	$	—	$	—	Unsecured revolving credit facility	$	135,000	$	—
Senior unsecured notes, net	Senior unsecured notes, net	2,477,730		2,033,242		Senior unsecured notes, net	2,185,974		2,479,772
Mortgage notes payable, net	Mortgage notes payable, net	98,460		169,729		Mortgage notes payable, net	72,841		98,178
Liabilities of properties held for sale	Liabilities of properties held for sale	1,059		891		Liabilities of properties held for sale	1,217		594
Accounts payable and other liabilities	Accounts payable and other liabilities	126,317		116,480		Accounts payable and other liabilities	152,945		142,609
Due to related persons	Due to related persons	12,571		6,114		Due to related persons	—		6,787
Assumed real estate lease obligations, net	Assumed real estate lease obligations, net	17,761		10,588		Assumed real estate lease obligations, net	14,844		17,034
Total liabilities	Total liabilities	2,733,898		2,337,044		Total liabilities	2,562,821		2,744,974

Commitments and contingencies	Commitments and contingencies	0		0		Commitments and contingencies

Shareholders’ equity:	Shareholders’ equity:					Shareholders’ equity:
Common shares of beneficial interest, $0.01 par value: 200,000,000 shares authorized, 48,425,924 and 48,318,366 shares issued and outstanding, respectively		484		483
Common shares of beneficial interest, $0.01 par value: 200,000,000 shares authorized, 48,566,206 and 48,425,665 shares issued and outstanding, respectively						Common shares of beneficial interest, $0.01 par value: 200,000,000 shares authorized, 48,566,206 and 48,425,665 shares issued and outstanding, respectively	486		484
Additional paid in capital	Additional paid in capital	2,616,751		2,615,305		Additional paid in capital	2,619,041		2,617,169
Cumulative net income	Cumulative net income	158,770		183,895		Cumulative net income	163,216		175,715

Cumulative common distributions	Cumulative common distributions	(1,270,025)		(1,190,291)		Cumulative common distributions	(1,376,578)		(1,296,659)
Total shareholders’ equity	Total shareholders’ equity	1,505,980		1,609,392		Total shareholders’ equity	1,406,165		1,496,709
Total liabilities and shareholders’ equity	Total liabilities and shareholders’ equity	$	4,239,878	$	3,946,436	Total liabilities and shareholders’ equity	$	3,968,986	$	4,241,683

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Table of Contents

OFFICE PROPERTIES INCOME TRUST

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(amounts in thousands, except per share data)

(unaudited)


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2021		2020		2021		2020			2022		2021		2022		2021

Rental income	Rental income	$	147,572	$	145,806	$	429,195	$	441,294	Rental income	$	137,683	$	147,572	$	426,353	$	429,195

Expenses:	Expenses:									Expenses:
Real estate taxes	Real estate taxes	20,067		16,113		52,133		48,701		Real estate taxes	16,414		20,067		49,642		52,133
Utility expenses	Utility expenses	7,389		7,564		19,131		19,777		Utility expenses	7,986		7,389		20,671		19,131
Other operating expenses	Other operating expenses	26,537		26,366		76,874		78,033		Other operating expenses	27,737		26,537		81,597		76,874
Depreciation and amortization	Depreciation and amortization	59,533		62,227		178,991		189,340		Depreciation and amortization	52,988		59,533		170,993		178,991
Loss on impairment of real estate	Loss on impairment of real estate	(3)		2,954		55,854		2,954		Loss on impairment of real estate	—		(3)		21,820		55,854

Acquisition and transaction related costs										Acquisition and transaction related costs	—		—		224		—
General and administrative	General and administrative	448		7,059		24,690		21,372		General and administrative	6,564		448		19,353		24,690
Total expenses	Total expenses	113,971		122,283		407,673		360,177		Total expenses	111,689		113,971		364,300		407,673

Gain on sale of real estate	Gain on sale of real estate	36		—		54,154		10,822		Gain on sale of real estate	16,925		36		7,437		54,154

Interest and other income	Interest and other income	—		2		7		738		Interest and other income	56		—		73		7
Interest expense (including net amortization of debt premiums, discounts and issuance costs of $2,442, $2,477, $7,366 and $7,162, respectively)		(26,929)		(27,097)		(84,728)		(79,461)
Interest expense (including net amortization of debt premiums, discounts and issuance costs of $2,176, $2,442, $6,946 and $7,366, respectively)										Interest expense (including net amortization of debt premiums, discounts and issuance costs of $2,176, $2,442, $6,946 and $7,366, respectively)	(24,969)		(26,929)		(78,923)		(84,728)
Loss on early extinguishment of debt	Loss on early extinguishment of debt	(2,274)		—		(14,068)		(3,839)		Loss on early extinguishment of debt	—		(2,274)		(77)		(14,068)
Income (loss) before income tax (expense) benefit and equity in net losses of investees		4,434		(3,572)		(23,113)		9,377
Income tax (expense) benefit		(34)		54		(348)		(220)
Income (loss) before income tax expense and equity in net losses of investees										Income (loss) before income tax expense and equity in net losses of investees	18,006		4,434		(9,437)		(23,113)
Income tax expense										Income tax expense	(90)		(34)		(431)		(348)
Equity in net losses of investees	Equity in net losses of investees	(688)		(279)		(1,664)		(815)		Equity in net losses of investees	(952)		(688)		(2,631)		(1,664)

Net income (loss)	Net income (loss)	3,712		(3,797)		(25,125)		8,342		Net income (loss)	$	16,964	$	3,712	$	(12,499)	$	(25,125)

Other comprehensive income (loss):
Unrealized gain on financial instrument		—		85		—		200

Other comprehensive income		—		85		—		200
Comprehensive income (loss)		$	3,712	$	(3,712)	$	(25,125)	$	8,542

Weighted average common shares outstanding (basic)	Weighted average common shares outstanding (basic)	48,211		48,132		48,179		48,111		Weighted average common shares outstanding (basic)	48,286		48,211		48,260		48,179
Weighted average common shares outstanding (diluted)	Weighted average common shares outstanding (diluted)	48,244		48,132		48,179		48,111		Weighted average common shares outstanding (diluted)	48,286		48,244		48,260		48,179

Per common share amounts (basic and diluted):	Per common share amounts (basic and diluted):									Per common share amounts (basic and diluted):

Net income (loss)	Net income (loss)	$	0.08	$	(0.08)	$	(0.52)	$	0.17	Net income (loss)	$	0.35	$	0.08	$	(0.27)	$	(0.52)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Table of Contents

OFFICE PROPERTIES INCOME TRUST

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(dollars in thousands)

(unaudited)

Number
of Shares Common Shares Additional
Paid In Capital Cumulative
Net Income Cumulative
Common
Distributions Total Shareholders’ Equity
Balance at December 31, 2020 48,318,366 $ 483 $ 2,615,305 $ 183,895 $ (1,190,291) $ 1,609,392
Share grants — — 321 — — 321
Net income — — — 37,860 — 37,860
Distributions to common shareholders — — — — (26,575) (26,575)
Balance at March 31, 2021 48,318,366 483 2,615,626 221,755 (1,216,866) 1,620,998
Share grants 28,000 — 1,176 — — 1,176
Share repurchases (12,009) — (352) — — (352)
Net loss — — — (66,697) — (66,697)
Distributions to common shareholders — — — — (26,575) (26,575)
Balance at June 30, 2021 48,334,357 483 2,616,450 155,058 (1,243,441) 1,528,550
Share grants 117,800 1 950 — — 951
Share forfeitures and repurchases (26,233) — (649) — — (649)
Net income — — — 3,712 — 3,712
Distributions to common shareholders — — — — (26,584) (26,584)
Balance at September 30, 2021 48,425,924 $ 484 $ 2,616,751 $ 158,770 $ (1,270,025) $ 1,505,980
`


	Number of Shares	Common Shares		Additional Paid In Capital		Cumulative Net Income		Cumulative Common Distributions		Total Shareholders’ Equity
Balance at December 31, 2021	48,425,665	$	484	$	2,617,169	$	175,715	$	(1,296,659)	$	1,496,709
Share grants	—	—		415		—		—		415
Share forfeitures	(400)	—		(1)		—		—		(1)
Net loss	—	—		—		(13,407)		—		(13,407)
Distributions to common shareholders	—	—		—		—		(26,634)		(26,634)
Balance at March 31, 2022	48,425,265	484		2,617,583		162,308		(1,323,293)		1,457,082
Share grants	31,500	1		1,078		—		—		1,079
Share forfeitures and repurchases	(1,690)	—		(21)		—		—		(21)
Net loss	—	—		—		(16,056)		—		(16,056)
Distributions to common shareholders	—	—		—		—		(26,634)		(26,634)
Balance at June 30, 2022	48,455,075	485		2,618,640		146,252		(1,349,927)		1,415,450
Share grants	141,200	1		922		—		—		923
Share forfeitures and repurchases	(30,069)	—		(521)		—		—		(521)
Net income	—	—		—		16,964		—		16,964
Distributions to common shareholders	—	—		—		—		(26,651)		(26,651)
Balance at September 30, 2022	48,566,206	$	486	$	2,619,041	$	163,216	$	(1,376,578)	$	1,406,165

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Table of Contents

OFFICE PROPERTIES INCOME TRUST

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(dollars in thousands)

(unaudited)


		Number of Shares	Common Shares		Additional Paid In Capital		Cumulative Net Income		Cumulative Other Comprehensive Loss		Cumulative Common Distributions		Total Shareholders’ Equity			Number of Shares	Common Shares		Additional Paid In Capital		Cumulative Net Income		Cumulative Common Distributions		Total Shareholders’ Equity
Balance at December 31, 2019		48,201,941	$	482	$	2,612,425	$	177,217	$	(200)	$	(1,084,170)	$	1,705,754
Balance at December 31, 2020															Balance at December 31, 2020	48,318,366	$	483	$	2,615,305	$	183,895	$	(1,190,291)	$	1,609,392
Share grants															Share grants	—	—		321		—		—		321

Net income															Net income	—	—		—		37,860		—		37,860
Distributions to common shareholders															Distributions to common shareholders	—	—		—		—		(26,575)		(26,575)
Balance at March 31, 2021															Balance at March 31, 2021	48,318,366	483		2,615,626		221,755		(1,216,866)		1,620,998
Share grants	Share grants	—	—		379		—		—		—		379		Share grants	28,000	—		1,176		—		—		1,176
Share repurchases	Share repurchases	(1,012)	—		(27)		—		—		—		(27)		Share repurchases	(12,009)	—		(352)		—		—		(352)
Net current period other comprehensive loss		—	—		—		—		(61)		—		(61)
Net loss															Net loss	—	—		—		(66,697)		—		(66,697)
Distributions to common shareholders															Distributions to common shareholders	—	—		—		—		(26,575)		(26,575)
Balance at June 30, 2021															Balance at June 30, 2021	48,334,357	483		2,616,450		155,058		(1,243,441)		1,528,550
Share grants															Share grants	117,800	1		950		—		—		951
Share forfeitures and repurchases															Share forfeitures and repurchases	(26,233)	—		(649)		—		—		(649)
Net income	Net income	—	—		—		10,840		—		—		10,840		Net income	—	—		—		3,712		—		3,712
Distributions to common shareholders	Distributions to common shareholders	—	—		—		—		—		(26,511)		(26,511)		Distributions to common shareholders	—	—		—		—		(26,584)		(26,584)
Balance at March 31, 2020		48,200,929	482		2,612,777		188,057		(261)		(1,110,681)		1,690,374
Share grants		28,000	—		1,121		—		—		—		1,121
Share repurchases		(1,129)	—		(30)		—		—		—		(30)
Net current period other comprehensive income		—	—		—		—		176		—		176
Net income		—	—		—		1,299		—		—		1,299
Distributions to common shareholders		—	—		—		—		—		(26,510)		(26,510)
Balance at June 30, 2020		48,227,800	482		2,613,868		189,356		(85)		(1,137,191)		1,666,430
Share grants		108,600	1		864		—		—		—		865
Share forfeitures and repurchases		(18,034)	—		(386)		—		—		—		(386)
Amounts reclassified from cumulative other comprehensive loss to net loss		—	—		—		—		85		—		85
Net loss		—	—		—		(3,797)		—		—		(3,797)
Distributions to common shareholders		—	—		—		—		—		(26,525)		(26,525)
Balance at September 30, 2020		48,318,366	$	483	$	2,614,346	$	185,559	$	—	$	(1,163,716)	$	1,636,672
Balance at September 30, 2021															Balance at September 30, 2021	48,425,924	$	484	$	2,616,751	$	158,770	$	(1,270,025)	$	1,505,980

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Table of Contents

OFFICE PROPERTIES INCOME TRUST

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(dollars in thousands)

(unaudited)

Nine Months Ended September 30,
2021 2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (25,125) $ 8,342
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation 67,469 62,570
Net amortization of debt premiums, discounts and issuance costs 7,366 7,162
Amortization of acquired real estate leases 108,471 126,409
Amortization of deferred leasing costs 5,750 5,208
Gain on sale of real estate (54,154) (10,822)
Loss on impairment of real estate 55,854 2,954
Loss on early extinguishment of debt 9,694 2,701
Straight line rental income (13,128) (12,963)
Other non-cash expenses, net 1,627 1,542
Equity in net losses of investees 1,664 815
Change in assets and liabilities:
Rents receivable 10,567 (4,853)
Deferred leasing costs (14,388) (10,722)
Other assets (1,523) (860)
Accounts payable and other liabilities (7,919) (11,593)
Due to related persons 6,457 208
Net cash provided by operating activities 158,682 166,098

CASH FLOWS FROM INVESTING ACTIVITIES:
Real estate acquisitions (563,447) (11,864)
Real estate improvements (65,186) (55,135)
Distributions in excess of earnings from unconsolidated joint ventures 459 408
Distributions in excess of earnings from Affiliates Insurance Company — 287
Proceeds from sale of properties, net 192,476 81,528
Proceeds from repayment of mortgage note receivable — 2,880
Net cash (used in) provided by investing activities (435,698) 18,104
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of mortgage notes payable (72,238) (154,734)
Repayment of senior unsecured notes (610,000) (400,000)
Proceeds from issuance of senior unsecured notes, net 1,041,809 408,932
Borrowings on unsecured revolving credit facility 755,000 561,467
Repayments on unsecured revolving credit facility (755,000) (561,467)
Payment of debt issuance costs (2,655) (1,477)
Repurchase of common shares (1,001) (434)
Distributions to common shareholders (79,734) (79,546)
Net cash provided by (used in) financing activities 276,181 (227,259)
Decrease in cash, cash equivalents and restricted cash (835) (43,057)
Cash, cash equivalents and restricted cash at beginning of period 56,855 100,696
Cash, cash equivalents and restricted cash at end of period $ 56,020 $ 57,639


	Nine Months Ended September 30,
	2022		2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(12,499)	$	(25,125)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation	73,174		67,469
Net amortization of debt premiums, discounts and issuance costs	6,946		7,366
Amortization of acquired real estate leases	93,458		108,471
Amortization of deferred leasing costs	6,115		5,750
Gain on sale of real estate	(7,437)		(54,154)
Loss on impairment of real estate	21,820		55,854
Loss on early extinguishment of debt	77		9,694

Straight line rental income	(7,226)		(13,128)
Other non-cash expenses, net	1,591		1,627


Equity in net losses of investees	2,631		1,664





Change in assets and liabilities:


Rents receivable	7,625		10,567
Deferred leasing costs	(20,724)		(14,388)
Other assets	(2,358)		(1,523)
Accounts payable and other liabilities	(3,255)		(7,919)
Due to / from related persons	(7,251)		6,457
Net cash provided by operating activities	152,687		158,682

CASH FLOWS FROM INVESTING ACTIVITIES:
Real estate acquisitions	—		(563,447)
Real estate improvements	(137,031)		(65,186)

Distributions in excess of earnings from unconsolidated joint ventures	51		459
Contributions to unconsolidated joint ventures	(2,914)		—
Proceeds from sale of properties, net	189,069		192,476



Net cash provided by (used in) investing activities	49,175		(435,698)

CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of mortgage notes payable	(25,400)		(72,238)

Repayment of senior unsecured notes	(300,000)		(610,000)

Proceeds from issuance of senior unsecured notes, net	—		1,041,809

Borrowings on unsecured revolving credit facility	295,000		755,000
Repayments on unsecured revolving credit facility	(160,000)		(755,000)
Payment of debt issuance costs	—		(2,655)
Repurchase of common shares	(533)		(1,001)


Distributions to common shareholders	(79,919)		(79,734)
Net cash (used in) provided by financing activities	(270,852)		276,181

Decrease in cash, cash equivalents and restricted cash	(68,990)		(835)
Cash, cash equivalents and restricted cash at beginning of period	84,515		56,855
Cash, cash equivalents and restricted cash at end of period	$	15,525	$	56,020

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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OFFICE PROPERTIES INCOME TRUST

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

(dollars in thousands)

(unaudited)


		Nine Months Ended September 30,					Nine Months Ended September 30,
		2021		2020			2022		2021
SUPPLEMENTAL CASH FLOW INFORMATION:	SUPPLEMENTAL CASH FLOW INFORMATION:					SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid	Interest paid	$	86,917	$	83,116	Interest paid	$	80,504	$	86,917
Income taxes paid	Income taxes paid	$	294	$	1,097	Income taxes paid	$	283	$	294

NON-CASH INVESTING ACTIVITIES:	NON-CASH INVESTING ACTIVITIES:					NON-CASH INVESTING ACTIVITIES:
Real estate improvements accrued, not paid	Real estate improvements accrued, not paid	$	15,428	$	12,640	Real estate improvements accrued, not paid	$	34,340	$	15,428
Real estate acquisitions	Real estate acquisitions	$	(13,031)	$	—	Real estate acquisitions	$	—	$	(13,031)

Capitalized interest	Capitalized interest	$	392	$	119	Capitalized interest	$	2,887	$	392

SUPPLEMENTAL DISCLOSURE OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH:

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the condensed consolidated balance sheets to the amounts shown in the condensed consolidated statements of cash flows:


		As of September 30,					As of September 30,
		2021		2020			2022		2021
Cash and cash equivalents	Cash and cash equivalents	$	54,881	$	45,035	Cash and cash equivalents	$	14,005	$	54,881
Restricted cash (1)	Restricted cash (1)	1,139		12,604		Restricted cash (1)	1,520		1,139
Total cash, cash equivalents and restricted cash shown in the condensed consolidated statements of cash flows	Total cash, cash equivalents and restricted cash shown in the condensed consolidated statements of cash flows	$	56,020	$	57,639	Total cash, cash equivalents and restricted cash shown in the condensed consolidated statements of cash flows	$	15,525	$	56,020

(1)Restricted cash consists of amounts escrowed for future real estate taxes, insurance, leasing costs, capital expenditures and debt service, as required by certain of our mortgage debts.

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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OFFICE PROPERTIES INCOME TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share data)

(unaudited)

Note 1. Basis of Presentation

The accompanying condensed consolidated financial statements of Office Properties Income Trust and its subsidiaries, or OPI, we, us or our, are unaudited. Certain information and disclosures required by U.S. generally accepted accounting principles, or GAAP, for complete financial statements have been condensed or omitted. We believe the disclosures made are adequate to make the information presented not misleading. However, the accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes contained in our Annual Report on Form 10-K for the year ended December 31, ~~2020,~~2021, or our ~~2020~~2021 Annual Report. In the opinion of management, all adjustments, consisting of normal recurring accruals considered necessary for a fair statement of results for the interim period have been included. All intercompany transactions and balances with or among our consolidated subsidiaries have been eliminated. Our operating results for interim periods are not necessarily indicative of the results that may be expected for the full year.

The preparation of these financial statements in conformity with GAAP requires us to make estimates and assumptions that affect reported amounts. Actual results could differ from those estimates. 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.

Note 2. Per Common Share Amounts

~~The following table provides a reconciliation~~We calculate basic earnings per common share using the two class method. We calculate diluted earnings per share using the more dilutive of the ~~weighted average number of~~two class method or the treasury stock method. Unvested share awards and other potentially dilutive common shares, ~~used in~~together with the related impact on earnings, are considered when calculating diluted earnings per share. The calculation of basic and diluted earnings per share ~~(in thousands):~~

Three Months Ended September 30, Nine Months Ended September 30,
2021 2020 2021 2020
Weighted average common shares for basic earnings per share 48,211 48,132 48,179 48,111
Effect of dilutive securities: unvested share awards (1)
33 — — —
Weighted average common shares for diluted earnings per share 48,244 48,132 48,179 48,111

~~(1)For the three months ended September 30, 2020 and the nine months ended September 30, 2021 and 2020, there were no dilutive common shares and certain unvested common shares were not included~~is as follows (amounts in ~~the calculation of diluted earnings~~thousands, except per share ~~because to do so would have been antidilutive.~~data):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Numerators:
Net income (loss)	$	16,964	$	3,712	$	(12,499)	$	(25,125)
Income attributable to unvested participating securities	(99)		(11)		(299)		—
Net income (loss) used in calculating earnings per share	$	16,865	$	3,701	$	(12,798)	$	(25,125)

Denominators:
Weighted average common shares outstanding - basic	48,286		48,211		48,260		48,179
Effect of dilutive securities: unvested share awards	—		33		—		—
Weighted average common shares outstanding - diluted	48,286		48,244		48,260		48,179

Net income (loss) per common share - basic and diluted	$	0.35	$	0.08	$	(0.27)	$	(0.52)

Note 3. Real Estate Properties

As of September 30, ~~2021,~~2022, our wholly owned properties were comprised of ~~178~~162 properties containing ~~a combined~~ approximately ~~23,274,000~~21,211,000 rentable square ~~feet. The aggregate~~feet, with an undepreciated carrying value of ~~our wholly owned properties as of September 30, 2021 was $3,916,800,~~$3,880,911, including ~~$79,035~~$4,566 classified as held for ~~sale, and we~~sale. We also had noncontrolling ownership interests of 51% and 50% in 2two unconsolidated joint ventures that own 3three properties containing ~~a combined~~ approximately 444,000 rentable square feet. We generally lease space at our properties on a gross lease, modified gross lease or net lease basis pursuant to fixed term contracts expiring between ~~2021~~2022 and 2053. Some of our leases generally require us to pay all or some property operating expenses and to provide all or most property management services. During the three months ended September 30, ~~2021,~~2022, we entered into 2024 leases for approximately ~~659,000~~606,000 rentable square feet for a weighted (by rentable square feet) average lease term of ~~10.9~~7.2 years and we made commitments for approximately ~~$46,133~~$43,013 of leasing related costs. During the nine months ended September 30, ~~2021,~~2022, we entered into 6563 leases for approximately ~~1,782,000~~1,857,000 rentable square feet for a weighted (by rentable square feet) average lease term of ~~10.9~~9.0 years and we

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except per share data)

(unaudited)

made commitments for approximately ~~$129,980~~$113,130 of leasing related costs. As of September 30, ~~2021,~~2022, we had estimated unspent leasing related obligations of ~~$129,369.~~$137,420.

We regularly evaluate whether events or changes in circumstances have occurred that could indicate an impairment in the value of our long lived assets. If there is an indication that the carrying value of an asset is not recoverable, we estimate the projected undiscounted cash flows to determine if an impairment loss should be recognized. The future net undiscounted cash flows are subjective and are based in part on assumptions regarding hold periods, market rents and terminal capitalization rates. We determine the amount of any impairment loss by comparing the historical carrying value to estimated fair value. We estimate fair value through an evaluation of recent financial performance and projected discounted cash flows using standard industry valuation techniques. In addition to the consideration of impairment upon the events or changes in circumstances

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~~OFFICE PROPERTIES INCOME TRUST~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(dollars in thousands, except per share data)~~

~~(unaudited)~~

described above, we regularly evaluate the remaining lives of our long lived assets. If we change our estimate of the remaining lives, we allocate the carrying value of the affected assets over their revised remaining lives.

~~Acquisition Activities~~

During the nine months ended September 30, 2021, we acquired 3 properties containing a combined approximately 926,000 rentable square feet for an aggregate purchase price of $576,478, including net purchase price adjustments of $1,761 and acquisition related costs of $1,264. These acquisitions were accounted for as asset acquisitions. We allocated the purchase prices of these acquisitions based on the relative estimated fair values of the acquired assets and assumed liabilities as follows:
Acquisition Date Location Number of Properties Rentable Square Feet Purchase Price Land Buildings and Improvements Acquired Real Estate Leases Assumed Real Estate Lease Obligations
June 2021
Chicago, IL (1)
1 531,000 $ 368,331 $ 42,935 $ 258,348 $ 76,136 $ (9,088)
June 2021 Atlanta, GA 1 346,000 180,602 13,040 135,459 32,103 —
August 2021 Boston, MA 1 49,000 27,545 16,103 10,217 1,225 —
3 926,000 $ 576,478 $ 72,078 $ 404,024 $ 109,464 $ (9,088)

~~(1)Purchase price includes an adjustment of $13,031 to record an estimated real estate tax liability as of the acquisition date.~~

Disposition Activities

During the nine months ended September 30, ~~2021,~~2022, we sold 616 properties ~~and a warehouse facility adjacent to a property we own~~ containing ~~a combined~~ approximately ~~2,565,000~~2,077,000 rentable square feet for an aggregate sales price of ~~$198,415,~~$195,920, excluding closing costs. The sales of these properties, as presented in the table below, do not represent significant dispositions, individually or in the aggregate, nor do they represent a strategic shift in our business. As a result, the results of operations of these properties are included in continuing operations through the date of sale in our condensed consolidated statements of comprehensive income (loss).

Date of Sale Number of Properties Location Rentable Square Feet
Gross
Sales Price (1)
Gain (Loss) on Sale of Real Estate Loss on Impairment of Real Estate
January 2021 —
Kansas City, MO (2)
10,000 $ 845 $ (63) $ —
January 2021 1 Richmond, VA 311,000 130,000 54,181 —
April 2021 1 Huntsville, AL 1,371,000 39,000 — 5,383
July 2021 1 Fresno, CA 532,000 6,000 — 33,902
July 2021 1 Liverpool, NY 38,000 650 31 —
August 2021 1 Memphis, TN 205,000 15,270 287 —
September 2021 1 Stoneham, MA 98,000 6,650 (282) 5,911
6 2,565,000 $ 198,415 $ 54,154 $ 45,196


Date of Sale	Number of Properties	Location	Rentable Square Feet	Gross Sales Price (1)		Gain (Loss) on Sale of Real Estate		Loss on Impairment of Real Estate
January 2022	1	Rockville, MD	129,000	$	6,750	$	(72)	$	—
February 2022	2	Chesapeake, VA	172,000	18,945		2,296		—
March 2022	1	Milwaukee, WI	29,000	3,775		(75)		—
May 2022	1	Holtsville, NY	264,000	28,500		1,900		—
June 2022	1	Fairfax, VA	184,000	19,750		(13,537)		—
July 2022	1	Houston, TX	206,000	9,800		(335)		15,278
August 2022	3	Birmingham, AL	448,000	16,050		(265)		3,709
August 2022	1	Erlanger, KY	86,000	2,600		135		2,184
September 2022	2	Chesapeake, VA	214,000	24,000		62		649
September 2022	2	Everett, WA	112,000	31,500		11,959		—
September 2022	1	Salem, OR	233,000	34,250		5,369		—




	16		2,077,000	$	195,920	$	7,437	$	21,820

(1)Gross sales price is the gross contract price, excluding closing costs.

~~(2)Consists~~As of ~~a warehouse facility adjacent~~September 30, 2022, we had four properties, including one leasable land parcel, classified as held for sale in our condensed consolidated balance sheet. As of October 26, 2022, we have entered into agreements to ~~a property~~sell five properties containing approximately 338,000 rentable square feet, including those classified as held for sale as of September 30, 2022, for an aggregate sales price of $20,450, excluding closing costs. These pending sales are subject to conditions; accordingly, we ~~own located in Kansas City, MO.~~cannot be sure that we will complete these sales or that these sales will not be delayed or the terms will not change.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except per share data)

(unaudited)

As of September 30, 2021, we had 5 properties and 2 land parcels classified as held for sale in our condensed consolidated balance sheet. These properties and land parcels have been sold or are under agreement to sell for an aggregate sales price of $84,500, excluding closing costs, and are summarized below:

Date of Sale Agreement Number of Properties Location Rentable Square Feet
Gross
Sales Price (1)
August 2021 —
Sterling, VA (2)
— $ 28,500
October 2021 5 Brookhaven, GA 378,000 56,000
5 378,000 $ 84,500

~~(1)Gross sales price is the gross contract price, excluding closing costs.~~

~~(2)Consists of two vacant land parcels adjacent to properties we own located in Sterling, VA. The sale of these land parcels was completed in October 2021.~~

In addition to the properties discussed above, we are currently marketing for sale 17 properties containing approximately 2,161,000 rentable square feet. As of September 30, 2021, 3 of these properties containing approximately 448,000 rentable square feet are classified as held for sale in our condensed consolidated balance sheet. We recorded a $10,658 loss on impairment of real estate to adjust the carrying value of these three properties to their estimated fair values less cost to sell during the nine months ended September 30, 2021. We have determined the remaining 14 properties were not impaired nor did they meet the held for sale criteria as of September 30, 2021.

We cannot be sure we will sell any properties we are marketing for prices in excess of our carrying values or that we will not recognize impairment losses or losses on sale with respect to these properties. In addition, our pending sale is subject to conditions; accordingly, we cannot be sure that we will complete this sale or that this sale will not be delayed or the terms will not change.

Unconsolidated Joint Ventures

We own interests in 2two joint ventures that own 3three properties. We account for these investments under the equity method of accounting. As of September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, our investments in unconsolidated joint ventures consisted of the following:


			OPI Carrying Value of Investments at									OPI Carrying Value of Investments at
Joint Venture	Joint Venture	OPI Ownership	September 30, 2021		December 31, 2020		Number of Properties	Location	Rentable Square Feet	Joint Venture	OPI Ownership	September 30, 2022		December 31, 2021		Number of Properties	Location	Rentable Square Feet
Prosperity Metro Plaza	Prosperity Metro Plaza	51%	$	21,142	$	21,888	2	Fairfax, VA	329,000	Prosperity Metro Plaza	51%	$	19,586	$	20,672	2	Fairfax, VA	329,000
1750 H Street, NW	1750 H Street, NW	50%	14,686		16,063		1	Washington, D.C.	115,000	1750 H Street, NW	50%	15,484		14,166		1	Washington, D.C.	115,000
Total	Total		$	35,828	$	37,951	3		444,000	Total		$	35,070	$	34,838	3		444,000

The following table provides a summary of the mortgage debt of our 2two unconsolidated joint ventures:


Joint Venture	Joint Venture	Interest Rate (1)	Maturity Date	Principal Balance at September 30, 2021 and December 31, 2020 (2)		Joint Venture	Interest Rate (1)	Maturity Date	Principal Balance at September 30, 2022 and December 31, 2021 (2)
Prosperity Metro Plaza	Prosperity Metro Plaza	4.09%	12/1/2029	$	50,000	Prosperity Metro Plaza	4.09%	12/1/2029	$	50,000
1750 H Street, NW	1750 H Street, NW	3.69%	8/1/2024	32,000		1750 H Street, NW	3.69%	8/1/2024	32,000
Weighted Average / Total	Weighted Average / Total	3.93%		$	82,000	Weighted Average / Total	3.93%		$	82,000

(1)Includes the effect of mark to market purchase accounting.

(2)Reflects the entire balance of the debt secured by the properties and is not adjusted to reflect the interests in the joint ventures we do not own. None of the debt is recourse to us.

At September 30, ~~2021,~~2022, the aggregate unamortized basis difference of our 2two unconsolidated joint ventures of ~~$7,098 is~~$6,612 was primarily attributable to the difference between the amount we paid to purchase our interest in these joint ventures, including transaction costs, and the historical carrying value of the net assets of these joint ventures. This difference is being amortized over the remaining useful life of the related properties and the resulting amortization expense is included in equity in net losses of investees in our condensed consolidated statements of comprehensive income (loss).

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~~OFFICE PROPERTIES INCOME TRUST~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(dollars in thousands, except per share data)~~

~~(unaudited)~~

Note 4. Leases

Our leases provide for base rent payments and in addition may include variable payments. Rental income from operating leases, including any payments derived by index or market-based indices, is recognized on a straight line basis over the lease term when we have determined that the collectability of substantially all of the lease payments is probable. Some of our leases have options to extend or terminate the lease exercisable at the option of our tenants, which are considered when determining the lease term. In certain circumstances, some leases provide the tenant with the right to terminate if the legislature or other funding authority does not appropriate the funding necessary for the tenant to meet its lease obligations; we have determined the fixed non-cancelable lease term of these leases to be the full term of the lease because we believe the occurrence of early terminations to be a remote contingency based on both our historical experience and our assessments of the likelihood of lease cancellation on a separate lease basis.

We increased rental income to record revenue on a straight line basis by ~~$3,924~~$1,765 and ~~$3,912~~$3,924 for the three months ended September 30, ~~2021~~2022 and ~~2020,~~2021, respectively, and ~~$13,128~~$7,226 and ~~$12,963~~$13,128 for the nine months ended September 30, ~~2021~~2022 and ~~2020,~~2021, respectively. Rents receivable, excluding properties classified as held for sale, ~~include $76,033~~included $82,701 and ~~$68,824~~$82,978 of straight line rent receivables at September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively.

We do not include in our measurement of our lease receivables certain variable payments, including payments determined by changes in the index or market-based indices after the inception of the lease, certain tenant reimbursements and other income until the specific events that trigger the variable payments have occurred. Such payments totaled ~~$24,098~~$23,183 and ~~$60,446~~$67,820 for the three and nine months ended September 30, ~~2021,~~2022, respectively, of which tenant reimbursements totaled ~~$23,167~~$21,953 and ~~$57,609,~~$64,437, respectively. For the three and nine months ended September 30, ~~2020,~~2021, such payments totaled ~~$18,606~~$24,098 and ~~$56,654,~~$60,446, respectively, of which tenant reimbursements totaled ~~$17,495~~$23,167 and ~~$53,346,~~$57,609, respectively.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except per share data)

(unaudited)

Note 5. Concentration

Tenant and Credit Concentration

We define annualized rental income as the annualized contractual base rents from our tenants pursuant to our lease agreements as of the measurement date, plus straight line rent adjustments and estimated recurring expense reimbursements to be paid to us, and excluding lease value amortization. As of September 30, 2022, the U.S. government, nine state governments and four other government tenants combined were responsible for approximately 27.8% of our annualized rental income. As of September 30, 2021, the U.S. government, 11 state governments and 4four other government tenants combined were responsible for approximately 29.8% ~~of our annualized rental income. As of September 30, 2020, the U.S. government, 11 state governments and 2 other government tenants combined were responsible for approximately 35.6%~~ of our annualized rental income. The U.S. government is our largest tenant by annualized rental income and represented approximately ~~19.7%~~19.1% and ~~25.2%~~19.7% of our annualized rental income as of September 30, ~~2021~~2022 and ~~2020,~~2021, respectively.

Geographic Concentration

At September 30, ~~2021,~~2022, our ~~178~~162 wholly owned properties were located in 3331 states and the District of Columbia. Properties located in California, Virginia, ~~California,~~Illinois, the District of Columbia ~~Illinois~~ and Georgia were responsible for ~~12.2%~~approximately 11.6%, ~~11.0%~~11.3%, ~~9.6%~~11.1%, ~~9.1%~~10.3% and ~~8.0%~~8.8% of our annualized rental income as of September 30, ~~2021,~~2022, respectively.

Note 6. Indebtedness

Our principal debt obligations at September 30, ~~2021~~2022 were: (1) ~~$2,512,000~~$135,000 of outstanding borrowings under our $750,000 unsecured revolving credit facility; (2) $2,212,000 aggregate outstanding principal amount of senior unsecured notes; and ~~(2) $98,604~~(3) $72,901 aggregate outstanding principal amount of mortgage notes.

Our $750,000 revolving credit facility is governed by a credit agreement, or our credit agreement, with a syndicate of institutional lenders that includes a feature under which the maximum aggregate borrowing availability may be increased to up to $1,950,000 in certain circumstances. Our revolving credit facility is available for general business purposes, including acquisitions. The maturity date of our revolving credit facility is January 31, 2023 and, subject to our payment of an extension fee and meeting certain other conditions, we have the option to extend the stated maturity date of our revolving credit facility by 2two additional six month periods. We can borrow, repay and reborrow funds available under our revolving credit facility until maturity and no principal repayment is due until maturity. We are required to pay interest at a rate of LIBOR plus a premium, which was 110 basis points per annum at September 30, ~~2021,~~2022, on the amount outstanding under our revolving credit ~~facility, if any.~~facility. We also pay a facility fee on the total amount of lending commitments under our revolving credit facility, which was 25

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~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(dollars in thousands, except per share data)~~

~~(unaudited)~~

basis points per annum at September 30, ~~2021.~~2022. Both the interest rate premium and facility fee are subject to adjustment based upon changes to our credit ratings. As of September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, the annual interest rate payable on borrowings under our revolving credit facility was 3.9% and 1.2%., respectively. The weighted average annual interest rate for borrowings under our revolving credit facility was 3.3% and 3.2% for the three and nine months ended September 30, 2022, respectively, and 1.2% for each of the three ~~months ended September 30, 2021~~ and ~~2020, and 1.2% and 2.0% for the~~ nine months ended September 30, ~~2021 and 2020, respectively.~~2021. As of September 30, ~~2021~~2022 and October ~~27, 2021,~~26, 2022, we had ~~no amounts~~$135,000 and $145,000, respectively, outstanding under our revolving credit facility, and ~~$750,000~~$615,000 and $605,000, respectively, available for borrowing.

Our credit agreement and senior unsecured notes indentures and their supplements provide for acceleration of payment of all amounts due thereunder upon the occurrence and continuation of certain events of default, such as, in the case of our credit agreement, a change of control of us, which includes The RMR Group LLC, or RMR, ~~LLC,~~ ceasing to act as our business and property manager. Our credit agreement and senior unsecured notes indentures and their supplements also contain covenants, including covenants that restrict our ability to incur debts, require us to comply with certain financial covenants and, in the case of our credit agreement, restrict our ability to make distributions under certain circumstances. We believe we were in compliance with the terms and conditions of the respective covenants under our credit agreement and senior unsecured notes indentures and their supplements at September 30, ~~2021.~~

~~Senior Unsecured Note Issuances~~

In May 2021, we issued $300,000 of 2.650% senior unsecured notes due 2026 in an underwritten public offering, raising net proceeds of $296,826, after deducting underwriters’ discounts and offering expenses. These notes require semi-annual payments of interest only through maturity on June 15, 2026 and may be repaid at par plus accrued and unpaid interest on or after May 15, 2026.

In August 2021, we issued $350,000 of 2.400% senior unsecured notes due 2027 in an underwritten public offering, raising net proceeds of $346,630, after deducting underwriters’ discounts and offering expenses. These notes require semi-annual payments of interest only through maturity on February 1, 2027 and may be repaid at par plus accrued and unpaid interest on or after January 1, 2027.

In September 2021, we issued $400,000 of 3.450% senior unsecured notes due 2031 in an underwritten public offering, raising net proceeds of $395,698, after deducting underwriters’ discounts and offering expenses. These notes require semi-annual payments of interest only through maturity on October 15, 2031 and may be repaid at par plus accrued and unpaid interest on or after July 15, 2031.

~~Senior Unsecured Note Redemptions~~

In June 2021, we redeemed, at par plus accrued interest, all $310,000 of our 5.875% senior unsecured notes due 2046. As a result of this redemption, we recognized a loss on early extinguishment of debt of $8,581 during the nine months ended September 30, 2021, from the write off of unamortized debt issuance costs.

~~In September 2021, we redeemed, at a premium plus accrued interest, all $300,000 of our 4.15% senior unsecured notes due~~ 2022. As a result of this redemption, we recognized a loss on early extinguishment of debt of $2,274 during the nine months ended September 30, 2021, from a prepayment penalty and the write off of unamortized discounts.

Mortgage Note ~~Repayment~~Prepayments

In ~~June 2021,~~April 2022, we prepaid, at ~~a premium~~par plus accrued interest, a mortgage note secured by ~~three properties~~one property with an outstanding principal balance of ~~$71,000,~~$24,863, an annual interest rate of ~~3.55%~~4.22% and a maturity date in May 2023. As a result of the prepayment of this mortgage note, we recognized a loss on early extinguishment of debt of $3,213 during the nine months ended September 30, 2021, from a prepayment penalty and the write off of unamortized discounts.

At September 30, 2021, 3 of our properties with an aggregate net book value of $189,298 were encumbered by mortgage notes with an aggregate principal amount of $98,604. Our mortgage notes are non-recourse, subject to certain limited exceptions and do not contain any material financial covenants.July 2022.

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(dollars in thousands, except per share data)

(unaudited)

In October 2022, we prepaid, at a discounted amount of $22,176 plus accrued interest, a mortgage note secured by one property with an outstanding principal balance of $22,901, an annual interest rate of 4.80% and a maturity date in June 2023.

Senior Unsecured Note Redemption

In June 2022, we redeemed, at par plus accrued interest, all $300,000 of our 4.00% senior unsecured notes due July 2022. As a result of this redemption, we recognized a loss on early extinguishment of debt of $77 during the nine months ended September 30, 2022, from the write off of unamortized discounts and debt issuance costs.

At September 30, 2022, two of our properties with an aggregate net book value of $125,033 were encumbered by mortgage notes with an aggregate principal amount of $72,901. Our mortgage notes are non-recourse, subject to certain limited exceptions and do not contain any material financial covenants.

Note 7. Fair Value of Assets and Liabilities

The following table presents certain of our assets measured at fair value at September 30, 2021, categorized by the level of inputs, as defined in the fair value hierarchy under GAAP, used in the valuation of each asset:

Fair Value at Reporting Date Using
Description Total Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3)
Non-recurring Fair Value Measurements Assets
Assets of properties held for sale (1)
$ 20,300 $ — $ — $ 20,300

~~(1)~~We recorded impairment charges of $10,658 to reduce the carrying value of 3 properties that are classified as held for sale in our condensed consolidated balance sheet to their estimated fair value, less estimated costs to sell of $425, based on third party offers (Level 3 inputs as defined in the fair value hierarchy under GAAP). See Note 3 for more information.

~~In addition to the assets described in the table above, our~~Our financial instruments include our cash and cash equivalents, restricted cash, rents receivable, accounts payable, a revolving credit facility, senior unsecured notes, mortgage notes payable, amounts due from and to related persons, other accrued expenses and security deposits. At September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, the fair values of our financial instruments approximated their carrying values in our condensed consolidated financial statements, due to their short term nature or floating interest rates, except as follows:


		As of September 30, 2021				As of December 31, 2020					As of September 30, 2022				As of December 31, 2021
Financial Instrument	Financial Instrument	Carrying Value (1)		Fair Value		Carrying Value (1)		Fair Value		Financial Instrument	Carrying Value (1)		Fair Value		Carrying Value (1)		Fair Value
Senior unsecured notes, 4.15% interest rate, due in 2022 (2)		$	—	$	—	$	298,853	$	306,192

Senior unsecured notes, 4.00% interest rate, due in 2022(2)	Senior unsecured notes, 4.00% interest rate, due in 2022(2)	299,270		306,717		298,579		306,756		Senior unsecured notes, 4.00% interest rate, due in 2022(2)	$	—	$	—	$	299,500	$	304,148
Senior unsecured notes, 4.25% interest rate, due in 2024	Senior unsecured notes, 4.25% interest rate, due in 2024	344,011		371,980		342,299		365,435		Senior unsecured notes, 4.25% interest rate, due in 2024	346,292		322,091		344,581		365,449
Senior unsecured notes, 4.50% interest rate, due in 2025	Senior unsecured notes, 4.50% interest rate, due in 2025	638,507		697,460		635,921		688,399		Senior unsecured notes, 4.50% interest rate, due in 2025	641,956		577,883		639,370		687,749
Senior unsecured notes, 2.650% interest rate, due in 2026 ~~(3)~~	Senior unsecured notes, 2.650% interest rate, due in 2026 ~~(3)~~	297,057		302,846		—		—		Senior unsecured notes, 2.650% interest rate, due in 2026 ~~(3)~~	297,682		225,054		297,213		298,502
Senior unsecured notes, 2.400% interest rate, due in 2027 ~~(4)~~	Senior unsecured notes, 2.400% interest rate, due in 2027 ~~(4)~~	346,713		346,456		—		—		Senior unsecured notes, 2.400% interest rate, due in 2027 ~~(4)~~	347,311		252,025		346,845		339,764
Senior unsecured notes, 3.450% interest rate, due in 2031 ~~(5)~~	Senior unsecured notes, 3.450% interest rate, due in 2031 ~~(5)~~	395,701		393,680		—		—		Senior unsecured notes, 3.450% interest rate, due in 2031 ~~(5)~~	396,070		241,576		395,744		388,458
Senior unsecured notes, 5.875% interest rate, due in 2046 (6)		—		—		301,264		322,028

Senior unsecured notes, 6.375% interest rate, due in 2050	Senior unsecured notes, 6.375% interest rate, due in 2050	156,471		180,533		156,326		171,590		Senior unsecured notes, 6.375% interest rate, due in 2050	156,663		124,416		156,519		177,098
Mortgage notes payable (7)		98,460		101,351		169,729		174,952
Mortgage notes payable (3) (4)										Mortgage notes payable (3) (4)	72,841		71,665		98,178		100,294
Total	Total	$	2,576,190	$	2,701,023	$	2,202,971	$	2,335,352	Total	$	2,258,815	$	1,814,710	$	2,577,950	$	2,661,462

(1)Includes unamortized debt premiums, discounts and issuance costs totaling ~~$34,414~~$26,086 and ~~$39,871~~$32,351 as of September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively.

(2)These senior notes were redeemed in ~~September 2021.~~June 2022.

(3)~~These senior notes were issued in May 2021.~~

~~(4)These senior notes were issued in August 2021.~~

~~(5)These senior notes were issued in September 2021.~~

~~(6)These senior notes were redeemed in June 2021.~~

~~(7)~~Balance as of December 31, ~~2020~~2021 includes ~~one~~a mortgage note secured by ~~3 properties~~one property with an outstanding principal balance of ~~$71,000~~$25,055 that was prepaid in April 2022.

(4)Balance as of September 30, 2022 includes a mortgage note secured by one property with an outstanding principal balance of $22,901 that was prepaid at a discounted amount of $22,176 plus accrued interest in October 2022. This mortgage note was secured by one property and had an annual interest rate of 4.80% and a maturity date in June ~~2021.~~2023.

We estimated the fair ~~value~~values of our senior unsecured notes (except for our senior unsecured notes due ~~2046 and~~ 2050) using an average of the bid and ask price of the notes (Level 2 inputs as defined in the fair value hierarchy under GAAP) as of the measurement date. We estimated the fair value of our senior unsecured notes due ~~2046 and~~ 2050 based on the closing price on The Nasdaq Stock Market LLC, or Nasdaq, (Level 1 inputs as defined in the fair value hierarchy under GAAP) as of the measurement date. We estimated the fair values of our mortgage notes payable using discounted cash flow analyses and currently prevailing market rates (Level 3 inputs as defined in the fair value hierarchy under GAAP) as of the measurement date. Because Level 3 inputs are unobservable, our estimated fair values may differ materially from the actual fair values.

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~~OFFICE PROPERTIES INCOME TRUST~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(dollars in thousands, except per share data)~~

~~(unaudited)~~

Note 8. Shareholders’ Equity

Share Awards

On June ~~17, 2021,~~16, 2022, in accordance with our Trustee compensation arrangements, we awarded to each of our 8nine Trustees 3,500 of our common shares, valued at ~~$29.88~~$18.84 per share, the closing price of our common shares on Nasdaq on that day.

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OFFICE PROPERTIES INCOME TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except per share data)

(unaudited)

On September ~~15, 2021,~~14, 2022, we awarded under our equity compensation plan an aggregate of ~~117,800~~141,200 of our common shares, valued at ~~$25.42~~$17.49 per share, the closing price of our common shares on Nasdaq on that day, to our officers and certain other employees of ~~RMR LLC.~~RMR.

Share Purchases

During the three and nine months ended September 30, ~~2021,~~2022, we purchased an aggregate of ~~25,533~~29,469 and ~~37,542~~30,259 of our common shares, respectively, valued at a weighted average share price of ~~$25.24~~$17.53 and ~~$26.55~~$17.61 per share, respectively, from certain of our ~~current and former~~ Trustees and officers and certain other current and former officers and employees of RMR ~~LLC~~ in satisfaction of tax withholding and payment obligations in connection with the vesting of awards of our common shares.

Distributions

During the nine months ended September 30, ~~2021,~~2022, we declared and paid regular quarterly distributions to common shareholders as follows:

Declaration Date Record Date Paid Date Distributions Per Common Share Total Distributions
January 14, 2021 January 25, 2021 February 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 August 19, 2021 0.55 26,584
$ 1.65 $ 79,734


Declaration Date	Record Date	Paid Date	Distributions Per Common Share		Total Distributions
January 13, 2022	January 24, 2022	February 17, 2022	$	0.55	$	26,634
April 14, 2022	April 25, 2022	May 19, 2022	0.55		26,634
July 14, 2022	July 25, 2022	August 18, 2022	0.55		26,651

			$	1.65	$	79,919

On October ~~14, 2021,~~13, 2022, we declared a regular quarterly distribution payable to common shareholders of record on October ~~25, 2021~~24, 2022 in the amount of $0.55 per share, or approximately ~~$26,600.~~$26,700. We expect to pay this distribution on or about November ~~18, 2021.~~17, 2022.

Note 9. Business and Property Management Agreements with RMR ~~LLC~~

We have no employees. The personnel and various services we require to operate our business are provided to us by ~~RMR LLC.~~RMR. We have 2two agreements with RMR ~~LLC~~ to provide management services to us: (1) a business management agreement, which relates to our business generally; and (2) a property management agreement, which relates to our property level operations.

Pursuant to our business management agreement with RMR, ~~LLC,~~ we recognized net business management fees of $4,260 and $13,462 for the three and nine months ended September 30, 2022, respectively, and $(1,738) and $18,287 for the three and nine months ended September 30, 2021, ~~respectively, and $4,236 and $13,237~~respectively. Based on our common share total return, as defined in our business management agreement, as of September 30, 2022, no estimated incentive fees are included in the net business management fees we recognized for the three and nine months ended September 30, ~~2020, respectively.~~2022. The actual amount of annual incentive fees for 2022, if any, will be based on our common share total return, as defined in our business management agreement, for the three year period ending December 31, 2022, and will be payable in January 2023. The net business management fees we recognized for the three months ended September 30, 2021 ~~include~~included a reversal of $6,627 of previously accrued estimated business management incentive fees, which represents the amount by which the 2021 business management incentive fees as of June 30, 2021 exceeded the amount estimated as of September 30, 2021. The net business management fees we recognized for the nine months ended September 30, 2021 ~~include~~included $4,484 of accrued estimated ~~business management~~ incentive fees. The estimated business management incentive fees as of September 30, 2021 are based on our common share total return, as defined in our business management agreement, for the measurement period ending as of that date. We did not recognize any estimated business management incentive fees for the three or nine months ended September 30, 2020. The actual amount of annual incentive fees for 2021, if any, will be based on our common share total return, as defined in our business management agreement, for the three year period ending December 31, 2021, and will be payable in January 2022. We did not incur an incentive fee payable to RMR ~~LLC~~ for the year ended December 31, ~~2020.~~2021. We include business management fees in general and administrative expenses in our condensed consolidated statements of comprehensive income (loss).

We and RMR amended our business management agreement effective August 1, 2021 to provide that (i) for periods beginning on and after August 1, 2021, the MSCI U.S. REIT/Office REIT Index will be used to calculate benchmark returns per share for purposes of determining any incentive management fee payable by us to RMR and (ii) for periods prior to August 1, 2021, the SNL U.S. REIT Office Index will continue to be used. This change of index was due to S&P Global ceasing to publish the SNL U.S. REIT Office Index.

Pursuant to our property management agreement with RMR, we recognized aggregate net property management and construction supervision fees of $6,502 and $19,024 for the three and nine months ended September 30, 2022, respectively, and

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except per share data)

(unaudited)

We and RMR LLC amended our business management agreement effective August 1, 2021 to replace the benchmark index used in the calculation of incentive management fees. Pursuant to the amendment, for periods beginning on and after August 1, 2021, the MSCI U.S. REIT/Office REIT Index will replace the discontinued SNL U.S. REIT Office Index and be used to calculate benchmark returns per share for purposes of determining any incentive management fee payable by us to RMR LLC. For periods prior to August 1, 2021, the SNL U.S. REIT Office Index will continue to be used. Accordingly, the calculation of incentive management fees for the next three measurement periods will continue to use the SNL U.S. REIT Office Index in calculating the benchmark returns for periods through July 31, 2021. This change of index was due to S&P Global ceasing to publish the SNL U.S. REIT Office Index.

~~Pursuant to our property management agreement with RMR LLC, we recognized aggregate net property management and construction supervision fees of $5,519~~$5,519 and $15,045 for the three and nine months ended September 30, 2021, ~~respectively, and $5,189 and $15,381~~respectively. Of these amounts, for the three and nine months ended September 30, ~~2020, respectively. Of these amounts, for~~2022, $3,996 and $12,237, respectively, were expensed to other operating expenses in our condensed consolidated statements of comprehensive income (loss) and $2,506 and $6,787, respectively, were capitalized as building improvements in our condensed consolidated balance sheet. For the three and nine months ended September 30, 2021, $4,224 and $12,239, respectively, were expensed to other operating expenses in our condensed consolidated ~~financial~~ statements of comprehensive income (loss) and $1,295 and $2,806, respectively, were capitalized as building improvements in our condensed consolidated balance sheets. For the three and nine months ended September 30, 2020, $4,302 and $12,952, respectively, were expensed to other operating expenses in our condensed consolidated financial statements and $887 and $2,429, respectively, were capitalized as building improvements in our condensed consolidated balance sheets. The amounts capitalized are being depreciated over the estimated useful lives of the related capital assets.

We are generally responsible for all of our operating expenses, including certain expenses incurred or arranged by RMR ~~LLC~~ on our behalf. We are generally not responsible for payment of ~~RMR LLC’s~~RMR’s employment, office or administrative expenses incurred to provide management services to us, except for the employment and related expenses of ~~RMR LLC’s~~RMR’s employees assigned to work exclusively or partly at our properties, our share of the wages, benefits and other related costs of ~~RMR LLC’s~~RMR’s centralized accounting personnel, our share of ~~RMR LLC’s~~RMR’s costs for providing our internal audit function and as otherwise agreed. Our property level operating expenses are generally incorporated into the rents charged to our tenants, including certain payroll and related costs incurred by ~~RMR LLC.~~RMR. We reimbursed RMR ~~LLC $6,131~~$6,268 and ~~$18,108~~$18,281 for these expenses and costs for the three and nine months ended September 30, ~~2021,~~2022, respectively, and ~~$6,437~~$6,131 and ~~$18,687~~$18,108 for the three and nine months ended September 30, ~~2020,~~2021, respectively. We included these amounts in other operating expenses and general and administrative expenses, as applicable, in our condensed consolidated statements of comprehensive income (loss).

Note 10. Related Person Transactions

We have relationships and historical and continuing transactions with RMR, ~~LLC,~~ The RMR Group Inc., or RMR Inc., and others related to them, including other companies to which RMR ~~LLC~~ or its subsidiaries provide management services and some of which have trustees, directors or officers who are also our Trustees or officers. RMR ~~LLC~~ is a majority owned subsidiary of RMR Inc. The Chair of our Board of Trustees and one of our Managing Trustees, Adam Portnoy, is the sole trustee, an officer and the controlling shareholder of ABP Trust, which is the controlling shareholder of RMR Inc., the chair of the board of directors, a managing director, ~~and~~ the president and chief executive officer of RMR Inc. and an officer and employee of ~~RMR LLC. David Blackman resigned as~~RMR. Jennifer Clark, our ~~President~~other Managing Trustee and ~~Chief Executive Officer, effective December 31, 2020, and~~our Secretary, also serves as a ~~Managing Trustee, effective June 17, 2021. In replacement~~managing director and the executive vice president, general counsel and secretary of Mr. Blackman, Christopher J. Bilotto was appointed as our President and Chief Operating Officer, effective January 1, 2021, and Jennifer Clark was elected as a Managing Trustee on June 17, 2021. Mr. Bilotto isRMR Inc., an officer and employee of RMR ~~LLC, Ms. Clark is a managing director and an executive officer of RMR Inc.~~ and an officer ~~and employee~~ of ~~RMR LLC, and each of our~~ABP Trust. Our other officers isare also ~~an officer~~officers and ~~employee~~employees of ~~RMR LLC.~~RMR. Some of our Independent Trustees also serve as independent trustees or independent directors of other public companies to which RMR ~~LLC~~ or its subsidiaries provide management services. ~~Adam~~Mr. Portnoy serves as chair of the boards ~~of trustees or boards of directors~~ and as a managing director or managing trustee of ~~those~~these public companies. Other officers of RMR, ~~LLC,~~ including Ms. Clark, serve as managing trustees, managing directors or officers of certain of these companies.

Share Awards to RMR Employees.See Note 8 for further information relating to our awards of common shares to our officers and certain other employees of RMR ~~LLC~~ in September ~~2021~~2022 and our repurchases of common shares from certain of our ~~current and former~~ Trustees and officers and certain other current and former officers and employees of RMR ~~LLC~~ in satisfaction of tax withholding and payment obligations in connection with the vesting of awards of our common shares to them. We include amounts recognized as expense for awards of our common shares to our officers and to other RMR ~~LLC~~ employees in general and administrative expenses in our condensed consolidated statements of comprehensive income (loss).

Our Manager, ~~RMR LLC.~~RMR. We have 2two agreements with RMR ~~LLC~~ to provide management services to us. See Note 9 for more information regarding our management agreements with ~~RMR LLC.~~RMR.

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~~OFFICE PROPERTIES INCOME TRUST~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(dollars in thousands, except per share data)~~

~~(unaudited)~~

Leases with ~~RMR LLC.~~RMR. We lease office space to RMR ~~LLC~~ in certain of our properties for ~~RMR LLC’s~~RMR’s property management offices. Pursuant to our lease agreements with RMR, ~~LLC,~~ we recognized rental income from RMR ~~LLC~~ for leased office space of $282 and $851 for the three and nine months ended September 30, 2022, respectively, and $275 and $850 for the three and nine months ended September 30, 2021, ~~respectively, and $282 and $836 for the three and nine months ended September 30, 2020,~~ respectively.

Sonesta. In June 2021, we entered into a 30-year lease agreement with a subsidiary of Sonesta International Hotels Corporation, or Sonesta, in connection with the redevelopment of an office property we own in Washington, D.C. as a ~~mixed use~~mixed-use property. Sonesta’s lease is for the planned full-service hotel component of the property that will include approximately 230,000 rentable square feet, which represents approximately 54% of the total square feet upon completion of the redevelopment. The term of the lease commences upon our delivery of the completed hotel, which we estimate to occur in the ~~first~~second quarter of 2023. Sonesta has 2two options to extend the term for 10 years each. Pursuant to the lease agreement, Sonesta

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OFFICE PROPERTIES INCOME TRUST

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(dollars in thousands, except per share data)

(unaudited)

will pay us annual base rent of approximately $6,436 beginning 18 months after the lease commences. The annual base rent will increase by 10% every five years throughout the term. Sonesta is also obligated to pay its pro rata share of the operating costs for the building. We estimate that the total cost to build the hotel space will be approximately $66,000. Mr. ~~Adam~~ Portnoy is a director and controlling shareholder of Sonesta and Ms. ~~Jennifer~~ Clark is also a director of Sonesta. Another officer and employee of RMR is a director and the president and chief executive officer of Sonesta.

For more information about these and other such relationships and certain other related person transactions, refer to our ~~2020~~2021 Annual Report.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following information should be read in conjunction with our condensed consolidated financial statements and accompanying notes included in Part I, Item 1 of this Quarterly Report on Form 10-Q and with our ~~2020~~2021 Annual Report.

OVERVIEW (dollars in thousands, except per share and per square foot data)

We are a real estate investment trust, or REIT, organized under Maryland law. As of September 30, ~~2021,~~2022, our wholly owned properties were comprised of ~~178~~162 properties and we had noncontrolling ownership interests of 51% and 50% in two unconsolidated joint ventures that own three properties containing ~~a combined~~ approximately 444,000 rentable square feet. As of September 30, ~~2021,~~2022, our properties are located in 3331 states and the District of Columbia and contain approximately ~~23,274,000~~21,211,000 rentable square feet. As of September 30, ~~2021,~~2022, our properties were leased to ~~331~~276 different tenants with a weighted average remaining lease term (based on annualized rental income) of approximately ~~6.0~~6.3 years. The U.S. government is our largest tenant, representing approximately ~~19.7%~~19.1% of our annualized rental income as of September 30, ~~2021.~~2022. The term annualized rental income as used herein is defined as the annualized contractual base rents from our tenants pursuant to our lease agreements as of September 30, ~~2021,~~2022, plus straight line rent adjustments and estimated recurring expense reimbursements to be paid to us, and excluding lease value amortization.

~~COVID-19 Pandemic~~

~~The~~Certain changes in office space utilization following the COVID-19 pandemic, including increased remote work arrangements, continue to impact the market. The utilization and demand for office space continues to evolve and the ~~various governmental~~ultimate impact of current trends on the demands for office space at our properties remains uncertain and ~~market responses intended~~subject to ~~contain and mitigate~~change. Accordingly, we do not yet know the ~~spread~~full extent of the ~~virus~~impacts on our or our tenants’ businesses and ~~its detrimental public health impact have had a significant impact on the global economy, including~~operations.

In response to inflationary pressures, the U.S. ~~economy. Many of~~Federal Reserve increased the ~~restrictions~~federal funds rate by 300 basis points over five consecutive meetings from March 2022 to September 2022 and has signaled that ~~had been imposed~~further increases are likely to occur. These inflationary pressures and rising interest rates in the United States ~~during~~and globally have given rise to increasing concerns that the ~~pandemic~~U.S. economy is now in, or may soon enter, an economic recession and they have ~~since been lifted and commercial activity~~caused disruptions in the ~~United States has increasingly returned to pre-pandemic practices and operations. We are continuing to closely monitor~~financial markets. Sustained inflationary pressures, increased interest rates, an economic recession or continued or intensified disruptions in the ~~impact of the COVID-19 pandemic on all aspects of our business. To date, the COVID-19 pandemic has not had a significant impact on our business and we continue to believe that~~financial markets could adversely affect our financial ~~resources, the characteristics of our portfolio, including the diversity of our tenant base, both geographically~~condition and ~~by industry, and the financial strength and resources~~that of our tenants, ~~will enable us to withstand~~could adversely impact the ~~COVID-19 pandemic. However, we have received requests from some~~ability of our tenants ~~for~~to renew our leases or pay rent ~~assistance. As~~to us, would impair our ability to effectively deploy our capital or realize upon investments on favorable terms, may restrict our access to, and would likely increase our cost of ~~October 26, 2021, we have granted temporary rent assistance totaling $2,483 to 18 tenants who represent approximately 3.3%~~capital, and may cause the values of our annualized rental income as of September 30, 2021. This assistance generally entails a deferral of, in most cases, one month of rent pursuant to deferred payment plans which require the deferred rent amounts be payable over a 12-month period, all of which have commenced. As of October 26, 2021, we have collected more than 95%properties and of our ~~granted rent deferrals.~~securities to decline.

There remains uncertainty as to the ultimate duration and severity of the COVID-19 pandemic, including risks that may arise from mutations or related strains of the virus, the ability to successfully administer vaccinations to a sufficient number of persons or attain immunity to the virus by natural or other means to achieve herd immunity, and the impact on the U.S. economy that may result from the inability of other countries to administer vaccinations to their citizens or their citizens’ ability to otherwise achieve immunity to the virus. As a result, we are unable to determine what the ultimate impact will be on our, our tenants’ and other stakeholders’ businesses, operations, financial results and financial position. For more information and risks relating to the COVID-19 pandemic, inflation and changes in market interest rates and their impacts on us and our business, see Part I, Item ~~1, “Business—COVID-19 Pandemic” and Part I, Item 1A,~~IA, “Risk Factors”, of our ~~2020~~2021 Annual Report.

Property Operations

Unless otherwise noted, the data presented in this section includes properties classified as held for sale as of September 30, ~~2021~~2022 and excludes three properties owned by two unconsolidated joint ventures in which we own 51% and 50% interests. For

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more information regarding our properties classified as held for sale and our two unconsolidated joint ventures, see Note 3 to ~~the Notes to~~our Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Occupancy data for our properties as of September 30, ~~2021~~2022 and ~~2020~~2021 was as follows (square feet in thousands):


		All Properties (1)				Comparable Properties (2)					All Properties (1)(2)				Comparable Properties (3)
		September 30,				September 30,					September 30,				September 30,
		2021		2020		2021		2020			2022		2021		2022		2021
Total properties ~~(3)~~	Total properties ~~(3)~~	178		184		163		163		Total properties ~~(3)~~	162		178		150		150
Total rentable square feet (4)	Total rentable square feet (4)	23,274		24,909		20,729		20,720		Total rentable square feet (4)	21,211		23,274		19,139		19,144
Percent leased (5)	Percent leased (5)	89.0	%	91.2	%	91.2	%	93.4	%	Percent leased (5)	90.7	%	89.0	%	93.6	%	93.1	%

(1)Based on properties we owned on September 30, ~~2021~~2022 and ~~2020,~~2021, respectively.

(2)Includes one leasable land parcel.

(3)Based on properties we owned continuously since January 1, ~~2020;~~2021; excludes properties classified as held for sale and properties undergoing significant redevelopment, if any, and three properties owned by two unconsolidated joint ventures in which we own 51% and 50% interests.

~~(3)Includes one leasable land parcel.~~

(4)Subject to changes when space is remeasured or reconfigured for tenants.

(5)Percent leased includes (i) space being fitted out for tenant occupancy pursuant to our lease agreements, if any, and (ii) space which is leased, but is not occupied or is being offered for sublease by tenants, if any, as of the measurement date.

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The average effective rental rate per square foot for our properties for the three and nine months ended September 30, 2022 and 2021 ~~and 2020 are~~were as follows:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2021		2020		2021		2020			2022		2021		2022		2021
Average effective rental rate per square foot (1):	Average effective rental rate per square foot (1):									Average effective rental rate per square foot (1):
All properties (2)	All properties (2)	$	28.86	$	25.85	$	27.12	$	25.89	All properties (2)	$	29.19	$	28.86	$	29.44	$	27.12
Comparable properties (3)	Comparable properties (3)	$	27.40	$	27.26	$	27.37	$	27.22	Comparable properties (3)	$	29.09	$	28.84	$	27.64	$	27.11

(1)Average effective rental rate per square foot represents annualized total rental income during the period specified divided by the average rentable square feet leased during the period specified.

(2)Based on properties we owned on September 30, ~~2021~~2022 and ~~2020,~~2021, respectively.

(3)Based on properties we owned continuously since July 1, ~~2020~~2021 and January 1, ~~2020, respectively,~~2021, respectively; excludes properties classified as held for sale and properties undergoing significant redevelopment, if any, and three properties owned by two unconsolidated joint ventures in which we own 51% and 50% interests.

During the three and nine months ended September 30, ~~2021,~~2022, changes in rentable square feet leased and available for lease at our properties were as follows (square feet in thousands):


		Three Months Ended September 30, 2021			Nine Months Ended September 30, 2021				Three Months Ended September 30, 2022			Nine Months Ended September 30, 2022
		Leased	Available for Lease	Total	Leased	Available for Lease	Total		Leased	Available for Lease	Total	Leased	Available for Lease	Total
Beginning of period	Beginning of period	21,553	2,538	24,091	22,705	2,184	24,889	Beginning of period	20,100	2,391	22,491	20,817	2,454	23,271
Changes resulting from:	Changes resulting from:							Changes resulting from:
Acquisition of properties		29	20	49	899	27	926

Disposition of properties	Disposition of properties	(799)	(74)	(873)	(2,491)	(74)	(2,565)	Disposition of properties	(827)	(472)	(1,299)	(1,349)	(728)	(2,077)
Lease expirations	Lease expirations	(738)	738	—	(2,206)	2,206	—	Lease expirations	(643)	643	—	(2,088)	2,088	—
Lease renewals (1)	Lease renewals (1)	385	(385)	—	1,206	(1,206)	—	Lease renewals (1)	383	(383)	—	1,272	(1,272)	—
New leases (1)	New leases (1)	274	(274)	—	576	(576)	—	New leases (1)	223	(223)	—	585	(585)	—

Remeasurements (2)	Remeasurements (2)	1	6	7	16	8	24	Remeasurements (2)	—	19	19	(1)	18	17
End of period	End of period	20,705	2,569	23,274	20,705	2,569	23,274	End of period	19,236	1,975	21,211	19,236	1,975	21,211

(1)Based on leases entered during the three and nine months ended September 30, ~~2021.~~2022.

(2)Rentable square feet are subject to changes when space is remeasured or reconfigured for tenants.

~~Table of Contents~~

Leases at our properties totaling approximately ~~738,000~~643,000 and ~~2,206,000~~2,088,000 rentable square feet expired during the three and nine months ended September 30, ~~2021,~~2022, respectively. During the three and nine months ended September 30, ~~2021,~~2022, we entered into new and renewal leases as summarized in the following tables (square feet in thousands):

Three Months Ended September 30, 2021
New Leases Renewals Total
Rentable square feet leased 274 385 659
Weighted average rental rate change (by rentable square feet) (7.6 %) 5.4 % (0.1 %)
Tenant leasing costs and concession commitments (1)
$ 27,322 $ 18,811 $ 46,133
Tenant leasing costs and concession commitments per rentable square foot (1)
$ 99.81 $ 48.85 $ 70.02
Weighted (by square feet) average lease term (years) 12.9 9.6 10.9
Total leasing costs and concession commitments per rentable square foot per year (1)
$ 7.74 $ 5.11 $ 6.40

Nine Months Ended September 30, 2021
New Leases Renewals Total
Rentable square feet leased 576 1,206 1,782
Weighted average rental rate change (by rentable square feet) 9.8 % 5.3 % 7.0 %
Tenant leasing costs and concession commitments (1)(2)
$ 98,517 $ 31,463 $ 129,980
Tenant leasing costs and concession commitments per rentable square foot (1)(2)
$ 170.91 $ 26.10 $ 72.94
Weighted (by square feet) average lease term (years) 18.9 7.1 10.9
Total leasing costs and concession commitments per rentable square foot per year (1)(2)
$ 9.06 $ 3.66 $ 6.68


	Three Months Ended September 30, 2022
	New Leases			Renewals			Total
Rentable square feet leased	223			383			606
Weighted average rental rate change (by rentable square feet)	59.1		%	0.2		%	21.6		%
Tenant leasing costs and concession commitments (1)	$	33,957		$	9,056		$	43,013
Tenant leasing costs and concession commitments per rentable square foot (1)	$	152.13		$	23.66		$	70.98
Weighted (by square feet) average lease term (years)	9.9			5.5			7.2
Total leasing costs and concession commitments per rentable square foot per year (1)	$	15.33		$	4.27		$	9.92


	Nine Months Ended September 30, 2022
	New Leases			Renewals			Total
Rentable square feet leased	585			1,272			1,857
Weighted average rental rate change (by rentable square feet)	27.8		%	2.7		%	11.0		%
Tenant leasing costs and concession commitments (1)	$	72,011		$	41,119		$	113,130
Tenant leasing costs and concession commitments per rentable square foot (1)	$	123.03		$	32.35		$	60.94
Weighted (by square feet) average lease term (years)	9.8			8.6			9.0
Total leasing costs and concession commitments per rentable square foot per year (1)	$	12.62		$	3.75		$	6.79

(1)Includes commitments made for leasing expenditures and concessions, such as tenant improvements, leasing commissions, tenant reimbursements and free rent.

~~(2)Includes commitments totaling approximately $66,000 in connection with the lease we entered with Sonesta in June 2021 related to the redevelopment~~Table of ~~a property in Washington, D.C. These costs represent the estimated costs related to the planned hotel component of the property.~~Contents

During the three and nine months ended September 30, ~~2021,~~2022, changes in effective rental rates per square foot achieved for new leases and lease renewals at our properties that commenced during the three and nine months ended September 30, ~~2021,~~2022, when compared to prior effective rental rates per square foot in effect for the same space (and excluding space acquired vacant), were as follows (square feet in thousands):


		Three Months Ended September 30, 2021					Nine Months Ended September 30, 2021						Three Months Ended September 30, 2022					Nine Months Ended September 30, 2022
		Old Effective Rent Per Square Foot (1)		New Effective Rent Per Square Foot (1)		Rentable Square Feet	Old Effective Rent Per Square Foot (1)		New Effective Rent Per Square Foot (1)		Rentable Square Feet		Old Effective Rent Per Square Foot (1)		New Effective Rent Per Square Foot (1)		Rentable Square Feet	Old Effective Rent Per Square Foot (1)		New Effective Rent Per Square Foot (1)		Rentable Square Feet
New leases	New leases	$	18.83	$	27.43	8	$	20.45	$	25.57	109	New leases	$	30.67	$	32.73	108	$	15.07	$	15.43	368
Lease renewals	Lease renewals	$	27.99	$	30.38	506	$	27.11	$	28.62	1,271	Lease renewals	$	29.38	$	29.97	328	$	28.08	$	29.28	1,356
Total leasing activity	Total leasing activity	$	27.85	$	30.33	514	$	26.58	$	28.38	1,380	Total leasing activity	$	29.70	$	30.65	436	$	25.30	$	26.32	1,724

(1)Effective rental ~~rate includes~~rates include contractual base rents from our tenants pursuant to our lease agreements, plus straight line rent adjustments and estimated expense reimbursements to be paid to us, and ~~excludes~~exclude lease value amortization.

~~Table of Contents~~

During the three and nine months ended September 30, ~~2021~~2022 and ~~2020,~~2021, amounts capitalized at our properties for lease related costs, building improvements and development, redevelopment and other activities were as follows:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2021		2020		2021		2020			2022		2021		2022		2021

Lease related costs (1)	Lease related costs (1)	$	17,074	$	7,192	$	35,259	$	26,226	Lease related costs (1)	$	17,297	$	17,074	$	42,092	$	35,259
Building improvements (2)	Building improvements (2)	9,267		10,579		21,558		29,814		Building improvements (2)	8,585		9,267		16,070		21,558
Recurring capital expenditures	Recurring capital expenditures	26,341		17,771		56,817		56,040		Recurring capital expenditures	25,882		26,341		58,162		56,817
Development, redevelopment and other activities (3)	Development, redevelopment and other activities (3)	13,272		5,521		30,916		11,260		Development, redevelopment and other activities (3)	36,811		13,272		114,637		30,916
Total capital expenditures	Total capital expenditures	$	39,613	$	23,292	$	87,733	$	67,300	Total capital expenditures	$	62,693	$	39,613	$	172,799	$	87,733

(1)Lease related costs generally include capital expenditures used to improve tenants’ space or amounts paid directly to tenants to improve their space and leasing related costs, such as brokerage commissions and other tenant inducements.

(2)Building improvements generally include expenditures to replace obsolete building components and expenditures that extend the useful life of existing assets.

(3)Development, redevelopment and other activities generally include capital expenditure projects that reposition a property or result in new sources of revenue.

AsIn addition to the capital expenditures described above, we contributed $712 and $2,914 to one of our unconsolidated joint ventures during the three and nine months ended September 30, 2022, respectively. Also, as of September 30, ~~2021,~~2022, we ~~have~~had estimated unspent leasing related obligations of ~~$129,369,~~$137,420, of which we expect to spend ~~$69,248~~$77,251 over the next 12 months.

As of September 30, ~~2021,~~2022, we had leases at our properties totaling approximately ~~2,317,000~~1,596,000 rentable square feet that were scheduled to expire through ~~December 31, 2022.~~September 30, 2023. As of October ~~27, 2021,~~26, 2022, we expect tenants with leases totaling approximately ~~758,000~~696,000 rentable square feet that are scheduled to expire through ~~December 31, 2022,~~September 30, 2023, not to ~~not~~ renew their leases upon expiration and we cannot be sure as to whether other tenants will renew their leases upon expiration. As a result of the COVID-19 pandemic and its economic impact, overall leasing activity has been volatile during 2021 and may remain so until office property market conditions meaningfully improve and stabilize for a sustained period. However, we ~~remain focused on proactive dialogues~~continue to proactively engage with our existing tenants and are focused on our overall tenant retention. Prevailing market conditions and government and other tenants’ needs at the time we negotiate and enter leases or lease renewals will generally determine rental rates and demand for leased space at our properties, ~~and market conditions and our tenants’ needs~~all of which factors are beyond our control. Whenever we renew or enter into new leases for our properties, we intend to seek rents which are equal to or higher than our historical rents for the same properties; however, our ability to maintain or increase the rents for our current properties will depend in large part upon market conditions, which are beyond our control. We cannot be sure of the rental rates which will result from our ongoing negotiations regarding lease renewals or any new or renewed leases we may ~~enter; also,~~enter. Also, we may experience material declines in our rental income due to vacancies upon lease expirations or early ~~terminations.~~terminations or lower rents upon lease renewal or reletting. Additionally, we may incur significant costs and make significant concessions to renew our leases with current tenants or lease our properties to new tenants.

2119

Table of Contents

As of September 30, ~~2021,~~2022, our lease expirations by year ~~are~~were as follows (square feet in thousands):


Year (1)	Year (1)	Number of Leases Expiring	Leased Square Feet Expiring (2)	Percent of Total		Cumulative Percent of Total		Annualized Rental Income Expiring		Percent of Total		Cumulative Percent of Total		Year (1)	Number of Leases Expiring	Leased Square Feet Expiring (2)	Percent of Total		Cumulative Percent of Total		Annualized Rental Income Expiring		Percent of Total		Cumulative Percent of Total
2021		25	487	2.4	%	2.4	%	$	16,114	2.8	%	2.8	%
2022	2022	72	1,830	8.8	%	11.2	%	51,980		8.9	%	11.7	%	2022	17	160	0.8	%	0.8	%	$	4,443	0.8	%	0.8	%
2023	2023	67	2,430	11.7	%	22.9	%	78,580		13.5	%	25.2	%	2023	64	2,374	12.3	%	13.1	%	77,045		14.0	%	14.8	%
2024	2024	58	3,209	15.5	%	38.4	%	83,908		14.4	%	39.6	%	2024	50	3,028	15.7	%	28.8	%	79,495		14.4	%	29.2	%
2025	2025	50	2,128	10.3	%	48.7	%	46,006		7.9	%	47.5	%	2025	43	2,036	10.6	%	39.4	%	43,564		7.9	%	37.1	%
2026	2026	39	1,853	8.9	%	57.6	%	48,876		8.4	%	55.9	%	2026	36	1,565	8.1	%	47.5	%	41,418		7.5	%	44.6	%
2027	2027	33	1,920	9.3	%	66.9	%	49,987		8.6	%	64.5	%	2027	35	2,055	10.7	%	58.2	%	52,053		9.5	%	54.1	%
2028	2028	15	1,254	6.1	%	73.0	%	46,543		8.0	%	72.5	%	2028	17	1,282	6.7	%	64.9	%	49,042		8.9	%	63.0	%
2029	2029	19	970	4.7	%	77.7	%	27,403		4.7	%	77.2	%	2029	18	732	3.8	%	68.7	%	22,550		4.1	%	67.1	%
2030 and thereafter		55	4,624	22.3	%	100.0	%	133,615		22.8	%	100.0	%
2030														2030	22	839	4.4	%	73.1	%	24,585		4.5	%	71.6	%
2031 and thereafter														2031 and thereafter	57	5,165	26.9	%	100.0	%	156,408		28.4	%	100.0	%
Total	Total	433	20,705	100.0	%			$	583,012	100.0	%			Total	359	19,236	100.0	%			$	550,603	100.0	%

Weighted average remaining lease term (in years)	Weighted average remaining lease term (in years)		5.9					6.0						Weighted average remaining lease term (in years)		6.0					6.3

(1)The year of lease expiration is pursuant to current contract terms. Some of our leases allow the tenants to vacate the leased premises before the stated expirations of their leases with little or no liability. As of September 30, ~~2021,~~2022, tenants occupying approximately ~~5.6%~~3.6% of our rentable square feet and responsible for approximately ~~5.5%~~3.5% of our annualized rental income as of September 30, ~~2021 currently have~~2022 had exercisable rights to terminate their leases before the stated terms of their leases expire. Also, in ~~2021, 2022,~~ 2023, 2024, 2025, 2026, 2027, 2028, 2029, 2030, 2031, 2035, 2037 and 2040, early termination rights become exercisable by other tenants who ~~currently occupy~~occupied an additional approximately ~~0.5%, 1.7%~~5.4%, 2.8%, ~~1.2%~~4.5%, ~~3.9%~~0.9%, ~~1.1%~~0.9%, 1.6%, 0.8%, ~~1.2%~~0.7%, ~~0.5%~~0.1%, ~~0.3%~~0.4%, 0.1% and 0.3% of our rentable square feet, respectively, and ~~contribute~~contributed an additional approximately ~~0.6%~~6.4%, ~~2.0%~~3.0%, ~~3.9%~~8.3%, 1.2%, 1.3%, 1.7%~~, 7.0%, 1.4%, 1.3%~~, 1.3%, 0.9%, ~~0.4%~~0.1%, 0.5%, 0.2% and ~~0.3%~~0.4% of our annualized rental income, respectively, as of September 30, ~~2021.~~2022. In addition, as of September 30, ~~2021,~~2022, pursuant to leases with 1410 of our tenants, these tenants ~~have~~had rights to terminate their leases if their respective legislature or other funding authority does not appropriate rent amounts in their respective annual budgets. These 1410 tenants ~~occupy~~occupied approximately ~~6.0%~~5.4% of our rentable square feet and ~~contribute~~contributed approximately ~~6.6%~~6.1% of our annualized rental income as of September 30, ~~2021.~~2022.

(2)Leased square feet is pursuant to leases existing as of September 30, ~~2021,~~2022, and includes (i) space being fitted out for tenant occupancy pursuant to our lease agreements, if any, and (ii) space which is leased, but is not occupied or is being offered for sublease by tenants, if any. Square feet measurements are subject to changes when space is remeasured or reconfigured for new tenants.

We generally will seek to renew or extend the terms of leases ~~in our single tenant~~at properties with tenants when they expire. Because of the capital many of ~~the~~our single tenants ~~in these properties~~ have invested in the properties they lease from us and because many of these properties appear to be of strategic importance to ~~the~~such tenants’ businesses, we believe that it is likely that most of these tenants will renew or extend their leases prior to when they expire. However, increases in remote work and changes in space utilization may cause our tenants not to renew or extend their leases when they expire, or to seek to renew their leases for less space than they currently occupy. If we are unable to extend or renew our leases, or we renew leases for reduced space, it may be time consuming and expensive to relet some of these properties.

We believe that recent government budgetary and spending priorities and enhancements in technology have resulted in a decrease in government office use for employees. Furthermore, over the past several years, government tenants have reduced their space utilization per employee and consolidated government tenants into existing government owned properties. This activity has reduced the demand for government leased space. Our historical experience with respect to properties of the type we own that are majority leased to government tenants has been that government tenants frequently renew leases to avoid the costs and disruptions that may result from relocating their operations. However, efforts to manage space utilization rates may result in our tenants exercising early termination rights under our leases, vacating our properties upon expiration of our leases in order to relocate, or renewing their leases for less space than they currently occupy. Also, our government tenants’ desire to reconfigure leased office space to manage utilization per employee may require us to spend significant amounts for tenant improvements, and tenant relocations are often more prevalent in those circumstances. Increasing uncertainty with respect to government agency budgets and funding to implement relocations, consolidations and reconfigurations has resulted in delayed decisions by some of our government tenants and their reliance on short term lease renewals; however, activity prior to the outbreak of the COVID-19 pandemic suggested that the U.S. government had begun to shift its leasing strategy to include longer term leases and was actively exploring 10 to 20 year lease terms at renewal, in some instances. It is also possible that as a result of the COVID-19 pandemic, government tenants may seek to manage space utilization rates in order to provide greater physical distancing for employees, mostly through lease renewals, which may require us to spend significant amounts for tenant improvements. However, the COVID-19 pandemic and its aftermath have had negative impacts on government budgets and resources, although there are indications that to date, certain of those impacts may not have been as negative as originally expected, and it is unclear what the effect of these impacts will be on government demand for leasing office space. In addition, the new presidential administration may result in a change in the federal government’s policy priorities, which may impact

~~Table of Contents~~

~~leasing at our government leased properties.~~ Given the significant uncertainties, including asthe extent to ~~the COVID-19 pandemic, its economic impact and its aftermath and the new presidential administration,~~which remote or alternative work arrangements may continue or increase, we are unable to reasonably project what the financial impact of market conditions or changing government circumstances will be on the demand for leased space at our properties and our financial results for future periods.

Table of Contents

As of September 30, ~~2021,~~2022, we ~~derive 21.5%~~derived 22.4% of our annualized rental income from our properties located in the metropolitan Washington, D.C. market area, which includes Washington, D.C., Northern Virginia and suburban Maryland. A downturn in economic conditions in this area ~~including as a result of the COVID-19 pandemic,~~ could result in reduced demand from tenants for our properties or reduce the rents that our tenants in this area are willing to pay when our leases expire or terminate and when renewal or new terms are negotiated. Additionally, in recent years there has been a decrease in demand for new leased office space by the U.S. government in the metropolitan Washington, D.C. market area, and that could increase competition for government tenants and adversely affect our ability to retain government tenants when our leases expire.

Our manager, RMR, ~~LLC,~~ employs a tenant review process for us. RMR ~~LLC~~ assesses tenants on an individual basis based on various applicable credit criteria. In general, depending on facts and circumstances, RMR ~~LLC~~ evaluates the creditworthiness of a tenant based on information concerning the tenant that is provided by the tenant and, in some cases, information that is publicly available or obtained from third party sources. ~~RMR LLC also often uses a third party service to monitor the credit ratings, both actual and implied, of our existing tenants.~~ We consider investment grade tenants to include: (a) investment grade rated tenants; (b) tenants with investment grade rated parent entities that guarantee the tenant’s lease obligations; and/or (c) tenants with investment grade rated parent entities that do not guarantee the tenant’s lease obligations. As of September 30, ~~2021,~~2022, tenants contributing ~~52.3%~~52.4% of annualized rental income were investment grade rated (or their payment obligations were guaranteed by an investment grade rated parent) and tenants contributing an additional ~~10.2%~~10.6% of annualized rental income were subsidiaries of an investment grade rated parent (although these parent entities were not liable for the payment of rents).

~~Table of Contents~~

As of September 30, ~~2021,~~2022, tenants representing 1% or more of our total annualized rental income were as ~~follows:~~follows (square feet in thousands):


		Tenant	Credit Rating	Sq. Ft.	% of Leased Sq. Ft.		Annualized Rental Income		% of Total Annualized Rental Income			Tenant	Credit Rating	Sq. Ft.	% of Leased Sq. Ft.		Annualized Rental Income		% of Total Annualized Rental Income
1	1	U.S. Government	Investment Grade	4,196	20.3	%	$	115,035	19.7	%	1	U.S. Government	Investment Grade	3,894	20.2	%	$	105,440	19.1	%
2	2	Alphabet Inc (Google)	Investment Grade	386	1.9	%	20,924		3.6	%	2	Alphabet Inc. (Google)	Investment Grade	386	2.0	%	23,713		4.3	%
3	3	State of California	Investment Grade	651	3.1	%	19,381		3.3	%	3	Shook, Hardy & Bacon L.L.P.	Not Rated	596	3.1	%	19,336		3.5	%
4	4	Shook, Hardy & Bacon L.L.P.	Not Rated	596	2.9	%	19,187		3.3	%	4	IG Investments Holdings LLC	Not Rated	338	1.8	%	16,788		3.0	%
5	5	Bank of America Corporation	Investment Grade	577	2.8	%	15,803		2.7	%	5	Bank of America Corporation	Investment Grade	577	3.0	%	15,766		2.9	%
6	6	IG Investments Holdings LLC	Non Investment Grade	333	1.6	%	14,553		2.5	%	6	State of California	Investment Grade	523	2.7	%	15,762		2.9	%
7	7	F5 Networks, Inc.	Not Rated	299	1.4	%	13,027		2.2	%	7	Commonwealth of Massachusetts	Investment Grade	311	1.6	%	12,260		2.2	%
8	8	Commonwealth of Massachusetts	Investment Grade	311	1.5	%	12,260		2.1	%	8	CareFirst Inc.	Not Rated	207	1.1	%	11,498		2.1	%
9	9	CareFirst Inc.	Not Rated	207	1.0	%	11,870		2.0	%	9	Northrop Grumman Corporation	Investment Grade	337	1.8	%	11,465		2.1	%
10	10	Northrop Grumman Corporation	Investment Grade	337	1.6	%	11,350		1.9	%	10	Tyson Foods, Inc.	Investment Grade	248	1.3	%	11,042		2.0	%
11	11	Tyson Foods, Inc.	Investment Grade	248	1.2	%	11,198		1.9	%	11	Sonesta International Hotels Corporation (1)	Not Rated	230	1.2	%	10,745		2.0	%
12	12	Sonesta International Hotels Corporation (1)	Not Rated	230	1.1	%	10,745		1.8	%	12	CommScope Holding Company Inc	Non Investment Grade	228	1.2	%	9,370		1.7	%
13	13	CommScope Holding Company Inc	Non Investment Grade	228	1.1	%	8,921		1.5	%	13	Sonoma Biotherapeutics, Inc. (2)	Not Rated	84	0.4	%	7,468		1.4	%
14	14	Micro Focus International plc	Non Investment Grade	242	1.2	%	7,431		1.3	%	14	State of Georgia	Investment Grade	308	1.6	%	7,383		1.3	%
15	15	State of Georgia	Investment Grade	308	1.5	%	7,248		1.2	%	15	PNC Bank	Investment Grade	441	2.3	%	6,924		1.3	%
16	16	PNC Bank	Investment Grade	441	2.1	%	6,924		1.2	%	16	Micro Focus International plc	Non Investment Grade	215	1.1	%	6,905		1.3	%
17	17	ServiceNow, Inc.	Investment Grade	149	0.7	%	6,623		1.1	%	17	Compass Group plc	Investment Grade	267	1.4	%	6,703		1.2	%
18	18	Compass Group plc	Investment Grade	267	1.3	%	6,496		1.1	%	18	ServiceNow, Inc.	Investment Grade	149	0.8	%	6,637		1.2	%
19	19	Allstate Insurance Co.	Investment Grade	468	2.3	%	6,475		1.1	%	19	Allstate Insurance Co.	Investment Grade	468	2.4	%	6,479		1.2	%
20	20	Automatic Data Processing, Inc.	Investment Grade	289	1.4	%	6,037		1.0	%	20	Leidos Holdings Inc.	Investment Grade	159	0.8	%	6,117		1.1	%
21	21	Church & Dwight Co., Inc.	Investment Grade	250	1.2	%	6,031		1.0	%	21	Automatic Data Processing, Inc.	Investment Grade	289	1.5	%	6,087		1.1	%
22											22	Church & Dwight Co., Inc.	Investment Grade	250	1.3	%	6,037		1.1	%
		Total		11,013	53.2	%	$	337,519	57.5	%		Total		10,505	54.6	%	$	329,925	60.0	%

(1)In June 2021, we entered into a 30-year lease with Sonesta. The lease relates to the redevelopment of a property we own in Washington, D.C to a mixed use and Sonesta's lease relates to the planned hotel component of the property. The term of the lease commences upon our delivery of the completed hotel, which is estimated to occur in the ~~first~~second quarter of 2023. For more information about our lease with Sonesta, see Note 10 to ~~the Notes to~~our Condensed Consolidated Financial Statements included in Part I, Item I of this Quarterly Report on Form 10-Q.

~~Acquisition Activities~~

~~During~~(2)In August 2022, we entered into an approximately 10-year lease with Sonoma Biotherapeutics, Inc. at a property we own in Seattle, WA that is currently undergoing redevelopment. The term of the ~~nine months ended September 30, 2021, we acquired three properties containing a combined approximately 926,000 rentable square feet for an aggregate purchase price~~lease is estimated to commence in the fourth quarter of ~~$576,975, excluding purchase price adjustments and acquisition related costs.~~

~~For more information about our acquisition activities, see Note 3 to the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.~~2023.

2421

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Disposition Activities

During the nine months ended September 30, ~~2021,~~2022, we sold ~~six~~16 properties ~~and a warehouse facility adjacent to a property we own~~ containing ~~a combined~~ approximately ~~2,565,000~~2,077,000 rentable square feet for an aggregate sales price of ~~$198,415,~~$195,920, excluding closing costs.

~~In October 2021,~~Based on current real estate market conditions, including rising interest rates, we ~~sold two vacant land parcels adjacent~~expect the pace of our dispositions to moderate. However, we continue to evaluate our portfolio to strategically recycle capital and are currently in various stages of marketing certain of our properties for sale, and we ~~own located~~may decide to seek to sell additional properties in ~~Sterling, VA for a sales price of $28,500, excluding closing costs.~~

the future. As of October ~~27, 2021,~~26, 2022, we have ~~also~~ entered into ~~an agreement~~agreements to sell five properties, ~~located in Brookhaven, GA~~including one leasable land parcel, containing approximately 338,000 rentable square feet for aan aggregate sales price of ~~$56,000,~~$20,450, excluding closing costs. ~~Also, we~~These sales are ~~currently marketing for sale 17 properties containing approximately 2,161,000 rentable square feet that we expect~~expected to ~~generate approximately $200,000~~occur before the end of ~~gross proceeds. We expect to substantially complete~~the fourth quarter of 2022. However, these ~~dispositions by mid-year 2022. We cannot be sure we will sell any properties we~~sales are ~~marketing for prices in excess of their carrying values or otherwise. In addition, our pending sale is~~ subject to conditions; accordingly, we cannot be sure that we will complete ~~this sale~~these sales or that ~~this sale~~these sales will not be delayed or the terms will not change.

For more information about our disposition activities, see Note 3 to ~~the Notes to~~our Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Financing Activities

~~Senior Unsecured Note Issuances~~

In ~~May 2021,~~April 2022, we ~~issued $300,000~~prepaid, at par plus accrued interest, a mortgage note secured by one property with an outstanding principal balance of ~~2.650% senior unsecured notes due 2026~~$24,863, an annual interest rate of 4.22% and a maturity date in an underwritten public offering, raising net proceeds of $296,826, after deducting underwriters' discounts and offering expenses, which we used to redeem all $310,000 of our 5.875% senior unsecured notes due 2046.

~~Senior Unsecured Note Redemptions~~July 2022 using cash on hand.

In June ~~2021,~~2022, we redeemed, at par plus accrued interest, all ~~$310,000~~$300,000 of our ~~5.875%~~4.00% senior unsecured notes due ~~2046~~July 2022 using cash on hand and ~~the net proceeds from the issuance of~~borrowings under our ~~2.650% senior unsecured notes due 2026.~~revolving credit facility.

In ~~September 2021, we redeemed, at a premium plus accrued interest, all $300,000 of our 4.15% senior unsecured notes due~~October 2022, ~~using a portion of the net proceeds from the issuance of our 2.400% senior unsecured notes due 2027.~~

~~Mortgage Note Repayment~~

~~In June 2021,~~ we prepaid, at a ~~premium~~discounted amount of $22,176 plus accrued interest, a mortgage note secured by ~~three properties~~one property with an outstanding principal balance of ~~$71,000,~~$22,901, an annual interest rate of ~~3.55%~~4.80% and a maturity date in ~~May~~June 2023 using cash on hand and borrowings under our revolving credit facility.

Segment Information

We operate in one business segment: ownership of real estate properties.

2522

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RESULTS OF OPERATIONS (amounts in thousands, except per share amounts)

Three Months Ended September 30, ~~2021,~~2022, Compared to Three Months Ended September 30, ~~2020~~2021


		Comparable Properties (1) Results Three Months Ended September 30,								Non-Comparable Properties Results Three Months Ended September 30,				Consolidated Results Three Months Ended September 30,										Comparable Properties (1) Results Three Months Ended September 30,								Non-Comparable Properties Results Three Months Ended September 30,					Consolidated Results Three Months Ended September 30,

		2021		2020		$ Change		% Change		2021		2020		2021		2020		$ Change		% Change				2022		2021		$ Change		% Change		2022		2021			2022			2021			$ Change			% Change
Rental income	Rental income	$	128,995	$	130,319	$	(1,324)	(1.0	%)	$	18,577	$	15,487	$	147,572	$	145,806	$	1,766	1.2	%		Rental income	$	133,923	$	133,153	$	770	0.6	%	$	3,760	$	14,419		$	137,683		$	147,572		$	(9,889)		(6.7		%)
Operating expenses:	Operating expenses:																						Operating expenses:
Real estate taxes	Real estate taxes	13,730		14,273		(543)		(3.8	%)	6,337		1,840		20,067		16,113		3,954		24.5	%		Real estate taxes	15,764		18,255		(2,491)		(13.6	%)	650		1,812			16,414			20,067			(3,653)			(18.2		%)
Utility expenses	Utility expenses	6,547		6,639		(92)		(1.4	%)	842		925		7,389		7,564		(175)		(2.3	%)		Utility expenses	7,522		6,108		1,414		23.1	%	464		1,281			7,986			7,389			597			8.1		%
Other operating expenses	Other operating expenses	23,470		23,933		(463)		(1.9	%)	3,067		2,433		26,537		26,366		171		0.6	%		Other operating expenses	26,290		23,022		3,268		14.2	%	1,447		3,515			27,737			26,537			1,200			4.5		%
Total operating expenses	Total operating expenses	43,747		44,845		(1,098)		(2.4	%)	10,246		5,198		53,993		50,043		3,950		7.9	%		Total operating expenses	49,576		47,385		2,191		4.6	%	2,561		6,608			52,137			53,993			(1,856)			(3.4		%)
Net operating income (2)	Net operating income (2)	$	85,248	$	85,474	$	(226)	(0.3	%)	$	8,331	$	10,289	93,579		95,763		(2,184)		(2.3	%)		Net operating income (2)	$	84,347	$	85,768	$	(1,421)	(1.7	%)	$	1,199	$	7,811		85,546			93,579			(8,033)			(8.6		%)

Other expenses:	Other expenses:																						Other expenses:
Depreciation and amortization	Depreciation and amortization													59,533		62,227		(2,694)		(4.3	%)		Depreciation and amortization														52,988			59,533			(6,545)			(11.0		%)
Loss on impairment of real estate	Loss on impairment of real estate													(3)		2,954		(2,957)		(100.1	%)		Loss on impairment of real estate														—			(3)			3			n/m

General and administrative	General and administrative													448		7,059		(6,611)		(93.7	%)		General and administrative														6,564			448			6,116			n/m
Total other expenses	Total other expenses													59,978		72,240		(12,262)		(17.0	%)		Total other expenses														59,552			59,978			(426)			(0.7		%)

Gain on sale of real restate														36		—		36		n/m
Gain on sale of real estate																						Gain on sale of real estate														16,925			36			16,889			n/m

Interest and other income	Interest and other income													—		2		(2)		(100.0	%)		Interest and other income														56			—			56			n/m
Interest expense	Interest expense													(26,929)		(27,097)		168		(0.6	%)		Interest expense														(24,969)			(26,929)			1,960			(7.3		%)
Loss on early extinguishment of debt	Loss on early extinguishment of debt													(2,274)		—		(2,274)		n/m			Loss on early extinguishment of debt														—			(2,274)			2,274			n/m

Income (loss) before income tax (expense) benefit and equity in net losses of investees														4,434		(3,572)		8,006		n/m
Income tax (expense) benefit														(34)		54		(88)		(163.0	%)
Income before income tax expense and equity in net losses of investees																						Income before income tax expense and equity in net losses of investees														18,006			4,434			13,572			n/m
Income tax expense																						Income tax expense														(90)			(34)			(56)			164.7		%
Equity in net losses of investees	Equity in net losses of investees													(688)		(279)		(409)		146.6	%		Equity in net losses of investees														(952)			(688)			(264)			38.4		%

Net income (loss)														$	3,712	$	(3,797)	$	7,509	(197.8	%)
Net income																						Net income														$	16,964		$	3,712		$	13,252		n/m

Weighted average common shares outstanding (basic)	Weighted average common shares outstanding (basic)													48,211		48,132		79		0.2	%		Weighted average common shares outstanding (basic)														48,286			48,211			75			0.2		%
Weighted average common shares outstanding (diluted)	Weighted average common shares outstanding (diluted)													48,244		48,132		112		0.2	%		Weighted average common shares outstanding (diluted)														48,286			48,244			42			0.1		%

Per common share amounts (basic and diluted):	Per common share amounts (basic and diluted):																						Per common share amounts (basic and diluted):
Net income (loss)														$	0.08	$	(0.08)	$	0.16	(200.0	%)
Net income																						Net income														$	0.35		$	0.08		$	0.27		n/m

n/m - not meaningful

(1)Comparable properties consists of ~~164~~152 properties we owned on September 30, ~~2021~~2022 and which we owned continuously since July 1, ~~2020~~2021 and excludes properties classified as held for sale and properties undergoing significant redevelopment, if any, and three properties owned by two unconsolidated joint ventures in which we own 51% and 50% interests.

(2)Our definition of net operating income, or NOI, and our reconciliation of net income ~~(loss)~~ to NOI are included below under the heading “Non-GAAP Financial Measures.”

References to changes in the income and expense categories below relate to the comparison of consolidated results for the three months ended September 30, ~~2021,~~2022, compared to the three months ended September 30, ~~2020.~~

~~Table of Contents~~

2021.

Rental income. The ~~increase~~decrease in rental income reflects ~~an increase in rental income of $14,477 related to acquired properties, offset by~~ decreases in rental income of ~~$7,158~~$7,112 as a result of property disposition activities ~~$4,229~~and $3,632 for properties undergoing significant redevelopment, ~~and $1,324~~offset by increases in rental income of $770 related to comparable properties and $85 related to acquired properties. The decrease in rental income for properties undergoing significant redevelopment is primarily due to the reduction in occupied space at a property located in ~~Washington, D.C.~~Seattle, WA that began a redevelopment project ~~during 2021.~~in February 2022. The ~~decrease~~increase in rental income for comparable properties is primarily due to ~~reductions~~higher reimbursement revenue resulting from increased operating expenses due to higher building utilization levels in ~~occupied space at~~the 2022 period and operating expenses that were previously paid directly by certain of our ~~properties~~tenants that are now being paid by and

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reimbursed to us pursuant to lease amendments with those tenants executed in ~~the 2021 period.~~2022. Rental income includes non-cash straight line rent adjustments totaling $1,765 in the 2022 period and $3,924 in the 2021 ~~period and $3,912 in the 2020~~ period, and amortization of acquired real estate leases and assumed real estate lease obligations totaling $(204) in the 2022 period and $(447) in the 2021 ~~period and $(1,312) in the 2020~~ period.

Real estate taxes. The ~~increase~~decrease in real estate taxes primarily reflects decreases of $2,491 for comparable properties, $875 related to property disposition activities and $325 for properties undergoing significant redevelopment, offset by an increase in real estate taxes of ~~$5,844~~$38 related to acquired ~~properties, offset by decreases of $932 related to property disposition activities, $543 for comparable properties and $415 for properties undergoing significant redevelopment.~~properties. Real estate taxes for comparable properties decreased primarily due to ~~decreases in~~lower assessed values ~~and refunds received in the 2021 period~~ at certain of our properties as a result of successful real estate tax ~~appeals.~~

~~Utility expenses.~~ The decrease in utility expenses reflects decreases in utility expenses of $155 for properties undergoing significant redevelopment, $151 related to property disposition activities and $92 for comparable properties, offset by an increase in utility expenses of $223 for acquired properties. The decrease in utility expenses for comparable properties is primarily due to a decrease in electricity and water usage as a result of reductions in occupied space at certain of our propertiesappeals in the ~~2021~~2022 period, partially offset by an increase related to ~~utility expenses in the 2021 period~~real estate taxes that were previously paid directly by ~~one~~certain of our tenants that are now being paid by us pursuant to a lease ~~amendment~~amendments with those tenants executed in 2022.

Utility expenses. The increase in utility expenses reflects increases in utility expenses of $1,414 for comparable properties and $27 for acquired properties, offset by decreases in utility expenses of $769 related to property disposition activities and $75 for properties undergoing significant redevelopment. The increase in utility expenses for comparable properties is primarily due to increased building utilization levels at certain of our properties and the impact of inflation in the 2022 period, as well as utility expenses that ~~tenant effective~~were previously paid directly by certain of our tenants that are now being paid by us pursuant to lease amendments with those tenants executed in ~~January 2021.~~2022.

Other operating expenses. Other operating expenses consist of salaries and benefit costs of property level personnel, repairs and maintenance expense, cleaning expense, other direct costs of operating our properties and property management fees. The increase in other operating expenses primarily reflects ~~an increase~~increases of ~~$1,910~~$3,268 for comparable properties and $32 for acquired properties, offset by decreases of ~~$841~~$1,795 related to property disposition activities ~~$463 for comparable properties~~ and ~~$435~~$305 for properties undergoing significant redevelopment. The ~~decrease~~increase in other operating expenses for comparable properties is primarily due to ~~a decrease in~~higher repairs and maintenance costs, higher cleaning expenses atdue to increased building utilization levels, increased insurance costs and an increase related to other operating expenses that were previously paid directly by certain of our ~~properties~~tenants that are now being paid by us pursuant to lease amendments with those tenants executed in ~~the 2021 period.~~2022.

Depreciation and amortization. The decrease in depreciation and amortization primarily reflects decreases of ~~$4,868~~$2,886 for comparable properties, ~~and $4,817~~$2,612 related to property disposition activities and $1,063 for properties undergoing significant redevelopment, offset by an increase of ~~$6,991~~$16 for acquired properties. Depreciation and amortization for comparable properties declined due to certain leasing related assets becoming fully depreciated ~~after~~since July 1, ~~2020.~~

~~Loss on impairment~~2021, partially offset by depreciation and amortization of ~~real estate.~~ ~~We recorded a $2,954 loss on impairment~~improvements made to certain of ~~real estate in the 2020 period to reduce the carrying value of four~~our properties ~~to their estimated fair values less costs to sell.~~since July 1, 2021.

General and administrative. General and administrative expenses consist of fees pursuant to our business management agreement, equity compensation expense, legal and accounting fees, Trustees’ fees and expenses, securities listing and transfer agency fees and other costs relating to our status as a publicly traded company. The ~~decrease~~increase in general and administrative expenses is primarily the result of the reversal of $6,627 of previously accrued estimated business management incentive fees in the 2021 period, ~~and the expiration of an office lease in January 2021 for which we were the lessee,~~ partially offset by ~~an increase~~a decrease in base business management fees resulting from ~~an increase~~a decrease in average total market capitalization in the ~~2021~~2022 period compared to the ~~2020~~2021 period.

Gain on sale of real estate. ~~Gain~~We recorded a $16,925 net gain on sale of real estate ~~for the 2021 period represents a net gain on~~resulting from the sale of ~~three properties.~~10 properties in the 2022 period.

Interest and other income. ~~Interest~~The increase in interest and other income ~~reflects~~is primarily due to the effect of higher interest rates earned ~~if any,~~ on cash balances ~~invested.~~invested in the 2022 period compared to the 2021 period.

Interest expense. The decrease in interest expense ~~is primarily due to lower weighted average interest expense incurred on balances outstanding in the 2021 period as a result of~~reflects financing activities since July 1, ~~2020,~~2021, which included the ~~aggregate~~ redemption ~~or repayment~~ of ~~debt totaling $720,635 with a weighted average interest rate of 4.8% and the aggregate issuance of $1,312,000~~$600,000 of senior unsecured notes with a weighted average interest rate of ~~3.2%~~4.1% and the repayment of a mortgage note with a principal balance of approximately $25,000 with an interest rate of 4.2%, as well as higher capitalized interest in the 2022 period, partially offset by the issuance of $750,000 of senior unsecured notes with a weighted average interest rate of 3.0%, as well as higher weighted average interest ~~expense incurred as a result of a higher average outstanding balance~~rates on borrowings under our revolving credit facility during the ~~2021~~2022 period compared to the ~~2020~~2021 period.

Loss on early extinguishment of debt. We recorded a loss on early extinguishment of debt of $2,274 in the 2021 period from prepayment fees incurred and the write off of unamortized discounts associated with the prepayment of our senior unsecured notes due 2022.

Income tax expense. Income tax expense is primarily the result of operating income earned in jurisdictions where we are subject to state income taxes and can fluctuate based on the timing of our income, including as a result of gains or losses on the sale of real estate.

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~~Income tax (expense) benefit.~~ ~~Income tax (expense) benefit is primarily the result of operating income or losses in jurisdictions where we are subject to state income taxes.~~

Equity in net losses of investees. Equity in net losses of investees represents our proportionate share of losses from our investments in two unconsolidated joint ventures. The increase in equity in net losses of investees is primarily due to reductions in occupied space at properties owned by our unconsolidated joint ventures in the 2022 period.

Net ~~income (loss).~~income. ~~The change in net~~Net income ~~(loss)~~ and net income ~~(loss)~~ per basic and diluted common share ~~from 2020~~increased in the 2022 period compared to the 2021 isperiod primarily as a result of the changes noted above.

~~RESULTS OF OPERATIONS(amounts in thousands, except per share amounts)~~

Nine Months Ended September 30, ~~2021,~~2022, Compared to Nine Months Ended September 30, ~~2020~~2021


		Comparable Properties (1) Results Nine Months Ended September 30,								Non-Comparable Properties Results Nine Months Ended September 30,				Consolidated Results Nine Months Ended September 30,									Comparable Properties (1) Results Nine Months Ended September 30,								Non-Comparable Properties Results Nine Months Ended September 30,				Consolidated Results Nine Months Ended September 30,
		2021		2020		$ Change		% Change		2021		2020		2021		2020		$ Change		% Change			2022		2021		$ Change		% Change		2022		2021		2022		2021		$ Change		% Change
Rental income	Rental income	$	388,517	$	391,233	$	(2,716)	(0.7	%)	$	40,678	$	50,061	$	429,195	$	441,294	$	(12,099)	(2.7	%)	Rental income	$	364,924	$	360,539	$	4,385	1.2	%	$	61,429	$	68,656	$	426,353	$	429,195	$	(2,842)	(0.7	%)
Operating expenses:	Operating expenses:																					Operating expenses:
Real estate taxes	Real estate taxes	42,584		42,616		(32)		(0.1	%)	9,549		6,085		52,133		48,701		3,432		7.0	%	Real estate taxes	38,814		38,857		(43)		(0.1	%)	10,828		13,276		49,642		52,133		(2,491)		(4.8	%)
Utility expenses	Utility expenses	17,182		17,338		(156)		(0.9	%)	1,949		2,439		19,131		19,777		(646)		(3.3	%)	Utility expenses	17,854		15,566		2,288		14.7	%	2,817		3,565		20,671		19,131		1,540		8.0	%
Other operating expenses	Other operating expenses	69,751		69,551		200		0.3	%	7,123		8,482		76,874		78,033		(1,159)		(1.5	%)	Other operating expenses	68,606		62,772		5,834		9.3	%	12,991		14,102		81,597		76,874		4,723		6.1	%
Total operating expenses	Total operating expenses	129,517		129,505		12		—	%	18,621		17,006		148,138		146,511		1,627		1.1	%	Total operating expenses	125,274		117,195		8,079		6.9	%	26,636		30,943		151,910		148,138		3,772		2.5	%
NOI (2)	NOI (2)	$	259,000	$	261,728	$	(2,728)	(1.0	%)	$	22,057	$	33,055	281,057		294,783		(13,726)		(4.7	%)	NOI (2)	$	239,650	$	243,344	$	(3,694)	(1.5	%)	$	34,793	$	37,713	274,443		281,057		(6,614)		(2.4	%)

Other expenses:	Other expenses:																					Other expenses:
Depreciation and amortization	Depreciation and amortization													178,991		189,340		(10,349)		(5.5	%)	Depreciation and amortization													170,993		178,991		(7,998)		(4.5	%)
Loss on impairment of real estate	Loss on impairment of real estate													55,854		2,954		52,900		n/m		Loss on impairment of real estate													21,820		55,854		(34,034)		(60.9	%)

Acquisition and transaction related costs																						Acquisition and transaction related costs													224		—		224		n/m
General and administrative	General and administrative													24,690		21,372		3,318		15.5	%	General and administrative													19,353		24,690		(5,337)		(21.6	%)
Total other expenses	Total other expenses													259,535		213,666		45,869		21.5	%	Total other expenses													212,390		259,535		(47,145)		(18.2	%)

Gain on sale of real estate	Gain on sale of real estate													54,154		10,822		43,332		n/m		Gain on sale of real estate													7,437		54,154		(46,717)		(86.3	%)

Interest and other income	Interest and other income													7		738		(731)		(99.1	%)	Interest and other income													73		7		66		n/m
Interest expense	Interest expense													(84,728)		(79,461)		(5,267)		6.6	%	Interest expense													(78,923)		(84,728)		5,805		(6.9	%)
Loss on early extinguishment of debt	Loss on early extinguishment of debt													(14,068)		(3,839)		(10,229)		n/m		Loss on early extinguishment of debt													(77)		(14,068)		13,991		(99.5	%)
Income (loss) before income tax expense and equity in net losses of investees														(23,113)		9,377		(32,490)		n/m
Loss before income tax expense and equity in net losses of investees																						Loss before income tax expense and equity in net losses of investees													(9,437)		(23,113)		13,676		(59.2	%)
Income tax expense	Income tax expense													(348)		(220)		(128)		58.2	%	Income tax expense													(431)		(348)		(83)		23.9	%
Equity in net losses of investees	Equity in net losses of investees													(1,664)		(815)		(849)		104.2	%	Equity in net losses of investees													(2,631)		(1,664)		(967)		58.1	%

Net income (loss)														$	(25,125)	$	8,342	$	(33,467)	n/m
Net loss																						Net loss													$	(12,499)	$	(25,125)	$	12,626	(50.3	%)

Weighted average common shares outstanding (basic and diluted)	Weighted average common shares outstanding (basic and diluted)													48,179		48,111		68		0.1	%	Weighted average common shares outstanding (basic and diluted)													48,260		48,179		81		0.2	%

Per common share amounts (basic and diluted):	Per common share amounts (basic and diluted):																					Per common share amounts (basic and diluted):

Net income (loss)														$	(0.52)	$	0.17	$	(0.69)	n/m
Net loss																						Net loss													$	(0.27)	$	(0.52)	$	0.25	(48.1	%)

n/m - not meaningful

(1)Comparable properties consists of ~~163~~150 properties we owned on September 30, ~~2021~~2022 and which we owned continuously since January 1, ~~2020~~2021 and excludes properties classified as held for sale and properties undergoing significant redevelopment, if any, and three properties owned by two unconsolidated joint ventures in which we own 51% and 50% interests.

(2)Our definition of NOI and our reconciliation of net ~~income (loss)~~loss to NOI are included below under the heading “Non-GAAP Financial Measures.”

References to changes in the income and expense categories below relate to the comparison of consolidated results for the nine months ended September 30, ~~2021,~~2022, compared to the nine months ended September 30, ~~2020.~~2021.

Rental income. The decrease in rental income reflects decreases in rental income of ~~$17,798~~$21,240 related to property disposition activities ~~$8,472~~and $8,719 for properties undergoing significant redevelopment, offset by increases in rental income of $22,732 for acquired properties and ~~$2,716~~$4,385 for comparable properties. The increase in rental income for comparable properties ~~offset by an~~is primarily due to higher reimbursement revenue resulting from increased operating expenses due to higher building utilization levels in the

2825

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~~increase~~2022 period and operating expenses that were previously paid directly by certain of our tenants that are now being paid by and reimbursed to us pursuant to lease amendments with those tenants executed in ~~rental income~~2022, termination fee revenue received and higher parking garage revenue as a result of ~~$16,887 for acquired~~higher parking volumes in the 2022 period, partially offset by reductions in occupied space at certain of our properties. The decrease in rental income for properties undergoing significant redevelopment is primarily due to the reduction in occupied space at a property located in Washington, D.C. that began a redevelopment project during the 2021 period. The decrease in rental income for comparable properties is primarily due to reductions in occupied space at ~~certain~~properties located in Washington, D.C. and Seattle, WA that began redevelopment projects during April 2021 and February 2022, respectively, partially offset by termination fee revenue at the Seattle, WA property related to the termination of ~~our properties~~the former tenant’s lease in February 2022 prior to the ~~2021 period.~~commencement of the redevelopment. Rental income includes non-cash straight line rent adjustments totaling $7,226 in the 2022 period and $13,128 in the 2021 ~~period and $12,963 in the 2020~~ period, and amortization of acquired real estate leases and assumed real estate lease obligations totaling $(780) in the 2022 period and $(1,836) in the 2021 ~~period and $(4,149) in the 2020~~ period.

Real estate taxes. The ~~increase~~decrease in real estate taxes primarily reflects ~~an increase in real estate taxes of $5,992 for acquired properties, offset by~~ decreases in real estate taxes of ~~$1,478~~$2,200 related to property disposition activities, ~~$1,050~~$2,062 for properties undergoing significant redevelopment and ~~$32 for comparable properties.~~

~~Utility expenses.~~ ~~The decrease in utility expenses reflects decreases in utility expenses of $439 related to property disposition activities, $290 for properties undergoing significant redevelopment and $156~~$43 for comparable properties, offset by an increase in ~~utility expenses~~real estate taxes of ~~$239~~$1,814 for acquired properties. ~~Utility expenses~~Real estate taxes for comparable properties ~~declined~~decreased primarily due to a decrease in electricity and water usage resulting from cost savings initiatives implemented by our manager, RMR LLC, in response to decreased space utilization at our properties as a result of the COVID-19 pandemic and reductions in occupied spacelower assessed values at certain of our properties in the ~~2021~~2022 period, partially offset by an increase related to ~~utility expenses in the 2021 period~~real estate taxes that were previously paid directly by ~~one~~certain of our tenants that are now being paid by us pursuant to lease amendments with those tenants executed in 2022.

Utility expenses. The increase in utility expenses reflects increases in utility expenses of $2,288 for comparable properties and $865 for acquired properties, offset by decreases of $1,333 related to property disposition activities and $280 for properties undergoing significant redevelopment. The increase in utility expenses for comparable properties is primarily due to increases in electricity usage as a result of higher building utilization levels at certain of our properties and the impact of inflation in the 2022 period, as well as utility expenses that were previously paid directly by certain of our tenants that are now being paid by us pursuant to lease ~~amendment~~amendments with ~~that tenant effective~~those tenants executed in ~~January 2021.~~2022.

Other operating expenses. The ~~decrease~~increase in other operating expenses primarily reflects ~~decreases~~increases in other operating expenses of ~~$2,557~~$5,834 for comparable properties and $4,575 for acquired properties, offset by decreases of $4,794 related to property disposition activities and ~~$885~~$892 for properties undergoing significant ~~redevelopment, offset by increases~~redevelopment. The increase in other operating expenses ~~of $2,083 for acquired properties and $200~~ for comparable ~~properties.~~properties is primarily due to increases in certain expenses as building utilization levels rise, including cleaning and parking garage expenses, higher repairs and maintenance and landscape maintenance expenses at certain of our properties in the 2022 period and an increase related to other operating expenses that were previously paid directly by certain of our tenants that are now being paid by us pursuant to lease amendments with those tenants executed in 2022.

Depreciation and amortization. The decrease in depreciation and amortization primarily reflects decreases of ~~$11,359 for comparable properties and $7,187~~$14,702 related to property disposition activities, ~~offset by increases of $8,158~~$5,362 for ~~acquired~~comparable properties and ~~$39~~$1,116 for properties undergoing significant ~~redevelopment.~~redevelopment, offset by an increase of $13,182 for acquired properties. Depreciation and amortization for comparable properties decreased due to certain leasing related assets becoming fully depreciated ~~after~~since January 1, ~~2020.~~2021, partially offset by depreciation and amortization of improvements made to certain of our properties since January 1, 2021.

Loss on impairment of real estate. We recorded a $21,820 loss on impairment of real estate in the 2022 period, including an adjustment of $6,957 to reduce the carrying value of seven properties to their estimated fair values less costs to sell and an adjustment of $14,863 to reduce the carrying value of one property that was held and used as of March 31, 2022 to its estimated fair value. We recorded a $55,854 loss on impairment of real estate in the 2021 period to reduce the carrying value of six properties to their estimated fair values less costs to ~~sell, which includes $45,196~~sell.

Acquisition and transaction related costs. Acquisition and transaction related costs represent costs related to ~~three properties containing approximately 2,001 rentable square feet~~an acquisition opportunity that were sold during the nine months ended September 30, 2021, as well as $10,658 related to three properties containing approximately 448 rentable square feet that were classified as held for sale as of September 30, 2021. We recorded a $2,954 loss on impairment of real estatedid not materialize in the ~~2020 period to reduce the carrying value of four properties to their estimated fair values less costs to sell.~~2022 period.

General and administrative. The ~~increase~~decrease in general and administrative expenses is primarily the result of ~~$4,484 of~~ estimated business management incentive fees of $4,484 recorded in the 2021 period, a state franchise tax refund received in the 2022 period and ~~an increase~~a decrease in base business management fees resulting from ~~an increase~~a decrease in average total market capitalization in the ~~2021~~2022 period compared to the ~~2020 period, partially offset by the expiration of an office lease in January~~ 2021 ~~for which we were the lessee and lower accounting and legal costs.~~period.

Gain on sale of real estate. We recorded a $7,437 net gain on sale of real estate resulting from the sale of 16 properties in the 2022 period. We recorded a $54,154 net gain on sale of real estate resulting from the sale of four properties and a warehouse facility adjacent to a property we ~~own during~~owned in the 2021 ~~period. We recorded a $10,822 net gain on sale of real estate resulting from the sale of six properties during the 2020~~ period.

Interest and other income. The ~~decrease~~increase in interest and other income is primarily due to ~~a settlement payment we received in the 2020 period resulting from a dispute with a vendor, the June 2020 payoff of a mortgage note receivable in connection with a property we sold in 2016 and~~ the effect of ~~lower returns~~higher interest rates earned on cash balances invested in the ~~2021~~2022 period compared to the ~~2020~~2021 period.

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Interest expense. The ~~increase~~decrease in interest expense ~~is primarily due to higher average outstanding debt balances in~~reflects financing activities since January 1, 2021, which included the ~~2021 period resulting from the aggregate issuance~~redemption of ~~$1,462,000~~$910,000 of senior unsecured notes with a weighted average interest rate of ~~3.5% since January 1, 2020, partially offset by~~4.7% and the ~~aggregate redemption or~~ repayment of ~~debt~~two mortgage notes totaling ~~$833,187~~approximately $96,000 with a weighted average interest rate of ~~4.8% since January 1, 2020 and lower~~3.7%, as well as higher capitalized interest ~~expense incurred~~in the 2022 period, partially offset by the issuance of $1,050,000 of senior unsecured notes with a weighted average interest rate of 2.9%, as ~~a result of having a lower~~well as higher weighted average ~~balance outstanding~~interest rates on borrowings under our revolving credit facility during the ~~2021~~2022 period compared to the ~~2020 period and lower average interest rates on amounts outstanding.~~2021 period.

Loss on early extinguishment of debt. We recorded a loss on early extinguishment of debt of $77 in the 2022 period from the write off of unamortized discounts and debt issuance costs associated with the redemption of our senior unsecured notes due July 2022. We recorded a loss on early extinguishment of debt of $14,068 in the 2021 period from prepayment fees incurred and the write off of unamortized discounts and debt issuance costs associated with the prepayment of one mortgage note and the redemption of our senior unsecured notes due 2022 and 2046. ~~In the 2020 period, we~~

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recorded a loss on early extinguishment of debt of $3,839 from prepayment fees incurred, the write off of unamortized discounts, premiums and debt issuance costs associated with the prepayment of three mortgage notes and a loss on the settlement of a mortgage note receivable related to a property sold in 2016.

Income tax expense. Income tax expense is primarily ~~reflects~~the result of operating income earned in jurisdictions where we are subject to state income ~~taxes.~~taxes and can fluctuate based on the timing of our income, including as a result of gains or losses on the sale of real estate.

Net ~~income (loss).~~loss. ~~Our net income (loss)~~Net loss and net ~~income (loss)~~loss per basic and diluted common share decreased in the ~~2021~~2022 period compared to the ~~2020~~2021 period primarily as a result of the changes noted above.

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Non-GAAP Financial Measures

We present certain “non-GAAP financial measures” within the meaning of the applicable rules of the Securities and Exchange Commission, or SEC, including the calculations below of NOI, funds from operations, or FFO, and normalized funds from operations, or Normalized FFO. These measures do not represent cash generated by operating activities in accordance with GAAP and should not be considered alternatives to net income (loss) as indicators of our operating performance or as measures of our liquidity. These measures should be considered in conjunction with net income (loss) as presented in our condensed consolidated statements of comprehensive income (loss). We consider these non-GAAP measures to be appropriate supplemental measures of operating performance for a REIT, along with net income (loss). We believe these measures provide useful information to investors because by excluding the effects of certain historical amounts, such as depreciation and amortization expense, they may facilitate a comparison of our operating performance between periods and with other REITs and, in the case of NOI, reflecting only those income and expense items that are generated and incurred at the property level may help both investors and management to understand the operations of our properties.

Net Operating Income

The calculation of NOI excludes certain components of net income (loss) in order to provide results that are more closely related to our property level results of operations. We calculate NOI as shown below. We define NOI as income from our rental of real estate less our property operating expenses. NOI excludes amortization of capitalized tenant improvement costs and leasing commissions that we record as depreciation and amortization expense. We use NOI to evaluate individual and company-wide property level performance. Other real estate companies and REITs may calculate NOI differently than we do.

The following table presents the reconciliation of net income (loss) to NOI for the three and nine months ended September 30, ~~2021~~2022 and ~~2020.~~2021:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2021		2020		2021		2020			2022		2021		2022		2021

Net income (loss)	Net income (loss)	$	3,712	$	(3,797)	$	(25,125)	$	8,342	Net income (loss)	$	16,964	$	3,712	$	(12,499)	$	(25,125)

Equity in net losses of investees	Equity in net losses of investees	688		279		1,664		815		Equity in net losses of investees	952		688		2,631		1,664
Income tax expense (benefit)		34		(54)		348		220
Income (loss) before income tax expense (benefit) and equity in net losses of investees		4,434		(3,572)		(23,113)		9,377
Income tax expense										Income tax expense	90		34		431		348
Income (loss) before income tax expense and equity in net losses of investees										Income (loss) before income tax expense and equity in net losses of investees	18,006		4,434		(9,437)		(23,113)
Loss on early extinguishment of debt	Loss on early extinguishment of debt	2,274		—		14,068		3,839		Loss on early extinguishment of debt	—		2,274		77		14,068
Interest expense	Interest expense	26,929		27,097		84,728		79,461		Interest expense	24,969		26,929		78,923		84,728
Interest and other income	Interest and other income	—		(2)		(7)		(738)		Interest and other income	(56)		—		(73)		(7)

Gain on sale of real estate	Gain on sale of real estate	(36)		—		(54,154)		(10,822)		Gain on sale of real estate	(16,925)		(36)		(7,437)		(54,154)

General and administrative	General and administrative	448		7,059		24,690		21,372		General and administrative	6,564		448		19,353		24,690

Acquisition and transaction related costs										Acquisition and transaction related costs	—		—		224		—
Loss on impairment of real estate	Loss on impairment of real estate	(3)		2,954		55,854		2,954		Loss on impairment of real estate	—		(3)		21,820		55,854
Depreciation and amortization	Depreciation and amortization	59,533		62,227		178,991		189,340		Depreciation and amortization	52,988		59,533		170,993		178,991
NOI	NOI	$	93,579	$	95,763	$	281,057	$	294,783	NOI	$	85,546	$	93,579	$	274,443	$	281,057

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Funds From Operations and Normalized Funds From Operations

We calculate FFO and Normalized FFO as shown below. FFO is calculated on the basis defined by The National Association of Real Estate Investment Trusts, which is net income (loss), calculated in accordance with GAAP, plus real estate depreciation and amortization of consolidated properties and our proportionate share of the real estate depreciation and amortization of unconsolidated joint venture properties, but excluding impairment charges on real estate assets and any gain or loss on sale of real estate, as well as certain other adjustments currently not applicable to us. In calculating Normalized FFO, we adjust for the other items shown below and include business management incentive fees, if any, only in the fourth quarter versus the quarter when they are recognized as an expense in accordance with GAAP due to their quarterly volatility not necessarily being indicative of our core operating performance and the uncertainty as to whether any such business management incentive fees will be payable when all contingencies for determining such fees are known at the end of the calendar year. FFO and Normalized FFO are among the factors considered by our Board of Trustees when determining the amount of distributions to our shareholders. Other factors include, but are not limited to, requirements to maintain our qualification for taxation as a REIT, limitations in our credit agreement and public debt covenants, the availability to us of debt and equity capital, our expectation of our future capital requirements and operating performance and our expected needs for and availability of cash to pay our obligations. Other real estate companies and REITs may calculate FFO and Normalized FFO differently than we do.

The following table presents the reconciliation of net income (loss) to FFO and Normalized FFO for the three and nine months ended September 30, ~~2021~~2022 and ~~2020.~~2021:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2021		2020		2021		2020			2022		2021		2022		2021
Net income (loss)	Net income (loss)	$	3,712	$	(3,797)	$	(25,125)	$	8,342	Net income (loss)	$	16,964	$	3,712	$	(12,499)	$	(25,125)
Add (less): Depreciation and amortization:	Add (less): Depreciation and amortization:									Add (less): Depreciation and amortization:
Consolidated properties	Consolidated properties	59,533		62,227		178,991		189,340		Consolidated properties	52,988		59,533		170,993		178,991
Unconsolidated joint venture properties	Unconsolidated joint venture properties	745		1,244		2,674		3,722		Unconsolidated joint venture properties	775		745		2,269		2,674

Loss on impairment of real estate	Loss on impairment of real estate	(3)		2,954		55,854		2,954		Loss on impairment of real estate	—		(3)		21,820		55,854

Gain on sale of real estate	Gain on sale of real estate	(36)		—		(54,154)		(10,822)		Gain on sale of real estate	(16,925)		(36)		(7,437)		(54,154)

FFO	FFO	63,951		62,628		158,240		193,536		FFO	53,802		63,951		175,146		158,240
Add (less): Acquisition and transaction related costs										Add (less): Acquisition and transaction related costs	—		—		224		—

Add (less): Loss on early extinguishment of debt		2,274		—		14,068		3,839
Loss on early extinguishment of debt										Loss on early extinguishment of debt	—		2,274		77		14,068

Estimated business management incentive fees	Estimated business management incentive fees	(6,627)		—		4,484		—		Estimated business management incentive fees	—		(6,627)		—		4,484

Normalized FFO	Normalized FFO	$	59,598	$	62,628	$	176,792	$	197,375	Normalized FFO	$	53,802	$	59,598	$	175,447	$	176,792

Weighted average common shares outstanding (basic)	Weighted average common shares outstanding (basic)	48,211		48,132		48,179		48,111		Weighted average common shares outstanding (basic)	48,286		48,211		48,260		48,179
Weighted average common shares outstanding (diluted)	Weighted average common shares outstanding (diluted)	48,244		48,132		48,179		48,111		Weighted average common shares outstanding (diluted)	48,286		48,244		48,260		48,179

FFO per common share (basic and diluted)	FFO per common share (basic and diluted)	$	1.33	$	1.30	$	3.28	$	4.02	FFO per common share (basic and diluted)	$	1.11	$	1.33	$	3.63	$	3.28

Normalized FFO per common share (basic and diluted)	Normalized FFO per common share (basic and diluted)	$	1.24	$	1.30	$	3.67	$	4.10	Normalized FFO per common share (basic and diluted)	$	1.11	$	1.24	$	3.64	$	3.67

LIQUIDITY AND CAPITAL RESOURCES

Our Operating Liquidity and Resources (dollar amounts in thousands, except per share amounts)

Our principal sources of funds to meet operating and capital expenses, pay debt service obligations and make distributions to our shareholders are the operating cash flows we generate from our properties, net proceeds from property sales and borrowings under our revolving credit facility. We believe that these sources of funds will be sufficient to meet our operating and capital expenses, pay debt service obligations and make distributions to our shareholders for the next 12 months and for the foreseeable future thereafter. Our future cash flows from operating activities will depend primarily upon:

•our ability to collect rent from our tenants;

•our ability to maintain or increase the occupancy of, and the rental rates at, our properties;

•our ability to control operating and capital expenses at our properties;

•our ability to successfully sell properties that we market for sale;

•~~our ability to develop or redevelop properties to produce cash flows in excess of our cost of capital; and~~

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•our ability to develop, redevelop or reposition properties to produce cash flows in excess of our cost of capital and property operating and capital expenses; and

•our ability to purchase additional properties which produce cash flows from operations in excess of our cost of acquisition capital and property operating and capital expenses.

On October ~~14, 2021,~~13, 2022, we announced a regular quarterly cash distribution of $0.55 per common share ($2.20 per common share per year). We determine our distribution payout ratio with consideration for our expected capital expenditures as well as cash flows from operations and payment of debt obligations.

We expect to accretively grow our property portfolio through our capital recycling program, pursuant to which we plan to selectively sell certain properties from time to time to fund future acquisitions and to ~~maintain~~manage leverage ~~consistent with our current investment grade ratings~~at levels we believe appropriate with a goal of (1) improving the asset quality of our portfolio by reducing the average age of our properties, lengthening the weighted average term of our leases and increasing the likelihood of retaining our tenants and (2) increasing our cash available for distribution. During the nine months ended September 30, ~~2021, we acquired three properties for an aggregate purchase price of $576,975, excluding purchase price adjustments and acquisition related costs, and~~2022, we sold ~~six~~16 properties ~~and a warehouse facility adjacent to a property we own~~ for an aggregate sales price of ~~$198,415,~~$195,920, excluding closing costs. ~~In October 2021,~~Based on current real estate market conditions, including rising interest rates, we ~~sold two vacant land parcels adjacent~~expect the pace of our dispositions to moderate. However, we continue to evaluate our portfolio to strategically recycle capital and are currently in various stages of marketing certain of our properties for sale, and we ~~own located~~may decide to seek to sell additional properties in ~~Sterling, VA for a sales price of $28,500, excluding closing costs.~~the future. As of October ~~27, 2021,~~26, 2022, we have ~~also~~ entered into ~~an agreement~~agreements to sell five properties, ~~located in Brookhaven, GA~~including one leasable land parcel, for aan aggregate sales price of ~~$56,000,~~$20,450, excluding closing costs. In addition, we are currently marketing for sale 17 properties containing approximately 2,161,000 rentable square feet that we expect to generate approximately $200,000 of gross proceeds. We expect to substantially complete these dispositions by mid-year 2022.W ~~Given the current economic conditions, we~~e continue to carefully consider our capital allocation strategy and believe we are well positioned to opportunistically recycle and deploy capital.

Our future purchases of properties cannot be accurately projected because such purchases depend upon purchase opportunities which come to our attention and our ability to successfully complete the acquisitions. We generally do not intend to purchase “turn around” properties, or properties which do not generate positive cash flows.

The following is a summary of our sources and uses of cash flows for the periods presented, as reflected in our condensed consolidated statements of cash flows:


		Nine Months Ended September 30,					Nine Months Ended September 30,
		2021		2020			2022		2021
Cash, cash equivalents and restricted cash at beginning of period	Cash, cash equivalents and restricted cash at beginning of period	$	56,855	$	100,696	Cash, cash equivalents and restricted cash at beginning of period	$	84,515	$	56,855
Net cash provided by (used in):	Net cash provided by (used in):					Net cash provided by (used in):
Operating activities	Operating activities	158,682		166,098		Operating activities	152,687		158,682
Investing activities	Investing activities	(435,698)		18,104		Investing activities	49,175		(435,698)
Financing activities	Financing activities	276,181		(227,259)		Financing activities	(270,852)		276,181
Cash, cash equivalents and restricted cash at end of period	Cash, cash equivalents and restricted cash at end of period	$	56,020	$	57,639	Cash, cash equivalents and restricted cash at end of period	$	15,525	$	56,020

The decrease in cash provided by operating activities for the ~~2021~~2022 period compared to the ~~2020~~2021 period was primarily a result of ~~a decline~~unfavorable changes in ~~NOI as a result of property sales~~working capital in the ~~2021 period compared to the 2020~~2022 period. The increase in cash ~~used in~~provided by investing activities in the ~~2021~~2022 period compared to the ~~2020~~2021 period is primarily due to higher acquisition activity in the 2021 period, ~~compared to the 2020 period,~~ partially offset by ~~higher cash proceeds from~~increased capital expenditures in the 2022 period related to our ~~sales of properties.~~two redevelopment projects in Washington D.C. and Seattle, WA. The increase in cash ~~provided by~~used in financing activities in the ~~2021~~2022 period compared to the ~~2020~~2021 period is ~~primarily~~a result of net debt repayment activity in the 2022 period that included the redemption of all $300,000 of our 4.00% senior unsecured notes due July 2022 and the repayment of a mortgage note with a principal balance of approximately $25,000, which was partially offset by borrowing activity under our revolving credit facility to facilitate these payments, compared to the aggregate issuance of $1,050,000 of senior ~~unsecured~~ notes in the 2021 period, ~~compared to $412,000 of such issuances in the 2020 period,~~ partially offset by ~~higher debt repayment activity in the 2021 period, which included~~ the aggregate redemption of $610,000 of senior unsecured notes and the repayment of $71,000 of mortgage debt.

Our Investment and Financing Liquidity and Resources (dollar amounts in thousands, except per share amounts)

In order to fund acquisitions and to meet cash needs that may result from our desire or need to make distributions or pay operating or capital expenses, we maintain a $750,000 revolving credit facility. The maturity date of our revolving credit facility is January 31, 2023 and, subject to our payment of an extension fee and meeting certain other conditions, we have the option to extend the stated maturity date of our revolving credit facility by two additional six month periods. We currently intend to exercise the first of our two extension options in advance of the January 31, 2023 maturity date. We can borrow, repay and reborrow funds available under our revolving credit facility until maturity, and no principal repayment is due until maturity.

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We are required to pay interest at a rate of LIBOR plus a premium, which was 110 basis points per annum at September 30, ~~2021,~~2022, on the amount outstanding under our revolving credit ~~facility, if any.~~facility. We also pay a facility fee on the total amount of lending commitments under our revolving credit facility, which was 25 basis points per annum at September 30,

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~~2021.~~ 2022. Both the interest rate premium and facility fee are subject to adjustment based upon changes to our credit ratings. As of September 30, ~~2021,~~2022, the annual interest rate payable on borrowings under our revolving credit facility was ~~1.2%~~3.9%. As of September 30, ~~2021~~2022 and October ~~27, 2021,~~26, 2022, we had ~~no amounts~~$135,000 and $145,000, respectively, outstanding under our revolving credit facility, and ~~$750,000~~$615,000 and $605,000, respectively, available for borrowing.

Our credit agreement includes a feature under which the maximum borrowing availability may be increased to up to $1,950,000 in certain circumstances.

Our credit agreement provides that, with certain exceptions, a subsidiary of ours is required to guaranty our obligations under our $750,000 revolving credit facility only if that subsidiary has separately incurred debt (other than nonrecourse debt), within the meaning specified in our credit agreement, or provided a guarantee of debt incurred by us or any of our other subsidiaries.

~~Senior Unsecured Note Issuances~~

~~In May 2021,~~Since January 1, 2022, we ~~issued $300,000 of 2.650%~~repaid the following mortgage notes and senior unsecured notes due 2026 in an underwritten public offering, raising net proceeds of $296,826, after deducting underwriters’ discounts and offering expenses. We used the net proceeds from this offering to redeem all $310,000 of our 5.875% senior unsecured notes due 2046. These notes require semi-annual payments of interest only through maturity on June 15, 2026 and may be repaid at par plus accrued and unpaid interest on or after May 15, 2026.

In August 2021, we issued $350,000 of 2.400% senior unsecured notes due 2027 in an underwritten public offering, raising net proceeds of $346,630, after deducting underwriters’ discounts and offering expenses. We used the net proceeds from this offering to redeem all $300,000 of our 4.15% senior unsecured notes due 2022, repay amounts outstanding under our revolving credit facility and for general business purposes. These notes require semi-annual payments of interest only through maturity on February 1, 2027 and may be repaid at par plus accrued and unpaid interest on or after January 1, 2027.

In September 2021, we issued $400,000 of 3.450% senior unsecured notes due 2031 in an underwritten public offering, raising net proceeds of $395,698, after deducting underwriters’ discounts and offering expenses. We used the net proceeds of this offering to repay amounts outstanding under our revolving credit facility and for general business purposes. These notes require semi-annual payments of interest only through maturity on October 15, 2031 and may be repaid at par plus accrued and unpaid interest on or after July 15, 2031.

~~Senior Unsecured Note Redemptions~~

In June 2021, we redeemed, at par plus accrued interest, all $310,000 of our 5.875% senior unsecured notes due 2046 using cash on hand and the net proceeds from the issuance of our 2.650% senior unsecured notes due 2026.

In September 2021, we redeemed, at a premium plus accrued interest, all $300,000 of our 4.15% senior unsecured notes due 2022 using a portion of the net proceeds from the issuance of our 2.400% senior unsecured notes due 2027.notes:

Mortgage Note ~~Repayment~~Prepayments

Senior Unsecured Note Redemption

~~Table~~In June 2022, we redeemed, at par plus accrued interest, all $300,000 of ~~Contents~~

our 4.00% senior unsecured notes due July 2022 using cash on hand and borrowings under our revolving credit facility.

As of September 30, ~~2021,~~2022, our debt maturities (other than our revolving credit facility), consisting of senior unsecured notes and mortgage notes, ~~are~~were as follows:


Year	Year	Debt Maturities		Year	Debt Maturities
2021		$	302
2022	2022	325,518		2022	$	117
2023		72,784
2023 (1)				2023 (1)	72,784
2024	2024	350,000		2024	350,000
2025	2025	650,000		2025	650,000
Thereafter		1,212,000
2026				2026	300,000
2027 and thereafter				2027 and thereafter	912,000
Total	Total	$	2,610,604	Total	$	2,284,901

(1)In October 2022, we prepaid, at a discounted amount of $22,176 plus accrued interest, a mortgage note secured by one property with an outstanding principal balance of $22,901, an annual interest rate of 4.80% and a maturity date in June 2023 using cash on hand and borrowings under our revolving credit facility.

None of our unsecured debt obligations require sinking fund payments prior to their maturity dates. Our ~~$98,604 in~~ mortgage debts generally require monthly payments of principal and interest through maturity.

In addition to our debt obligations, as of September 30, ~~2021,~~2022, we ~~have~~had estimated unspent leasing related obligations of ~~$129,369,~~$137,420, of which we expect to spend ~~$69,248~~$77,251 over the next 12 months.

We are currently in the process of redeveloping a property located in Washington, D.C. We currently estimate the total project costs associated with this redevelopment will be approximately ~~$200,000~~$215,000 and completion of the redevelopment in the ~~first~~second quarter of 2023. As of September 30, ~~2021,~~2022, we ~~have~~had incurred approximately ~~$25,800~~$125,667 related to this project. In June 2021, we entered into a 30-year lease for approximately 230,000 rentable square feet at this property that is approximately 25.1% higher than the prior rental rate for the same space, making the redevelopment project 54% pre-leased. See Note 10 to

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our Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for more information regarding this lease and related redevelopment costs.

We are also in the process of redeveloping a three-property campus located in Seattle, WA containing approximately 300,000 rentable square feet. This project includes the repositioning of two properties from office to life science and maintaining the third property for office use. We currently estimate the total project costs associated with this redevelopment will be approximately $162,000 and completion of the redevelopment in the second quarter of 2023. As of September 30, 2022, we had incurred approximately $27,934 related to this project. In August 2022, we entered into an approximately 10-year lease for approximately 84,000 rentable square feet at one of the life science properties that is approximately 109.0% higher than the prior rental rate for the same space, making the redevelopment project 28% pre-leased.

We currently expect to use cash balances, borrowings under our revolving credit facility, net proceeds from property sales, incurrences or assumptions of mortgage debt and net proceeds from offerings of debt or equity securities to fund our future operations, capital expenditures, distributions to our shareholders and property acquisitions. When significant amounts are outstanding under our revolving credit facility or the maturities of our indebtedness approach, we expect to explore refinancing alternatives. Such alternatives may include incurring term debt, issuing debt or equity securities, extending the maturity date of our revolving credit facility and entering into a new revolving credit facility. We may assume additional mortgage debt in connection with our acquisitions or elect to place new mortgages on properties we own as a source of financing. We may also seek to participate in additional joint venture or other arrangements that may provide us with additional sources of financing. Although we cannot be sure that we will be successful in consummating any particular type of financing, we believe that we will have access to financing, such as debt and equity offerings, to fund future acquisitions and capital expenditures and to pay our obligations. We currently have an effective shelf registration statement that allows us to issue public securities on an expedited basis, but it does not assure that there will be buyers for such securities.

Our ability to obtain, and the costs of, our future debt financings will depend primarily on credit market conditions and our creditworthiness. We have no control over market conditions. Potential investors and lenders likely will evaluate our ability to pay distributions to shareholders, fund required debt service and repay debts when they become due by reviewing our business practices and plans to balance our use of debt and equity capital so that our financial profile and leverage ratios afford us flexibility to withstand any reasonably anticipated adverse changes. Similarly, our ability to raise equity capital in the future will depend primarily upon equity capital market conditions and our ability to conduct our business to maintain and grow our operating cash flows. We intend to conduct our business in a manner that will afford us reasonable access to capital for investment and financing activities, but we cannot be sure that we will be able to successfully carry out this intention. For instance, it is uncertain what the ~~duration and severity~~ultimate impacts of ~~the COVID-19 pandemic and its ultimate~~inflationary pressures, rising interest rates or an economic ~~impact~~recession will be. A protracted and extensive economic ~~downturn may cause a decline~~recession or continued or intensified disruptions in ~~financing availability and increased costs for financings. Further, such conditions could also disrupt~~ capital markets ~~and~~could limit our access to financing from public ~~sources.~~sources and would likely increase our cost of capital.

During the nine months ended September 30, ~~2021,~~2022, we paid quarterly distributions to our shareholders totaling ~~$79,734~~$79,919 using cash on ~~hand.~~hand and borrowings under our revolving credit facility. On October ~~14, 2021,~~13, 2022, we declared a regular quarterly distribution payable to shareholders of record on October ~~25, 2021~~24, 2022 of $0.55 per share, or approximately ~~$26,600.~~$26,700. We expect to pay this distribution on or about November ~~18, 2021~~17, 2022 using cash on ~~hand.~~hand and borrowings under our revolving credit facility. For more information regarding the distributions we paid and declared during ~~2021,~~2022, see Note 8 to ~~the Notes to~~our Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

We own 51% and 50% interests in two unconsolidated joint ventures which own three properties. The properties owned by these joint ventures are encumbered by an aggregate $82,000 principal amount of mortgage indebtedness, none of which is recourse to us. We do not control the activities that are most significant to these joint ventures and, as a result, we account for

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our investments in these joint ventures under the equity method of accounting. For more information on the financial condition and results of operations of these joint ventures, see Note 3 to ~~the Notes to~~our Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q. Other than these joint ventures, as of September 30, ~~2021,~~2022, we had no off balance sheet arrangements that have had or that we expect would be reasonably likely to have a material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

~~U.S. Government Funding~~

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The U.S. government recently increased its debt ceiling, which the U.S. Department of the Treasury has stated will provide the U.S. Government with sufficient funding to pay its obligations through December 3, 2021. It is uncertain whether the U.S. government will further increase its debt ceiling. If it does not, and does not find other means to sufficiently fund its obligations, the U.S. government could default on its debts or other obligations, which could potentially include its rent owed to us.

Debt Covenants (dollars in thousands)

Our principal debt obligations at September 30, ~~2021~~2022 consisted of $135,000 of borrowings outstanding under our revolving credit facility, an aggregate outstanding principal balance of ~~$2,512,000~~$2,212,000 of public issuances of senior unsecured notes and mortgage notes with an aggregate outstanding principal balance of ~~$98,604,~~$72,901, that were assumed in connection with certain of our acquisitions. Also, the three properties owned by two joint ventures in which we own 51% and 50% interests secure two additional mortgage notes. Our publicly issued senior unsecured notes are governed by indentures and their supplements. Our credit agreement and our senior unsecured notes indentures and their supplements provide for acceleration of payment of all amounts outstanding upon the occurrence and continuation of certain events of default, such as, in the case of our credit agreement, a change of control of us, which includes RMR ~~LLC~~ ceasing to act as our business and property manager. Our credit agreement and our senior unsecured notes indentures and their supplements also contain a number of covenants, including those that restrict our ability to incur debts, including debts secured by mortgages on our properties, in excess of calculated amounts, require us to comply with certain financial covenants and, in the case of our credit agreement, restrict our ability to make distributions to our shareholders under certain circumstances. As of September 30, ~~2021,~~2022, we believe we were in compliance with the terms and conditions of our respective covenants under our credit agreement and senior unsecured notes indentures and their supplements. Our mortgage notes are non-recourse, subject to certain limited exceptions, and do not contain any material financial covenants.

Neither our credit agreement nor our senior unsecured notes indentures and their supplements contain provisions for acceleration which could be triggered by our credit ratings. However, under our credit agreement, our highest senior credit rating is used to determine the fees and interest rates we pay. Accordingly, if that credit rating is downgraded, our interest expense and related costs under our credit agreement would increase.

Our credit agreement has cross default provisions to other indebtedness that is recourse of $25,000 or more and indebtedness that is non-recourse of $50,000 or more. Similarly, our senior unsecured notes indentures and their supplements contain cross default provisions to any other debts of more than $25,000 (or up to $50,000 in certain circumstances).

Related Person Transactions

We have relationships and historical and continuing transactions with RMR, ~~LLC,~~ RMR Inc. and others related to them. For more information about these and other such relationships and related person transactions, see Notes 9 and 10 to ~~the Notes to~~our Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q, our ~~2020~~2021 Annual Report, our definitive Proxy Statement for our ~~2021~~2022 Annual Meeting of Shareholders and our other filings with the SEC. In addition, see the section captioned “Risk Factors” of our ~~2020~~2021 Annual Report for a description of risks that may arise as a result of these and other related person transactions and relationships. We may engage in additional transactions with related persons, including businesses to which RMR ~~LLC~~ or its subsidiaries provide management services.

Critical Accounting Estimates

The preparation of our Condensed Consolidated Financial Statements in conformity with GAAP requires us to make estimates and assumptions that affect reported amounts. Actual results could differ from those estimates. 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.

A discussion of our critical accounting estimates is included in our 2021 Annual Report. There have been no significant changes in our critical accounting estimates since the year ended December 31, 2021.

Item 3. Quantitative and Qualitative Disclosures About Market Risk (dollar amounts in thousands, except per share data)

We are exposed to risks associated with market changes in interest rates. We manage our exposure to this market risk by monitoring available financing alternatives. Our strategy to manage exposure to changes in interest rates has not materially changed since December 31, ~~2020.~~2021. Other than as described below, we do not currently foresee any significant changes in our exposure to fluctuations in interest rates or in how we manage this exposure in the near future.

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Fixed Rate Debt

At September 30, ~~2021,~~2022, our outstanding fixed rate debt consisted of the following:


Debt	Debt	Principal Balance (1)		Annual Interest Rate (1)	Annual Interest Expense (1)		Maturity	Interest Payments Due	Debt	Principal Balance (1)		Annual Interest Rate (1)	Annual Interest Expense (1)		Maturity	Interest Payments Due

Senior unsecured notes	Senior unsecured notes	$	300,000	4.000%	$	12,000	2022	Semi-annually	Senior unsecured notes	$	350,000	4.250%	$	14,875	2024	Semi-annually
Senior unsecured notes	Senior unsecured notes	350,000		4.250%	14,875		2024	Semi-annually	Senior unsecured notes	650,000		4.500%	29,250		2025	Semi-annually
Senior unsecured notes	Senior unsecured notes	650,000		4.500%	29,250		2025	Semi-annually	Senior unsecured notes	300,000		2.650%	7,950		2026	Semi-annually
Senior unsecured notes	Senior unsecured notes	300,000		2.650%	7,950		2026	Semi-annually	Senior unsecured notes	350,000		2.400%	8,400		2027	Semi-annually
Senior unsecured notes	Senior unsecured notes	350,000		2.400%	8,400		2027	Semi-annually	Senior unsecured notes	400,000		3.450%	13,800		2031	Semi-annually
Senior unsecured notes	Senior unsecured notes	400,000		3.450%	13,800		2031	Semi-annually	Senior unsecured notes	162,000		6.375%	10,328		2050	Quarterly
Senior unsecured notes		162,000		6.375%	10,328		2050	Quarterly

Mortgage note (one property in Washington, D.C.)		25,245		4.220%	1,065		2022	Monthly

Mortgage note (one property in Chicago, IL)	Mortgage note (one property in Chicago, IL)	50,000		3.700%	1,850		2023	Monthly	Mortgage note (one property in Chicago, IL)	50,000		3.700%	1,850		2023	Monthly
Mortgage note (one property in Washington, D.C.)		23,359		4.800%	1,121		2023	Monthly
Mortgage note (one property in Washington, D.C.) (2)									Mortgage note (one property in Washington, D.C.) (2)	22,901		4.800%	1,099		2023	Monthly

Total	Total	$	2,610,604		$	100,639			Total	$	2,284,901		$	87,552

(1)The principal balances and annual interest rates are the amounts stated in the applicable contracts. In accordance with GAAP, our carrying values and recorded interest expense may differ from these amounts because of market conditions at the time we issued or assumed these debts. For more information, see Notes 6 and 7 to ~~the Notes to~~our Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

(2)In October 2022, this mortgage note was prepaid at a discounted amount of $22,176 plus accrued interest.

Our senior unsecured notes require semi-annual or quarterly interest payments through maturity. Our mortgages generally require principal and interest payments through maturity pursuant to amortization schedules. Because these debts require interest to be paid at a fixed rate, changes in market interest rates during the term of these debts will not affect our interest obligations. If these debts were refinanced at interest rates which are one percentage point higher or lower than shown above, our annual interest cost would increase or decrease by approximately ~~$26,106.~~$22,849.

Changes in market interest rates also would affect the fair value of our fixed rate debt obligations; increases in market interest rates decrease the fair value of our fixed rate debt, while decreases in market interest rates increase the fair value of our fixed rate debt. The U.S. Federal Reserve has recently raised interest rates several times in an effort to combat inflation and may continue to do so. Based on the balances outstanding at September 30, ~~2021,~~2022, and discounted cash flow analyses through the respective maturity dates, and assuming no other changes in factors that may affect the fair value of our fixed rate debt obligations, a hypothetical immediate one percentage point increase in interest rates would change the fair value of those obligations by approximately ~~$119,658.~~$84,480.

Some of our fixed rate secured debt arrangements allow us to make repayments earlier than the stated maturity date. In some cases, we are not allowed to make early repayment prior to a cutoff date and we are generally allowed to make prepayments only at a premium equal to a make whole amount, as defined, which is generally designed to preserve a stated yield to the note holder. These prepayment rights may afford us opportunities to mitigate the risk of refinancing our debts at maturity at higher rates by refinancing prior to maturity.

At September 30, ~~2021,~~2022, we had noncontrolling ownership interests of 51% and 50% in two unconsolidated joint ventures that own three properties that are secured by fixed rate debt consisting of the following mortgage notes:


Debt	Our JV Ownership Interest	Principal Balance (1)(2)		Annual Interest Rate (1)	Annual Interest Expense (1)		Maturity	Interest Payments Due
Mortgage note (two properties in Fairfax, VA)	51%	$	50,000	4.090%	$	2,045	2029	Monthly
Mortgage note (one property in Washington, D.C.)	50%	32,000		3.690%	1,181		2024	Monthly
Total		$	82,000		$	3,226

(1)The principal balances and annual interest rates are the amounts stated in the applicable contracts. In accordance with GAAP, the joint ventures’ recorded interest expense may differ from these amounts because of market conditions at the time they incurred the debt.

(2)Reflects the entire balance of the debt secured by the properties and is not adjusted to reflect the interests in the joint ventures we do not own. None of the debt is recourse to us.

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Floating Rate Debt

At September 30, ~~2021,~~2022, we had no$135,000 of outstanding floating rate debt under our revolving credit facility. Our revolving credit facility matures on January 31, 2023 and, subject to the payment of an extension fee and meeting certain other conditions, we have the option to extend the stated maturity by two six month periods. No principal repayments are required under our revolving credit facility prior to maturity, and we can borrow, repay and reborrow funds available under our revolving credit facility, subject to conditions, at any time without penalty.

Borrowings under our revolving credit facility are in U.S. dollars and require interest to be paid at a rate of LIBOR plus premiums that are subject to adjustment based upon changes to our credit ratings. Accordingly, we are vulnerable to changes in U.S. dollar based short term rates, specifically LIBOR, and to changes in our credit ratings. In addition, upon renewal or refinancing of our revolving credit facility, we are vulnerable to increases in interest rate premiums due to market conditions or our perceived credit characteristics. Generally, a change in interest rates would not affect the value of our floating rate debt but would affect our operating results.

The following table presents the impact a one percentage point increase in interest rates would have on our annual floating rate interest expense as of September 30, ~~2021 if we were fully drawn on our revolving credit facility:~~2022:

Impact of an Increase in Interest Rates

Annual Interest Rate (1)
Outstanding Debt Total Interest Expense Per Year
Annual Earnings Per Share Impact (2)
At September 30, 2021 1.2 % $ 750,000 $ 9,000 $ 0.19
One percentage point increase 2.2 % $ 750,000 $ 16,500 $ 0.34


	Impact of an Increase in Interest Rates
	Annual Interest Rate (1)		Outstanding Debt		Total Interest Expense Per Year		Annual Earnings Per Share Impact (2)
At September 30, 2022	3.9	%	$	135,000	$	5,265	$	0.11
One percentage point increase	4.9	%	$	135,000	$	6,615	$	0.14

(1)Based on LIBOR plus a premium, which was 110 basis points per annum, as of September 30, ~~2021.~~2022.

(2)Based on the weighted average shares outstanding (diluted) for the nine months ended September 30, ~~2021.~~2022.

The following table presents the impact a one percentage point increase in interest rates would have on our annual floating rate interest expense as of September 30, 2022 if we were fully drawn on our revolving credit facility:


	Impact of an Increase in Interest Rates
	Annual Interest Rate (1)		Outstanding Debt		Total Interest Expense Per Year		Annual Earnings Per Share Impact (2)
At September 30, 2022	3.9	%	$	750,000	$	29,250	$	0.61
One percentage point increase	4.9	%	$	750,000	$	36,750	$	0.76

(1)Based on LIBOR plus a premium, which was 110 basis points per annum, as of September 30, 2022.

(2)Based on the weighted average shares outstanding (diluted) for the nine months ended September 30, 2022.

The foregoing ~~table shows~~tables show the impact of an immediate increase in floating interest rates as of September 30, ~~2021.~~2022. If interest rates were to increase gradually over time, the impact would be spread over time. Our exposure to fluctuations in floating interest rates will increase or decrease in the future with increases or decreases in the outstanding amount under our revolving credit facility or our other floating rate debt, if any. Although we have no present plans to do so, we may in the future enter into hedge arrangements from time to time to mitigate our exposure to changes in interest rates.

LIBOR Phase Out

~~LIBOR is currently expected to be phased out for new contracts by December 31, 2021 and for pre-existing contracts by June 30, 2023.~~ We are required to pay interest on borrowings under our revolving credit facility at a floating ~~rate~~rates based on LIBOR. ~~Interest we may pay on any future debt that we may incur may also require that we pay interest based upon LIBOR.~~LIBOR has been phased out for new contracts and is expected to be phased out for pre-existing contracts by June 30, 2023. We currently expect that the determination of interest under our revolving credit facility ~~would~~will be revised as provided under our credit agreement or amended as necessary to provide for an alternative interest rate index. We expect that ~~approximates~~ the ~~existing~~alternative interest rate index would likely be the secured overnight financing rate, or SOFR, because interest rates based on SOFR have gained significant market adoption as ~~calculated~~the replacement to LIBOR for debt facilities similar to ours. Any alternative interest rate index that may replace LIBOR may result in ~~accordance with LIBOR. Despite our current expectations, we cannot be sure that, if LIBOR is phased out or transitioned, the~~ changes to the ~~determination~~amount of interest ~~under~~we are required to pay and could result in our ~~agreements would approximate the current calculation in accordance with LIBOR. We do not know what standard, if any, will replace LIBOR if it is phased out or transitioned.~~paying increased interest amounts.

Item 4. Controls and Procedures

As of the end of the period covered by this Quarterly Report on Form 10-Q, our management carried out an evaluation, under the supervision and with the participation of our Managing Trustees, our President and Chief Operating Officer and our Chief Financial Officer and Treasurer, of the effectiveness of our disclosure controls and procedures pursuant to Rules 13a-15

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and 15d-15 under the Securities Exchange Act of 1934, as amended. Based upon that evaluation, our Managing Trustees, our President and Chief Operating Officer and our Chief Financial Officer and Treasurer concluded that our disclosure controls and procedures are effective.

There have been no changes in our internal control over financial reporting during the quarter ended September 30, ~~2021~~2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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Warning Concerning Forward-Looking Statements

This Quarterly Report on Form 10-Q contains statements that constitute 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 forward-looking statements. These forward-looking statements are based upon our present intent, beliefs or expectations, but forward-looking statements are not guaranteed to occur and may not occur. Forward-looking statements in this Quarterly Report on Form 10-Q relate to various aspects of our business, including:

•The ~~duration~~extent to which changes in office space utilization, including remote work arrangements, will continue and ~~severity of~~ the ~~COVID-19 pandemic and its~~ impact that may have on ~~us and~~demand for office space at our ~~tenants and our tenants’ ability and willingness to pay us rent,~~properties,

•Our expectations about the financial strength of our tenants,

•The likelihood that our rents will increase when we renew or extend our leases or enter new leases,

•Our belief that we are in a position to opportunistically recycle and deploy capital,

•Our expectations that the diversity and other characteristics of our property portfolio and our financial resources will result in our ability to successfully withstand the current economic conditions,

•The likelihood that our tenants will renew or extend their leases and not exercise early termination options pursuant to their leases or that we will obtain replacement tenants, on terms as favorable to us as our prior leases,

•The likelihood that our tenants will be negatively affected by cyclical economic conditions or government budget constraints and, if so, the impact that may have on their ability and willingness to lease our properties and pay us rent,

•Our ability to successfully execute our capital recycling program,

•~~The expectation that, as a result of the COVID-19 pandemic, leasing activity may remain volatile until office property market conditions meaningfully improve and stabilize,~~

•Our ability to pay distributions to our shareholders and to maintain or increase the amount of such distributions,

•Our expectations regarding occupancy at our properties,

•Our expectations regarding our future financial performance including FFO, Normalized FFO or NOI,

•Our expectations regarding demand for leased space,

•Our expectations regarding capital expenditures,

•Our expectation that there will be opportunities for us to acquire, and that we will acquire, additional properties primarily leased to single or majority tenants and tenants with high credit quality characteristics, ~~such as government entities,~~

•Our expectations regarding the costs and timing of our development, redevelopment ~~projects,~~and repositioning activities,

•Our ability to compete for acquisitions and tenancies effectively,

•Our sales and acquisitions of properties,

•Our policies and plans regarding investments, financings and dispositions,

•Our ability to appropriately balance our use of debt and equity capital,

•The future availability of borrowings under our revolving credit facility,

•Our ability to raise debt or equity capital,

•Our ability to pay interest on and principal of our debt,

•~~Our ability to maintain sufficient liquidity during the duration of the COVID-19 pandemic and any resulting economic downturn,~~

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•~~The U.S. government’s debt ceiling limit and related impact on its~~Our ability to ~~fund its obligations, including pay rent owed~~maintain sufficient liquidity during any economic downturn that may result in response to ~~us,~~current inflationary conditions or otherwise,

•Our credit ratings,

•Our expectation that we benefit from our relationships with RMR, ~~LLC,~~

•The credit qualities of our tenants,

•Our qualification for taxation as a REIT,

•Changes in federal or state tax laws, and

•Other matters.

Our actual results may differ materially from those contained in or implied by our forward-looking statements. Forward-looking statements involve known and unknown risks, uncertainties and other factors, some of which are beyond our control. Risks, uncertainties and other factors that could have a material adverse effect on our forward-looking statements and upon our business, results of operations, financial condition, FFO, Normalized FFO, NOI, cash flows, liquidity and prospects include, but are not limited to:

•The impact of conditions in the economy, including ~~the COVID-19 pandemic~~increasing interest rates, inflation, geopolitical risks and ~~its aftermath,~~a possible recession, and the capital markets on us and our tenants,

•Competition within the real estate industry, particularly in those markets in which our properties are located,

•The impact of changes in the real estate needs and financial conditions of our tenants,

•Compliance with, and changes to, federal, state and local laws and regulations, accounting rules, tax laws and similar matters,

•The impact of any U.S. government shutdown on our ability to collect rents or pay our operating expenses, debt obligations and distributions to shareholders on a timely basis,

•Actual and potential conflicts of interest with our related parties, including our Managing Trustees, RMR, ~~LLC,~~ Sonesta and others affiliated with them,

•Limitations imposed on our business and our ability to satisfy complex rules in order for us to maintain our qualification for taxation as a REIT for U.S. federal income tax purposes, and

•Acts of terrorism, war or other hostilities, outbreaks of pandemics, ~~including the COVID-19 pandemic,~~ or other manmade or natural disasters beyond our control.

For example:

•Our ability to make ~~future~~or sustain distributions to our shareholders and to make payments of principal and interest on our indebtedness depends upon a number of factors, including our receipt of rent from our tenants, our future earnings, the capital costs we incur to lease our properties and our working capital requirements. We may be unable to pay our debt obligations or to maintain our current rate of distributions on our common shares and future distributions may be reduced or eliminated,

•Our ability to grow our business and increase our distributions depends in large part upon our ability to buy properties and lease them for rents, less their property operating costs, that exceed our capital costs. We may be unable to identify properties that we want to acquire, and we may fail to reach agreement with the sellers and complete the purchases of any properties we want to acquire. In addition, any properties we may acquire may not provide us with rents less property operating costs that exceed our capital costs or achieve our expected returns,

•We may fail to maintain, or we may elect to change our distribution rate. Our Board of Trustees considers many factors when setting distribution rates, including our historical and projected income, Normalized FFO, ~~CAD,~~cash available for distribution, the then current and expected needs and availability of cash to pay our obligations and fund our investments, distributions which may be required to be paid to maintain our qualification for taxation as a REIT and ~~other factors deemed~~

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other factors deemed relevant by our Board of Trustees. Accordingly, future distribution rates may be increased or decreased and there is no assurance as to the rate at which future distributions will be paid,

•We expect to selectively sell properties from time to time when we determine our continued ownership or ongoing required capital expenditures will not achieve desired returns or when we believe we can successfully pursue more desirable opportunities than retaining those properties. We cannot be sure we will sell any of these properties or what the terms of any sales may be or that we will acquire replacement properties that improve our asset quality or our ability to increase our distributions to shareholders,

•We may not receive the amounts we expect for properties we seek to sell,

•We may not succeed in ~~maintaining our~~managing leverage ~~consistent with our current investment grade ratings or~~at levels ~~that the market or credit rating agencies~~we believe are appropriate,

•Some of our tenants may not renew expiring leases or they may exercise their rights, if any, to vacate their space before the stated expirations of their leases, and we may be unable to obtain new tenants to maintain or increase the historical occupancy rates of, or rents from, our properties,

•Rents that we can charge at our properties may decline upon renewals or expirations because of changing market conditions or otherwise,

•Leasing for some of our properties depends on a ~~private sector~~ single or majority tenant and we may be adversely affected by the bankruptcy, insolvency, a downturn of business or a lease termination of such single or majority tenant at these properties,

•Our belief that there is a likelihood that tenants may renew or extend our leases prior to their expirations whenever they have made significant investments in the leased properties, or because those properties may be of strategic importance to them, may not be realized,

•Overall new leasing volume may ~~decrease more than we currently expect. In addition,~~be impacted if ~~the COVID-19 pandemic~~a significant level of remote work arrangements and ~~any resulting economic downturn~~current inflationary conditions continue for an extended period or worsen or if a recession occurs. Also, our tenants may become unable to pay rent or they may elect to not renew their leases with us. Further, some of our government leases provide the tenant with certain rights to terminate their lease early. Budgetary and other fiscal pressures may result in some governmental tenants terminating their leases early or not renewing their leases. In addition, certain changes in office space utilization following the COVID-19 pandemic, ~~has caused changes in workplace practices,~~ including increased remote work ~~arrangements.~~arrangements, continue to impact the market. To the extent those practices become permanent or ~~increased,~~further increase, leasing demand for office space may decline. As a result of these factors, our tenant retention levels could decline and we may experience reduced rent or incur increased costs under future new or renewal leases,

•Our belief that we are well positioned to opportunistically recycle and deploy capital may not be realized. We may fail to identify and execute on opportunities to deploy capital and any deployment of capital we may make may not result in the returns that we expect,

•Our perception that ~~as a result of the COVID-19 pandemic, government tenants may seek to manage space utilization rates in order to provide greater physical distancing for employees, may prove incorrect,~~

•~~Our perception that~~ activity prior to the outbreak of the COVID-19 pandemic suggested that the government had begun to shift its leasing strategy to include longer term leases and that the government was actively exploring 10 to 20 year lease terms at renewal, in some instances, may mistakenly imply that these activities are indicative of a trend or broader change in government leasing strategy or practices, ~~that will recommence after the COVID-19 pandemic ends. Further, even if such a trend or change were to recommence, that trend or change may not be sustained by the government,~~

•Contingencies in our acquisition and sale agreements, if any, may not be satisfied and any expected acquisitions and sales and any related lease arrangements we expect to enter may not occur, may be delayed or the terms of such transactions or arrangements may change,

•We expect to pursue accretively growing our property portfolio. However, we may not succeed in making acquisitions that are accretive and future acquisitions could be dilutive,

•The competitive advantages we believe we have may not in fact exist or provide us with the advantages we expect. We may fail to maintain any of these advantages or our competition may obtain or increase their competitive advantages relative to us,

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•We intend to conduct our business activities in a manner that will afford us reasonable access to capital for investment and financing activities. However, we may not succeed in this regard and we may not have reasonable access to capital,

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•Continued availability of borrowings under our revolving credit facility is subject to our satisfying certain financial covenants and other credit facility conditions that we may be unable to satisfy,

•Actual costs under our revolving credit facility will be higher than ~~LIBOR~~the stated rate plus a premium because of fees and expenses associated with such debt,

•The interest rates payable under our floating rate debt obligations depend upon our credit ratings. If our credit ratings are downgraded, our borrowing costs will increase,

•Our ability to access debt capital and the cost of our debt capital will depend in part on our credit ratings. If our credit ratings are downgraded, we may not be able to access debt capital or the debt capital we can access may be expensive,

•We may be unable to repay our debt obligations when they become due,

•The maximum borrowing availability under our revolving credit facility may be increased to up to $1.95 billion in certain circumstances; however, increasing the maximum borrowing availability under our revolving credit facility is subject to our obtaining additional commitments from lenders, which may not occur,

•We have ~~the option~~two options to extend the maturity date of our revolving credit facility upon payment of a fee and meeting other ~~conditions;~~conditions and we currently intend to exercise the first of such options; however, the applicable conditions may not be met,

•We may incur significant costs to prepare a property for tenancy, particularly for single or majority tenant properties,

•We may spend more for capital expenditures than we currently expect or than we had planned when the project was commenced, including as a result of inflation, supply chain challenges or otherwise, and we plan to spend more for capital expenditures than we have in the past,

•We may fail to obtain development rights or entitlements that we may seek for development and other projects we may wish to conduct at our properties,

•Our existing joint ~~venture arrangements~~ventures and any ~~other~~additional joint ~~venture arrangements that~~ventures we may enter into in the future may not be successful,

•Any development, redevelopment or repositioning projects we undertake may be unsuccessful, may require greater capital expenditures or other costs than we project or may take significant time to complete,

•~~We believe that we are well positioned to weather the present disruptions~~ including as a result of ~~the COVID-19 pandemic facing the real estate industry. However, the full extent of the future impact of the COVID-19 pandemic is unknown and we may not realize similar~~inflation, supply chain challenges or ~~better operating results in the future,~~

•We believe that the near term impact of the COVID-19 pandemic to us will not be material due to the strength of our tenant base. However, if the COVID-19 pandemic and any resulting economic downturn continue for an extended period of time or worsen, our tenants may be significantly adversely impacted, which may result in those tenants seeking relief from their rent obligations, their inability to pay rent, the termination of their leases or our tenants not renewing their leases or renewing their leases for less space. Therefore, the impact we experience in the near term may be worse than we currently expect and our results of operations and financial position may be negatively affected,

•We have granted requests to some of our tenants to defer payments over, in most cases, a 12-month period, all of which have commenced. However, current market and economic conditions may deteriorate further and the rent assistance granted by us may not be sufficient to ensure that tenants will be able to meet their rent payment obligations under their leases with us, which may result in an increase in tenant defaults and terminations,otherwise,

•The business and property management agreements between us and RMR ~~LLC~~ have continuing 20 year terms. However, those agreements permit early termination in certain circumstances. Accordingly, we cannot be sure that these agreements will remain in effect for continuing 20 year terms,

•We expect that we will benefit from RMR’s Environmental, Social and Governance, or ESG, program and initiatives. However, we may not realize the benefits we expect from such program and initiatives and we or RMR may not succeed in meeting existing or future standards regarding ESG,

•We believe that our relationships with our related parties, including RMR, ~~LLC,~~ Sonesta and others affiliated with them, may benefit us and provide us with competitive advantages in operating and growing our business. However, the advantages we believe we may realize from these relationships may not materialize, and

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•It is difficult to accurately estimate leasing related obligations and costs of property ~~repositioning,~~ development, redevelopment or repositioning and tenant improvement costs. Our unspent leasing related obligations and development, redevelopment or ~~redevelopment~~repositioning costs may cost more and may take longer to complete than we currently expect or than we planned when the project was commenced, and we may incur increased amounts for these and similar purposes in the future.

Currently unexpected results could occur due to many different circumstances, some of which are beyond our control, such as economic conditions, including increasing interest rates, inflation, geopolitical risks and a possible recession, other changes in the ~~COVID-19 pandemic and its aftermath,~~capital markets or the economy generally, changes in our tenants’ needs for leased space, the ability of the U.S. and state governments to approve spending bills to fund their obligations, acts of terrorism, war or other hostilities, natural disasters or climate change ~~or changes in capital markets or the economy generally.~~and climate related events.

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The information contained elsewhere in this Quarterly Report on Form 10-Q and in our ~~2020~~2021 Annual Report, or in our other filings with the SEC, including under the caption “Risk Factors”, or incorporated herein or therein, identifies other important factors that could cause differences from our forward-looking statements. Our filings with the SEC are available on the SEC’s website at www.sec.gov.

You should not place undue reliance upon our forward-looking statements.

Except as required by law, we do not intend to update or change any forward-looking statements as a result of new information, future events or otherwise.

Statement Concerning Limited Liability

The amended and restated declaration of trust establishing Office Properties Income Trust, dated June 8, 2009, as amended, as filed with the State Department of Assessments and Taxation of Maryland, provides that no trustee, officer, shareholder, employee or agent of Office Properties Income Trust shall be held to any personal liability, jointly or severally, for any obligation of, or claim against, Office Properties Income Trust. All persons dealing with Office Properties Income Trust in any way shall look only to the assets of Office Properties Income Trust for the payment of any sum or the performance of any obligation.

Part II. Other Information

Item 1A. Risk Factors

There have been no material changes to the risk factors from those previously disclosed in our ~~2020~~2021 Annual Report.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Issuer purchases of equity securities. The following table provides information about our purchases of our equity securities during the quarter ended September 30, ~~2021:~~2022:


Calendar Month	Calendar Month	Number of Shares Purchased (1)	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs	Calendar Month	Number of Shares Purchased (1)	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
September 2021		25,533	$	25.24	—	—
September 2022							September 2022	29,469	$	17.53	—	$	—

(1)These common share withholdings and purchases were made to satisfy tax withholding and payment obligations of ~~one~~certain of our Trustees ~~our~~and officers and certain other current and former officers and employees of RMR ~~LLC~~ in connection with awards of our common shares and the vesting of those and prior awards of common shares to them. We withheld and purchased these shares at their fair market values based upon the trading prices of our common shares at the close of trading on Nasdaq on the purchase dates.

Item 6. Exhibits


Exhibit Number			Description
3.1			Composite Copy of Amended and Restated Declaration of Trust, dated June 8, 2009, as amended to date. (Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2020.)

3.2			Amended and Restated Bylaws of the Company, adopted March 27, 2019. (Incorporated by reference to the Company’s Current Report on Form 8-K filed on March 28, 2019.)

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4.1			Form of Common Share Certificate. (Incorporated by reference to the Company's Annual Report on Form 10-K for the year ended December 31, 2018.)

4.2			Indenture, dated as of July 20, 2017, between the Company and U.S. Bank Trust Company, National Association (as successor in interest to U.S. Bank National ~~Association.~~Association). (Incorporated by reference to the Company’s Current Report on Form 8-K filed on July 21, 2017.)

4.3			First Supplemental Indenture, dated as of July 20, 2017, between the Company and U.S. Bank National Association, relating to the Company’s 4.000% Senior Notes due 2022, including form thereof. (Incorporated by reference to the Company’s Current Report on Form 8-K filed on July 21, 2017.)

~~4.4~~			Second Supplemental Indenture, dated as of June 23, 2020, between the Company and U.S. Bank Trust Company, National Association (as successor in interest to U.S. Bank National ~~Association,~~Association), relating to the Company’s 6.375% Senior Notes due 2050, including form thereof. (Incorporated by reference to the Company’s Registration Statement on Form 8-A filed on June 23, 2020.)

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~~4.5~~4.4			Third Supplemental Indenture, dated as of May 18, 2021, between the Company and U.S. Bank Trust Company, National Association (as successor in interest to U.S. Bank National ~~Association,~~Association), relating to the Company’s 2.650% Senior Notes due 2026, including form thereof. (Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2021.)

~~4.6~~4.5			Fourth Supplemental Indenture, dated as of August 13, 2021, between the Company and U.S. Bank Trust Company, National Association (as successor in interest to U.S. Bank National ~~Association,~~Association), relating to the Company’s 2.400% Senior Notes due 2027, including form thereof. ~~(Filed herewith.~~(Incorporated by reference to the Company's Quarterly Report on Form 10Q for the quarter ended September 30, 2021.)

~~4.7~~4.6			Fifth Supplemental Indenture, dated as of September 28, 2021, between the Company and U.S. Bank Trust Company, National Association (as successor in interest to U.S. Bank National ~~Association,~~Association), relating to the Company’s 3.450% Senior Notes due 2031, including form thereof. ~~(Filed herewith.~~(Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2021.)

~~4.8~~4.7			Indenture, dated as of February 3, 2015, between the Company (as successor to Select Income REIT) and U.S. Bank Trust Company, National Association (as successor in interest to U.S. Bank National ~~Association.~~Association). (Incorporated by reference to Select Income REIT’s Current Report on Form 8-K filed on February 3, 2015.)

~~4.9~~4.8			First Supplemental Indenture, dated as of February 3, 2015, between the Company (as successor to Select Income REIT) and U.S. Bank Trust Company, National Association (as successor in interest to U.S. Bank National ~~Association,~~Association), including the form of 4.50% Senior Notes due 2025. (Incorporated by reference to Select Income REIT’s Current Report on Form 8-K filed on February 3, 2015.)

~~4.10~~4.9			Second Supplemental Indenture, dated as of May 15, 2017, between the Company (as successor to Select Income REIT) and U.S. Bank Trust Company, National Association (as successor in interest to U.S. Bank National ~~Association,~~Association), including the form of 4.250% Senior Notes due 2024. (Incorporated by reference to Select Income REIT’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2017, filed by Select Income REIT on July 25, 2017.)

~~4.11~~4.10			Third Supplemental Indenture, dated as of December 31, 2018, among Select Income REIT, the Company and U.S. Bank Trust Company, National Association (as successor in interest to U.S. Bank National ~~Association.~~Association). (Incorporated by reference to the Company’s Current Report on Form 8-K filed on December 31, 2018.)

~~4.12~~4.11			Authentication Order, dated as of September 24, 2020, from the Company to U.S. Bank Trust Company, National Association (as successor in interest to U.S. Bank National ~~Association,~~Association), relating to the Company’s 4.50% Senior Notes due 2025. (Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2020.)

~~4.13~~4.12			Registration Rights and Lock-Up Agreement, dated as of June 5, 2015, among the Company, ABP Trust (f/k/a Reit Management & Research Trust) and Adam D. Portnoy. (Incorporated by reference to the Company’s Current Report on Form 8‑K filed on June 8, 2015.)

~~10.1~~			~~Second Amendment to Second Amended and Restated Business Management Agreement, effective as of August 1, 2021, between the Company and The RMR Group LLC. (Filed herewith.~~)

31.1			Rule 13a-14(a) Certification. (Filed herewith.)

31.2			Rule 13a-14(a) Certification. (Filed herewith.)

31.3			Rule 13a-14(a) Certification. (Filed herewith.)

31.4			Rule 13a-14(a) Certification. (Filed herewith.)

32.1			Section 1350 Certification. (Furnished herewith.)

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101.INS			XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH			XBRL Taxonomy Extension Schema Document. (Filed herewith.)
101.CAL			XBRL Taxonomy Extension Calculation Linkbase Document. (Filed herewith.)
101.DEF			XBRL Taxonomy Extension Definition Linkbase Document. (Filed herewith.)

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101.LAB			XBRL Taxonomy Extension Label Linkbase Document. (Filed herewith.)
101.PRE			XBRL Taxonomy Extension Presentation Linkbase Document. (Filed herewith.)
104			Cover Page Interactive Data File. (Formatted as Inline XBRL and contained in Exhibit 101.)

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


			OFFICE PROPERTIES INCOME TRUST


			By:			/s/ Christopher J. Bilotto
						Christopher J. Bilotto
						President and Chief Operating Officer
						Dated: October ~~28, 2021~~27, 2022

			By:			/s/ Matthew C. Brown
						Matthew C. Brown
						Chief Financial Officer and Treasurer
						(principal financial officer and principal accounting officer)
						Dated: October ~~28, 2021~~27, 2022

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Acquisition Date	Location	Number of Properties	Rentable Square Feet	Purchase Price		Land		Buildings and Improvements		Acquired Real Estate Leases		Assumed Real Estate Lease Obligations
June 2021	Chicago, IL (1)	1	531,000	$	368,331	$	42,935	$	258,348	$	76,136	$	(9,088)
June 2021	Atlanta, GA	1	346,000	180,602		13,040		135,459		32,103		—
August 2021	Boston, MA	1	49,000	27,545		16,103		10,217		1,225		—












		3	926,000	$	576,478	$	72,078	$	404,024	$	109,464	$	(9,088)


Date of Sale Agreement	Number of Properties	Location	Rentable Square Feet	Gross Sales Price (1)
August 2021	—	Sterling, VA (2)	—	$	28,500
October 2021	5	Brookhaven, GA	378,000	56,000













	5		378,000	$	84,500


			Fair Value at Reporting Date Using
Description	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Non-recurring Fair Value Measurements Assets
Assets of properties held for sale (1)	$	20,300	$	—	$	—	$	20,300