OPI 10-K & 10-Q changes, risk factors and insider trading
Office Properties Income Trust · Nasdaq · Real Estate · CIK 1456772 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
Risk Factors
New heading “Risks Related to Our Chapter 11 Bankruptcy Proceedings”
New heading “We are and, upon our emergence from bankruptcy, will continue to be subject to the risks and uncertainties associated with the Chapter 11 Cases”
New heading “Upon our emergence from bankruptcy, the composition of our Board of Trustees is expected to change significantly.”
New heading “Upon our emergence from bankruptcy, our financial results may change significantly and may not reflect historical trends.”
New heading “Our common shares currently have limited liquidity and will be cancelled, released and discharged on the effective date of the Plan.”
Removed heading “We may be unable to grow our business by acquiring additional properties, and we might encounter unanticipated difficulties and expenditures relating to our acquired properties.”
Removed heading “Our credit ratings may increase our cost of capital and could otherwise materially adversely affect our business and financial condition.”
Removed heading “The termination of our management agreements with RMR may require us to pay a substantial termination fee, including in the case of a termination for unsatisfactory performance, which may limit our ability to end our relationship with RMR.”
Removed heading “The Notes, other than the March 2027 Notes, the March 2029 Notes and the September 2029 Notes, or the Unsecured Notes, are unsecured and effectively subordinated to all of our and our subsidiary guarantors’ existing and future secured debt to the extent of the value of the assets securing such indebtedness.”
Largest changes
•we have and, following our emergence from bankruptcy, will have a substantial amount of debt and we are subject to risks related to our debt, includingsee in full comparisontheourinabilityability to refinance maturing debt and the cost of any such refinanced debt andtheourinabilityability to reduce our debt leverage, which may remain at or abovecurrentthe levels expected upon emergence from bankruptcy for an indefiniteperiod,period.covenantsCovenants andconditionsterms contained in our debt agreementswhichmay restrict our operations by increasing our interest expense and limiting our ability to make investments in our properties, sell properties securing our debt and pay distributions to ourshareholders, potential downgrades to our credit ratingsshareholders and other limitations on our ability to access capital at reasonable costs or at all, including the limited availability of debt capital to office REITs generally;
“We are currently seeking to refinance our senior unsecured notes due 2026, or the 2026 Notes, through a debt exchange, and we expect to sell certain properties to raise cash and may pursue other strategies to address our liquidity needs, including equity issuances. We cannot be sure that we will be able to obtain any future financing, and any such financing we may obtain may not be sufficient to repay our existing debt. If we are unable to obtain sufficient funds, we may be unable to continue as a going concern and our Board of Trustees may consider a reorganization in bankruptcy court.”see in full comparison
There remains a continued focus from regulators, investors, tenants, including the General Services Administration, and other stakeholders concerning corporate sustainability.see in full comparisonForWeexample,are,theandSECexpecthasto continue to be, subject to various proposed, new and evolving sustainability laws and requirements adoptedclimate change related regulations andby certain stateshaveandenactedregulators,climateincludingfocusedboth voluntary and mandatory disclosurelawsrequirements that may impact how we conduct business, and we may incur significant costs in compliance with such rules if and when such regulations become effective. Some investors may use ESG factors to guide their investment strategies and, in some cases, may choose not to invest in us, or otherwise do business with us, if they believe our or RMR’s policies relating to corporate sustainability areinadequate.notThird-partyaligned with their own policies. Third party providers of corporate sustainability ratings and reports on companies have increased in number, resulting in varied and, in some cases, inconsistent standards.In addition, the criteria by which companies’ corporate sustainability practices are assessed are evolving, which could result in greater expectations of us and RMR and cause us and RMR to undertake costly initiatives to satisfy such new criteria. Alternatively, ifIf we or RMR elect not to or are unable to satisfysuch newthe criteria by which companies’ corporate responsibility practices are assessed or do not meet the criteria of a specificthird-partythird party provider, some investors may conclude that our or RMR’s policies with respect to corporate sustainability are inadequate. Pursuant to RMR’s zero emissions goal, RMR has pledged to reduce its Scope 1 and 2 emissions to net zero by 2050 with a 50% reduction commitment by 2029 from a 2019 baseline. We and RMR may face reputational damage in the event that our or their corporate sustainability procedures or standards do not meet the goals that we or RMR have set or the standards set by various constituencies. In addition, there are efforts by some stakeholders and governmental authorities to reduce companies’ efforts regarding ESG, including human capital management-related matters, and anti-ESG or anti-diversity, equity and inclusion, or DEI, sentiment has gained momentum across the United States, with several states and governmental authorities enacting or proposing anti-ESG or anti-DEI policies or legislation and filing suits alleging that ESG or DEI measures or initiatives violate law. Additionally, in January 2025, President Trump signed a number of executive orders focused on DEI, which indicate continued scrutiny of DEI initiatives and potential related investigations of certain private entities with respect to DEI initiatives, including publicly traded companies. If our and RMR’s practices and programs are deemed to be in contradiction of such initiatives, we and RMR could be subject to government investigations or lawsuits that could negatively impact us and RMR and affect our business, financial condition or reputation. Increasingly, different stakeholder groups and government authorities have divergent views on ESG matters, which increases the risk that any action or lack thereof with respect to ESG matters will be perceived negatively by at least some stakeholders or governmental authorities and adversely impact our reputation and business. If we and RMR fail to comply with ESG and anti-ESG related regulations and to satisfy the expectations of investors and our tenants and other stakeholders or our or RMR’s announced goals and other initiatives are not executed as planned, our and RMR’s reputation could be adversely affected, and our revenues, results of operations and ability to grow our business may be negatively impacted. In addition, we may incur significant costs in attempting to comply with regulatory requirements, ESG and anti-ESG policies orthird-partythird party expectations or demands.
“Currently, our ability to incur additional indebtedness is substantially limited as a result of the Chapter 11 Cases and, until the effectiveness of the Plan, will require Bankruptcy Court approval in most instances. Although we have successfully obtained debt to operate our business prior to the commencement of the Chapter 11 Cases, there can be no assurance as to whether we will be able to obtain debt in the future or that the financing options available to us will be on favorable or acceptable terms. …”see in full comparison
“We have engaged in and may engage in future development, redevelopment and repositioning activities with respect to our properties, and, as a result, we are subject to certain risks. These risks include cost overruns and untimely completion of construction due to, among other things, weather conditions, inflation, labor or material shortages or delays in receiving permits or other governmental approvals or inability to achieve desired returns, as well as the availability and pricing of financing on favorable terms or at all, and finding tenants to lease our properties. …”see in full comparison
“The filing of the Chapter 11 Cases constituted an event of default under our credit agreement and senior notes indentures and their supplements which accelerated amounts due under the applicable agreements. Efforts to enforce financial obligations under the applicable agreements are stayed as a result of the filing of the Chapter 11 Cases and the creditors’ rights of enforcement are subject to the applicable provisions of the Bankruptcy Code.”see in full comparison
Full comparison: every changed paragraph (108)
•we are subject to risks and uncertainties related to the Chapter 11 Cases and upon our expected emergence from bankruptcy;
•we have and, following our emergence from bankruptcy, will have a substantial amount of debt and we are subject to risks related to our debt, including theour inabilityability to refinance maturing debt and the cost of any such refinanced debt and theour inabilityability to reduce our debt leverage, which may remain at or above currentthe levels expected upon emergence from bankruptcy for an indefinite period,period. covenantsCovenants and conditionsterms contained in our debt agreements which may restrict our operations by increasing our interest expense and limiting our ability to make investments in our properties, sell properties securing our debt and pay distributions to our shareholders, potential downgrades to our credit ratingsshareholders and other limitations on our ability to access capital at reasonable costs or at all, including the limited availability of debt capital to office REITs generally;
•we have a significant amount of scheduled lease expirations in 2025 and thereafter and we may be unable to renew our leases when they expire or lease our properties to new tenants without decreasing rents or incurring significant costs or at all; in addition, some of our tenants have the right to terminate their leases prior to their stated lease expiration date;
•unfavorable market and commercial real estate industry conditions, particularly impacting the office sector, due to, among other things, uncertainties surrounding interest rates and inflation, changing tariffs and trade policies and related uncertainty, supply chain disruptions, volatility in the public equity and debt markets and in the commercial real estate markets, generally, reductions in government spending to fund their obligations, pandemics, geopolitical instability and tensions, pandemics, any U.S. government shutdown, economic downturns or a possible recession, labor market conditions, changes in real estate utilization, including increasedcontinued remotehybrid and other alternative work arrangements and tenants consolidating their real estate footprint, and other conditions beyond our control, have had, and may continue to have, a material adverse effect on our and our tenants’ results of operations and financial conditions, and our tenants may be unable to satisfy their lease obligations to us;
•we are subject to risks related to our dependence upon RMR to implement our business strategies and manage our day to day operations;
•we are subject to risks related to the security of RMR’s information technology and RMR’s use of artificial intelligence, or AIintelligence;
•our distributions to shareholders have been suspended and may not be resumed, and any future distributions may not remain at $0.01or perincrease commonabove shareprior per quarter for an indefinite periodlevels or may be reduced or eliminated again and the form of payment could change.
Risks Related to Our Chapter 11 Bankruptcy Proceedings
We are and, upon our emergence from bankruptcy, will continue to be subject to the risks and uncertainties associated with the Chapter 11 Cases
As a result of our filing of the Chapter 11 Cases, our business and our ability to execute our business plan, and our continuation as a going concern, will be subject to the risks and uncertainties, including upon our anticipated emergence from bankruptcy. These risks and uncertainties include the following:
•our ability to consummate the transactions contemplated by the Plan;
•the high costs of bankruptcy proceedings and related fees;
•our ability to obtain additional financing, reduce expenses and execute our business plan post-emergence;
•the adequacy of our cash balances at the time of our projected exit from the Chapter 11 Cases;
•our ability to attract and retain tenants and to maintain our relationships with our tenants, manager, lenders and other third parties; and
•the actions and decisions of our creditors and other third parties who have interests in the Chapter 11 Cases that may be inconsistent with our plans.
These risks and uncertainties could affect our business and operations in various ways. For example, negative events associated with the Chapter 11 Cases could adversely affect our relationships with our tenants, manager, lenders and other third parties, which in turn could adversely affect our business and financial condition. In addition, we need the prior approval of the Bankruptcy Court for transactions outside the ordinary course of business, which may limit our ability to respond timely to certain events or take advantage of certain opportunities. Because of the risks and uncertainties associated with the Chapter 11 Cases, we cannot accurately predict or quantify the ultimate impact of events that occur during the pendency of the Chapter 11 Cases or upon our anticipated emergence from bankruptcy that may be inconsistent with our plans, or provide assurance that having been subject to Chapter 11 protection will not adversely affect our operations in the future.
Upon our emergence from bankruptcy, the composition of our Board of Trustees is expected to change significantly.
The composition of our Board of Trustees is expected to change significantly. New Trustees are likely to have different backgrounds, experiences and perspectives from those individuals who previously served on our Board of Trustees and, thus, may have different views on the issues that will determine our future. As a result, our future strategy and plans may differ materially from those of the past.
Upon our emergence from bankruptcy, our financial results may change significantly and may not reflect historical trends.
During the pendency of the Chapter 11 Cases, our financial results have been volatile as restructuring activities and expenses, contract terminations and rejections and claims assessments have significantly impacted our consolidated financial statements. Upon our emergence from bankruptcy, the amounts reported in subsequent consolidated financial statements may materially change relative to historical consolidated financial statements. We are also required to adopt fresh-start reporting at the effectiveness of the Plan, with our assets and liabilities being recorded at fair value as of the fresh-start reporting date, which may differ materially from the recorded values of assets and liabilities on our consolidated balance sheets. Accordingly, under fresh-start reporting rules, our financial condition and results of operations following our emergence from bankruptcy will not be comparable to the financial condition and results of operations reflected in our historical financial statements.
As discussed in Note 1 to the Notes to Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report on Form 10-K, we concluded that there was substantial doubt about our ability to continue as a going concern due to (1) insufficient liquidity to satisfy our obligations as they come due, (2) limited alternatives available to us to obtain debt or equity financing, (3) inability to refinance our maturing debt, and (4) the resulting Chapter 11 Cases. Our ability to continue as a going concern is contingent upon, among other things, our ability to implement the Plan and generate sufficient liquidity following the reorganization to meet our obligations, restructured debt obligations and operating needs.
The transactions contemplated by the Plan are subject to certain conditions. Accordingly, no assurance can be given that the transactions described therein will be consummated. If we are unable to consummate the transactions contemplated by the Plan, we may be unable to continue as a going concern.
Our portfolio has been adversely affected by shifts in office space utilization, including increased remote work arrangements and tenants consolidating their real estate footprint. Demand for office space continues to face headwinds and declining rents and increasing costs to re-lease space when tenants can be identified continue to impact the market. In addition, there are limited debt or equity financing alternatives available to us to refinance our debt and financing sources we have utilized have increased our cost of capital. The duration and ultimate impact of these factors on our properties and our business remains uncertain and subject to change; however, these conditions continue to have a significant negative impact on our results of operations, financial position and cash flows. As of February 13, 2025, our total available liquidity was comprised of $113.0 million of cash and, in addition to long-term debt, our near-term obligations include outstanding lease obligations of $81.9 million and principal debt repayments of $26.0 million in 2025 and $291.5 million in 2026.
As discussed in Note 1 to the Notes to Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report on Form 10-K, based on these challenges and upcoming debt maturities, we concluded that there was substantial doubt about our ability to continue as a going concern. Our continuation as a going concern is dependent upon many factors, including our ability to meet our debt covenants, repay our debts and other obligations when due and our ability to make required principal payments under our debt agreements.
We are currently seeking to refinance our senior unsecured notes due 2026, or the 2026 Notes, through a debt exchange, and we expect to sell certain properties to raise cash and may pursue other strategies to address our liquidity needs, including equity issuances. We cannot be sure that we will be able to obtain any future financing, and any such financing we may obtain may not be sufficient to repay our existing debt. If we are unable to obtain sufficient funds, we may be unable to continue as a going concern and our Board of Trustees may consider a reorganization in bankruptcy court.
We have and, following our emergence from bankruptcy, will have a substantial amount of debt and are subject to risks related to our debt, including our ability to refinance maturing debt and the cost of any such refinanced debt.
As of December 31, 2024,2025, our consolidated debt was $2.6$2.4 billionbillion, and we were fully drawn on our revolving credit facility. Upon emergence from bankruptcy, we expect our debt to be reduced by approximately $700 million.
We are subject to numerous risks associated with our debt, including our ability to refinance maturing debt and the cost of any refinancing, the risk that our liquidity could be insufficient for us to make required payments and risks associated with highchanging interest rates. For example, we currently do not have sufficient liquidity on hand to make the required principal payments of $157.5 million due by March 31, 2026 under our senior secured notes due 2027, or the March 2027 Notes, and the outstanding $140.5 million in principal amount of the 2026 Notes. We continue to engage a financial advisor to assist in evaluating our options to address our upcoming debt maturities. There can be no assurance our advisor will be successful in assisting us with our debt maturities. There are also no limits in our organizational documents on the amount of debt we may incur or maintain, and, subject to any limitations in our debt agreements, we may incur and maintain additional debt. Our debt may increase our vulnerability to adverse market and economic conditions, limit our flexibility in planning for changes in our business and place us at a disadvantage in relation to competitors that have lower debt levels. Our debt could increase our cost of capital, limit our ability to incur additional debt in the future, and increase our exposure to floating interest rates or expose us to potential events of default (if not cured or waived) under covenants contained in debt instruments that could have a material adverse effect on our business, financial condition and operating results. High interest rates under our recently issued debt instruments have significantly increased our borrowing costs and we have pledged a significant portion of our assets as collateral. Although we have an option to extend the maturity date of certain of our debt upon payment of a fee and meeting other conditions, the applicable conditions may not be met, and we may be required to repay or refinance our existing debt with new debt aton less favorable terms. Excessive or expensive debt could reduce the available cash flow to fund, or limit our ability to obtain financing for, lease obligations, working capital, capital expenditures, refinancing, acquisitions, development or redevelopment projects or other purposes and hinder our ability to pay distributions to our shareholders.
Currently, our ability to incur additional indebtedness is substantially limited as a result of the Chapter 11 Cases and, until the effectiveness of the Plan, will require Bankruptcy Court approval in most instances. Although we have successfully obtained debt to operate our business prior to the commencement of the Chapter 11 Cases, there can be no assurance as to whether we will be able to obtain debt in the future or that the financing options available to us will be on favorable or acceptable terms. Further, the filing of the Chapter 11 Cases constituted an event of default under certain of our debt agreements, although efforts to enforce financial obligations under the applicable agreements are stayed as a result of the filing of the Chapter 11 Cases and the creditors’ rights of enforcement are subject to the applicable provisions of the Bankruptcy Code.
If we default under any of our debt obligations, we may be in default under our other debt agreements that have cross default provisions, including our credit agreement and our senior notes indentures and their supplements. In such case, our lenders or noteholders may demand immediate payment of any outstanding debt and could seek payment from the subsidiary guarantors under our credit agreement, our March 2027 Notes, our 9.000% senior secured notes due March 2029, or the March 2029 Notes, or our 9.000% senior secured notes due September 2029, or the September 2029 Notes, seek to sell any pledged equity interests of certain subsidiaries or the mortgaged properties owned by certain pledged subsidiaries, or we could be forced to liquidate our assets for less than the values we would receive in a more orderly process.
We have a significant amount of scheduled lease expirations in 2025 and thereafter and we may be unable to lease our properties when our leases expire.
Leases representing approximately 9.9%3.7% and 4.2%12.9% of our annual rental income are scheduled to expire in each of 20252026 and 2026,2027, respectively. Although we typically will seek to renew or extend the terms of leases for our properties with tenants when they expire, we cannot be sure that we will be successful in doing so. Certain shifts in space utilization, including increases in remotehybrid and other alternative work arrangements, as well as ongoing market and economic conditions, including government spending and budget priorities, 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 re-lease these properties to new tenants.
RemoteHybrid and other alternative work arrangements and shifts in space utilization and other business practices may continue to reduce the demand for office leasing.
Certain shifts in office space utilization, including increasedcontinued remotehybrid and other alternative work arrangements and tenants consolidating their real estate footprint, as well as declining rents and increasing costs to re-lease space when tenants can be identified, continue to impact the market for both private sector and government tenants. It is uncertain to what extent and for how long such remotehybrid or other alternative work arrangements may continue. In addition, it is possible that hybrid work arrangements could continue or increase, such as workspace sharing or hoteling of office space. To the extent these practices become permanent or further increase, demand for office space, including at our properties, 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 business and operations have been and may continue to be adversely affected by market and economic volatility experienced by the U.S. and global economies, the commercial real estate industry and/or the local economies in the markets in which our properties are located. Unfavorable economic and industry conditions may be due to, among other things, uncertainties surrounding interest rates and inflation, changing tariffs and trade policies and related uncertainty, supply chain disruptions, volatility in the public equity and debt markets, pandemics, geopolitical instability and tensions, pandemics, any U.S. government shutdown, economic downturns or a possible recession, labor market conditions, changes in real estate utilizationutilization, catastrophic events such as natural disasters, adverse weather and climate conditions and other conditions beyond our control. As economic conditions in the United States may affect the demand for office space, real estate values, occupancy levels and property income, current and future economic conditions in the United States, including slower growth or a possible recession and capital market volatility or disruptions, could have a material adverse impact on our earnings and financial condition. Economic conditions may be affected by numerous factors, including, but not limited to, the pace of economic growth and/or recessionary concerns, inflation, increases in the levels of unemployment, energy prices, uncertainty about government fiscalfiscal, tax and taxtrade policy, geopolitical events, the regulatory environment, the availability of credit and interest rates. Unfavorable market conditions have particularly impacted the office sector and sustained low occupancy in office properties, reduced values of these properties and limited acquisition and disposition volume have negatively impacted our ability to pay distributions to our shareholders and these or other conditions may continue to have similar impacts in the future and on our results of operations and financial condition.
Our business depends on our tenants satisfying their lease obligations. The financial capacities of our private sector tenants to pay us rent will depend upon their abilities to successfully operate their businesses, which may be adversely affected by factors over which we and they have no control, including market and economic conditions, such as uncertainties surrounding interest rates and inflation, supply chain challengeschallenges, changing tariffs and trade policies and related uncertainty, economic downturns or a possible recession.recession and labor market conditions. The failure of our private sector tenants and any applicable parent guarantor to satisfy their lease obligations to us, whether due to a downturn in their business or otherwise, could materially and adversely affect us.
Government budgetary pressures, policies and priorities and trends in government employment and office leasing, including elimination or reduction of government agencies and programs, remotehybrid workingwork arrangements and other space utilization trends, may adversely impact our business.
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 and efforts to manage space utilization rates may result in our tenants exercising early termination rights under their leases, vacating our properties upon expiration of their leases in order to relocate to government owned properties or consolidate leased space within a market, or renew their leases for less space than they currently occupy. The current administration is reportedly seeking to reduce the U.S. government’s office leases through termination of existing leases. Accordingly, there can be no assurance that the U.S. government will not seek to exercise early termination rights or otherwise purport to terminate our leases with the U.S. government or use the threat thereof to seek rent concessions. Also, our government tenants’ desire to reconfigure 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, in some instances, resulted in delayed decisions by some of our government tenants and more focus on short term lease renewals. In addition, the new presidential administration may implement new or change existing policies, including the potential elimination or reduction of government agencies and programs, which may impact leasing at our government leased properties. Although the current administration has issued so called return to work mandates, there can be no assurance such actions will result in increased office utilization. Given the significant uncertainties, including the extent to which remotehybrid 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.
We expect to sell properties, or sell an interest in properties through joint venture arrangements, from time to time, in order to manage leverage levels or to recycle capital into properties that we believe have better long-term earnings potential or that we believe will help diversifyimprove our revenue base, improve the average age of our properties, lengthen the weighted average term of our leases, reduce our ongoing capital requirements and/or increase our distributions to shareholders.liquidity. Our ability to sell properties, and the prices we may receive in any such sales may be affected by various factors. In particular, these factors could arise from, among other things:
•any requirement to obtain the consent of the Bankruptcy Court to consummate such sale;
•unfavorable local, national or international economic conditions, such as uncertainties surrounding interest rates and inflation, changing tariffs and trade policies and related uncertainty, supply chain challenges and economic downturns or a possible recession and labor market challengesconditions; and
For example, current market conditions have caused, and may continue to cause, increased capitalization rates which, together with increased high interest rates, has resulted in reduced commercial real estate transaction volume, and such conditions may continue or worsen. We may not succeed in selling properties and any sales may be delayed or may not occur or, if sales do occur, the terms may not meet our expectations and we may incur losses in connection with any sales. In addition, we may elect to forego or abandon property sales. If we are unable to realize proceeds from the sale of assets sufficient to allow us to reduce our leverage to a level we, or possible financing sources, believe appropriate, we may be unable to fund capital expenditures or future acquisitions to grow our business. In addition, we may elect to change or abandon our strategy and forego or abandon property or other asset sales.
We may fail to comply with the terms of our debt agreements, which could adversely affect our business and prohibit us from paying distributions to our shareholders.business.
Our debt agreements includecontain various conditions, covenants and events of default. We may not be able to satisfy all of these conditions or may default on some of these covenants for various reasons, including for reasons beyond our control. If any of the covenants in these debt agreements are breached and not cured within the applicable cure period, we could be required to repay the debt immediately, even in the absence of a payment default, or be prevented from refinancing maturing debt or issuing new debt. Complying with these covenants may limit our ability to take actions that may be beneficial to us and our security holders.
Our credit agreement and our senior notes indentures and their supplements require us to comply with certain financial and other covenants. These covenants may limit our ability to issue new debt or refinance existing debt, our operational flexibility and acquisition and disposition activity. Our ability to comply with those covenants will depend upon the net rental income we receive from our properties. If our operating results and financial condition are significantly negatively impacted by the current market conditions or otherwise, we may fail to satisfy covenants under our credit agreement or our senior notes indentures and their supplements. Further, if the occupancy at our properties declines or if our rents decline, we may be unable to borrow under our revolving credit facility. Our revolving credit facility is secured by certain properties and the availability of borrowings under the facility is subject to minimum performance and value levels of those properties. We are currently fully drawn under our revolving credit facility, and we may therefore experience future liquidity constraints.facility. An inability to incur additional debt would require us to meet our capital needs from other sources, such as cash on hand, operating cash flow, equity financing or asset sales, which may not be available to us on attractive terms or at all and we may be unable to meet our obligations or grow our business by acquiring additional properties or otherwise.
The filing of the Chapter 11 Cases constituted an event of default under our credit agreement and senior notes indentures and their supplements which accelerated amounts due under the applicable agreements. Efforts to enforce financial obligations under the applicable agreements are stayed as a result of the filing of the Chapter 11 Cases and the creditors’ rights of enforcement are subject to the applicable provisions of the Bankruptcy Code.
If we default under our credit agreement, our lenders may demand immediate payment and could seek payment from the subsidiary guarantors under our credit agreement, the March 2027 Notes, the March 2029 Notes or the September 2029 Notes, seek to sell any pledged equity interests of certain subsidiaries or the mortgaged properties owned by such pledged subsidiaries, or may elect not to fund future borrowings. During the continuance of any event of default under our credit agreement, we may be limited or, in some cases, prohibited from paying distributions to our shareholders. Any default under our credit agreement that results in acceleration of our obligations to repay outstanding debt or in our no longer being permitted to borrow under our revolving credit facility would likely have serious adverse consequences to us and would likely cause the value of our securities to decline.
In the future, we may obtain additional debt financing,financing upon emergence from the Chapter 11 Cases, and the covenants and conditions applicable to that debt may be more restrictive than the covenants and conditions that are contained in our existing debt agreements.
We have engaged in and may engage in future development, redevelopment and repositioning activities with respect to our properties, and, as a result, we are subject to certain risks. These risks include cost overruns and untimely completion of construction due to, among other things, weather conditions, inflation, labor or material shortages or delays in receiving permits or other governmental approvals, as well as the availability and pricing of financing on favorable terms or at all, and finding tenants to lease our properties. While inflation declined significantly in 2024, it remains above historic levels, and the global economy continues to experience commodity pricing and other inflation, including inflation impacting wages and employee benefits, and it is uncertain whether inflation will decline, remain relatively steady or increase. These conditions have increased the costs for materials, other goods and labor, including construction materials, and caused some delays in construction activities, and these conditions may continue and worsen. These pricing increases, as well as increases in labor costs, could result in substantial unanticipated delays and increased development and renovation costs and could prevent the initiation or the completion of development, redevelopment or repositioning activities. In addition, changes to demand for office space and increased vacancies due to continued increases in remote and other alternative work arrangements and shifts in space utilization, as well as current economic conditions and volatility in the commercial real estate markets, generally, may cause delays in leasing these properties or possible loss of tenancies and negatively impact our ability to generate cash flows from these properties that meet or exceed our cost of investment. Any of these risks associated with our current or future development, redevelopment and repositioning activities could have a material adverse effect on our business, financial condition and results of operations.
A prolonged U.S. government shutdownshutdowns may adversely impact our operations, financial results and liquidity.
We may be unable to grow our business by acquiring additional properties, and we might encounter unanticipated difficulties and expenditures relating to our acquired properties.
Although our business plan does not currently contemplate the acquisition of additional properties, we may acquire additional properties in the future. Our ability to make profitable acquisitions is subject to risks, including, but not limited to, risks associated with:
•the extent of our debt leverage;
•the availability, terms and cost of debt and equity capital;
•our liquidity position;
•competition from other investors; and
•contingencies in our acquisition agreements.
These risks may limit our ability to grow our business by acquiring additional properties. In addition, we might encounter unanticipated difficulties and expenditures relating to our acquired properties. For example:
•notwithstanding pre-acquisition due diligence, we could acquire a property that contains undisclosed defects in design or construction or unknown liabilities, including those related to undisclosed environmental contamination, or our analyses and assumptions for the properties may prove to be incorrect, or we could receive rental revenues less than we expect at an acquired property due to tenant vacancies, changed economic conditions or otherwise;
Management's Discussion & Analysis (MD&A)
New heading “Nasdaq Delisting”
New heading “Segment Information”
New heading “Senior Note Exchange”
New heading “Share Issuances”
Removed heading “Disposition Activities”
Removed heading “Senior Secured Notes Issuance and Senior Unsecured Notes Redemption”
Largest changes
“Our ability to issue additional indebtedness, dispose of assets or access capital markets is substantially limited as a result of the Chapter 11 Cases and, until the effectiveness of the Plan, will require Bankruptcy Court approval in most instances. Accordingly, our liquidity primarily depends on cash generated from operating activities and borrowings under our DIP Facility. …”see in full comparison
“Given the limited alternatives available to us to obtain debt or equity financing to refinance our maturing debt, the illiquid nature of our real estate assets and our limited ability to incur additional debt while maintaining compliance with the financial covenants in our existing debt agreements, we continue to work with our financial advisor, Moelis & Company LLC, to evaluate strategies to address our upcoming debt obligations, including through asset sales, debt exchanges, and/or equity sales. …”see in full comparison
Our principal debt obligations as of December 31,see in full comparison20242025 consisted of $325,000 of borrowings outstanding under our revolving credit facility, $100,000 outstanding principal amount under our secured term loan, an outstanding principal balance of$2,024,204$1,819,069 of seniornotesnotes, $10,225 outstanding under our DIP Facility and mortgage notes with an outstanding principal balance of $177,320. Also, the two properties owned by the joint venture in which we owned a 51% interest secured an additional mortgage note. Our senior notes are governed by indentures and their supplements. Our creditagreement and ouragreement, senior notes indentures and their supplements and the amended and restated debtor-in-possession term loan credit agreement governing our DIP Facility, or the DIP Credit Agreement, provide for acceleration of payment of all amountsoutstandingdue 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 RMR ceasing to act as our business and property manager. Our creditagreement andagreement, our senior notes indentures and their supplements and the DIP Credit Agreement also containa number ofcovenants, including those that restrict our ability to incurdebts, includingdebtssecured 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 increase our distribution rate above the current level of $0.01 per common share per quarter.AsThe filing ofDecember 31, 2024, we believe we were in compliance withthetermsChapterand11conditionsCases constituted an event ofour respective covenantsdefault under our credit agreement andoursenior notes indenturesandwhichtheiracceleratedsupplements.amountsOurduemortgageundernotesthe applicable agreements. Efforts to enforce financial obligations under the applicable agreements arenon-recourse,stayed as a result of the filing of the Chapter 11 Cases and the creditors’ rights of enforcement are subject tocertainthelimitedapplicableexceptions,provisionsandofdothenotBankruptcycontain any material financial covenants.Code.
“As of February 13, 2025, our total available liquidity was comprised of $113,000 of cash and our near-term obligations include outstanding lease obligations of $81,865 and principal debt repayments of $26,000 in 2025 and $291,488 in 2026. We are currently seeking to refinance the 2026 Notes through the debt exchange described above, and we expect to sell certain properties to raise cash and may pursue other strategies to address our liquidity needs, including equity issuances. …”see in full comparison
“Substantial doubt about our ability to continue as a going concern exists due to (1) insufficient liquidity to satisfy our obligations as they come due, (2) limited alternatives available to us to obtain debt or equity financing, (3) inability to refinance our maturing debt, and (4) the resulting Chapter 11 Cases. …”see in full comparison
“Leases representing approximately 9.9% and 4.2% of our annual rental income are scheduled to expire in each of 2025 and 2026, respectively, and we may be unable to renew leases or find replacement tenants. Certain shifts in office space utilization, including increased remote work arrangements and tenants consolidating their real estate footprint, as well as declining rents and increasing costs to re-lease space when tenants can be identified, continue to impact the office sector and our portfolio. …”see in full comparison
Full comparison: every changed paragraph (94)
Leases representing approximately 3.7% of our annualized rental income are scheduled to expire through 2026 and we may be unable to renew leases or find replacement tenants. Certain shifts in office space utilization, including increased remote work arrangements and tenants consolidating their real estate footprint, as well as ongoing market and economic conditions, including government spending and budget priorities, continue to impact the office sector and our portfolio. The demand for office space continues to face headwinds, including in markets where we have a concentration of properties, such as Washington, D.C., and declining rents and increasing costs to relet space when tenants can be identified continue to impact the market. The duration and ultimate impact of current trends on the demand for office space at our properties remains uncertain and subject to change. Higher interest rates, inflationary pressures, changes in government policies including the potential reduction of U.S. federal office leases and potential impacts from tariffs, geopolitical events, an economic recession or disruptions in financial markets could adversely affect our and our tenants’ financial condition and the ability or willingness of our tenants to renew our leases or pay rent to us. In addition, prospective tenants may delay their decision to lease space due to current economic conditions. Accordingly, we do not yet know what the full extent of the impacts will be on our or our tenants’ businesses and operations nor the long-term outlook for leasing at our properties.
On the Petition Date, the Debtors voluntarily commenced the Chapter 11 Cases. In connection with the filing of the Chapter 11 Cases, we entered into the RSA with certain holders of the September 2029 Notes to implement a court-supervised financial restructuring pursuant to the transactions contemplated in the RSA.
We continue to operate our businesses as debtors-in-possession under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court. As debtors-in-possession, we are authorized to pay all debts and honor all obligations arising in the ordinary course of our business after the Petition Date. However, generally, we may not pay third-party claims or creditors on account of obligations arising before the Petition Date or engage in transactions outside the ordinary course of business without prior approval of the Bankruptcy Court.
While the commencement of these proceedings constituted an event of default under certain of our debt agreements, enforcement of any remedies in respect of which is automatically stayed during the pendency of the Chapter 11 Cases. There are a number of risks and uncertainties associated with our bankruptcy proceedings, including, among others, that the Plan may not become effective.
The Plan has not yet become effective as of the date of filing of this Annual Report on Form 10-K. Effectiveness of the Plan is subject to a number of conditions precedent. There can be no assurance that all conditions to the effectiveness of the Plan will be satisfied or waived, or that the Plan will become effective on the timeline currently contemplated, or at all. For more information regarding the Chapter 11 Cases, the RSA and the Plan, including the material terms thereof, see elsewhere in this Annual Report on Form 10-K, including Part I, Item 1, “Business” and Note 1 to our Consolidated Financial Statements included in Part IV, Item 15.
Going Concern
Substantial doubt about our ability to continue as a going concern exists due to (1) insufficient liquidity to satisfy our obligations as they come due, (2) limited alternatives available to us to obtain debt or equity financing, (3) inability to refinance our maturing debt, and (4) the resulting Chapter 11 Cases. Our ability to continue as a going concern is contingent upon, among other things, our ability to, subject to the approval by the Bankruptcy Court, implement a plan of reorganization, emerge from the Chapter 11 proceedings and generate sufficient liquidity following the reorganization to meet our obligations, restructured debt obligations and operating needs.
The transactions contemplated by the Plan are subject to approval by the Bankruptcy Court, among other conditions. Accordingly, no assurance can be given that the transactions described therein will be consummated. As a result, we have concluded that management’s plans at this stage do not alleviate substantial doubt about our ability to continue as a going concern.
Leases representing approximately 9.9% and 4.2% of our annual rental income are scheduled to expire in each of 2025 and 2026, respectively, and we may be unable to renew leases or find replacement tenants. Certain shifts in office space utilization, including increased remote work arrangements and tenants consolidating their real estate footprint, as well as declining rents and increasing costs to re-lease space when tenants can be identified, continue to impact the office sector and our portfolio. The demand for office space continues to face headwinds and declining rents and increasing costs to relet space when tenants can be identified continue to impact the market. The duration and ultimate impact of current trends on the demand for office space at our properties remains uncertain and subject to change. Accordingly, we do not yet know what the full extent of the impacts will be on our or our tenants’ businesses and operations nor the long-term outlook for leasing at our properties. Higher interest rates, inflationary pressures, government policies (including the potential reduction of U.S. federal office leases), geopolitical hostilities and tensions, and concerns that the U.S. economy may enter an economic recession have caused disruptions in the financial markets and these factors could adversely affect our and our tenants’ financial condition and the ability or willingness of our tenants to renew our leases or pay rent to us. We also have a significant amount of debt maturing in the next 18 months and we have limited debt and equity financing alternatives available to us to refinance our debt, and recent financing sources we have utilized to refinance debt have increased our cost of capital. The duration and ultimate impact of these factors on our properties and our business remains uncertain and subject to change; however, these conditions continue to have a significant negative impact on our results of operations, financial position and cash flows. As of February 13, 2025, our total available liquidity was comprised of $113,000 of cash and our near-term obligations include lease obligations of $81,865 and principal debt repayments of $26,000 in 2025 and $291,488 in 2026.
Given the limited alternatives available to us to obtain debt or equity financing to refinance our maturing debt, the illiquid nature of our real estate assets and our limited ability to incur additional debt while maintaining compliance with the financial covenants in our existing debt agreements, we continue to work with our financial advisor, Moelis & Company LLC, to evaluate strategies to address our upcoming debt obligations, including through asset sales, debt exchanges, and/or equity sales. However, we are not able to conclude that it is probable that these strategies will allow us to satisfy our upcoming debt obligations and maturities. If we are unable to consummate transactions that allow us to refinance certain of our existing debt, our Board of Trustees may consider a reorganization in a bankruptcy court. As a result of the foregoing, we have concluded that there is substantial doubt about our ability to continue as a going concern.
Nasdaq Delisting
On September 25, 2025, Nasdaq notified us that our common shares were subject to delisting. We did not appeal Nasdaq’s determination, and our common shares were delisted from Nasdaq effective October 6, 2025.
Unless otherwise noted, the data presented in this section includes properties classified as held for sale as of December 31, 20242025 and excludes two properties owned by an unconsolidated joint venture in which we owned a 51% interest.interest and the hotel component of a mixed-use property in Washington, D.C. For more information regarding our properties classified as held for sale andsale, our unconsolidated joint venture,venture and our mixed-use property in Washington, D.C., see Note 4 to the Notes to Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report on Form 10-K.
(2)Based on properties we owned continuously since January 1, 20232024; excludes five properties classified as held for sale, five properties affected by significant redevelopment activities and two properties owned by an unconsolidated joint venture in which we owned a 51% interest as of December 31, 2024.2025.
(3)Based on properties we owned continuously since January 1, 20232024; excludes five properties classified as held for sale, five properties affected by significant redevelopment activities and two properties owned by an unconsolidated joint venture in which we owned a 51% interest.interest as of December 31, 2025.
(3)Development, redevelopment and other activities generally include capital expenditure projects that reposition a property or result in new sources of revenue. Includes capitalized interest and other operating costs of $1,172 and $10,159 for the yearsyear ended December 31, 20242024. andWe 2023,did respectively.not capitalize interest or other operating costs during the year ended December 31, 2025.
As of December 31, 2024,2025, we had leases at our properties totaling approximately 2,067,000 and 522,000504,000 rentable square feet that were scheduled to expire duringthrough 2025 and 2026, respectively.2026. As of FebruaryMay 12,18, 2025,2026, we expect tenants with leases totaling approximately 1,547,000 and 33,000171,000 rentable square feet that are scheduled to expire during 2025 andthrough 2026, respectively, excluding space that has been re-leased and space for which we are in advanced negotiations to re-lease, not to renew or to downsize their leased space upon expiration, and we cannot be sure as to whether other tenants will renew their leases upon expiration. We continue to proactively engage with our existing tenants and are focused on overall tenant retention. Prevailing market conditions and our 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, all of which 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 properties will depend in large part upon market conditions, which are beyond our control. We cannot be sure of the rental rates that will result from our ongoing negotiations regarding lease renewals or any new or renewed leases we may enter. Also, we may experience material declines in our rental income due to vacancies upon lease expirations, early terminations or lower rents upon lease renewal or reletting. Additionally, we may incur significant costs and make significant concessions to renew leases with current tenants or attract new tenants to our properties.
(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 December 31, 2024,2025, tenants occupying approximately 2.1%1.6% of our rentable square feet and responsible for approximately 2.3%2.1% of our annualized rental income as of December 31, 20242025 had exercisable rights to terminate their leases before the stated terms of their leases expire. Also, in 2025, 2026, 2027, 2028, 2029, 2030, 2031, 2032, 2034, 2035, 2036, 2037 and 2040, early termination rights become exercisable by other tenants who occupied an additional approximately 1.7%,1.1%, 1.5%,1.8%, 1.7%,5.3%, 5.1%,3.2%, 3.1%,2.4%, 1.9%,0.7%, 1.0%, 3.5%,4.3%, 0.3%, 1.0%,1.1%, 0.2%, 0.2% and 0.4% of our rentable square feet, respectively, and contributed an additional approximately 2.1%,1.9%, 2.3%,2.6%, 2.4%,6.2%, 3.1%, 3.0%, 0.8%, 5.7%, 2.7%, 2.1%, 1.1%, 4.6%, 0.8%, 1.5%,1.6%, 0.3%,0.4%, 0.2%0.3% and 0.5% of our annualized rental income, respectively, as of December 31, 2024.2025. In addition, as of December 31, 2024,2025, pursuant to leases with fivefour of our tenants, these tenants 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 fivefour tenants occupied approximately 3.6%3.5% of our rentable square feet and contributed approximately 3.7%3.9% of our annualized rental income as of December 31, 2024.2025.
As of December 31, 2024,2025, we derived 25.0%22.6% 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. Current economic conditions in this area or a possible recession could reduce demand from tenants at our properties, reduce rents that our tenants are willing to pay when our leases expire or increase lease concessions for new leases and renewals. Additionally, although the current administration has issued so called return to work mandates, there has been a decrease in demand for new leased office space by the U.S. government, including in the metropolitan Washington, D.C. market area, which could increase competition for government tenants and adversely affect our ability to retain government tenants or maintain or increase our rents when leases expire.
Segment Information
We operate in one business segment: ownership and leasing of real estate properties.
(1)Effective January 1, 2025, the existing lease with this tenant was terminated and replaced with a hotel management agreement.
Disposition Activities
During the year ended December 31, 2024, we sold 24 properties containing approximately 2,789,000 rentable square feet for an aggregate sales price of $199,351, excluding closing costs. The net proceeds of these sales were used to repay debt and to increase our liquidity. In February 2025, we sold one additional property with approximately 100,000 rentable square feet for a sale price of $5,750, excluding closing costs. This property previously secured our March 2027 Notes. Accordingly, we expect to use the net proceeds of this sale to redeem a portion of our March 2027 Notes in accordance with the terms of the indenture governing the March 2027 Notes.
We continue to evaluate our portfolio and are currently in various stages of marketing certain of our properties for sale, and we may seek to sell additional properties in the future. As of February 12, 2025, we have entered into agreements to sell six properties containing approximately 581,000 rentable square feet for an aggregate sales price of $54,763, excluding closing costs. We cannot be sure we will sell any of the properties we are marketing for sale for prices in excess of their carrying values or otherwise. In addition, our pending sales are subject to conditions; accordingly, we cannot be sure that we will complete these sales or that these sales will not be delayed or the pricing will not change.
For more information about our disposition activities, see “Business —Disposition Policies” in Part I, Item 1 of this Annual Report on Form 10-K and Note 4 to the Notes to Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report on Form 10-K.
n/m - not meaningful (1)Comparable properties consists of 118117 properties we owned on December 31, 20242025 and which we owned continuously since January 1, 20232024 and excludes five properties classified as held for sale, five properties affected by significant redevelopment activities and two properties owned by an unconsolidated joint venture in which we own a 51% interest.
Rental income. Rental income decreased $35,564$56,008 related to our property disposition activities and $11,061$22,205 for comparable properties as a result of increased vacancies and lower rents from lease renewals at certain of our properties in 2024,2025, partially offset by an increase in rental income of $15,051 due to the lease-up of certainat properties affected by significant redevelopment activities.activities of $18,790 related to the conversion of a lease at a mixed-use property to a hotel management agreement and our recognition of the operating revenues of the hotel. Rental income includes non-cash straight line rent adjustments totaling $23,074 in 2025 and $31,102 in 2024 and $26,194 in 2023,2024, and amortization of acquired real estate leases and assumed real estate lease obligations totaling $562 in 2025 and $402 in 2024 and $252 in 2023.2024.
Real estate taxes. Real estatesestate taxes decreased $4,669$7,673 related to our property disposition activitiesactivities, and $781$3,787 for comparable properties primarily due to successful tax appeals at certain of our properties in 2024,2025 partiallyand offset$1,899 for properties affected by an increase of $4,988 due to the substantial completion of redevelopment activities at certain properties in 2024.activities.
Utility expenses. Utility expenses increased $973 for comparable properties primarily due to the lease-up of certain previously vacant properties and increased utility expenses at newly vacant properties where tenants previously paid utility expenses directly in 2024 and $563 due to the substantial completion of redevelopment activities at certain properties, partially offset by a decline of $847 related to our property disposition activities.
Other operatingUtility expenses. Other operatingUtility expenses decreased $6,450$2,875 related to our property disposition activities and $219 for properties affected by significant redevelopment activities, partially offset by increasesan increase of $2,214$2,507 for comparable properties primarily due to higher repairelectricity usage and maintenance and snow removal costsrates in 2024 and $1,753 due to the substantial completion of redevelopment activities at certain properties.2025.
Other operating expenses. Other operating expenses increased $24,509 related to the conversion of a lease at a mixed-use property to a hotel management agreement and our recognition of operating expenses of the hotel and $951 for comparable properties due to higher repair and maintenance and snow removal costs in 2025, partially offset by a decrease of $11,404 related to our property disposition activities.
Depreciation and amortization. Depreciation and amortization declined $20,760$13,698 related to our property disposition activities and $5,483$10,236 for comparable properties due to certain leasing related assets becoming fully depreciated since January 1, 2023, partially offset by an increase of $11,726$4,154 due to the substantial completion of redevelopment activities at certain properties and depreciation and amortization of improvements made to certain of our properties since January 1, 2023.2024.
Loss on impairment of real estate. We recorded a $181,578 loss on impairment of real estate in the 2024 period to reduce the carrying value of 18 properties to their estimated fair value less costs to sell. We recorded an $11,299 loss on impairment of real estate in 2023 to reduce the carrying value of one property to its estimated fair value less costs to sell.
Transaction related costs. Transaction related costs in 2024 consist of costs related to our evaluation of potential financing transactions. Transaction related costs in 2023 consist of costs incurred in connection with our terminated merger with Diversified Healthcare Trust and related financings.
General and administrative. The decrease in general and administrative expenses is primarily the result of a decrease in base business management fees resulting from a decrease in our average total market capitalization and a decrease in share based compensation in 2024 compared to 2023.
(Loss) gain on saleimpairment of real estate. We recorded a $7,410 net$2,048 loss on saleimpairment of real estate resulting fromin the sale2025 period to reduce the carrying value of 24one propertiesproperty into 2024.its estimated fair value less costs to sell. We recorded a $3,780$181,578 net gainloss on saleimpairment of real estate resultingin from2024 to reduce the salecarrying value of eight18 properties into 2023.their estimated fair values less costs to sell.
Transaction related costs. Transaction related costs in 2025 consist of advisory fees related to restructuring efforts prior to our bankruptcy proceedings. Transaction related costs in 2024 consist of costs related to our evaluation of potential financing transactions.
General and administrative. The decrease in general and administrative expenses is primarily the result of a decrease in base business management fees resulting from a decrease in our average total market capitalization and a decrease in share based compensation in 2025 compared to 2024.
Gain (loss) on sale of real estate. We recorded a $916 net gain on sale of real estate resulting from the sale of six properties in 2025. We recorded a $7,410 net loss on sale of real estate resulting from the sale of 24 properties in 2024.
Interest and other income. The increasedecrease in interest and other income is primarily due to the effect of higherlower cash balances invested in 20242025 compared to 2023.2024.
Interest expense. The increase in interest expense is due to higher weighted average interest rates in 2025 as a result of our financing activities in 2024, partially offset by declines in interest expense related to our adoption of Financial Accounting Standards Board Accounting Standards Codification, or ASC, Topic 852, Reorganizations, or ASC 852, as a result of the Chapter 11 Cases, pursuant to which we ceased recognition of interest expense on our senior unsecured notes and wrote-off unamortized discounts and issuance costs related to liabilities subject to compromise, or LSTC, as of the Petition Date, resulting in lower amortization expense in 2025. For more information regarding our adoption of ASC 852 and the Chapter 11 Cases, see Notes 1 and 2 to the Notes to Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report on Form 10-K.
(Loss) gain on early extinguishment of debt. We recorded a net loss on early extinguishment of debt of $449 in 2025 primarily due to the write off of unamortized discounts and issuance costs related to the partial redemption of our senior secured notes due 2027, partially offset by the reduction of debt principal related to a senior note exchange. We recorded a net gain on early extinguishment of debt of $126,185 in 2024 resulting from the series of debt exchanges we completed during 2024.
Reorganization items, net. Reorganization items, net, represent amounts incurred after the Petition Date as a direct result of the Chapter 11 Cases and are comprised of bankruptcy-related professional fees and adjustments to reflect the carrying value of LSTC at their estimated allowed claim amounts. For more information regarding reorganization items, net and the Chapter 11 Cases, see Notes 1 and 2 to the Notes to Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report on Form 10-K.
Interest expense. The increase in interest expense is due to higher weighted average interest rates in the 2024 period as a result of debt incurred in 2024.
Gain on early extinguishment of debt. We recorded a net gain on early extinguishment of debt of $126,185 in 2024 resulting from the series of debt exchanges we completed during 2024. For more information about our financing activities, see “Liquidity and Capital Resources—Our Investment and Financing Liquidity and Resources” below and Note 9 to the Notes to Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report on Form 10-K.
Equity in net losses of investees. Equity in net losses of investees represents our proportionate share of losses from our investmentsinvestment in our unconsolidated joint ventures.venture.
Loss on impairment of equity method investment. We recorded a $19,183 loss on impairment of equity method investment in 2023 to fully write off the carrying value of one of our unconsolidated joint ventures. For further information, see Note 4 to the Notes to Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report on Form 10-K.
Net loss. Net loss and net loss per basic and diluted common share increased in 20242025 compared to 20232024 primarily as a result of the changes noted above. Net loss per basic and diluted common share in 2025 also reflects the effect of the issuance of common shares related to our financing activities in 2025 and 2024.
Our historical 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. Our future cash flows from operating activities will depend primarily upon:
Our ability to issue additional indebtedness, dispose of assets or access capital markets is substantially limited as a result of the Chapter 11 Cases and, until the effectiveness of the Plan, will require Bankruptcy Court approval in most instances. Accordingly, our liquidity primarily depends on cash generated from operating activities and borrowings under our DIP Facility. The filing of the Chapter 11 Cases constituted an event of default under our credit agreement, senior notes indentures and their supplements and mortgage notes which accelerated amounts due under the applicable agreements. Efforts to enforce financial obligations under the applicable agreements are stayed as a result of the filing of the Chapter 11 Cases and the creditors’ rights of enforcement are subject to the applicable provisions of the Bankruptcy Code. Our credit agreement is being amended and restated pursuant to the Plan to resolve any defaults thereunder and address certain terms to facilitate the Debtors’ restructuring. The amended and restated credit agreement will become effective on the effective date of the Plan.
Our future cash flows from operating activities will depend primarily upon:
•our ability to control operating and capital expenses at our properties; and
•our ability to successfully sell properties that we market for sale; andsale.
•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.
The office industry has been adversely affected by shifts in office space utilization, including increased remote work arrangements and tenants consolidating their real estate footprint.footprint, as well as ongoing market and economic conditions, including government spending and budget priorities. Demand for office space continues to face headwindsheadwinds, including markets where we have a concentration of properties, such as Washington, D.C., and the duration and ultimate impact of current trends on our properties remains uncertain and subject to change. These conditions continue to have a significant negative impact on our results of operations, financial position and cash flows. We are actively pursuing several strategic initiatives to improve liquidity, including asset sales, debt refinancing and equity issuance opportunities.
We expect to sell properties, or sell an interest in properties through joint venture arrangements, from time to time in order to manage leverage levels or improve our liquidity. During the year ended December 31, 2025, we sold six properties for an aggregate sales price of $40,088, excluding closing costs. As of May 18, 2026, we have entered into an agreement to sell one property containing approximately 275,000 rentable square feet for a sales price of $18,125, excluding closing costs. We expect to sell this property in 2027. This 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 pricing will not change. We are also at various stages of marketing for sale 31 properties with a total of approximately 3,416,000 square feet. We expect to use the net sales proceeds from property sales to repay debt. There can be no assurance we will be successful selling any of these properties or what the amount of proceeds we may realize will be.
We expect to sell properties, or sell an interest in properties through joint venture arrangements, from time to time, in order to manage leverage levels or to recycle capital into properties that we believe have better long-term earnings potential or that we believe will help diversify our revenue based, improve the average age of our properties, lengthen the weighted average term of our leases, reduce our ongoing capital requirements and/or increase our distributions to shareholders. During the year ended December 31, 2024, we sold 24 properties for an aggregate sales price of $199,351, excluding closing costs. We continue to evaluate our portfolio and are currently in various stages of marketing certain of our properties for sale. In February 2025, we sold one additional property with approximately 100,000 rentable square feet for a sale price of $5,750, excluding closing costs. This property previously secured our March 2027 Notes. Accordingly, we expect to use the net proceeds of this sale to redeem a portion of our March 2027 Notes in accordance with the terms of the indenture governing the March 2027 Notes. As of February 12, 2025, we had six properties containing approximately 581,000 rentable square feet which are under agreement to sell for an aggregate sales price of $54,763, excluding closing costs. We cannot be sure we will sell any of the properties we are marketing for sale for prices in excess of their carrying values or otherwise. In addition, our pending sales are subject to conditions; accordingly, we cannot be sure that we will complete these sales or that these sales will not be delayed or the pricing will not change.
The decreasechange infrom cash provided by operating activities in 2024 compared to 2023cash used in operating activities in 2025 was primarily due to decreases in NOI as a result of property dispositionsdispositions, andtenant reductions in occupied spacevacancies at certain of our properties.properties, higher interest expense and payment of professional fees related to potential financing transactions and the Chapter 11 Cases. The change from cash useddecrease in investing activities in 2023 to cash provided by investing activities in 2025 compared to 2024 iswas primarily due to higherlower proceeds received from property salessales, andpartially offset by decreased capital expenditures in 20242025 related to our redevelopment activities.activities in 2024. The increasechange infrom cash flows provided by financing activities in 2024 to cash flows used in financing in 2025 was primarily due to our issuance of $339,000 of secured senior notes and higher net borrowings and decreased distributions tounder our shareholders,credit partiallyagreement offsetin by the payment of debt issuance costs.2024.
In order to meet cash needs to pay operating or capital expenses during the pendency of the Chapter 11 Cases, we have relied on borrowings under our secured $125,000 DIP Facility. We have made the following borrowings under the DIP Facility: (a) we borrowed $10,000 on November 6, 2025 pursuant to an interim order entered by the Bankruptcy Court; (b) $75,000 was made available to us and drawn as follows: (i) we borrowed $64,300 on February 5, 2026, and (ii) we borrowed $10,700 on March 13, 2026; and (c) we borrowed $40,000, or the Tranche B Term Loan, on April 7, 2026. Borrowings under the DIP Facility bear interest, payable in cash, at a rate of 12.00% per annum. The DIP Facility had an original maturity date of May 4, 2026, with the option to extend under certain circumstances. In May 2026, the maturity date was extended to May 31, 2026. Borrowings under the DIP Facility may be repaid in reorganized common equity or cash, at the Debtors’ election. On April 5, 2026, the Debtors filed a notice of their intent to equitize the DIP Facility with the Bankruptcy Court. Fees and expenses under the DIP Facility include: (a) an upfront fee equal to (i) cash at 2.25% of the lenders’ commitments or (ii) common equity of the reorganized OPI in an aggregate amount equal to 3.60% of the commitments, which fee was earned upon the initial funding of each loan under the DIP Facility and is payable in kind; (b) an anchor capital commitment fee of 10.00% of the lenders’ commitments under the DIP Facility payable to certain backstop parties, which was earned upon the initial funding of the DIP Facility, and may be paid, at our election, in cash or common equity of the reorganized company; and (c) an exit fee of 4.50% of the aggregate borrowings under the DIP Facility, which is due and payable upon the repayment of any loan under the DIP Facility, at our election, in cash or common equity of the reorganized company. In the event of a voluntary prepayment, we are required to pay, for the ratable account of each lender, in cash a prepayment premium equal to 1.0% multiplied by the sum of the principal amount of the borrowings that are being repaid at such time. A commitment fee is also due for the ratable account of each Tranche B Term Loan lender, in an aggregate amount equal to 0.75% per annum times the actual daily amount of the aggregate undrawn Tranche B Term Loan commitments. As of December 31, 2025 and May 18, 2026, the outstanding principal balance under our DIP Facility was $10,225 and $127,813, respectively, including fees payable in kind.
What changed in the latest 10-Q
Risk Factors
There have been no material changes to the risk factors from those previously disclosed in our 2025 Annual Report.
No wording changes found in this section.
Full comparison: every changed paragraph (0)
Management's Discussion & Analysis (MD&A)
New heading “Voluntary Reorganization Under and Emergence from Chapter 11 Bankruptcy”
New heading “Six Months Ended June 30, 2026, Compared to Six Months Ended June 30, 2025”
New heading “Fresh Start Accounting”
Removed heading “Chapter 11 Bankruptcy Proceedings”
Largest changes
“Our ability to issue additional indebtedness, dispose of assets or access capital markets is substantially limited as a result of the Chapter 11 Cases and, until the effectiveness of the Plan, will require Bankruptcy Court approval in most instances. Accordingly, our liquidity primarily depends on cash generated from operating activities and borrowings under our DIP Facility. …”see in full comparison
Our principal debt obligations as ofsee in full comparisonMarchJune31,30, 2026 consisted of (i) $325,000 of borrowings outstanding under our revolving credit facility, (ii) $100,000 outstanding principal amount under our secured term loan, (iii) an outstanding principal balance of$1,819,069$1,105,000 of seniornotes, (iv) $86,913 outstanding under our DIP Facilitynotes and (viv) mortgage notes with an outstanding principal balance of $177,320. Also, the two properties owned by the joint venture in which we own a 51% interest secure an additional mortgage note. Our senior notes are governed byindentures and their supplements.indentures. Our creditagreement,agreement and senior notes indenturesand their supplements and the amended and restated debtor-in-possession term loan credit agreement governing our DIP Facility, or the DIP Credit Agreement,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 RMR ceasing to act as our business and property manager. Our creditagreement,agreement and senior notes indenturesand their supplements and the DIP Credit Agreementalso 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 increase our distribution rate above the level of $0.01 per common share per quarter.TheOurfiling of the Chapter 11 Cases constituted an event of default under our credit agreement and seniormortgage notesindentures which accelerated amounts due under the applicable agreements. Efforts to enforce financial obligations under the applicable agreementsarestayed as a result of the filing of the Chapter 11 Cases and the creditors’ rights of enforcement arenon-recourse, subject tothecertainapplicablelimitedprovisionsexceptions,ofandthedoBankruptcynotCode.contain any material financial covenants.
“Substantial doubt about our ability to continue as a going concern exists due to (1) insufficient liquidity to satisfy our obligations as they come due, (2) limited alternatives available to us to obtain debt or equity financing, (3) inability to refinance our maturing debt, and (4) the resulting Chapter 11 Cases. …”see in full comparison
On the Petition Date, the Debtorssee in full comparisonvoluntarilycommenced the Chapter 11Cases.Cases in the Bankruptcy Court. In connection with the filing of the Chapter 11 Cases, we entered into the RSA with certain holders of the Old September 2029NotesNotes, to implement a court-supervised financial restructuring pursuant to the transactions contemplated in the RSA. During the pendency of the Chapter 11 Cases, we continued to operate our businesses as debtors-in-possession under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court. While the commencement of the Chapter 11 Cases constituted an event of default under certain of our debt agreements, enforcement of any remedies in respect of such events of default was automatically stayed during the pendency of the Chapter 11 Cases.
“While the commencement of these proceedings constituted an event of default under certain of our debt agreements, enforcement of any remedies in respect of which is automatically stayed during the pendency of the Chapter 11 Cases. There are a number of risks and uncertainties associated with our bankruptcy proceedings, including, among others, that the Plan may not become effective.”see in full comparison
“The transactions contemplated by the Plan are subject to approval by the Bankruptcy Court, among other conditions. Accordingly, no assurance can be given that the transactions described therein will be consummated. As a result, we have concluded that management’s plans at this stage do not alleviate substantial doubt about our ability to continue as a going concern.”see in full comparison
Full comparison: every changed paragraph (104)
We are a REITreal estate investment trust, or REIT, organized under Maryland law. As of MarchJune 31,30, 2026, our wholly owned properties were comprised of 122 properties and we had a noncontrolling ownership interest of 51% in an unconsolidated joint venture that owned two properties containing approximately 346,000 rentable square feet. As of MarchJune 31,30, 2026, our properties are located in 29 states and the District of Columbia and contain approximately 17,113,000 rentable square feet. As of MarchJune 31,30, 2026, our properties were leased to 209211 different tenants with a weighted average remaining lease term (based on annualized rental income) of approximately 6.46.2 years. The U.S. government is our largest tenant, representing approximately 17.5%18.0% of our annualized rental income as of MarchJune 31,30, 2026. 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 MarchJune 31,30, 2026, plus straight line rent adjustments and estimated recurring expense reimbursements to be paid to us, and excluding lease value amortization.
Leases representing approximately $22,248,$59,671, or 5.7%,14.4%, of our annualized rental income, are scheduled to expire on or before MarchDecember 31, 2027 and we may be unable to renew leases or find replacement tenants. Certain shifts in office space utilization, including increased remote work arrangements and tenants consolidating their real estate footprint, as well as ongoing market and economic conditions, including government spending and budget priorities, continue to impact the office sector and our portfolio. The demand for office space continues to face headwinds, including in markets where we have a concentration of properties, such as Washington, D.C., and declining rents and increasing costs to relet space when tenants can be identified continue to impact the market. The duration and ultimate impact of current trends on the demand for office space at our properties remains uncertain and subject to change. Higher interest rates, inflationary pressures, changes in government policies including the potential reduction of U.S. federal office leases and potential impacts from tariffs, geopolitical events or an economic recession, continue to cause disruptions in financial markets could adversely affect our and our tenants’ financial condition and the ability or willingness of our tenants to renew our leases or pay rent to us. In addition, prospective tenants may delay their decision to lease space due to current economic conditions. Accordingly, we do not yet know what the full extent of the impacts will be on our or our tenants’ businesses and operations nor the long-term outlook for leasing at our properties.
Voluntary Reorganization Under and Emergence from Chapter 11 Bankruptcy
Chapter 11 Bankruptcy Proceedings
On the Petition Date, the Debtors voluntarily commenced the Chapter 11 Cases.Cases in the Bankruptcy Court. In connection with the filing of the Chapter 11 Cases, we entered into the RSA with certain holders of the Old September 2029 NotesNotes, to implement a court-supervised financial restructuring pursuant to the transactions contemplated in the RSA. During the pendency of the Chapter 11 Cases, we continued to operate our businesses as debtors-in-possession under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court. While the commencement of the Chapter 11 Cases constituted an event of default under certain of our debt agreements, enforcement of any remedies in respect of such events of default was automatically stayed during the pendency of the Chapter 11 Cases.
We continue to operate our businesses as debtors-in-possession under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court. As debtors-in-possession, we are authorized to pay all debts and honor all obligations arising in the ordinary course of our business after the Petition Date. However, generally, we may not pay third-party claims or creditors on account of obligations arising before the Petition Date or engage in transactions outside the ordinary course of business without prior approval of the Bankruptcy Court.
While the commencement of these proceedings constituted an event of default under certain of our debt agreements, enforcement of any remedies in respect of which is automatically stayed during the pendency of the Chapter 11 Cases. There are a number of risks and uncertainties associated with our bankruptcy proceedings, including, among others, that the Plan may not become effective.
TheOn PlanApril has21, not2026, yetwe become effective as of the date of filing of this Quarterly Report on Form 10-Q. Effectiveness offiled the Plan iswith subjectthe toBankruptcy aCourt numberand ofon April 22, 2026, the Bankruptcy Court confirmed the Plan. On the Effective Date, the conditions precedent. There can be no assurance that all conditionsprecedent to the effectiveness of the Plan will bewere satisfied or waived, or thatand the PlanDebtors willemerged become effective onfrom the timelineChapter currently11 contemplated, or at all.Cases. For more information regarding the Chapter 11 Cases, the RSA and the Plan, including the material terms thereof, see Note 1 to our Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.
Prior to and during the Chapter 11 Cases, substantial doubt about our ability to continue as a going concern existed. As a result of the restructuring transactions completed in connection with the emergence from the Chapter 11 Cases on the Effective Date, we reduced our aggregate outstanding debt obligations by approximately $714,000, while also increasing the weighted average term to maturity of our indebtedness. Following emergence, the reduction in indebtedness and extension of debt maturities improved our financial flexibility, alleviated near-term refinancing pressures and restored our ability to pursue capital market alternatives that were not available prior to emergence.
We currently have $425,000 outstanding under our credit agreement that matures in January 2027 and are required to make $50,000 of principal payments under the 2029 Secured Exit Notes during the next twelve months. We currently expect to satisfy these obligations through our existing cash balances, operating cash flows, asset sales and potential capital market transactions. As part of these plans, we are currently actively working with a bank on options to refinance our revolving credit facility and term loan prior to its maturity and we have identified 32 properties for sale, two of which were sold in July 2026 for an aggregate gross sales price of $58,500, nine of which are under agreement to sell for an aggregate gross sales price of $49,675, and the remaining 21 of which are being actively marketed.
After considering the actions through the restructuring and management’s plans, including anticipated asset sales and refinancing activities, management believes it is probable that we will be able to satisfy our obligations as they become due during the next 12 months. Accordingly, management concluded that the conditions that previously existed to cause substantial doubt about our ability to continue as a going concern have been alleviated.
Substantial doubt about our ability to continue as a going concern exists due to (1) insufficient liquidity to satisfy our obligations as they come due, (2) limited alternatives available to us to obtain debt or equity financing, (3) inability to refinance our maturing debt, and (4) the resulting Chapter 11 Cases. Our ability to continue as a going concern is contingent upon, among other things, our ability to, subject to the approval by the Bankruptcy Court, implement a plan of reorganization, emerge from the Chapter 11 proceedings and generate sufficient liquidity following the reorganization to meet our obligations, restructured debt obligations and operating needs.
The transactions contemplated by the Plan are subject to approval by the Bankruptcy Court, among other conditions. Accordingly, no assurance can be given that the transactions described therein will be consummated. As a result, we have concluded that management’s plans at this stage do not alleviate substantial doubt about our ability to continue as a going concern.
Nasdaq DelistingListing
Our previous common shares were delisted from The Nasdaq Stock Market LLC, or Nasdaq, on October 6, 2025. We re-applied for and were approved to be relisted on Nasdaq on June 18, 2026. Our Reorganized Common Equity trades under the symbol “OPI”.
On September 25, 2025, Nasdaq notified us that our common shares were subject to delisting. We did not appeal Nasdaq’s determination, and our common shares were delisted from Nasdaq effective October 6, 2025.
Occupancy data for our properties as of MarchJune 31,30, 2026 and 2025 was as follows (square feet in thousands):
(1)Based on properties we owned on MarchJune 31,30, 2026 and 2025, respectively.
(2)Based on properties we owned continuously since January 1, 2025; excludes five32 properties affectedclassified byas significantheld redevelopmentfor activitiessale and two properties owned by an unconsolidated joint venture in which we owned a 51% interest.
The average effective rental rate per square foot for our properties for the three and six months ended MarchJune 31,30, 2026 and 2025 were as follows:
(2)Based on properties we owned on MarchJune 31,30, 2026 and 2025, respectively.
(3)Based on properties we owned continuously since JanuaryApril 1, 2025; excludes five32 properties affectedclassified byas significantheld redevelopmentfor activitiessale and two properties owned by an unconsolidated joint venture in which we owned a 51% interest as of MarchJune 31,30, 2026.
During the three and six months ended MarchJune 31,30, 2026, changes in rentable square feet leased and available for lease at our properties were as follows (square feet in thousands):
(1)Based on leases entered during the three and six months ended MarchJune 31,30, 2026.
During the three and six months ended MarchJune 31,30, 2026, we entered into new and renewal leases as summarized in the following table (square feet in thousands):
During the threeSuccessor monthsperiod ended MarchJune 31,30, 2026, changes in effective rental rates per square foot achieved for new leases and lease renewals at our properties that commenced during the threeSuccessor monthsperiod ended MarchJune 31,30, 2026, 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):
(1)Information includes effective rental rates for the Successor period only, as effective rental rates established during the Predecessor period are not comparable as a result of fresh start accounting.
During the three and six months ended MarchJune 31,30, 2026 and 2025, amounts capitalized at our properties for lease related costs, building improvements and development, redevelopment and other activities were as follows:
As of MarchJune 31,30, 2026, we had estimated unspent leasing related obligations of $54,390,$48,106, of which we expect to spend $35,186$31,517 over the next 12 months.
As of MarchJune 31,30, 2026, we had leases at our properties totaling approximately 801,0002,030,000 rentable square feet that were scheduled to expire on or before MarchDecember 31, 2027. As of MayAugust 18,4, 2026, we expect tenants with leases totaling approximately 196,000660,000 rentable square feet that are scheduled to expire on or before MarchDecember 31, 2027, 458,000 of which are related to properties we have identified for sale, excluding space that has been re-leased and space for which we are in advanced negotiations to re-lease, not to renew or to downsize their leased space upon expiration, and we cannot be sure as to whether other tenants will renew their leases upon expiration. We continue to proactively engage with our existing tenants and are focused on overall tenant retention. Prevailing market conditions and our 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, all of which 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 properties will depend in large part upon market conditions, which are beyond our control. We cannot be sure of the rental rates that will result from our ongoing negotiations regarding lease renewals or any new or renewed leases we may enter. Also, we may experience material declines in our rental income due to vacancies upon lease expirations, early terminations or lower rents upon lease renewal or reletting. Additionally, we may incur significant costs and make significant concessions to renew leases with current tenants or attract new tenants to our properties.
As of MarchJune 31,30, 2026, our lease expirations by year were as follows (square feet in thousands):
(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 MarchJune 31,30, 2026, tenants occupying approximately 2.2%2.4% of our rentable square feet and responsible for approximately 2.8% of our annualized rental income as of MarchJune 31,30, 2026 had exercisable rights to terminate their leases before the stated terms of their leases expire. Also, in 2026, 2027, 2028, 2029, 2030, 2031, 2032, 2034, 2035, 2036 and 2037, early termination rights become exercisable by other tenants who occupied an additional approximately 0.5%, 1.5%, 5.3%, 3.2%, 2.4%, 0.7%, 4.3%, 0.3%, 1.1%, 0.2% and 0.2%, of our rentable square feet, respectively, and contributed an additional approximately 0.9%,0.8%, 2.2%, 6.4%,6.5%, 3.1%,3.3%, 3.0%, 0.8%, 5.6%,5.8%, 0.9%, 1.6%,1.7%, 0.4% and 0.3% of our annualized rental income, respectively, as of MarchJune 31,30, 2026. In addition, as of MarchJune 31,30, 2026, pursuant to leases with six of our tenants, these tenants 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 six tenants occupied approximately 4.5% of our rentable square feet and contributed approximately 4.9%5.2% of our annualized rental income as of MarchJune 31,30, 2026.
(2)Leased square feet is pursuant to leases existing as of MarchJune 31,30, 2026, 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.
As of MarchJune 31,30, 2026, we derived 23.2%24.1% 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. Current economic conditions in this area or a possible recession could reduce demand from tenants at our properties, reduce rents that our tenants are willing to pay when our leases expire or increase lease concessions for new leases and renewals. Additionally, although the current administration has issued so called return to work mandates, there has been a decrease in demand for leased office space by the U.S. government, including in the metropolitan Washington, D.C. market area, which could increase competition for government tenants and adversely affect our ability to retain government tenants or maintain or increase our rents when leases expire.
Our manager, RMR, employs a tenant review process for us. RMR assesses tenants on an individual basis based on various applicable credit criteria. In general, depending on facts and circumstances, RMR 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. 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 MarchJune 31,30, 2026, tenants contributing 59.6%61.0% 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 0.5%1.2% of annualized rental income were subsidiaries of an investment grade rated parent (although these parent entities were not liable for the payment of rents).
As of MarchJune 31,30, 2026, tenants representing 1% or more of our total annualized rental income were as follows (square feet in thousands):
Three Months Ended MarchJune 31,30, 2026, Compared to Three Months Ended MarchJune 31,30, 2025
n/m - not meaningful (1)Comparable properties consists of 117 properties we owned on March 31, 2026 and which we owned continuously since January 1, 2025 and excludes five properties affected by significant redevelopment activities and two properties owned by an unconsolidated joint venture in which we own a 51% interest.
As a result of our emergence from the Chapter 11 Cases and adoption of fresh start accounting on the Effective Date, the Successor and Predecessor periods are not comparable. The discussion below focuses on the primary factors affecting operating results in the respective periods. References to comparable properties refer to 90 properties we owned on June 30, 2026 and which we owned continuously since January 1, 2025 and excludes 32 properties classified as held for sale, or the “non-comparable” properties, and two properties owned by an unconsolidated joint venture in which we own a 51% interest.
References to changes in the income and expense categories below relate to the comparison of consolidated results for the three months ended March 31, 2026, compared to the three months ended March 31, 2025.
Rental income. Rental income decreased $4,157increased for comparable properties asdue ato resulthigher ofexpense reimbursements and increased vacanciesrental and lower rents from lease renewalsrates at certain of our properties, partially offset by lower rental income at certain non-comparable properties indue to increased vacancy. Rental income during the 2026 Predecessor period andincluded $590a termination fee of $8,810 received related to ourthe early termination of a lease at a property dispositionthat activities.is being marketed for sale, largely offset by the write off of the straight line rent receivable for this lease. Rental income includes non-cash straight line rent adjustments totaling $1,936$1,337 for the Successor and $(2,999) for the Predecessor in the 2026 period and $6,856$6,636 in the Predecessor 2025 period, and amortization of acquired real estate leases and assumed real estate lease obligations totaling $140$141 for the Successor and $118 for the Predecessor in the 2026 period and $123$159 in the 2025 period.
Real estate taxes. Real estate taxes reflect higher assessed values at certain of our properties in the 2026 Successor and Predecessor periods.
Real estate taxes. Real estate taxes decreased $249 related to our property disposition activities, $74 for comparable properties and $41 for properties affected by significant redevelopment activities.
Utility expenses. Utility expenses increased $1,731 for comparable properties due toreflect higher electricity usage and rates infor thecomparable 2026 period,properties, partially offset by decreasesa of $144decrease for non-comparable properties affecteddue byto significantlower redevelopmentelectricity activitiesusage resulting from increased vacancy in the 2026 Successor and $75Predecessor related to our property disposition activities.periods.
Other operating expenses. Other operating expenses decreased for comparable properties due to lower repairs and maintenance costs and on-site personnel salary and benefits expense in the 2026 Successor and Predecessor periods. Other operating expenses for non-comparable properties increased due to higher repairs and maintenance costs in the 2026 Predecessor period.
Depreciation and amortization. Depreciation and amortization in the 2026 Predecessor period reflects accelerated amortization of lease related assets resulting from the early termination of a lease at a property that is being marketed for sale. Depreciation and amortization during the Successor period reflects the reset in basis of our real estate and lease intangible assets as a result of fresh start accounting.
Loss on impairment of real estate. We recorded a $2,426 loss on impairment of real estate in the 2025 period to reduce the carrying value of one property to its estimated fair values less costs to sell.
Other operating expenses. Other operating expenses decreased $730 for comparable properties due to lower repairs and maintenance costs in the 2026 period and $298 related to our property disposition activities, partially offset by an increase of $105 related to properties affected by significant redevelopment activities.
Depreciation and amortization. Depreciation and amortization increased $424 for comparable properties and $110 for properties affected by significant redevelopment activities related to improvements made at certain of our properties since January 1, 2025, partially offset by a decrease of $184 related to our property disposition activities.
General and administrative. General and administrative expenses in the 2026 Predecessor period reflect higher share-based compensation due to the recognition of vesting expense of our unvested share awards upon cancellation of those awards on the Effective Date.
General and administrative. The decrease in general and administrative expenses is primarily the result of a decrease in base business management fees resulting from a decrease in average total market capitalization, lower public company costs during the pendency of the Chapter 11 Cases and a decrease in share-based compensation in the 2026 period compared to the 2025 period.
LossGain on sale of real estate. We recorded a $4,737$159 lossgain on sale of real estate resultingrelated fromto thedisposition sale of one propertyactivities in the 2025 period.
Interest and other income. The decreaseincrease in interest and other income in the Successor period is primarily due to lower cash balances invested and the effectreceipt of lowerescrow interestfunds rates earned on cash balances invested in the 2026 period comparedrelated to thea 2025prior period.year asset sale.
Fair value adjustment of warrants. Fair value adjustment of warrants represents the change in fair value in the New Warrants as of June 30, 2026 compared to the fair value as of the Effective Date.
Interest expense. The decrease in interest expense in the 2026 Predecessor period is primarily due to our adoption of Financial Accounting Standards Board Accounting Standards Codification, or ASC, Topic 852, Reorganizations, or ASC 852,852 as a result of the Chapter 11 Cases, pursuant to which we ceased recognition of interest expense on our senior unsecured notes and wrote-off unamortized discounts and issuance costs related to liabilities subject to compromise, or LSTC,LSTC as of the Petition Date,Date resulting in lower amortization expense in the 2026 period.Predecessor period, partially offset by interest expense incurred at default rates as a result of the Chapter 11 Cases under certain of our debt instruments. Interest expense in the Successor period reflects interest expense related to our indebtedness following the Effective Date. For more information regarding our adoption of ASC 852 and the Chapter 11 Cases, see Notes 1 and 2 to our Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.
Net lossgain on early extinguishment of debt. We recorded a net lossgain on early extinguishment of debt of $243$148 in the 2025 period related to the reduction of debt principal related to a senior note exchange andin the 2025 period, partially offset by the write off of unamortized discounts and issuance costs related to the partial redemption of our prior senior secured notes due 2027.
Reorganization Items, net. Reorganization items, net in the 2026 Predecessor period represent amounts incurred after the Petition Date as a direct result of the Chapter 11 Cases and are comprised of bankruptcy-relatedour professionalloss feeson andfresh adjustmentsstart toaccounting reflectadjustments, thegains carryingon valuesettlement of LSTC atand theirbankruptcy-related estimatedprofessional allowedfees. claimReorganization amounts.items, net in the Successor period include costs related to professionals retained through the closure of matters related to the Chapter 11 Cases. For more information regarding reorganization items, net and the Chapter 11 Cases, see Notes 1 and 2 to our Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.
Income tax benefit (expense).expense. Income tax benefit (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 or the repayment of debt.
Net loss. Net loss and net loss per basic and diluted common share changed in the 2026 periodand compared2025 toperiods reflects the 2025 period primarily as a result of the changesitems noted above.
Weighted average common shares outstanding and per common share data. Weighted average common shares outstanding and per common share data reflect the cancellation of our previously outstanding common shares and the issuance of common shares of Reorganized Common Equity upon emergence from the Chapter 11 Cases on the Effective Date. For more information regarding our Reorganized Common Equity and the Chapter 11 Cases, see Notes 1 and 2 to our Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.
OPI insider buying and selling (Form 4)
Since 2026-04-11, insiders reported open-market purchases in 0 Form 4 filings and open-market sales in 4 filings (3 insiders, 6 trade dates, 527,783 shares, about $10.3M). Net open-market shares: -527,783 (purchases minus sales); net value about -$10.3M.Totals add up every open-market (code P and S) line in those filings, using the prices reported in the filings. Awards, option exercises, tax withholding and gifts are listed below but not counted.
| Trade date | Insider | Transaction | Shares | Price | Value |
|---|---|---|---|---|---|
| 2026-08-18 | Double Twins K, Llc |
Open-market sale | 175,734 | $19.03 | $3.3M |
| 2026-08-17 | Double Twins K, Llc |
Open-market sale | 20,686 | $19.03 | $393.7K |
| 2026-08-13 | Redwood Capital Management Holdings, Lp |
Open-market sale | 1,826 | $19.00 | $34.7K |
| 2026-08-12 | Redwood Capital Management Holdings, Lp |
Open-market sale | 2,616 | $19.04 | $49.8K |
| 2026-08-11 | Redwood Capital Management Holdings, Lp |
Open-market sale | 2,413 | $19.00 | $45.8K |
| 2026-08-06 | Double Twins K, Llc |
Open-market sale | 136,649 | $19.88 | $2.7M |
| 2026-08-06 | Double Twins K, Llc |
Open-market sale | 25,605 | $18.81 | $481.6K |
| 2026-08-06 | Redwood Capital Management, Llc |
Open-market sale | 162,254 | $19.71 | $3.2M |
Well-known investors holding OPI (13F)
| Investor | Quarter | Shares | Reported value | % of their 13F | Change vs prior quarter |
|---|---|---|---|---|---|
| Oaktree Capital Management (Howard Marks) | 2026-06-30 | 10,851 | $184.5K | 0.0% | New position |