Office Properties Income Trust

05/22/2026 | Press release | Distributed by Public on 05/22/2026 10:46

Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations
The following information should be read in conjunction with our Condensed Consolidated Financial Statements and accompanying notes included in Part I, Item 1 of this Quarterly Report on Form 10-Q and with our 2024 Annual Report.
OVERVIEW (dollars in thousands, except per share and per square foot data)
We are a REIT organized under Maryland law. As of September 30, 2025, our wholly owned properties were comprised of 124 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 September 30, 2025, our properties are located in 29 states and the District of Columbia and contain approximately 17,214,000 rentable square feet. As of September 30, 2025, our properties were leased to 218 different tenants with a weighted average remaining lease term (based on annualized rental income) of approximately 6.7 years. The U.S. government is our largest tenant, representing approximately 17.0% of our annualized rental income as of September 30, 2025. The term annualized rental income as used herein is defined as the annualized contractual base rents from our tenants pursuant to our lease agreements as of September 30, 2025, plus straight line rent adjustments and estimated recurring expense reimbursements to be paid to us, and excluding lease value amortization.
Leases representing approximately $15,278 or 3.9%, of our annualized rental income are scheduled to expire on or before September 30, 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 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.
Chapter 11 Bankruptcy Proceedings
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 Quarterly Report on Form 10-Q. 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 Note 1 to our Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.
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.
For more information about the risks relating to these dynamics and conditions and their impacts on us and our business, see Part I, Item IA, "Risk Factors", of this Quarterly Report on Form 10-Q and in our 2024 Annual Report.
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.
Property Operations
Unless otherwise noted, the data presented in this section includes properties classified as held for sale as of September 30, 2025 and excludes two properties owned by an unconsolidated joint venture in which we owned a 51% 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, our unconsolidated joint venture and our mixed-use property in Washington, D.C., see Notes 4 and 11 to our Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.
Occupancy data for our properties as of September 30, 2025 and 2024 was as follows (square feet in thousands):
All Properties (1)
Comparable Properties (2)
September 30,
September 30,
2025 2024 2025 2024
Total properties 124 145 117 117
Total rentable square feet (3)
17,214 19,543 16,351 16,344
Percent leased (4)
78.3 % 82.8 % 81.9 % 91.3 %
(1)Based on properties we owned on September 30, 2025 and 2024, respectively.
(2)Based on properties we owned continuously since January 1, 2024; excludes two 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.
(3)Subject to changes when space is remeasured or reconfigured for tenants.
(4)Percent leased includes (i) space being fitted out for tenant occupancy pursuant to our lease agreements, if any, and (ii) space which is leased, but is not occupied or is being offered for sublease by tenants, if any, as of the measurement date.
The average effective rental rate per square foot for our properties for the three and nine months ended September 30, 2025 and 2024 were as follows:
Three Months Ended September 30, Nine Months Ended September 30,
2025 2024 2025 2024
Average effective rental rate per square foot (1):
All properties (2)
$ 32.59 $ 29.34 $ 32.67 $ 30.21
Comparable properties (3)
$ 30.37 $ 29.15 $ 30.08 $ 29.06
(1)Average effective rental rate per square foot represents annualized total rental income during the period specified divided by the average rentable square feet leased during the period specified.
(2)Based on properties we owned on September 30, 2025 and 2024, respectively.
(3)Based on properties we owned continuously since July 1, 2024 and January 1, 2024, respectively; excludes two 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 September 30, 2025.
During the three and nine months ended September 30, 2025, changes in rentable square feet leased and available for lease at our properties were as follows (square feet in thousands):
Three Months Ended September 30, 2025 Nine Months Ended September 30, 2025
Leased Available for Lease Total Leased Available for Lease Total
Beginning of period 14,019 3,251 17,270 15,092 2,671 17,763
Changes resulting from:
Disposition of properties - (56) (56) (100) (205) (305)
Lease expirations (673) 673 - (2,041) 2,041 -
Lease renewals (1)
131 (131) - 582 (582) -
New leases (1)
51 (51) - 239 (239) -
Lease conversion to managed hotel - - - (240) - (240)
Remeasurements (47) 47 - (51) 47 (4)
End of period 13,481 3,733 17,214 13,481 3,733 17,214
(1)Based on leases entered during the three and nine months ended September 30, 2025.
During the three and nine months ended September 30, 2025, we entered into new and renewal leases as summarized in the following table (square feet in thousands):
Three Months Ended September 30, 2025
New Leases Renewals Total
Rentable square feet leased 51 131 182
Weighted average rental rate change (by rentable square feet) (26.7 %) (11.6 %) (16.7 %)
Tenant leasing costs and concession commitments (1)
$ 1,217 $ 1,292 $ 2,509
Tenant leasing costs and concession commitments per rentable square foot (1)
$ 23.90 $ 9.81 $ 13.74
Weighted (by square feet) average lease term (years) 4.7 4.2 4.3
Total leasing costs and concession commitments per rentable square foot per year (1)
$ 5.10 $ 2.33 $ 3.16
Nine Months Ended September 30, 2025
New Leases Renewals Total
Rentable square feet leased 239 582 821
Weighted average rental rate change (by rentable square feet) (2.4 %) 4.9 % 2.4 %
Tenant leasing costs and concession commitments (1)
$ 11,055 $ 10,051 $ 21,106
Tenant leasing costs and concession commitments per rentable square foot (1)
$ 46.34 $ 17.26 $ 25.71
Weighted (by square feet) average lease term (years) 5.9 6.8 6.5
Total leasing costs and concession commitments per rentable square foot per year (1)
$ 7.88 $ 2.55 $ 3.95
(1)Includes commitments made for leasing expenditures and concessions, such as tenant improvements, leasing commissions, tenant reimbursements and free rent.
During the three and nine months ended September 30, 2025, changes in effective rental rates per square foot achieved for new leases and lease renewals at our properties that commenced during the three and nine months ended September 30, 2025, when compared to prior effective rental rates per square foot in effect for the same space (and excluding space acquired vacant), were as follows (square feet in thousands):
Three Months Ended September 30, 2025 Nine Months Ended September 30, 2025
Old Effective Rent Per Square Foot (1)
New Effective Rent Per Square Foot (1)
Rentable Square Feet
Old Effective Rent Per Square Foot (1)
New Effective Rent Per Square Foot (1)
Rentable Square Feet
New leases $ 25.85 $ 24.17 73 $ 28.36 $ 24.68 112
Lease renewals $ 20.15 $ 19.55 72 $ 20.46 $ 23.83 589
Total leasing activity $ 23.02 $ 21.88 145 $ 21.72 $ 23.97 701
(1)Effective rental rates include contractual base rents from our tenants pursuant to our lease agreements, plus straight line rent adjustments and estimated expense reimbursements to be paid to us, and exclude lease value amortization.
During the three and nine months ended September 30, 2025 and 2024, amounts capitalized at our properties for lease related costs, building improvements and development, redevelopment and other activities were as follows:
Three Months Ended September 30, Nine Months Ended September 30,
2025 2024 2025 2024
Lease related costs (1)
$ 4,257 $ 29,148 $ 23,814 $ 71,881
Building improvements (2)
3,922 5,225 11,260 13,784
Recurring capital expenditures 8,179 34,373 35,074 85,665
Development, redevelopment and other activities (3)
598 864 1,246 11,637
Total capital expenditures $ 8,777 $ 35,237 $ 36,320 $ 97,302
(1)Lease related costs generally include capital expenditures used to improve tenants' space or amounts paid directly to tenants to improve their space and leasing related costs, such as brokerage commissions and other tenant inducements.
(2)Building improvements generally include expenditures to replace obsolete building components and expenditures that extend the useful life of existing assets.
(3)Development, redevelopment and other activities generally include capital expenditure projects that reposition a property or result in new sources of revenue. Includes capitalized interest and other operating costs of $1,172 for the nine months ended September 30, 2024. We did not capitalize any interest or other operating costs during the three months ended September 30, 2024 or the three and nine months ended September 30, 2025.
As of September 30, 2025, we had estimated unspent leasing related obligations of $67,223, of which we expect to spend $41,780 over the next 12 months.
As of September 30, 2025, we had leases at our properties totaling approximately 654,000 rentable square feet that were scheduled to expire on or before September 30, 2026. As of May 18, 2026, we expect tenants with leases totaling approximately 253,000 rentable square feet that are scheduled to expire on or before September 30, 2026, 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 September 30, 2025, our lease expirations by year were as follows (square feet in thousands):
Year (1)
Number of Leases Expiring
Leased
Square Feet Expiring (2)
Percent of Total Cumulative Percent of Total Annualized Rental Income Expiring Percent of Total Cumulative Percent of Total
2025 11 309 2.3 % 2.3 % $ 4,475 1.2 % 1.2 %
2026 43 412 3.1 % 5.4 % 13,780 3.5 % 4.7 %
2027 32 1,859 13.8 % 19.2 % 50,307 12.9 % 17.6 %
2028 20 525 3.9 % 23.1 % 28,666 7.4 % 25.0 %
2029 37 1,104 8.2 % 31.3 % 34,732 8.9 % 33.9 %
2030 31 957 7.1 % 38.4 % 27,582 7.1 % 41.0 %
2031 26 1,621 12.0 % 50.4 % 38,650 9.9 % 50.9 %
2032 13 578 4.3 % 54.7 % 17,748 4.6 % 55.5 %
2033 14 1,159 8.6 % 63.3 % 22,093 5.7 % 61.2 %
2034 and thereafter
44 4,957 36.7 % 100.0 % 150,559 38.8 % 100.0 %
Total 271 13,481 100.0 % $ 388,592 100.0 %
Weighted average remaining lease term (in years)
6.7 6.7
(1)The year of lease expiration is pursuant to current contract terms. Some of our leases allow the tenants to vacate the leased premises before the stated expirations of their leases with little or no liability. As of September 30, 2025, tenants occupying approximately 1.6% of our rentable square feet and responsible for approximately 2.1% of our annualized rental income as of September 30, 2025 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, 2037 and 2040 early termination rights become exercisable by other tenants who occupied an additional approximately 1.6%, 1.8%, 5.2%, 3.2%, 2.4%, 0.7%, 4.2%, 0.3%, 1.0%, 0.2%, 0.2% and 0.4% of our rentable square feet, respectively, and contributed an additional approximately 2.7%, 2.6%, 6.2%, 3.0%, 2.9%, 0.8%, 5.7%, 0.9%, 1.4%, 0.4%, 0.3% and 0.5% of our annualized rental income, respectively, as of September 30, 2025. In addition, as of September 30, 2025, 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 4.4% of our rentable square feet and contributed approximately 4.9% of our annualized rental income as of September 30, 2025.
(2)Leased square feet is pursuant to leases existing as of September 30, 2025, and includes (i) space being fitted out for tenant occupancy pursuant to our lease agreements, if any, and (ii) space which is leased, but is not occupied or is being offered for sublease by tenants, if any. Square feet measurements are subject to changes when space is remeasured or reconfigured for new tenants.
We generally will seek to renew or extend the terms of leases at properties with tenants when they expire. However, market and economic factors, along with increases in remote work, changes in space utilization and government policies, 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 relet our properties.
As of September 30, 2025, we derived 22.8% 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 September 30, 2025, tenants contributing 52.1% 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 8.0% 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 September 30, 2025, tenants representing 1% or more of our total annualized rental income were as follows (square feet in thousands):
Tenant Credit Rating Sq. Ft. % of Leased Sq. Ft. Annualized Rental Income % of Total Annualized Rental Income
1 U.S. Government Investment Grade 2,415 17.9 % $ 66,140 17.0 %
2 Alphabet Inc. (Google) Investment Grade 386 2.9 % 22,977 5.9 %
3 IG Investments Holdings LLC Not Rated 337 2.5 % 18,619 4.8 %
4 Bank of America Corporation Investment Grade 577 4.3 % 17,419 4.5 %
5
Shook, Hardy & Bacon L.L.P.
Not Rated 412 3.1 % 13,609 3.5 %
6 Northrop Grumman Corporation Investment Grade 337 2.5 % 10,746 2.8 %
7 State of California Investment Grade 363 2.7 % 10,315 2.7 %
8 State of Georgia Investment Grade 308 2.3 % 7,924 2.0 %
9 Sonoma Biotherapeutics, Inc. Not Rated 84 0.6 % 7,497 1.9 %
10 Automatic Data Processing, Inc. Investment Grade 289 2.1 % 6,253 1.6 %
11 Compass Group plc Investment Grade 267 2.0 % 6,186 1.6 %
12 Church & Dwight Co., Inc. Investment Grade 250 1.9 % 6,043 1.6 %
13 Genesys Cloud Services Holdings I, LLC Non Investment Grade 275 2.0 % 5,950 1.5 %
14 Leidos Holdings Inc. Investment Grade 159 1.2 % 5,939 1.5 %
15 Primerica, Inc. Investment Grade 344 2.6 % 5,743 1.5 %
16 Science Applications International Corp Non Investment Grade 159 1.2 % 5,151 1.3 %
17 AT&T Inc. Investment Grade 425 3.2 % 5,041 1.3 %
18 Rocky Mountain University of Health Professions, Inc. Not Rated 170 1.3 % 4,563 1.2 %
19 CommScope Holding Company Inc. Non Investment Grade 96 0.7 % 4,513 1.2 %
20 Hartford Financial Services Group Inc Investment Grade 143 1.1 % 4,469 1.2 %
21 Berkshire Hathaway Inc. Investment Grade 134 1.0 % 4,249 1.1 %
22 BAE Systems plc Investment Grade 139 1.0 % 3,973 1.0 %
Total 8,069 60.1 % $ 243,319 62.7 %
Segment Information
We operate in one business segment: ownership and leasing of real estate properties.
RESULTS OF OPERATIONS (amounts in thousands, except per share amounts)
Three Months Ended September 30, 2025, Compared to Three Months Ended September 30, 2024
Comparable Properties (1) Results
Three Months Ended September 30,
Non-Comparable
Properties Results
Three Months Ended September 30,
Consolidated Results
Three Months Ended September 30,
2025 2024 $ Change % Change 2025 2024 2025 2024 $ Change % Change
Rental income $ 101,045 $ 106,676 $ (5,631) (5.3 %) $ 8,082 $ 13,944 $ 109,127 $ 120,620 $ (11,493) (9.5 %)
Operating expenses:
Real estate taxes 12,949 13,791 (842) (6.1 %) 699 3,136 13,648 16,927 (3,279) (19.4 %)
Utility expenses 7,457 6,621 836 12.6 % 261 1,248 7,718 7,869 (151) (1.9 %)
Other operating expenses 23,573 22,827 746 3.3 % 7,166 3,792 30,739 26,619 4,120 15.5 %
Total operating expenses 43,979 43,239 740 1.7 % 8,126 8,176 52,105 51,415 690 1.3 %
Net operating income (loss) (2)
$ 57,066 $ 63,437 $ (6,371) (10.0 %) $ (44) $ 5,768 57,022 69,205 (12,183) (17.6 %)
Other expenses:
Depreciation and amortization 42,834 46,047 (3,213) (7.0 %)
Loss on impairment of real estate - 41,847 (41,847) (100.0 %)
Transaction related costs 22,904 738 22,166 n/m
General and administrative 4,964 4,927 37 0.8 %
Total other expenses 70,702 93,559 (22,857) (24.4 %)
Gain on sale of real estate 6 8,456 (8,450) (99.9 %)
Interest and other income 802 196 606 n/m
Interest expense (53,259) (42,580) (10,679) 25.1 %
Net (loss) gain on early extinguishment of debt (354) 264 (618) n/m
Loss before income tax benefit (expense) and equity in net losses of investees (66,485) (58,018) (8,467) 14.6 %
Income tax benefit (expense) 261 (230) 491 n/m
Equity in net losses of investees (115) (166) 51 (30.7 %)
Net (loss) income $ (66,339) $ (58,414) $ (7,925) 13.6 %
Weighted average common shares outstanding (basic and diluted) 73,480 51,197 22,283 43.5 %
Per common share amounts (basic and diluted):
Net loss $ (0.90) $ (1.14) $ 0.24 (21.1 %)
n/m - not meaningful
(1)Comparable properties consists of 117 properties we owned on September 30, 2025 and which we owned continuously since July 1, 2024 and excludes two 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.
(2)Our definition of net operating income, or NOI, and our reconciliation of Net (loss) income to NOI are included below under the heading "Non-GAAP Financial Measures."
References to changes in the income and expense categories below relate to the comparison of consolidated results for the three months ended September 30, 2025, compared to the three months ended September 30, 2024.
Rental income. Rental income for non-comparable properties decreased $8,890 related to our property disposition activities, partially offset by an increase in rental income at properties affected by significant redevelopment activities of $3,028 primarily 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 for comparable properties decreased $5,631 as a result of increased vacancies and lower rents from lease renewals at certain of our properties in the 2025 period. Rental income includes non-cash straight line rent adjustments totaling $4,750 in the 2025 period and $8,854 in the 2024 period, and amortization of acquired real estate leases and assumed real estate lease obligations totaling $140 in the 2025 period and $(59) in the 2024 period.
Real estate taxes. Real estate taxes decreased $2,017 related to our property disposition activities, $842 for comparable properties primarily due to successful tax appeals at certain of our properties in the 2025 period and $420 for properties affected by significant redevelopment activities.
Utility expenses. Utility expenses decreased $903 related to our property disposition activities and $84 for properties affected by significant redevelopment activities, partially offset by an increase in comparable properties of $836 primarily due to higher electricity costs.
Other operating expenses. Other operating expenses for non-comparable properties increased $5,906 primarily 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, partially offset by a decrease of $2,532 related to our property disposition activities. Other operating expenses for comparable properties increased $746 due to higher repairs and maintenance costs, partially offset by lower insurance costs and property management fee expenses in the 2025 period.
Depreciation and amortization. Depreciation and amortization for non-comparable properties decreased $1,973 related to our property disposition activities, partially offset by an increase of $664 due to the substantial completion of redevelopment activities at certain properties in the 2024 period. Depreciation and amortization for comparable properties declined $1,904 due to certain leasing related assets becoming fully depreciated since July 1, 2024, partially offset by depreciation and amortization of improvements made to certain of our properties since July 1, 2024.
Loss on impairment of real estate. We recorded a $41,847 loss on impairment of real estate in the 2024 period to reduce the carrying value of 10 properties to their estimated fair values less costs to sell.
Transaction related costs. Transaction related costs in the 2025 period consist of advisory fees related to restructuring efforts prior to our bankruptcy proceedings. Transaction related costs in the 2024 period consist of costs related to our evaluation of potential financing transactions.
General and administrative. The increase in general and administrative expenses is primarily the result of higher legal and other professional costs in the 2025 period, partially offset by a decrease in share-based compensation in the 2025 period compared to the 2024 period.
Gain on sale of real estate. We recorded a $6 net gain on sale of real estate related to disposition activities in the 2025 period. We recorded a $8,456 gain on sale of real estate resulting from the sale of one property in the 2024 period.
Interest and other income. The increase in interest and other income is primarily due to higher cash balances invested, partially offset by the effect of lower interest rates earned on cash balances invested in the 2025 period compared to the 2024 period.
Interest expense. The increase in interest expense is due to higher weighted average interest rates in the 2025 period as a result of our financing activities in 2024.
Net (loss) gain on early extinguishment of debt. We recorded a net loss on early extinguishment of debt of $354 in the 2025 period related to the write off of unamortized discounts and issuance costs related to the partial redemption of our senior secured notes due 2027. We recorded a gain on early extinguishment of debt of $263 in the 2024 period resulting from our exchange of $865,219 of existing unsecured notes for $567,429 of our 9.000% senior secured notes due 2029 in June 2024. For more information regarding the Senior Note Exchange, see Note 7 to our Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.
Income tax benefit (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.
Equity in net losses of investees. Equity in net losses of investees represents our proportionate share of losses from our investment in our unconsolidated joint venture.
Net (loss) income. Net (loss) income and net (loss) income per basic and diluted common share changed in the 2025 period compared to the 2024 period primarily as a result of the changes noted above. Net loss per basic and diluted common share in the 2025 period also reflects the effect of the issuance of common shares related to our financing activities in 2025 and 2024.
Nine Months Ended September 30, 2025, Compared to Nine Months Ended September 30, 2024
Comparable Properties (1) Results
Nine Months Ended September 30,
Non-Comparable
Properties Results
Nine Months Ended September 30,
Consolidated Results
Nine Months Ended September 30,
2025 2024 $ Change % Change 2025 2024 2025 2024 $ Change % Change
Rental income $ 308,116 $ 318,878 $ (10,762) (3.4 %) $ 29,125 $ 64,863 $ 337,241 $ 383,741 $ (46,500) (12.1 %)
Operating expenses:
Real estate taxes 37,425 37,646 (221) (0.6 %) 1,792 9,717 39,217 47,363 (8,146) (17.2 %)
Utility expenses 20,072 18,207 1,865 10.2 % 896 3,575 20,968 21,782 (814) (3.7 %)
Other operating expenses 70,668 67,878 2,790 4.1 % 22,513 13,219 93,181 81,097 12,084 14.9 %
Total operating expenses 128,165 123,731 4,434 3.6 % 25,201 26,511 153,366 150,242 3,124 2.1 %
Net operating income (2)
$ 179,951 $ 195,147 $ (15,196) (7.8 %) $ 3,924 $ 38,352 183,875 233,499 (49,624) (21.3 %)
Other expenses:
Depreciation and amortization 130,405 146,779 (16,374) (11.2 %)
Loss on impairment of real estate 2,426 173,579 (171,153) (98.6 %)
Transaction related costs 27,720 971 26,749 n/m
General and administrative 14,838 15,861 (1,023) (6.4 %)
Total other expenses 175,389 337,190 (161,801) (48.0 %)
(Loss) gain on sale of real estate (4,572) 6,008 (10,580) (176.1 %)
Interest and other income 2,752 1,779 973 54.7 %
Interest expense (159,144) (116,405) (42,739) 36.7 %
Net (loss) gain on early extinguishment of debt (449) 225,637 (226,086) (100.2 %)
(Loss) income before income tax benefit (expense) and equity in net losses of investees (152,927) 13,328 (166,255) n/m
Income tax benefit (expense) 30 (179) 209 (116.8 %)
Equity in net losses of investees (495) (576) 81 (14.1 %)
Net (loss) income $ (153,392) $ 12,573 $ (165,965) n/m
Weighted average common shares outstanding (basic and diluted) 71,355 49,444 21,911 44.3 %
Per common share amounts (basic and diluted):
Net (loss) income $ (2.15) $ 0.25 $ (2.40) n/m
n/m - not meaningful
(1)Comparable properties consists of 117 properties we owned on September 30, 2025 and which we owned continuously since January 1, 2024 and excludes two 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.
(2)Our definition of NOI and our reconciliation of net income (loss) to NOI are included below under the heading "Non-GAAP Financial Measures."
References to changes in the income and expense categories below relate to the comparison of consolidated results for the nine months ended September 30, 2025, compared to the nine months ended September 30, 2024.
Rental income. Rental income for non-comparable properties decreased $50,842 related to our property disposition activities, partially offset by an increase in rental income at properties affected by significant redevelopment activities of $15,104 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 for comparable properties decreased $10,762 as a result of increased vacancies and lower rents from lease renewals at certain of our properties in the 2025 period. Rental income includes non-cash straight line rent adjustments totaling $18,242 in the 2025 period and $23,796 in the 2024 period, and amortization of acquired real estate leases and assumed real estate lease obligations totaling $422 in the 2025 period and $30 in the 2024 period.
Real estate taxes. Real estate taxes decreased $6,627 related to our property disposition activities, $1,298 for properties affected by significant redevelopment activities and $221 for comparable properties primarily due to successful tax appeals at
certain of our properties in the 2025 period, partially offset by real estate taxes that were previously paid directly by one of our tenants that are now being paid by us pursuant to a lease renewal with that tenant.
Utility expenses. Utility expenses decreased $2,504 related to our property disposition activities and $175 for properties affected by significant redevelopment activities, partially offset by an increase in comparable properties of $1,865 primarily due to higher electricity costs.
Other operating expenses. Other operating expenses for non-comparable properties increased $18,944 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, partially offset by a decrease of $9,650 related to our property disposition activities. Other operating expenses for comparable properties increased $2,790 due to higher snow removal and repairs and maintenance costs, partially offset by lower insurance costs and property management fee expenses in the 2025 period.
Depreciation and amortization. Depreciation and amortization for non-comparable properties decreased $12,957 related to our property disposition activities, partially offset by an increase of $3,286 due to the substantial completion of redevelopment activities at certain properties in the 2024 period. Depreciation and amortization for comparable properties declined $6,703 due to certain leasing related assets becoming fully depreciated since January 1, 2024, partially offset by depreciation and amortization of improvements made to certain of our properties since January 1, 2024.
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. We recorded a $173,579 loss on impairment of real estate in the 2024 period to reduce the carrying value of 16 properties to their estimated fair values less costs to sell.
Transaction related costs. Transaction related costs in the 2025 period consist of advisory fees related to restructuring efforts prior to our bankruptcy proceedings. Transaction related costs in the 2024 period 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 average total market capitalization and a decrease in share-based compensation in the 2025 period compared to the 2024 period.
(Loss) gain on sale of real estate. We recorded a $4,572 net loss on sale of real estate resulting from the sale of four properties in the 2025 period. We recorded a $6,008 net gain on sale of real estate resulting from the sale of seven properties in the 2024 period.
Interest and other income. The increase in interest and other income is primarily due to higher cash balances invested, partially offset by the effect of lower interest rates earned on cash balances invested in the 2025 period compared to the 2024 period.
Interest expense. The increase in interest expense is due to higher weighted average interest rates in the 2025 period as a result of our financing activities in 2024.
Net (loss) gain on early extinguishment of debt. We recorded a net loss on early extinguishment of debt of $449 in the 2025 period related 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 our Senior Note Exchange. We recorded a net gain on early extinguishment of debt of $225,637 in the 2024 period resulting from our exchange of $865,219 of existing unsecured notes for $567,429 of our 9.000% senior secured notes due 2029 in June 2024. For more information regarding the Senior Note Exchange, see Note 7 to our Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.
Income tax benefit (expense). Income tax (expense) benefit 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 repayment of debt.
Equity in net losses of investees. Equity in net losses of investees represents our proportionate share of losses from our investments in two unconsolidated joint ventures.
Net (loss) income. Net (loss) income and net (loss) income per basic and diluted common share changed in the 2025 period compared to the 2024 period primarily as a result of the changes noted above. Net (loss) income per basic and diluted common share in the 2025 period also reflects the effect of the issuance of common shares related to our financing activities in 2025 and 2024.
Non-GAAP Financial Measures
We present certain "non-GAAP financial measures" within the meaning of the applicable SEC rules, including the calculations below of NOI, funds from operations, or FFO, and normalized funds from operations, or Normalized FFO. These measures do not represent cash generated by operating activities in accordance with GAAP and should not be considered alternatives to net (loss) income as indicators of our operating performance or as measures of our liquidity. These measures should be considered in conjunction with net (loss) income as presented in our condensed consolidated statements of comprehensive income (loss). We consider these non-GAAP measures to be appropriate supplemental measures of operating performance for a REIT, along with net (loss) income. We believe these measures provide useful information to investors because by excluding the effects of certain historical amounts, such as depreciation and amortization expense, they may facilitate a comparison of our operating performance between periods and with other REITs and, in the case of NOI, reflecting only those income and expense items that are generated and incurred at the property level may help both investors and management to understand the operations of our properties.
Net Operating Income
The calculation of NOI excludes certain components of net (loss) income in order to provide results that are more closely related to our property level results of operations. We calculate NOI as shown below. We define NOI as income from our rental of real estate less our property operating expenses. NOI excludes amortization of capitalized tenant improvement costs and leasing commissions that we record as depreciation and amortization expense. We use NOI to evaluate individual and company-wide property level performance. Other real estate companies and REITs may calculate NOI differently than we do.
The following table presents the reconciliation of net loss to NOI for the three and nine months ended September 30, 2025 and 2024:
Three Months Ended September 30, Nine Months Ended September 30,
2025 2024 2025 2024
Net (loss) income $ (66,339) $ (58,414) $ (153,392) $ 12,573
Equity in net losses of investees 115 166 495 576
Income tax (benefit) expense (261) 230 (30) 179
(Loss) income before income tax (benefit) expense and equity in net losses of investees (66,485) (58,018) (152,927) 13,328
Net loss (gain) on early extinguishment of debt 354 (264) 449 (225,637)
Interest expense 53,259 42,580 159,144 116,405
Interest and other income (802) (196) (2,752) (1,779)
(Gain) loss on sale of real estate (6) (8,456) 4,572 (6,008)
General and administrative 4,964 4,927 14,838 15,861
Transaction related costs 22,904 738 27,720 971
Loss on impairment of real estate - 41,847 2,426 173,579
Depreciation and amortization 42,834 46,047 130,405 146,779
NOI $ 57,022 $ 69,205 $ 183,875 $ 233,499
Funds From Operations and Normalized Funds From Operations
We calculate FFO and Normalized FFO as shown below. FFO is calculated on the basis defined by The National Association of Real Estate Investment Trusts, which is net (loss) income, calculated in accordance with GAAP, plus real estate depreciation and amortization of consolidated properties and our proportionate share of the real estate depreciation and amortization of unconsolidated joint venture properties, but excluding impairment charges on real estate assets and any gain or loss on sale of real estate, as well as certain other adjustments currently not applicable to us. In calculating Normalized FFO, we adjust for the other items shown below and include business management incentive fees, if any, only in the fourth quarter versus the quarter when they are recognized as an expense in accordance with GAAP due to their quarterly volatility not necessarily being indicative of our core operating performance and the uncertainty as to whether any such business management incentive fees will be payable when all contingencies for determining such fees are known at the end of the calendar year. FFO and Normalized FFO are among the factors considered by our Board of Trustees when determining the amount of distributions to our shareholders. Other factors include, but are not limited to, requirements to maintain our qualification for taxation as a REIT, limitations in our credit agreement and public debt covenants, the availability to us of debt and equity capital, our
expectation of our future capital requirements and operating performance and our expected needs for and availability of cash to pay our obligations. Other real estate companies and REITs may calculate FFO and Normalized FFO differently than we do.
The following table presents the reconciliation of net (loss) income to FFO and Normalized FFO for the three and nine months ended September 30, 2025 and 2024:
Three Months Ended September 30, Nine Months Ended September 30,
2025 2024 2025 2024
Net (loss) income $ (66,339) $ (58,414) $ (153,392) $ 12,573
Add (less): Depreciation and amortization:
Consolidated properties 42,834 46,047 130,405 146,779
Unconsolidated joint venture properties 684 616 2,020 1,869
Loss on impairment of real estate - 41,847 2,426 173,579
(Gain) loss on sale of real estate (6) (8,456) 4,572 (6,008)
FFO (22,827) 21,640 (13,969) 328,792
Add (less): Transaction related costs
22,904 738 27,720 971
Net loss (gain) on early extinguishment of debt 354 (264) 449 (225,637)
Lease termination fees for sold property - - - (10,524)
Normalized FFO $ 431 $ 22,114 $ 14,200 $ 93,602
Weighted average common shares outstanding (basic and diluted) 73,480 51,197 71,355 49,444
Per common share amounts (basic and diluted):
Net (loss) income $ (0.90) $ (1.14) $ (2.15) $ 0.25
FFO $ (0.31) $ 0.42 $ (0.20) $ 6.65
Normalized FFO $ 0.01 $ 0.43 $ 0.20 $ 1.89
LIQUIDITY AND CAPITAL RESOURCES
Our Operating Liquidity and Resources (dollar amounts in thousands, except per share amounts)
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 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 collect rent from our tenants;
•our ability to maintain or increase the occupancy of, and the rental rates at, our properties;
•our ability to control operating and capital expenses at our properties; and
•our ability to successfully sell properties that we market for sale.
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, as well as ongoing market and economic conditions, including government spending and budget priorities. Demand for office space continues to face headwinds, including in
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 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 nine months ended September 30, 2025, we sold four properties for an aggregate sales price of $29,050, excluding closing costs. In December 2025, we sold two properties containing approximately 101,000 rentable square feet for a sales price of $11,038, 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.
The following is a summary of our sources and uses of cash flows for the periods presented, as reflected in our condensed consolidated statements of cash flows:
Nine Months Ended September 30,
2025 2024
Cash, cash equivalents and restricted cash at beginning of period $ 275,165 $ 26,714
Net cash (used in) provided by:
Operating activities (8,365) 41,442
Investing activities (7,515) (13,251)
Financing activities (200,126) (18,636)
Cash, cash equivalents and restricted cash at end of period $ 59,159 $ 36,269
The change from cash provided by operating activities in the 2024 period to cash used in operating activities in the 2025 period was primarily due to higher interest expense and decreased NOI related to property dispositions and reductions in occupied space at certain of our properties in the 2025 period. The decrease in cash used in investing activities in the 2025 period compared to the 2024 period was primarily due to decreased capital expenditures, partially offset by lower proceeds from property sales in the 2025 period. The increase in cash used in financing activities in the 2025 period was primarily due to an increase in net debt repayments in the 2025 period.
Our Investment and Financing Liquidity and Resources (dollar amounts in thousands, except per share amounts)
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 May 18, 2026, the outstanding principal balance under our DIP Facility was $127,813, including fees payable in kind.
Historically, in order to meet cash needs to pay operating or capital expenses and make distributions, we have maintained a revolving credit facility under our credit agreement. Our obligations under our credit agreement are secured by a pledge by certain of our subsidiaries of all of their respective equity interests in certain of our direct and indirect property owning subsidiaries and first mortgage liens on 19 properties owned by the pledged subsidiaries with a gross book value of real estate assets of $1,034,776 as of September 30, 2025. The maturity date of our credit agreement is January 29, 2027. Our credit agreement contains a number of covenants, including covenants that require us to maintain certain financial ratios, restrict our ability to incur additional debt in excess of calculated amounts and, subject to limited exceptions, restrict our ability to increase our distribution rate above $0.01 per common share per quarter and enter into share repurchases. Availability of borrowings under our credit agreement is subject to ongoing minimum performance and market values of the 19 collateral properties, our satisfying certain financial covenants and other credit facility conditions.
Interest payable on borrowings under our credit agreement was at a rate of the secured overnight financing rate plus a margin of 350 basis points through the Petition Date. Effective on the Petition Date, interest payable on borrowings under our credit agreement changed to a rate of the U.S. federal prime rate plus a margin of 250 basis points. Effective February 4, 2026, in accordance with an order entered by the Bankruptcy Court, the margin increased to 450 basis points pursuant to the default rate stipulated in our credit agreement. We are also required to pay an unused facility fee on the amount of total lending commitments, which was 25 basis points per annum at September 30, 2025. As of September 30, 2025, the annual interest rate payable on borrowings under our credit agreement was 7.7%. As of September 30, 2025, and May 18, 2026, our $325,000 revolving credit facility was fully drawn and $100,000 was outstanding under our term loan.
Senior Notes Redemptions and Repayments
In January 2025, we redeemed, at par plus accrued interest, all $171,586 of our 4.50% senior unsecured notes due 2025 using the proceeds from the issuance of our senior secured notes due 2027 and cash on hand.
In February 2025, in connection with the sale of a collateral property, we redeemed, at par plus accrued interest, $5,469 of our senior secured notes due 2027.
In July 2025, in connection with the sale of a collateral property, we redeemed, at par plus accrued interest, $2,029 of our senior secured notes due 2027.
Our senior secured notes due 2027 require quarterly principal repayments of $6,500 and an additional $117,502 principal repayment in March 2026. As of September 30, 2025, we have made $19,500 of scheduled quarterly principal repayments on these notes in 2025. We ceased scheduled quarterly principal payments and did not make the additional March 2026 principal repayment following the commencement of the Chapter 11 Cases.
Senior Note Exchange
In March 2025, in connection with the Senior Note Exchange, we exchanged $14,439 of the 2030 Notes for an aggregate $20,990 of our outstanding unsecured senior notes. The 2030 Notes are fully and unconditionally guaranteed on a joint, several and unsecured basis by certain of our subsidiaries which also guarantee our senior secured notes due 2027. The 2030 Notes require semi-annual payments of interest only and are prepayable, at par plus accrued interest, after March 12, 2029. For more
information regarding the Senior Note Exchange and the New 2030 Notes, see Note 6 to our Condensed Consolidated Financial Statements included in Part I, Item I of this Quarterly Report on Form 10-Q.
As of September 30, 2025, our debt maturities (other than our revolving credit facility), consisting of senior notes, a term loan and mortgage notes, were as follows:
Year Debt Maturities
2025 $ 6,500
2026 277,431
2027 346,298
2028 123,487
2029 910,278
2030 and thereafter 332,395
Total $ 1,996,389
None of our unsecured debt obligations require sinking fund payments prior to their respective maturity dates. Our mortgage notes currently require monthly payments of interest only; however, certain of our mortgage notes will require payments of principal and interest after a specified date through maturity.
In addition to our debt obligations, as of September 30, 2025, we had estimated unspent leasing related obligations of $67,223, of which we expect to spend $41,780 over the next 12 months.
Share Issuances
In March 2025, we entered into a sales agreement with Clear Street LLC, or the Agent, pursuant to which we may issue and sell our common shares from time to time in transactions that are deemed to be an "at the market offering" as defined in Rule 415 under the Securities Act for up to an aggregate sales price of $100,000, or the ATM Program. We are required to pay the Agent a cash commission of 3% of the gross sales prices of any common shares we sell under the ATM Program. During the nine months ended September 30, 2025, we sold an aggregate of 4,171,689 of our common shares under the ATM Program valued at a weighted average share price of $0.27 for net proceeds of $1,106 after deducting Agent commissions and other offering costs. We did not sell any common shares under the ATM Program subsequent to June 30, 2025.
As of May 18, 2026, our total available liquidity was comprised of $118,501, which included $56,253 of unrestricted cash and $62,248 of restricted cash. 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 implement the Plan, emerge from the Chapter 11 proceedings and generate sufficient liquidity following the reorganization to meet our obligations, restructured debt obligations and operating needs.
During the nine months ended September 30, 2025, we paid quarterly distributions to our shareholders totaling $1,407 using cash on hand. In July 2025, we suspended our regular quarterly distribution payable on our common shares to preserve our cash. For more information regarding the distributions we paid and declared during 2025, see Note 8 to our Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.
We owned a 51% interest in an unconsolidated joint venture which owned two properties at September 30, 2025. As of September 30, 2025, the properties owned by this joint venture were encumbered by $49,333 principal amount of mortgage indebtedness, none of which is recourse to us. As of September 30, 2025, we did not control the activities that are most significant to this joint venture and, as a result, we accounted for our investment in this joint venture under the equity method of accounting. The filing of the Chapter 11 Cases constituted an event of default under the mortgage note secured by the properties owned by this joint venture. This joint venture remains current on debt service under this mortgage note and continues to own, operate and lease the collateral properties. For more information on the financial condition and results of operations of this joint venture, see Note 4 to our Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q. Other than this joint venture, as of September 30, 2025, we had no off balance sheet arrangements that have had or that we expect would be reasonably likely to have a material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
Debt Covenants
Our principal debt obligations as of September 30, 2025 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 of senior notes and (iv) 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 credit agreement, 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 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 credit agreement, senior notes indentures and their supplements and the DIP Credit Agreement also contain covenants, including covenants that restrict our ability to incur debts, require us to comply with certain financial covenants and, in the case of our credit agreement, restrict our ability to increase our distribution rate above the level of $0.01 per common share per quarter. The filing of the Chapter 11 Cases constituted an event of default under our credit agreement and senior notes indentures 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.
Related Person Transactions
We have relationships and historical and continuing transactions with RMR, RMR Inc. and others related to them. For more information about these and other such relationships and related person transactions, see Notes 10 and 11 to our Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q, our 2024 Annual Report, our definitive Proxy Statement for our 2025 Annual Meeting of Shareholders and our other filings with the SEC. In addition, see the section captioned "Risk Factors" in Part I, Item 1A of our 2024 Annual Report for a description of risks that may arise as a result of these and other related person transactions and relationships. We may engage in additional transactions with related persons, including businesses to which RMR or its subsidiaries provide management services.
Critical Accounting Estimates
The preparation of our Condensed Consolidated Financial Statements in conformity with GAAP requires us to make estimates and assumptions that affect reported amounts. Actual results could differ from those estimates. Significant estimates in the Condensed Consolidated Financial Statements include purchase price allocations, useful lives of fixed assets and assessment of impairment of real estate and the related intangibles.
A discussion of our critical accounting estimates is included in our 2024 Annual Report. There have been no significant changes in our critical accounting estimates since the year ended December 31, 2024.
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