Maryland
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26-4273474
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(State or Other Jurisdiction of Incorporation or Organization)
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(IRS Employer Identification No.)
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Title of Each Class
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Trading Symbol(s)
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Name Of Each Exchange On Which Registered
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Common Shares of Beneficial Interest
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OPI
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The Nasdaq Stock Market LLC
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5.875% Senior Notes due 2046
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OPINI
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The Nasdaq Stock Market LLC
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6.375% Senior Notes due 2050
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OPINL
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The Nasdaq Stock Market LLC
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Large accelerated filer
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☒
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Accelerated filer
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☐
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Non-accelerated filer
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☐
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Smaller reporting company
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☐
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Emerging growth company
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☐
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Page
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June 30,
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December 31,
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||||
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2020
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2019
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||||
ASSETS
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Real estate properties:
|
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Land
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$
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843,418
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$
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840,550
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Buildings and improvements
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2,691,482
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2,652,681
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Total real estate properties, gross
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3,534,900
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3,493,231
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Accumulated depreciation
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(422,716
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)
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(387,656
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)
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Total real estate properties, net
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3,112,184
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3,105,575
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Assets of properties held for sale
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—
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70,877
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Investments in unconsolidated joint ventures
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39,067
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39,756
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Acquired real estate leases, net
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645,589
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732,382
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Cash and cash equivalents
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24,485
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93,744
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Restricted cash
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5,616
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6,952
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Rents receivable
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95,005
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83,556
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Deferred leasing costs, net
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45,029
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40,107
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Other assets, net
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10,688
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20,187
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Total assets
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$
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3,977,663
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$
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4,193,136
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||||
LIABILITIES AND SHAREHOLDERS’ EQUITY
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Unsecured revolving credit facility
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$
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200,000
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$
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—
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Senior unsecured notes, net
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1,766,387
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2,017,379
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Mortgage notes payable, net
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210,539
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309,946
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Liabilities of properties held for sale
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—
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14,693
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Accounts payable and other liabilities
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115,593
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125,048
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Due to related persons
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6,856
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7,141
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Assumed real estate lease obligations, net
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11,858
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13,175
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Total liabilities
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2,311,233
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2,487,382
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Commitments and contingencies
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Shareholders’ equity:
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Common shares of beneficial interest, $.01 par value: 200,000,000 shares authorized, 48,227,800 and 48,201,941 shares issued and outstanding, respectively
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482
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482
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Additional paid in capital
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2,613,868
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2,612,425
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Cumulative net income
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189,356
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177,217
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Cumulative other comprehensive loss
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(85
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)
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(200
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)
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Cumulative common distributions
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(1,137,191
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)
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(1,084,170
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)
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Total shareholders’ equity
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1,666,430
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1,705,754
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Total liabilities and shareholders’ equity
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$
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3,977,663
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$
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4,193,136
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Three Months Ended June 30,
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Six Months Ended June 30,
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||||||||||||
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2020
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2019
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2020
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2019
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||||||||
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Rental income
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$
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145,603
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$
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176,032
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$
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295,488
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$
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350,809
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Expenses:
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Real estate taxes
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15,781
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18,147
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32,588
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36,539
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Utility expenses
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5,201
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7,470
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12,213
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16,851
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Other operating expenses
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25,787
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29,692
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51,667
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59,828
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Depreciation and amortization
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64,170
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73,913
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127,113
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151,434
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Loss on impairment of real estate
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—
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2,380
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—
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5,584
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|
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Acquisition and transaction related costs
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—
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98
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—
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682
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|
||||
General and administrative
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7,204
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8,744
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14,313
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17,467
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Total expenses
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118,143
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140,444
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237,894
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288,385
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Gain (loss) on sale of real estate
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66
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(17
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)
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10,822
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22,075
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Dividend income
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—
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980
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—
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1,960
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Loss on equity securities
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—
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(66,135
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)
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—
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(44,007
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)
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Interest and other income
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30
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241
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736
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489
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Interest expense (including net amortization of debt premiums, discounts and issuance costs of $2,402, $2,863, $4,685 and $5,704, respectively)
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(25,205
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)
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(35,348
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)
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(52,364
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)
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(72,481
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)
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Loss on early extinguishment of debt
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(557
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)
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(71
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)
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(3,839
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)
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(485
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)
|
||||
Income (loss) before income tax (expense) benefit and equity in net losses of investees
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1,794
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(64,762
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)
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12,949
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(30,025
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)
|
||||
Income tax (expense) benefit
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(235
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)
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130
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(274
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)
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(353
|
)
|
||||
Equity in net losses of investees
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(260
|
)
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(142
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)
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(536
|
)
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(377
|
)
|
||||
Net income (loss)
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1,299
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(64,774
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)
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12,139
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(30,755
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)
|
||||
Other comprehensive income (loss):
|
|
|
|
|
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|
|
|
||||||||
Unrealized gain (loss) on financial instrument
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176
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|
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(269
|
)
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115
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|
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(367
|
)
|
||||
Equity in unrealized gain of investees
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—
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71
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|
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—
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|
|
137
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|
||||
Other comprehensive income (loss)
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176
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|
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(198
|
)
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115
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|
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(230
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)
|
||||
Comprehensive income (loss)
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$
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1,475
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|
$
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(64,972
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)
|
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$
|
12,254
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$
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(30,985
|
)
|
|
|
|
|
|
|
|
|
|
||||||||
Weighted average common shares outstanding (basic and diluted)
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|
48,106
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|
|
48,049
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|
|
48,101
|
|
|
48,040
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Per common share amounts (basic and diluted):
|
|
|
|
|
|
|
|
|
|
|
||||||
Net income (loss)
|
|
$
|
0.03
|
|
|
$
|
(1.35
|
)
|
|
$
|
0.25
|
|
|
$
|
(0.64
|
)
|
|
Number
of Shares |
|
Common Shares
|
|
Additional
Paid In Capital |
|
Cumulative
Net Income |
|
Cumulative
Other Comprehensive Income (Loss) |
|
Cumulative
Common Distributions |
|
Total Shareholders’ Equity
|
|||||||||||||
Balance at December 31, 2019
|
48,201,941
|
|
$
|
482
|
|
|
$
|
2,612,425
|
|
|
$
|
177,217
|
|
|
$
|
(200
|
)
|
|
$
|
(1,084,170
|
)
|
|
$
|
1,705,754
|
|
|
Share grants
|
—
|
|
|
—
|
|
|
379
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
379
|
|
||||||
Share repurchases
|
(1,012
|
)
|
|
—
|
|
|
(27
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(27
|
)
|
||||||
Net current period other comprehensive loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(61
|
)
|
|
—
|
|
|
(61
|
)
|
||||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
10,840
|
|
|
—
|
|
|
—
|
|
|
10,840
|
|
||||||
Distributions to common shareholders
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(26,511
|
)
|
|
(26,511
|
)
|
||||||
Balance at March 31, 2020
|
48,200,929
|
|
|
482
|
|
|
2,612,777
|
|
|
188,057
|
|
|
(261
|
)
|
|
(1,110,681
|
)
|
|
1,690,374
|
|
||||||
Share grants
|
28,000
|
|
—
|
|
|
1,121
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,121
|
|
|||||||
Share repurchases
|
(1,129)
|
|
—
|
|
|
(30
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(30
|
)
|
|||||||
Net current period other comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
176
|
|
|
—
|
|
|
176
|
|
||||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
1,299
|
|
|
—
|
|
|
—
|
|
|
1,299
|
|
||||||
Distributions to common shareholders
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(26,510
|
)
|
|
(26,510
|
)
|
||||||
Balance at June 30, 2020
|
48,227,800
|
|
$
|
482
|
|
|
$
|
2,613,868
|
|
|
$
|
189,356
|
|
|
$
|
(85
|
)
|
|
$
|
(1,137,191
|
)
|
|
$
|
1,666,430
|
|
|
Number
of Shares |
|
Common Shares
|
|
Additional
Paid In Capital |
|
Cumulative
Net Income (Loss) |
|
Cumulative
Other Comprehensive Income (Loss) |
|
Cumulative
Common Distributions |
|
Total Shareholders’ Equity
|
|||||||||||||
Balance at December 31, 2018
|
48,082,903
|
|
$
|
481
|
|
|
$
|
2,609,801
|
|
|
$
|
146,882
|
|
|
$
|
106
|
|
|
$
|
(978,302
|
)
|
|
$
|
1,778,968
|
|
|
Share grants
|
9,000
|
|
—
|
|
|
865
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
865
|
|
|||||||
Amount reclassified from cumulative other comprehensive income to net income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(371
|
)
|
|
—
|
|
|
(371
|
)
|
||||||
Net current period other comprehensive loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(32
|
)
|
|
—
|
|
|
(32
|
)
|
||||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
34,019
|
|
|
—
|
|
|
—
|
|
|
34,019
|
|
||||||
Distributions to common shareholders
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(26,445
|
)
|
|
(26,445
|
)
|
||||||
Balance at March 31, 2019
|
48,091,903
|
|
481
|
|
|
2,610,666
|
|
|
180,901
|
|
|
(297
|
)
|
|
(1,004,747
|
)
|
|
1,787,004
|
|
|||||||
Share grants
|
24,000
|
|
—
|
|
|
971
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
971
|
|
|||||||
Share repurchases
|
(2,245)
|
|
—
|
|
|
(63
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(63
|
)
|
|||||||
Share forfeitures
|
(214)
|
|
—
|
|
|
(4
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(4
|
)
|
|||||||
Net current period other comprehensive loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(198
|
)
|
|
—
|
|
|
(198
|
)
|
||||||
Net loss
|
—
|
|
|
—
|
|
|
—
|
|
|
(64,774
|
)
|
|
—
|
|
|
—
|
|
|
(64,774
|
)
|
||||||
Distributions to common shareholders
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(26,450
|
)
|
|
(26,450
|
)
|
||||||
Balance at June 30, 2019
|
48,113,444
|
|
$
|
481
|
|
|
$
|
2,611,570
|
|
|
$
|
116,127
|
|
|
$
|
(495
|
)
|
|
$
|
(1,031,197
|
)
|
|
$
|
1,696,486
|
|
|
|
Six Months Ended June 30,
|
||||||
|
|
2020
|
|
2019
|
||||
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
||
Net income (loss)
|
|
$
|
12,139
|
|
|
$
|
(30,755
|
)
|
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
|
|
|
|
|
|
|
||
Depreciation
|
|
41,318
|
|
|
46,091
|
|
||
Net amortization of debt premiums, discounts and issuance costs
|
|
4,685
|
|
|
5,704
|
|
||
Amortization of acquired real estate leases
|
|
85,726
|
|
|
105,460
|
|
||
Amortization of deferred leasing costs
|
|
3,380
|
|
|
2,771
|
|
||
Gain on sale of real estate
|
|
(10,822
|
)
|
|
(22,075
|
)
|
||
Loss on impairment of real estate
|
|
—
|
|
|
5,584
|
|
||
Loss on early extinguishment of debt
|
|
2,701
|
|
|
485
|
|
||
Straight line rental income
|
|
(9,051
|
)
|
|
(12,461
|
)
|
||
Other non-cash expenses, net
|
|
957
|
|
|
1,288
|
|
||
Loss on equity securities
|
|
—
|
|
|
44,007
|
|
||
Equity in net losses of investees
|
|
536
|
|
|
377
|
|
||
Change in assets and liabilities:
|
|
|
|
|
||||
Rents receivable
|
|
(2,162
|
)
|
|
15,886
|
|
||
Deferred leasing costs
|
|
(8,803
|
)
|
|
(15,208
|
)
|
||
Other assets
|
|
5,300
|
|
|
6,104
|
|
||
Accounts payable and other liabilities
|
|
(14,429
|
)
|
|
(16,858
|
)
|
||
Due to related persons
|
|
(285
|
)
|
|
(28,610
|
)
|
||
Net cash provided by operating activities
|
|
111,190
|
|
|
107,790
|
|
||
|
|
|
|
|
|
|
||
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
||
Real estate acquisitions
|
|
(11,864
|
)
|
|
—
|
|
||
Real estate improvements
|
|
(32,050
|
)
|
|
(21,126
|
)
|
||
Distributions in excess of earnings from unconsolidated joint ventures
|
|
153
|
|
|
1,121
|
|
||
Distributions in excess of earnings from Affiliates Insurance Company
|
|
287
|
|
|
—
|
|
||
Proceeds from sale of properties, net
|
|
81,528
|
|
|
288,885
|
|
||
Proceeds from repayment of mortgage note receivable
|
|
2,880
|
|
|
—
|
|
||
Net cash provided by investing activities
|
|
40,934
|
|
|
268,880
|
|
||
|
|
|
|
|
||||
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
||
Repayment of mortgage notes payable
|
|
(114,413
|
)
|
|
(9,970
|
)
|
||
Repayment of unsecured term loans
|
|
—
|
|
|
(218,000
|
)
|
||
Repayment of senior unsecured notes
|
|
(400,000
|
)
|
|
—
|
|
||
Proceeds from issuance of senior notes, net of discounts
|
|
145,275
|
|
|
—
|
|
||
Borrowings on unsecured revolving credit facility
|
|
481,467
|
|
|
85,000
|
|
||
Repayments on unsecured revolving credit facility
|
|
(281,467
|
)
|
|
(195,000
|
)
|
||
Payment of debt issuance costs
|
|
(503
|
)
|
|
—
|
|
||
Repurchase of common shares
|
|
(57
|
)
|
|
(63
|
)
|
||
Distributions to common shareholders
|
|
(53,021
|
)
|
|
(52,895
|
)
|
||
Net cash used in financing activities
|
|
(222,719
|
)
|
|
(390,928
|
)
|
|
|
Six Months Ended June 30,
|
||||||
|
|
2020
|
|
2019
|
||||
Decrease in cash, cash equivalents and restricted cash
|
|
$
|
(70,595
|
)
|
|
$
|
(14,258
|
)
|
Cash, cash equivalents and restricted cash at beginning of period
|
|
100,696
|
|
|
38,943
|
|
||
Cash, cash equivalents and restricted cash at end of period
|
|
$
|
30,101
|
|
|
$
|
24,685
|
|
|
|
Six Months Ended June 30,
|
||||||
|
|
2020
|
|
2019
|
||||
SUPPLEMENTAL CASH FLOW INFORMATION:
|
|
|
|
|
||||
Interest paid
|
|
$
|
53,811
|
|
|
$
|
68,640
|
|
Income taxes paid
|
|
$
|
—
|
|
|
$
|
457
|
|
|
|
As of June 30,
|
||||||
|
|
2020
|
|
2019
|
||||
Cash and cash equivalents
|
|
$
|
24,485
|
|
|
$
|
21,102
|
|
Restricted cash
|
|
5,616
|
|
|
3,583
|
|
||
Total cash, cash equivalents and restricted cash shown in the condensed consolidated statements of cash flows
|
|
$
|
30,101
|
|
|
$
|
24,685
|
|
Date of Sale
|
|
Number of Properties
|
|
Location
|
|
Rentable Square Feet
|
|
Gross
Sales Price (1)
|
|
Gain (Loss) on Sale of Real Estate
|
||||
January 2020
|
|
2
|
|
Stafford, VA
|
|
64,656
|
|
$
|
14,063
|
|
|
$
|
4,704
|
|
January 2020
|
|
1
|
|
Windsor, CT
|
|
97,256
|
|
7,000
|
|
|
314
|
|
||
February 2020
|
|
1
|
|
Lincolnshire, IL
|
|
222,717
|
|
12,000
|
|
|
1,176
|
|
||
March 2020
|
|
1
|
|
Trenton, NJ
|
|
267,025
|
|
30,100
|
|
|
(192
|
)
|
||
March 2020
|
|
1
|
|
Fairfax, VA
|
|
83,130
|
|
22,200
|
|
|
4,820
|
|
||
|
|
6
|
|
|
|
734,784
|
|
$
|
85,363
|
|
|
$
|
10,822
|
|
(1)
|
Gross sales price is equal to the gross contract price, includes purchase price adjustments, if any, and excludes closing costs.
|
|
|
|
|
OPI Carrying Value of Investments at
|
|
|
|
|
|
|
|||||||
Joint Venture
|
|
OPI Ownership
|
|
June 30,
2020 |
|
December 31, 2019
|
|
Number of Properties
|
|
Location
|
|
Rentable Square Feet
|
|||||
Prosperity Metro Plaza
|
|
51%
|
|
$
|
22,304
|
|
|
$
|
22,483
|
|
|
2
|
|
Fairfax, VA
|
|
328,655
|
|
1750 H Street, NW
|
|
50%
|
|
16,763
|
|
|
17,273
|
|
|
1
|
|
Washington, D.C.
|
|
115,411
|
|
||
Total
|
|
|
|
$
|
39,067
|
|
|
$
|
39,756
|
|
|
3
|
|
|
|
444,066
|
|
Joint Venture
|
|
Interest Rate (1)
|
|
Maturity Date
|
|
Principal Balance at June 30, 2020 and December 31, 2019 (2)
|
||
Prosperity Metro Plaza
|
|
4.09%
|
|
12/1/2029
|
|
$
|
50,000
|
|
1750 H Street, NW
|
|
3.69%
|
|
8/1/2024
|
|
32,000
|
|
|
Weighted Average / Total
|
|
3.93%
|
|
|
|
$
|
82,000
|
|
(1)
|
Includes the effect of mark to market purchase accounting.
|
(2)
|
Reflects the entire balance of the debt secured by the properties and is not adjusted to reflect the interests in the joint ventures we do not own. None of the debt is recourse to us.
|
|
|
As of June 30, 2020
|
|
As of December 31, 2019
|
||||||||||||
Financial Instrument
|
|
Carrying Value (1)
|
|
Fair Value
|
|
Carrying Value (1)
|
|
Fair Value
|
||||||||
Senior unsecured notes, 3.60% interest rate, due in 2020 (2)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
399,934
|
|
|
$
|
400,048
|
|
Senior unsecured notes, 4.00% interest rate, due in 2022
|
|
298,118
|
|
|
299,565
|
|
|
297,657
|
|
|
306,096
|
|
||||
Senior unsecured notes, 4.15% interest rate, due in 2022
|
|
298,324
|
|
|
299,199
|
|
|
297,795
|
|
|
307,221
|
|
||||
Senior unsecured notes, 4.25% interest rate, due in 2024
|
|
341,159
|
|
|
347,069
|
|
|
340,018
|
|
|
364,602
|
|
||||
Senior unsecured notes, 4.50% interest rate, due in 2025
|
|
382,919
|
|
|
399,232
|
|
|
381,055
|
|
|
419,578
|
|
||||
Senior unsecured notes, 5.875% interest rate, due in 2046
|
|
301,091
|
|
|
288,176
|
|
|
300,920
|
|
|
322,028
|
|
||||
Senior unsecured notes, 6.375% interest rate, due in 2050 (3)
|
|
144,776
|
|
|
147,780
|
|
|
—
|
|
|
—
|
|
||||
Mortgage notes payable (4)
|
|
210,539
|
|
|
214,129
|
|
|
323,074
|
|
|
331,675
|
|
||||
Total
|
|
$
|
1,976,926
|
|
|
$
|
1,995,150
|
|
|
$
|
2,340,453
|
|
|
$
|
2,451,248
|
|
(1)
|
Includes unamortized debt premiums, discounts and issuance costs totaling $44,870 and $45,756 as of June 30, 2020 and December 31, 2019, respectively.
|
(2)
|
These senior unsecured notes were redeemed in January 2020.
|
(3)
|
These senior unsecured notes were issued in June 2020. In July 2020, we issued an additional $12,000 of these senior unsecured notes in connection with the underwriters partial exercise of their option to purchase additional notes.
|
(4)
|
Balance as of December 31, 2019 includes one mortgage note with a carrying value of $13,128 net of unamortized issuance costs totaling $38 which is classified in liabilities of properties held for sale in our condensed consolidated balance sheet. This mortgage note was secured by a property in Fairfax, VA that was sold in March 2020. The mortgage note was repaid at closing.
|
Declaration Date
|
|
Record Date
|
|
Paid Date
|
|
Distributions Per Common Share
|
|
Total Distributions
|
||||
January 16, 2020
|
|
January 27, 2020
|
|
February 20, 2020
|
|
$
|
0.55
|
|
|
$
|
26,511
|
|
April 2, 2020
|
|
April 13, 2020
|
|
May 21, 2020
|
|
0.55
|
|
|
26,510
|
|
||
|
|
|
|
|
|
$
|
1.10
|
|
|
$
|
53,021
|
|
•
|
our tenants and their ability to withstand the current economic conditions and continue to pay us rent;
|
•
|
our operations, liquidity and capital needs and resources;
|
•
|
conducting financial modeling and sensitivity analyses;
|
•
|
actively communicating with our tenants and other key constituents and stakeholders in order to help assess market conditions, opportunities, best practices and mitigate risks and potential adverse impacts;
|
•
|
monitoring applicable states and municipalities to which we lease property and their responses to the COVID-19 pandemic and economic slowdown, including budgetary impacts; and
|
•
|
monitoring, with the assistance of counsel and other specialists, possible government relief funding sources and other programs that may be available to us or our tenants to enable us and them to operate through the current economic conditions and enhance our tenants’ ability to pay us rent.
|
•
|
$570,000 of availability under our revolving credit facility;
|
•
|
only approximately $40,000 of debt maturities until 2022; and
|
•
|
62.8% of our annualized rental income, as of June 30, 2020, derived from investment grade tenants (as described below).
|
•
|
focusing on sanitizing high touch points in common areas and restrooms;
|
•
|
shutting down certain building amenities; and
|
•
|
prudently managing the execution or deferment of tenant work orders to limit RMR LLC staff and tenant interactions at our properties.
|
•
|
deferring non-emergency work;
|
•
|
implementing energy reduction protocols for lighting and HVAC systems;
|
•
|
reducing non-essential building services and staff; and
|
•
|
reducing the frequency of trash removal.
|
•
|
installing signage throughout our properties with social distancing reminders;
|
•
|
making changes to certain building HVAC systems and equipment, including adjusting outdoor air control programs to increase the amount of outside air delivered to interior spaces and to adjust control sequences to maintain space relative humidity in order to help minimize the concentration of the virus;
|
•
|
flushing domestic water systems to prepare for re-occupancy;
|
•
|
performing service calls and preventative maintenance after business hours to limit social interactions;
|
•
|
requiring vendors to follow best practices under COVID-19 pandemic conditions, including providing RMR LLC with documented preventative measures for the vendors’ employees and requiring vendors’ staff to wear appropriate personal protective equipment when working at our properties; and
|
•
|
altering cleaning schedules to perform vacuuming at times intended to reduce the potential airborne spread of the virus.
|
•
|
the duration and severity of the negative economic impact;
|
•
|
the strength and sustainability of any economic recovery;
|
•
|
the timing and process for how federal, state and local governments and other market participants may oversee and conduct the return of economic activity when the COVID-19 pandemic abates, such as what continuing restrictions and protective measures may remain in place or be added and what restrictions and protective measures may be lifted or reduced in order to foster a return of increased economic activity in the United States; and
|
•
|
whether, following a recommencing of more normal levels of economic activities, the United States or other countries experience any “second wave” of COVID-19 infection outbreaks and, if so, the responses of governments, businesses and the general public to those events.
|
|
|
All Properties (1)
|
|
Comparable Properties (2)
|
||||||||
|
|
June 30,
|
|
June 30,
|
||||||||
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
||||
Total properties (3)
|
|
184
|
|
|
209
|
|
|
182
|
|
|
182
|
|
Total rentable square feet (4)
|
|
24,909
|
|
|
29,309
|
|
|
24,622
|
|
|
24,711
|
|
Percent leased (5)
|
|
91.7
|
%
|
|
91.6
|
%
|
|
92.8
|
%
|
|
93.4
|
%
|
(1)
|
Based on properties we owned on June 30, 2020 and 2019, respectively.
|
(2)
|
Based on properties we owned continuously since January 1, 2019; excludes properties classified as held for sale and properties undergoing significant redevelopment, if any, and three properties owned by two unconsolidated joint ventures in which we own 51% and 50% interests.
|
(3)
|
Includes one leasable land parcel.
|
(4)
|
Subject to changes when space is remeasured or reconfigured for tenants.
|
(5)
|
Percent leased includes (i) space being fitted out for tenant occupancy pursuant to our lease agreements, if any, and (ii) space which is leased, but is not occupied or is being offered for sublease by tenants, if any, as of the measurement date.
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
||||||||
Average effective rental rate per square foot (1):
|
|
|
|
|
|
|
|
|
||||||||
All properties (2)
|
|
$
|
25.71
|
|
|
$
|
26.37
|
|
|
$
|
25.87
|
|
|
$
|
26.20
|
|
Comparable properties (3)
|
|
$
|
25.77
|
|
|
$
|
25.87
|
|
|
$
|
25.93
|
|
|
$
|
25.98
|
|
(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 June 30, 2020 and 2019, respectively.
|
(3)
|
Based on properties we owned continuously since April 1, 2019 and January 1, 2019, respectively; excludes properties classified as held for sale and properties undergoing significant redevelopment, if any, and three properties owned by two unconsolidated joint ventures in which we own 51% and 50% interests.
|
|
|
Three Months Ended June 30, 2020
|
|
Six Months Ended June 30, 2020
|
||||||||||||||
|
|
Leased
|
|
Available for Lease
|
|
Total
|
|
Leased
|
|
Available for Lease
|
|
Total
|
||||||
Beginning of period
|
|
22,789
|
|
|
2,117
|
|
|
24,906
|
|
|
23,761
|
|
|
1,965
|
|
|
25,726
|
|
Changes resulting from:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition of properties
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
13
|
|
|
13
|
|
Disposition of properties
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(693
|
)
|
|
(42
|
)
|
|
(735
|
)
|
Lease expirations
|
|
(590
|
)
|
|
590
|
|
|
—
|
|
|
(1,458
|
)
|
|
1,458
|
|
|
—
|
|
Lease renewals (1)
|
|
564
|
|
|
(564
|
)
|
|
—
|
|
|
1,072
|
|
|
(1,072
|
)
|
|
—
|
|
New leases (1)
|
|
78
|
|
|
(78
|
)
|
|
—
|
|
|
159
|
|
|
(159
|
)
|
|
—
|
|
Remeasurements (2)
|
|
(2
|
)
|
|
5
|
|
|
3
|
|
|
(2
|
)
|
|
(93
|
)
|
|
(95
|
)
|
End of period
|
|
22,839
|
|
|
2,070
|
|
|
24,909
|
|
|
22,839
|
|
|
2,070
|
|
|
24,909
|
|
(1)
|
Based on leases entered during the three and six months ended June 30, 2020.
|
(2)
|
Rentable square feet are subject to changes when space is remeasured or reconfigured for tenants.
|
|
|
Three Months Ended June 30, 2020
|
||||||||||
|
|
New Leases
|
|
Renewals
|
|
Total
|
||||||
Rentable square feet leased
|
|
78
|
|
|
564
|
|
|
642
|
|
|||
Tenant leasing costs and concession commitments (1)
|
|
$
|
8,158
|
|
|
$
|
8,371
|
|
|
$
|
16,529
|
|
Tenant leasing costs and concession commitments per rentable square foot (1)
|
|
$
|
104.83
|
|
|
$
|
14.85
|
|
|
$
|
25.76
|
|
Weighted (by square feet) average lease term (years)
|
|
12.8
|
|
|
5.1
|
|
|
6.1
|
|
|||
Total leasing costs and concession commitments per rentable square foot per year (1)
|
|
$
|
8.16
|
|
|
$
|
2.90
|
|
|
$
|
4.25
|
|
|
|
Six Months Ended June 30, 2020
|
||||||||||
|
|
New Leases
|
|
Renewals
|
|
Total
|
||||||
Rentable square feet leased
|
|
159
|
|
|
1,072
|
|
|
1,231
|
|
|||
Tenant leasing costs and concession commitments (1)
|
|
$
|
14,318
|
|
|
$
|
15,141
|
|
|
$
|
29,459
|
|
Tenant leasing costs and concession commitments per rentable square foot (1)
|
|
$
|
90.11
|
|
|
$
|
14.12
|
|
|
$
|
23.93
|
|
Weighted (by square feet) average lease term (years)
|
|
11.8
|
|
|
4.5
|
|
|
5.4
|
|
|||
Total leasing costs and concession commitments per rentable square foot per year (1)
|
|
$
|
7.64
|
|
|
$
|
3.14
|
|
|
$
|
4.40
|
|
(1)
|
Includes commitments made for leasing expenditures and concessions, such as tenant improvements, leasing commissions, tenant reimbursements and free rent.
|
|
|
Three Months Ended June 30, 2020
|
|
Six Months Ended June 30, 2020
|
||||||||||||||||||
|
|
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
|
|
$
|
30.82
|
|
|
$
|
30.29
|
|
|
50
|
|
|
$
|
29.03
|
|
|
$
|
28.07
|
|
|
150
|
|
Lease renewals
|
|
$
|
32.48
|
|
|
$
|
32.85
|
|
|
280
|
|
|
$
|
37.32
|
|
|
$
|
38.25
|
|
|
848
|
|
Total leasing activity
|
|
$
|
32.23
|
|
|
$
|
32.46
|
|
|
330
|
|
|
$
|
36.07
|
|
|
$
|
36.72
|
|
|
998
|
|
(1)
|
Effective rental rate includes 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 excluding lease value amortization.
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
||||||||
Tenant improvements (1)
|
|
$
|
7,764
|
|
|
$
|
7,123
|
|
|
$
|
10,731
|
|
|
$
|
12,035
|
|
Leasing costs (2)
|
|
4,157
|
|
|
6,760
|
|
|
8,303
|
|
|
14,085
|
|
||||
Building improvements (3)
|
|
10,005
|
|
|
7,317
|
|
|
19,235
|
|
|
11,625
|
|
||||
Recurring capital expenditures
|
|
21,926
|
|
|
21,200
|
|
|
38,269
|
|
|
37,745
|
|
||||
Development, redevelopment and other activities (4)
|
|
2,578
|
|
|
959
|
|
|
5,739
|
|
|
1,185
|
|
||||
Total capital expenditures
|
|
$
|
24,504
|
|
|
$
|
22,159
|
|
|
$
|
44,008
|
|
|
$
|
38,930
|
|
(1)
|
Tenant improvements include capital expenditures used to improve tenants’ space or amounts paid directly to tenants to improve their space.
|
(2)
|
Leasing costs include leasing related costs, such as brokerage commissions and other tenant inducements.
|
(3)
|
Building improvements generally include expenditures to replace obsolete building components and expenditures that extend the useful life of existing assets.
|
(4)
|
Development, redevelopment and other activities generally include capital expenditure projects that reposition a property or result in new sources of revenue.
|
(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 June 30, 2020, tenants occupying approximately 11.5% of our rentable square feet and responsible for approximately 8.6% of our annualized rental income as of June 30, 2020 currently have exercisable rights to terminate their leases before the stated terms of their leases expire. Also, in 2020, 2021, 2022, 2023, 2024, 2025, 2026, 2027, 2028, 2030 and 2035, early termination rights become exercisable by other tenants who currently occupy an additional approximately 2.3%, 1.6%, 2.3%, 1.3%, 1.0%, 2.2%, 1.0%, 0.5%, 1.1%, 0.1% and 0.1% of our rentable square feet, respectively, and contribute an additional approximately 2.8%, 1.8%, 2.4%, 1.5%, 1.6%, 3.9%, 1.3%, 0.7%, 1.4%, 0.2% and 0.1% of our annualized rental income, respectively, as of June 30, 2020. In addition, as of June 30, 2020, pursuant to leases with 14 of our tenants, these tenants have rights to terminate their leases if their respective legislature or other funding authority does not appropriate rent amounts in their respective annual budgets. These 14 tenants occupy approximately 5.4% of our rentable square feet and contribute approximately 5.8% of our annualized rental income as of June 30, 2020.
|
(2)
|
Leased square feet is pursuant to leases existing as of June 30, 2020, 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.
|
|
Tenant
|
|
Credit Rating
|
|
Annualized Rental Income
|
|
% of Total Annualized Rental Income
|
||||
1
|
|
U.S. Government
|
|
Investment Grade
|
|
$
|
146,308
|
|
|
25.2
|
%
|
2
|
|
Shook, Hardy & Bacon L.L.P.
|
|
Not Rated
|
|
19,199
|
|
|
3.3
|
%
|
|
3
|
|
State of California
|
|
Investment Grade
|
|
19,144
|
|
|
3.3
|
%
|
|
4
|
|
Bank of America Corporation
|
|
Investment Grade
|
|
16,520
|
|
|
2.8
|
%
|
|
5
|
|
WestRock Company
|
|
Investment Grade
|
|
12,864
|
|
|
2.2
|
%
|
|
6
|
|
F5 Networks, Inc.
|
|
Not Rated
|
|
12,777
|
|
|
2.2
|
%
|
|
7
|
|
CareFirst Inc.
|
|
Non Investment Grade
|
|
11,684
|
|
|
2.0
|
%
|
|
8
|
|
Northrop Grumman Corporation
|
|
Investment Grade
|
|
11,320
|
|
|
2.0
|
%
|
|
9
|
|
Tyson Foods, Inc.
|
|
Investment Grade
|
|
11,011
|
|
|
1.9
|
%
|
|
10
|
|
Commonwealth of Massachusetts
|
|
Investment Grade
|
|
9,769
|
|
|
1.7
|
%
|
|
11
|
|
Micro Focus International plc
|
|
Non Investment Grade
|
|
8,710
|
|
|
1.5
|
%
|
|
12
|
|
CommScope Holding Company Inc
|
|
Non Investment Grade
|
|
8,097
|
|
|
1.4
|
%
|
|
13
|
|
Technicolor SA
|
|
Non Investment Grade
|
|
7,856
|
|
|
1.4
|
%
|
|
14
|
|
State of Georgia
|
|
Investment Grade
|
|
7,173
|
|
|
1.2
|
%
|
|
15
|
|
PNC Bank
|
|
Investment Grade
|
|
6,902
|
|
|
1.2
|
%
|
|
16
|
|
ServiceNow, Inc.
|
|
Not Rated
|
|
6,481
|
|
|
1.1
|
%
|
|
17
|
|
Allstate Insurance Co.
|
|
Investment Grade
|
|
6,473
|
|
|
1.1
|
%
|
|
18
|
|
Compass Group plc
|
|
Investment Grade
|
|
6,399
|
|
|
1.1
|
%
|
|
19
|
|
Automatic Data Processing, Inc.
|
|
Investment Grade
|
|
6,047
|
|
|
1.0
|
%
|
|
20
|
|
Church & Dwight Co., Inc.
|
|
Investment Grade
|
|
6,019
|
|
|
1.0
|
%
|
|
21
|
|
Tailored Brands, Inc.
|
|
Non Investment Grade
|
|
5,898
|
|
|
1.0
|
%
|
|
|
Total
|
|
|
|
$
|
346,651
|
|
|
59.6
|
%
|
|
|
|
|
|
|
|
|
|
|
Non-Comparable
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
Properties Results
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
|
Comparable Properties Results (1)
|
|
Three Months Ended
|
|
Consolidated Results
|
||||||||||||||||||||||||||||||||
|
|
Three Months Ended June 30,
|
|
June 30,
|
|
Three Months Ended June 30,
|
||||||||||||||||||||||||||||||||
|
|
|
|
|
|
$
|
|
%
|
|
|
|
|
|
|
|
|
|
$
|
|
%
|
||||||||||||||||||
|
|
2020
|
|
2019
|
|
Change
|
|
Change
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
Change
|
|
Change
|
||||||||||||||||||
Rental income
|
|
$
|
145,935
|
|
|
$
|
147,567
|
|
|
$
|
(1,632
|
)
|
|
(1.1
|
%)
|
|
$
|
(332
|
)
|
|
$
|
28,465
|
|
|
$
|
145,603
|
|
|
$
|
176,032
|
|
|
$
|
(30,429
|
)
|
|
(17.3
|
%)
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Real estate taxes
|
|
15,938
|
|
|
15,860
|
|
|
78
|
|
|
0.5
|
%
|
|
(157
|
)
|
|
2,287
|
|
|
15,781
|
|
|
18,147
|
|
|
(2,366
|
)
|
|
(13.0
|
%)
|
||||||||
Utility expenses
|
|
5,055
|
|
|
6,352
|
|
|
(1,297
|
)
|
|
(20.4
|
%)
|
|
146
|
|
|
1,118
|
|
|
5,201
|
|
|
7,470
|
|
|
(2,269
|
)
|
|
(30.4
|
%)
|
||||||||
Other operating expenses
|
|
25,556
|
|
|
25,635
|
|
|
(79
|
)
|
|
(0.3
|
%)
|
|
231
|
|
|
4,057
|
|
|
25,787
|
|
|
29,692
|
|
|
(3,905
|
)
|
|
(13.2
|
%)
|
||||||||
Total operating expenses
|
|
46,549
|
|
|
47,847
|
|
|
(1,298
|
)
|
|
(2.7
|
%)
|
|
220
|
|
|
7,462
|
|
|
46,769
|
|
|
55,309
|
|
|
(8,540
|
)
|
|
(15.4
|
%)
|
||||||||
Property net operating income (2)
|
|
$
|
99,386
|
|
|
$
|
99,720
|
|
|
$
|
(334
|
)
|
|
(0.3
|
%)
|
|
$
|
(552
|
)
|
|
$
|
21,003
|
|
|
98,834
|
|
|
120,723
|
|
|
(21,889
|
)
|
|
(18.1
|
%)
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
Other expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Depreciation and amortization
|
|
64,170
|
|
|
73,913
|
|
|
(9,743
|
)
|
|
(13.2
|
%)
|
||||||||||||||||||||||||||
Loss on impairment of real estate
|
|
—
|
|
|
2,380
|
|
|
(2,380
|
)
|
|
n/m
|
|
||||||||||||||||||||||||||
Acquisition and transaction related costs
|
|
—
|
|
|
98
|
|
|
(98
|
)
|
|
n/m
|
|
||||||||||||||||||||||||||
General and administrative
|
|
7,204
|
|
|
8,744
|
|
|
(1,540
|
)
|
|
(17.6
|
%)
|
||||||||||||||||||||||||||
Total other expenses
|
|
71,374
|
|
|
85,135
|
|
|
(13,761
|
)
|
|
(16.2
|
%)
|
||||||||||||||||||||||||||
Gain (loss) on sale of real restate
|
|
66
|
|
|
(17
|
)
|
|
83
|
|
|
n/m
|
|
||||||||||||||||||||||||||
Dividend income
|
|
—
|
|
|
980
|
|
|
(980
|
)
|
|
n/m
|
|
||||||||||||||||||||||||||
Loss on equity securities
|
|
—
|
|
|
(66,135
|
)
|
|
66,135
|
|
|
n/m
|
|
||||||||||||||||||||||||||
Interest and other income
|
|
30
|
|
|
241
|
|
|
(211
|
)
|
|
(87.6
|
%)
|
||||||||||||||||||||||||||
Interest expense
|
|
(25,205
|
)
|
|
(35,348
|
)
|
|
10,143
|
|
|
(28.7
|
%)
|
||||||||||||||||||||||||||
Loss on early extinguishment of debt
|
|
(557
|
)
|
|
(71
|
)
|
|
(486
|
)
|
|
n/m
|
|
||||||||||||||||||||||||||
Income (loss) before income tax (expense) benefit and equity in net losses of investees
|
|
1,794
|
|
|
(64,762
|
)
|
|
66,556
|
|
|
102.8
|
%
|
||||||||||||||||||||||||||
Income tax (expense) benefit
|
|
(235
|
)
|
|
130
|
|
|
(365
|
)
|
|
n/m
|
|
||||||||||||||||||||||||||
Equity in net losses of investees
|
|
(260
|
)
|
|
(142
|
)
|
|
(118
|
)
|
|
83.1
|
%
|
||||||||||||||||||||||||||
Net income (loss)
|
|
$
|
1,299
|
|
|
$
|
(64,774
|
)
|
|
$
|
66,073
|
|
|
102.0
|
%
|
|||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||
Weighted average common shares outstanding (basic and diluted)
|
|
48,106
|
|
|
48,049
|
|
|
57
|
|
|
0.1
|
%
|
||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||
Per common share amounts (basic and diluted):
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||
Net income (loss)
|
|
$
|
0.03
|
|
|
$
|
(1.35
|
)
|
|
$
|
1.38
|
|
|
102.2
|
%
|
(1)
|
Comparable properties consists of 182 properties we owned on June 30, 2020 and which we owned continuously since April 1, 2019 and excludes properties classified as held for sale and properties undergoing significant redevelopment, if any, and three properties owned by two unconsolidated joint ventures in which we own 51% and 50% interests.
|
(2)
|
Our definition of property net operating income, or Property NOI, and our reconciliation of net income (loss) to Property NOI are included below under the heading “Non-GAAP Financial Measures.”
|
|
|
|
|
|
|
|
|
|
|
Non-Comparable
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
Properties Results
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
|
Comparable Properties Results (1)
|
|
Six Months Ended
|
|
Consolidated Results
|
||||||||||||||||||||||||||||||||
|
|
Six Months Ended June 30,
|
|
June 30,
|
|
Six Months Ended June 30,
|
||||||||||||||||||||||||||||||||
|
|
|
|
|
|
$
|
|
%
|
|
|
|
|
|
|
|
|
|
$
|
|
%
|
||||||||||||||||||
|
|
2020
|
|
2019
|
|
Change
|
|
Change
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
Change
|
|
Change
|
||||||||||||||||||
Rental income
|
|
$
|
293,446
|
|
|
$
|
296,162
|
|
|
$
|
(2,716
|
)
|
|
(0.9
|
%)
|
|
$
|
2,042
|
|
|
$
|
54,647
|
|
|
$
|
295,488
|
|
|
$
|
350,809
|
|
|
$
|
(55,321
|
)
|
|
(15.8
|
%)
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Real estate taxes
|
|
32,103
|
|
|
31,887
|
|
|
216
|
|
|
0.7
|
%
|
|
485
|
|
|
4,652
|
|
|
32,588
|
|
|
36,539
|
|
|
(3,951
|
)
|
|
(10.8
|
%)
|
||||||||
Utility expenses
|
|
11,929
|
|
|
14,066
|
|
|
(2,137
|
)
|
|
(15.2
|
%)
|
|
284
|
|
|
2,785
|
|
|
12,213
|
|
|
16,851
|
|
|
(4,638
|
)
|
|
(27.5
|
%)
|
||||||||
Other operating expenses
|
|
50,662
|
|
|
51,021
|
|
|
(359
|
)
|
|
(0.7
|
%)
|
|
1,005
|
|
|
8,807
|
|
|
51,667
|
|
|
59,828
|
|
|
(8,161
|
)
|
|
(13.6
|
%)
|
||||||||
Total operating expenses
|
|
94,694
|
|
|
96,974
|
|
|
(2,280
|
)
|
|
(2.4
|
%)
|
|
1,774
|
|
|
16,244
|
|
|
96,468
|
|
|
113,218
|
|
|
(16,750
|
)
|
|
(14.8
|
%)
|
||||||||
Property NOI (2)
|
|
$
|
198,752
|
|
|
$
|
199,188
|
|
|
$
|
(436
|
)
|
|
(0.2
|
%)
|
|
$
|
268
|
|
|
$
|
38,403
|
|
|
199,020
|
|
|
237,591
|
|
|
(38,571
|
)
|
|
(16.2
|
%)
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
Other expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Depreciation and amortization
|
127,113
|
|
|
151,434
|
|
|
(24,321
|
)
|
|
(16.1
|
%)
|
|||||||||||||||||||||||||||
Loss on impairment of real estate
|
—
|
|
|
5,584
|
|
|
(5,584
|
)
|
|
n/m
|
|
|||||||||||||||||||||||||||
Acquisition and transaction related costs
|
—
|
|
|
682
|
|
|
(682
|
)
|
|
n/m
|
|
|||||||||||||||||||||||||||
General and administrative
|
14,313
|
|
|
17,467
|
|
|
(3,154
|
)
|
|
(18.1
|
%)
|
|||||||||||||||||||||||||||
Total other expenses
|
141,426
|
|
|
175,167
|
|
|
(33,741
|
)
|
|
(19.3
|
%)
|
|||||||||||||||||||||||||||
Gain on sale of real estate
|
10,822
|
|
|
22,075
|
|
|
(11,253
|
)
|
|
(51.0
|
%)
|
|||||||||||||||||||||||||||
Dividend income
|
—
|
|
|
1,960
|
|
|
(1,960
|
)
|
|
n/m
|
|
|||||||||||||||||||||||||||
Loss on equity securities
|
—
|
|
|
(44,007
|
)
|
|
44,007
|
|
|
n/m
|
|
|||||||||||||||||||||||||||
Interest and other income
|
736
|
|
|
489
|
|
|
247
|
|
|
50.5
|
%
|
|||||||||||||||||||||||||||
Interest expense
|
(52,364
|
)
|
|
(72,481
|
)
|
|
20,117
|
|
|
(27.8
|
%)
|
|||||||||||||||||||||||||||
Loss on early extinguishment of debt
|
(3,839
|
)
|
|
(485
|
)
|
|
(3,354
|
)
|
|
n/m
|
|
|||||||||||||||||||||||||||
Income (loss) before income tax expense and equity in net losses of investees
|
12,949
|
|
|
(30,025
|
)
|
|
42,974
|
|
|
143.1
|
%
|
|||||||||||||||||||||||||||
Income tax expense
|
(274
|
)
|
|
(353
|
)
|
|
79
|
|
|
(22.4
|
%)
|
|||||||||||||||||||||||||||
Equity in net losses of investees
|
(536
|
)
|
|
(377
|
)
|
|
(159
|
)
|
|
42.2
|
%
|
|||||||||||||||||||||||||||
Net income (loss)
|
$
|
12,139
|
|
|
$
|
(30,755
|
)
|
|
$
|
42,894
|
|
|
139.5
|
%
|
||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||
Weighted average common shares outstanding (basic and diluted)
|
48,101
|
|
|
48,040
|
|
|
61
|
|
|
0.1
|
%
|
|||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||
Per common share amounts (basic and diluted):
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||
Net income (loss)
|
$
|
0.25
|
|
|
$
|
(0.64
|
)
|
|
$
|
0.89
|
|
|
139.1
|
%
|
(1)
|
Comparable properties consists of 182 properties we owned on June 30, 2020 and which we owned continuously since January 1, 2019 and excludes properties classified as held for sale and properties undergoing significant redevelopment, if any, and three properties owned by two unconsolidated joint ventures in which we own 51% and 50% interests.
|
(2)
|
Our definition of Property NOI and our reconciliation of net income (loss) to Property NOI are included below under the heading “Non-GAAP Financial Measures.”
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
||||||||
Net income (loss)
|
|
$
|
1,299
|
|
|
$
|
(64,774
|
)
|
|
$
|
12,139
|
|
|
$
|
(30,755
|
)
|
Equity in net losses of investees
|
|
260
|
|
|
142
|
|
|
536
|
|
|
377
|
|
||||
Income tax expense (benefit)
|
|
235
|
|
|
(130
|
)
|
|
274
|
|
|
353
|
|
||||
Income before income tax expense (benefit) and equity in net losses of investees
|
|
1,794
|
|
|
(64,762
|
)
|
|
12,949
|
|
|
(30,025
|
)
|
||||
Loss on early extinguishment of debt
|
|
557
|
|
|
71
|
|
|
3,839
|
|
|
485
|
|
||||
Interest expense
|
|
25,205
|
|
|
35,348
|
|
|
52,364
|
|
|
72,481
|
|
||||
Interest and other income
|
|
(30
|
)
|
|
(241
|
)
|
|
(736
|
)
|
|
(489
|
)
|
||||
Loss on equity securities
|
|
—
|
|
|
66,135
|
|
|
—
|
|
|
44,007
|
|
||||
Dividend income
|
|
—
|
|
|
(980
|
)
|
|
—
|
|
|
(1,960
|
)
|
||||
(Gain) loss on sale of real estate
|
|
(66
|
)
|
|
17
|
|
|
(10,822
|
)
|
|
(22,075
|
)
|
||||
General and administrative
|
|
7,204
|
|
|
8,744
|
|
|
14,313
|
|
|
17,467
|
|
||||
Acquisition and transaction related costs
|
|
—
|
|
|
98
|
|
|
—
|
|
|
682
|
|
||||
Loss on impairment of real estate
|
|
—
|
|
|
2,380
|
|
|
—
|
|
|
5,584
|
|
||||
Depreciation and amortization
|
|
64,170
|
|
|
73,913
|
|
|
127,113
|
|
|
151,434
|
|
||||
Property NOI
|
|
$
|
98,834
|
|
|
$
|
120,723
|
|
|
$
|
199,020
|
|
|
$
|
237,591
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
||||||||
Net income (loss)
|
|
$
|
1,299
|
|
|
$
|
(64,774
|
)
|
|
$
|
12,139
|
|
|
$
|
(30,755
|
)
|
Add (less): Depreciation and amortization:
|
|
|
|
|
|
|
|
|
|
|||||||
Consolidated properties
|
|
64,170
|
|
|
73,913
|
|
|
127,113
|
|
|
151,434
|
|
||||
Unconsolidated joint venture properties
|
|
1,237
|
|
|
1,410
|
|
|
2,478
|
|
|
3,161
|
|
||||
Loss on impairment of real estate
|
|
—
|
|
|
2,380
|
|
|
—
|
|
|
5,584
|
|
||||
(Gain) loss on sale of real estate
|
|
(66
|
)
|
|
17
|
|
|
(10,822
|
)
|
|
(22,075
|
)
|
||||
Loss on equity securities
|
|
—
|
|
|
66,135
|
|
|
—
|
|
|
44,007
|
|
||||
FFO
|
|
66,640
|
|
|
79,081
|
|
|
130,908
|
|
|
151,356
|
|
||||
Add (less): Acquisition and transaction related costs
|
|
—
|
|
|
98
|
|
|
—
|
|
|
682
|
|
||||
Loss on early extinguishment of debt
|
|
557
|
|
|
71
|
|
|
3,839
|
|
|
485
|
|
||||
Normalized FFO
|
|
$
|
67,197
|
|
|
$
|
79,250
|
|
|
$
|
134,747
|
|
|
$
|
152,523
|
|
|
|
|
|
|
|
|
|
|
||||||||
FFO per common share (basic and diluted)
|
|
$
|
1.39
|
|
|
$
|
1.65
|
|
|
$
|
2.72
|
|
|
$
|
3.15
|
|
Normalized FFO per common share (basic and diluted)
|
|
$
|
1.40
|
|
|
$
|
1.65
|
|
|
$
|
2.80
|
|
|
$
|
3.17
|
|
•
|
our ability to collect rent from our tenants;
|
•
|
our ability to successfully sell properties that we market for sale; and
|
•
|
our ability to purchase additional properties which produce cash flows from operations in excess of our cost of acquisition capital and property operating expenses and capital expenses.
|
Year
|
|
Debt Maturities
|
||
2020
|
|
$
|
40,953
|
|
2021
|
|
1,541
|
|
|
2022
|
|
625,518
|
|
|
2023
|
|
143,784
|
|
|
2024
|
|
350,000
|
|
|
2025 and thereafter
|
|
860,000
|
|
|
Total
|
|
$
|
2,021,796
|
|
Debt
|
|
Principal Balance (1)
|
|
Annual Interest Rate (1)
|
|
Annual Interest Expense (1)
|
|
Maturity
|
|
Interest Payments Due
|
||||
Senior unsecured notes
|
|
$
|
300,000
|
|
|
4.150%
|
|
$
|
12,450
|
|
|
2022
|
|
Semi-annually
|
Senior unsecured notes
|
|
300,000
|
|
|
4.000%
|
|
12,000
|
|
|
2022
|
|
Semi-annually
|
||
Senior unsecured notes
|
|
350,000
|
|
|
4.250%
|
|
14,875
|
|
|
2024
|
|
Semi-annually
|
||
Senior unsecured notes
|
|
400,000
|
|
|
4.500%
|
|
18,000
|
|
|
2025
|
|
Semi-annually
|
||
Senior unsecured notes
|
|
310,000
|
|
|
5.875%
|
|
18,213
|
|
|
2046
|
|
Quarterly
|
||
Senior unsecured notes (2)
|
|
150,000
|
|
|
6.375%
|
|
9,563
|
|
|
2050
|
|
Quarterly
|
||
Mortgage note (one property in Philadelphia, PA)
|
|
39,698
|
|
|
2.173%
|
|
863
|
|
|
2020
|
|
Monthly
|
||
Mortgage note (one property in Lakewood, CO)
|
|
1,030
|
|
|
8.150%
|
|
84
|
|
|
2021
|
|
Monthly
|
||
Mortgage note (one property in Washington, D.C.)
|
|
26,167
|
|
|
4.220%
|
|
1,104
|
|
|
2022
|
|
Monthly
|
||
Mortgage note (three properties in Seattle, WA)
|
|
71,000
|
|
|
3.550%
|
|
2,521
|
|
|
2023
|
|
Monthly
|
||
Mortgage note (one property in Chicago, IL)
|
|
50,000
|
|
|
3.700%
|
|
1,850
|
|
|
2023
|
|
Monthly
|
||
Mortgage note (one property in Washington, D.C.)
|
|
23,901
|
|
|
4.800%
|
|
1,147
|
|
|
2023
|
|
Monthly
|
||
Total
|
|
$
|
2,021,796
|
|
|
|
|
$
|
92,670
|
|
|
|
|
|
(1)
|
The principal balances and interest rates are the amounts stated in the applicable contracts. In accordance with GAAP, our carrying values and recorded interest expense may differ from these amounts because of market conditions at the time we issued or assumed these debts. For more information, see Notes 7 and 8 to the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.
|
(2)
|
In July 2020, we issued an additional $12,000 of these senior unsecured notes in connection with the underwriters partial exercise of their option to purchase additional notes.
|
Debt
|
|
Our JV Ownership Interest
|
|
Principal Balance (1)(2)
|
|
Annual Interest Rate (1)
|
|
Annual Interest Expense (1)
|
|
Maturity
|
|
Interest Payments Due
|
||||
Mortgage note (two properties in Fairfax, VA)
|
|
51%
|
|
$
|
50,000
|
|
|
4.09%
|
|
$
|
2,045
|
|
|
2029
|
|
Monthly
|
Mortgage note (one property in Washington, D.C.)
|
|
50%
|
|
32,000
|
|
|
3.69%
|
|
1,181
|
|
|
2024
|
|
Monthly
|
||
Total
|
|
|
|
$
|
82,000
|
|
|
|
|
$
|
3,226
|
|
|
|
|
|
(1)
|
The principal balances and interest rates are the amounts stated in the applicable contracts. In accordance with GAAP, the joint ventures’ recorded interest expense may differ from these amounts because of market conditions at the time they incurred the debt.
|
(2)
|
Reflects the entire balance of the debt secured by the properties and is not adjusted to reflect the interests in the joint ventures we do not own.
|
|
|
Impact of Changes in Interest Rates
|
|||||||||||||
|
|
Annual Interest Rate (1)
|
|
Outstanding Debt
|
|
Total Interest Expense Per Year
|
|
Annual Earnings Per Share Impact (2)
|
|||||||
At June 30, 2020
|
|
1.2
|
%
|
|
$
|
200,000
|
|
|
$
|
2,400
|
|
|
$
|
0.05
|
|
One percentage point increase
|
|
2.2
|
%
|
|
$
|
200,000
|
|
|
$
|
4,400
|
|
|
$
|
0.09
|
|
(1)
|
Weighted based on the interest rate and outstanding borrowings under our revolving credit facility as of June 30, 2020.
|
(2)
|
Based on the weighted average shares outstanding (diluted) for the six months ended June 30, 2020.
|
|
|
Impact of an Increase in Interest Rates
|
|||||||||||||
|
|
Annual Interest Rate (1)
|
|
Outstanding Debt
|
|
Total Interest Expense Per Year
|
|
Annual Earnings Per Share Impact (2)
|
|||||||
At June 30, 2020
|
|
1.2
|
%
|
|
$
|
750,000
|
|
|
$
|
9,000
|
|
|
$
|
0.19
|
|
One percentage point increase
|
|
2.2
|
%
|
|
$
|
750,000
|
|
|
$
|
16,500
|
|
|
$
|
0.34
|
|
(1)
|
Weighted based on the interest rate and outstanding borrowings under our revolving credit facility as of June 30, 2020.
|
(2)
|
Based on the weighted average shares outstanding (diluted) for the six months ended June 30, 2020.
|
•
|
The duration and severity of the economic impact resulting from the COVID-19 pandemic and its impact on us and our tenants,
|
•
|
The likelihood and extent to which our tenants will be negatively impacted by the COVID-19 pandemic and its aftermath and be able and willing to pay us rent,
|
•
|
Our expectations about the financial strength of our tenants,
|
•
|
Our expectations that the diversity and other characteristics of our property portfolio and our financial resources will result in our ability to successfully withstand the current economic conditions,
|
•
|
Our sales and acquisitions of properties,
|
•
|
Our ability to compete for acquisitions and tenancies effectively,
|
•
|
The likelihood that our tenants will pay rent or be negatively affected by cyclical economic conditions or government budget constraints,
|
•
|
The likelihood that our tenants will renew or extend their leases and not exercise early termination options pursuant to their leases or that we will obtain replacement tenants on terms as favorable to us as our prior leases,
|
•
|
The likelihood that our rents will increase when we renew or extend our leases or enter new leases,
|
•
|
The expectation that, as a result of the COVID-19 pandemic, leasing activity may continue to slow, but overall tenant retention levels may increase,
|
•
|
Our belief that we are in a position to opportunistically recycle and deploy capital during 2020,
|
•
|
Our ability to pay distributions to our shareholders and to increase the amount of such distributions,
|
•
|
Our expectations regarding our future financial performance including FFO, Normalized FFO, Property NOI, and cash basis NOI,
|
•
|
Our policies and plans regarding investments, financings and dispositions,
|
•
|
Our expectations regarding occupancy at our properties,
|
•
|
The future availability of borrowings under our revolving credit facility,
|
•
|
Our expectation that there will be opportunities for us to acquire, and that we will acquire, additional properties primarily leased to single tenants and tenants with high credit quality characteristics like government entities,
|
•
|
Our expectations regarding demand for leased space,
|
•
|
Our expectations regarding capital expenditures,
|
•
|
Our ability to raise debt or equity capital,
|
•
|
Our ability to pay interest on and principal of our debt,
|
•
|
Our ability to appropriately balance our use of debt and equity capital,
|
•
|
Our ability to successfully execute our capital recycling program,
|
•
|
Our ability to maintain sufficient liquidity during the duration of the COVID-19 pandemic and resulting economic downturn,
|
•
|
Our credit ratings,
|
•
|
Our expectation that we benefit from our relationships with RMR LLC and RMR Inc.,
|
•
|
The credit qualities of our tenants,
|
•
|
Our qualification for taxation as a REIT,
|
•
|
Changes in federal or state tax laws, and
|
•
|
Other matters.
|
•
|
The impact of conditions in the economy, including the COVID-19 pandemic and its aftermath, and the capital markets on us and our tenants,
|
•
|
Competition within the real estate industry, particularly in those markets in which our properties are located,
|
•
|
The impact of changes in the real estate needs and financial conditions of our tenants,
|
•
|
Compliance with, and changes to, federal, state and local laws and regulations, accounting rules, tax laws and similar matters,
|
•
|
The impact of any U.S. government shutdown on our ability to collect rents or pay our operating expenses, debt obligations and distributions to shareholders on a timely basis,
|
•
|
Actual and potential conflicts of interest with our related parties, including our Managing Trustees, RMR LLC, RMR Inc., and others affiliated with them,
|
•
|
Limitations imposed on our business and our ability to satisfy complex rules in order for us to maintain our qualification for taxation as a REIT for U.S. federal income tax purposes, and
|
•
|
Acts of terrorism, outbreaks of pandemics, including the COVID-19 pandemic, or other manmade or natural disasters beyond our control.
|
•
|
Our ability to make future distributions to our shareholders and to make payments of principal and interest on our indebtedness depends upon a number of factors, including our receipt of rent from our tenants, our future earnings, the capital costs we incur to lease our properties and our working capital requirements. We may be unable to pay our debt obligations or to maintain our current rate of distributions on our common shares and future distributions may be reduced or eliminated,
|
•
|
Our ability to grow our business and increase our distributions depends in large part upon our ability to buy properties and lease them for rents, less their property operating costs, that exceed our capital costs. We may be unable to identify properties that we want to acquire, and we may fail to reach agreement with the sellers and complete the purchases of any properties we want to acquire. In addition, any properties we may acquire may not provide us with rents less property operating costs that exceed our capital costs or achieve our expected returns,
|
•
|
We may fail to maintain, or we may elect to change, our target payout ratio for distributions to shareholders of 75% of cash available for distribution. Further, our Board of Trustees considers many factors when setting distribution rates including our historical and projected income, Normalized FFO, cash available for distribution, the then current and expected needs and availability of cash to pay our obligations and fund our investments, distributions which may be required to be paid to maintain our qualification for taxation as a REIT and other factors deemed relevant by our Board of Trustees. Accordingly, future distribution rates may be increased or decreased and there is no assurance as to the rate at which future distributions will be paid,
|
•
|
We plan to selectively sell certain properties from time to time to fund future acquisitions and to strategically update, rebalance and reposition our investment portfolio, which we refer to as our capital recycling program. We cannot be sure we will sell any of these properties or what the terms of any sales may be nor that we will acquire replacement properties that improve our asset quality or our ability to increase our distributions to shareholders,
|
•
|
We may not succeed in maintaining our leverage consistent with our current investment grade ratings or levels that the market or credit rating agencies believe are appropriate,
|
•
|
Some of our tenants may not renew expiring leases, and we may be unable to obtain new tenants to maintain or increase the historical occupancy rates of, or rents from, our properties,
|
•
|
Some government tenants may exercise their rights to vacate their space before the stated expirations of their leases, and we may be unable to obtain new tenants to maintain the historical occupancy rates of, or rents from, our properties,
|
•
|
Rents that we can charge at our properties may decline upon renewals or expirations because of changing market conditions or otherwise,
|
•
|
Leasing for some of our properties depends on a single tenant and we may be adversely affected by the bankruptcy, insolvency, a downturn of business or a lease termination of a single tenant,
|
•
|
Our belief that there is a likelihood that tenants may renew or extend our leases prior to their expirations whenever they have made significant investments in the leased properties, or because those properties may be of strategic importance to them, may not be realized,
|
•
|
Our belief that our overall tenant retention levels may increase as a result of the COVID-19 pandemic may not be realized. In addition, if the COVID-19 pandemic and the current economic conditions continue for an extended period or worsen, our tenants may become unable to pay rent or they may elect to not renew their leases with us. Further, some of our government leases provide the tenant with certain rights to terminate their lease early. Budgetary and other fiscal pressures may result in some governmental tenants terminating their leases early or not renewing their leases. In addition, the COVID-19 pandemic has caused changes in workplace practices, including increased remote work arrangements. To the extent those practices become permanent or increased, leasing demand for office space may decline. As a result of these factors, our tenant retention levels may not increase and they could decline,
|
•
|
Our belief that we are well positioned to opportunistically recycle and deploy capital during 2020 may not be realized. We may fail to identify and execute on opportunities to deploy capital and any deployment of capital we may make may not result in the returns that we expect,
|
•
|
Our belief that the reduction in government tenant space utilization and the consolidation of government tenants into government owned real estate is substantially complete may prove misplaced if these prior trends continue or do not moderate to the extent we expect, including in response to the COVID-19 pandemic and its aftermath,
|
•
|
Our perception that recent activity suggests that the government has begun to shift its leasing strategy to include longer term leases and that the government is actively exploring 10 to 20 year lease terms at renewal, in some instances, may mistakenly imply that these activities are indicative of a trend or broader change in government leasing strategy or practices. Further, even if they may be indicative of such a trend or change, that trend or change may not be sustained by the government, including in response to the COVID-19 pandemic and its aftermath,
|
•
|
Contingencies in our acquisition and sale agreements may not be satisfied and any expected acquisitions and sales and any related lease arrangements we expect to enter may not occur, may be delayed or the terms of such transactions or arrangements may change,
|
•
|
We expect to pursue accretively growing our property portfolio. However, we may not succeed in making acquisitions that are accretive and future acquisitions could be dilutive,
|
•
|
The competitive advantages we believe we have may not in fact exist or provide us with the advantages we expect. We may fail to maintain any of these advantages or our competition may obtain or increase their competitive advantages relative to us,
|
•
|
We intend to conduct our business activities in a manner that will afford us reasonable access to capital for investment and financing activities. However, we may not succeed in this regard and we may not have reasonable access to capital,
|
•
|
Continued availability of borrowings under our revolving credit facility is subject to our satisfying certain financial covenants and other credit facility conditions that we may be unable to satisfy,
|
•
|
Actual costs under our revolving credit facility will be higher than LIBOR plus a premium because of fees and expenses associated with such debt,
|
•
|
The interest rates payable under our floating rate debt obligations depend upon our credit ratings. If our credit ratings are downgraded, our borrowing costs will increase,
|
•
|
Our ability to access debt capital and the cost of our debt capital will depend in part on our credit ratings. If our credit ratings are downgraded, we may not be able to access debt capital or the debt capital we can access may be expensive,
|
•
|
We may be unable to repay our debt obligations when they become due,
|
•
|
The maximum borrowing availability under our revolving credit facility may be increased to up to $1.95 billion in certain circumstances; however, increasing the maximum borrowing availability under our revolving credit facility is subject to our obtaining additional commitments from lenders, which may not occur,
|
•
|
We have the option to extend the maturity date of our revolving credit facility upon payment of a fee and meeting other conditions; however, the applicable conditions may not be met,
|
•
|
We may incur significant costs to prepare a property for a tenant, particularly for single tenant properties,
|
•
|
We may spend more for capital expenditures than we currently expect,
|
•
|
We may fail to obtain development rights or entitlements that we may seek for development and other projects we may wish to conduct at our properties,
|
•
|
Our existing joint venture arrangements and any other joint venture arrangements that we may enter may not be successful,
|
•
|
We believe that we are well positioned to weather the present disruptions of the COVID-19 pandemic facing the real estate industry and the economy generally. However, the full extent of the future impact of the COVID-19 pandemic is unknown and we may not realize similar or better operating results in the future,
|
•
|
We believe that the near term impact of the COVID-19 pandemic to us will not be material due to the strength of our tenant base. However, if the COVID-19 pandemic and the current economic conditions continue for an extended period of time or worsen, our tenants may be significantly adversely impacted, which may result in those tenants seeking relief from their rent obligations, their inability to pay rent, the termination of their leases or our tenants not renewing their leases or renewing their leases for less space. Therefore, the impact we experience in the near term may be worse than we currently expect and our results of operations and financial position may be negatively affected,
|
•
|
We have granted requests to some of our tenants to defer payments over, in most cases, a 12-month period commencing in September 2020. However, current market and economic conditions may deteriorate further and the rent assistance granted by us may not be sufficient to ensure that tenants will be able to meet their rent payment obligations under their leases with us, which may result in an increase in tenant defaults and terminations,
|
•
|
The business and property management agreements between us and RMR LLC have continuing 20 year terms. However, those agreements permit early termination in certain circumstances. Accordingly, we cannot be sure that these agreements will remain in effect for continuing 20 year terms,
|
•
|
We believe that our relationships with our related parties, including RMR LLC, RMR Inc., and others affiliated with them may benefit us and provide us with competitive advantages in operating and growing our business. However, the advantages we believe we may realize from these relationships may not materialize, and
|
•
|
It is difficult to accurately estimate leasing related obligations and costs of development and tenant improvement costs. Our unspent leasing related obligations and development costs may cost more and may take longer to complete than we currently expect, and we may incur increased amounts for these and similar purposes in the future.
|
•
|
continued sudden and/or severe declines in the market price of our common shares;
|
•
|
possible significant declines in the value of our properties;
|
•
|
our inability to accurately or reliably value our portfolio;
|
•
|
our inability to comply with financial covenants contained in our debt agreements that could result in our defaulting under such agreements;
|
•
|
our need to reduce or eliminate the distributions we pay to our shareholders and our need to maintain such reduction or elimination for an extended period of time;
|
•
|
our failure to pay interest and principal when due under our outstanding debt, which may result in the acceleration of payment for our outstanding debt and our possible loss of our revolving credit facilities;
|
•
|
our inability to access debt and equity capital on attractive terms, or at all;
|
•
|
increased risk of default or bankruptcy of our tenants;
|
•
|
increased risk of our tenants being unable to weather an extended cessation of normal economic activity and thereby impairing their ability to continue functioning as a going concern;
|
•
|
downgrades of our credit ratings by nationally recognized credit rating agencies;
|
•
|
our inability to sell properties we may identify for sale due to a general decline in business activity and demand for real estate transactions and, as a result, our inability to redeploy our capital into investments we believe are more beneficial to us;
|
•
|
our inability to make improvements to our properties due to a construction moratorium or decrease in available construction workers or construction activity, including required inspectors and governmental personnel for permitting and other requirements, and due to our need to maintain our liquidity; and
|
•
|
reduced economic demand resulting from mass employee layoffs or furloughs in response to governmental action taken to slow the spread of the virus that causes COVID-19, which could impact the continued viability of our tenants and the demand for office space at our properties.
|
•
|
our ability to make or sustain the rate of distributions may be adversely affected by the negative impact of the COVID-19 pandemic and its aftermath on our business, results of operations and liquidity;
|
•
|
our making of distributions is subject to compliance with restrictions contained in our credit agreement and may be subject to restrictions in future debt obligations we may incur; during the continuance of any event of default under our credit agreement, we may be limited or in some cases prohibited from making distributions to our shareholders; and
|
•
|
our distribution rates are set and reset from time to by our Board of Trustees. Our Board of Trustees considers many factors when setting distribution rates including our historical and projected income, Normalized FFO, cash available for distribution, the then current and expected needs and availability of cash to pay our obligations and fund our investments, distributions which may be required to be paid to maintain our qualification for taxation as a REIT and other factors deemed relevant by our Board of Trustees. Accordingly, future distribution rates may be increased or decreased and there is no assurance as to the rate at which future distributions will be paid.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maximum
|
|
|
|
|
|
|
|
|
|
Total Number of
|
|
|
Approximate Dollar
|
|
|
|
|
|
|
|
|
|
Shares Purchased
|
|
|
Value of Shares that
|
|
|
|
Number of
|
|
|
|
|
|
as Part of Publicly
|
|
|
May Yet Be Purchased
|
|
|
|
Shares
|
|
Average Price
|
|
|
Announced Plans
|
|
|
Under the Plans or
|
||
Calendar Month
|
|
Purchased (1)
|
|
Paid per Share
|
|
or Programs
|
|
Programs
|
||||
May 2020
|
|
525
|
|
|
$
|
26.61
|
|
|
—
|
|
$
|
—
|
June 2020
|
|
604
|
|
|
|
25.97
|
|
|
—
|
|
|
—
|
Total
|
|
1,129
|
|
|
$
|
26.27
|
|
|
—
|
|
$
|
—
|
(1)
|
These common share withholdings and purchases were made to satisfy tax withholding and payment obligations of one of our Trustees and a former officer and employee of RMR LLC in connection with awards of our common shares and the vesting of those and prior awards of common shares to them. We withheld and purchased these shares at their fair market values based upon the trading prices of our common shares at the close of trading on Nasdaq on the purchase dates.
|
Exhibit Number
|
Description
|
3.1
|
|
|
|
3.2
|
|
|
|
3.3
|
|
|
|
4.1
|
|
|
|
4.2
|
|
|
|
4.3
|
|
|
|
4.4
|
|
|
|
4.5
|
|
|
|
4.6
|
|
|
|
4.7
|
|
|
|
4.8
|
|
|
|
4.9
|
|
|
|
4.10
|
|
|
|
4.11
|
|
|
|
4.12
|
|
|
|
10.1
|
|
|
|
10.2
|
|
|
|
31.1
|
|
|
|
31.2
|
|
|
|
32.1
|
|
|
|
101.INS
|
XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
|
101.SCH
|
XBRL Taxonomy Extension Schema Document. (Filed herewith.)
|
101.CAL
|
XBRL Taxonomy Extension Calculation Linkbase Document. (Filed herewith.)
|
101.DEF
|
XBRL Taxonomy Extension Definition Linkbase Document. (Filed herewith.)
|
101.LAB
|
XBRL Taxonomy Extension Label Linkbase Document. (Filed herewith.)
|
101.PRE
|
XBRL Taxonomy Extension Presentation Linkbase Document. (Filed herewith.)
|
104
|
Cover Page Interactive Data File. (Formatted as Inline XBRL and contained in Exhibit 101.)
|
|
OFFICE PROPERTIES INCOME TRUST
|
|
|
|
|
|
|
|
|
By:
|
/s/ David M. Blackman
|
|
|
David M. Blackman
|
|
|
President and Chief Executive Officer
|
|
|
Dated: July 30, 2020
|
|
|
|
|
By:
|
/s/ Matthew C. Brown
|
|
|
Matthew C. Brown
|
|
|
Chief Financial Officer and Treasurer
|
|
|
(principal financial officer and principal accounting officer)
|
|
|
Dated: July 30, 2020
|
1.
|
I have reviewed this Quarterly Report on Form 10-Q of Office Properties Income Trust;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
|
|
Date: July 30, 2020
|
/s/ David M. Blackman
|
|
David M. Blackman
President and Chief Executive Officer
|
1.
|
I have reviewed this Quarterly Report on Form 10-Q of Office Properties Income Trust;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
|
|
Date: July 30, 2020
|
/s/ Matthew C. Brown
|
|
Matthew C. Brown
Chief Financial Officer and Treasurer
|
1)
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
|
|
|
|
|
/s/ David M. Blackman
|
|
|
David M. Blackman
President and Chief Executive Officer
|
|
|
|
|
|
|
|
|
/s/ Matthew C. Brown
|
|
|
Matthew C. Brown
Chief Financial Officer and Treasurer |