Office Properties Income Trust (OPI) risk factors, FY2024 10-K

Risks Related to Our Business

1. 01We have concluded that there is substantial doubt about our ability to continue as a going concern
2. 02As of December 31, 2024, our consolidated debt was $2.6 billion and we were fully drawn on our revolving credit facility
3. 03We have a significant amount of scheduled lease expirations in 2025 and thereafter and we may be unable to lease our properties when our leases expire
4. 04Remote and other alternative work arrangements and shifts in space utilization and other business practices may continue to reduce the demand for office leasing
5. 05We currently have a concentration of properties in the metropolitan Washington, D.C. market area and are exposed to changes in market conditions in this area
6. 06Unfavorable market and industry conditions have had, and may continue to have, a material adverse effect on our results of operations, financial condition and ability to pay distributions to our shareholders
7. 07We may experience declining rents or incur significant costs to renew our leases with current tenants or lease our properties to new tenants, and any rent increases that we do achieve may not exceed increased costs we may incur
8. 08Government budgetary pressures, policies and priorities and trends in government employment and office leasing, including elimination or reduction of government agencies and programs, remote working and other space utilization trends, may adversely impact our business
9. 09We may not succeed in selling properties we may identify for sale and any proceeds we may receive from sales we do complete may be less than expected, and we may incur losses with respect to any such sales
10. 10We may fail to comply with the terms of our debt agreements, which could adversely affect our business and prohibit us from paying distributions to our shareholders
11. 11We are exposed to risks associated with property development, redevelopment and repositioning that could adversely affect us, including our financial condition and results of operations
12. 12A prolonged U.S. government shutdown may adversely impact our operations, financial results and liquidity
13. 13We may be unable to grow our business by acquiring additional properties, and we might encounter unanticipated difficulties and expenditures relating to our acquired properties
14. 14REIT distribution requirements and limitations on our ability to access capital at reasonable costs or at all may adversely impact our ability to carry out our business plan
15. 15We face significant competition
16. 16Some tenants have the right to terminate their leases prior to their lease expiration date
17. 17Secured debt exposes us to the possibility of foreclosure, which could result in the loss of our investment in certain of our subsidiaries or in a property or group of properties or other assets that secure that debt
18. 18We face challenges from uncertainties regarding interest rates and high interest rates have significantly increased our interest expense and may otherwise materially and negatively affect us
19. 19Our credit ratings may increase our cost of capital and could otherwise materially adversely affect our business and financial condition
20. 20Ownership of real estate is subject to environmental risks and liabilities
21. 21We are subject to risks from adverse weather, natural disasters and adverse impacts from global climate change, and we incur significant costs and invest significant amounts with respect to these matters
22. 22RMR relies on information technology and systems in providing services to us, and any material failure, inadequacy, interruption or security breach of that technology or those systems could materially harm us
23. 23RMR is incorporating artificial intelligence into some of its business workflows and processes, and challenges with properly managing its use could result in reputational harm, competitive harm, legal liability, and increased regulatory costs and could adversely affect our results of operations
24. 24Sustainability initiatives, requirements and market expectations may impose additional costs and expose us to new risks
25. 25Insurance may not adequately cover our losses, and insurance costs may increase

Risks Related to Our Relationships with RMR

1. 26We are dependent upon RMR to manage our business and implement our growth strategy
2. 27RMR has broad discretion in operating our day to day business
3. 28Our management structure and agreements and relationships with RMR and RMR’s and its controlling shareholder’s relationships with others may create conflicts of interest, or the perception of such conflicts, and may restrict our investment activities
4. 29Our management agreements with RMR were not negotiated on an arm’s length basis and their fee and expense structure may not create proper incentives for RMR, which may increase the risk of an investment in our common shares
5. 30The termination of our management agreements with RMR may require us to pay a substantial termination fee, including in the case of a termination for unsatisfactory performance, which may limit our ability to end our relationship with RMR
6. 31Our management arrangements with RMR may discourage a change of control of us
7. 32We are party to transactions with related parties that may increase the risk of allegations of conflicts of interest
8. 33We may be at an increased risk for dissident shareholder activities due to perceived conflicts of interest arising from our management structure and relationships

Risks Related to Our Organization and Structure

1. 34We may change our operational, financing and investment policies without shareholder approval
2. 35Ownership limitations and certain provisions in our declaration of trust, bylaws and agreements, as well as certain provisions of Maryland law, may deter, delay or prevent a change in our control or unsolicited acquisition proposals
3. 36Our rights and the rights of our shareholders to take action against our Trustees and officers are limited
4. 37Disputes with RMR may be referred to mandatory arbitration proceedings, which follow different procedures than in-court litigation and may be more restrictive to those asserting claims than in-court litigation

Risks Related to Our Taxation

1. 38Our failure to remain qualified for taxation as a REIT under the IRC could have significant adverse consequences
2. 39Distributions to shareholders generally will not qualify for reduced tax rates applicable to “qualified dividends.”
3. 40REIT distribution requirements could adversely affect us and our shareholders
4. 41Even if we remain qualified for taxation as a REIT under the IRC, we may face other tax liabilities that reduce our cash flow
5. 42If arrangements involving one of our TRSs fail to comply as intended with the REIT qualification and taxation rules, we may fail to qualify for taxation as a REIT under the IRC or be subject to significant penalty taxes
6. 43Legislative or other actions affecting REITs could materially and adversely affect us and our shareholders

Risks Related to Our Securities

1. 44Our quarterly cash distribution rate on our common shares is currently $0.01 per common share and future distributions may remain at this level for an indefinite period or be eliminated and the form of payment could change
2. 45The Notes and the Guarantees are structurally subordinated to the payment of all indebtedness and other liabilities of our subsidiaries that do not guarantee the March 2027 Notes, the March 2029 Notes and the September 2029 Notes
3. 46The Notes, other than the March 2027 Notes, the March 2029 Notes and the September 2029 Notes, or the Unsecured Notes, are unsecured and effectively subordinated to all of our and our subsidiary guarantors’ existing and future secured debt to the extent of the value of the assets securing such indebtedness
4. 47Federal and state statutes allow courts, under specific circumstances, to void guarantees and require holders of notes to return payments received from guarantors
5. 48In addition, any payment by that guarantor pursuant to its guarantee could be voided and required to be returned to the guarantor, or to a fund for the benefit of our creditors or the creditors of the guarantor
6. 49There may be no public market for certain of the Notes, and one may not develop, be maintained or be liquid
7. 50Some or all of the Guarantees and any related collateral may be released automatically