OFFICE PROPERTIES INCOME TRUST Management’s Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

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

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


We are a real estate investment trust, or REIT, organized under Maryland law. As
of June 30, 2022, our wholly owned properties were comprised of 172 properties
and we had noncontrolling ownership interests of 51% and 50% in two
unconsolidated joint ventures that own three properties containing approximately
444,000 rentable square feet. As of June 30, 2022, our properties are located in
32 states and the District of Columbia and contain approximately 22,491,000
rentable square feet. As of June 30, 2022, our properties were leased to 287
different tenants with a weighted average remaining lease term (based on
annualized rental income) of approximately 6.2 years. The U.S. government is our
largest tenant, representing approximately 18.5% of our annualized rental income
as of June 30, 2022. The term annualized rental income as used herein is defined
as the annualized contractual base rents from our tenants pursuant to our lease
agreements as of June 30, 2022, plus straight line rent adjustments and
estimated recurring expense reimbursements to be paid to us, and excluding lease
value amortization.

The COVID-19 pandemic and the various governmental and market responses intended
to contain and mitigate the spread of the virus and its detrimental public
health impact have had a significant impact on the global economy, including the
U.S. economy. Many of the restrictions that had been imposed in the United
States during the pandemic have since been lifted and commercial activity in the
United States generally has increasingly returned to pre-pandemic practices and
operations. However, certain market practices that have resulted from the
pandemic, including increased alternative work arrangements such as work from
home, are continuing to be experienced. We are continuing to closely monitor the
impact of the COVID-19 pandemic on all aspects of our business. To date, the
COVID-19 pandemic has not had a significant adverse impact on our business and
we continue to believe that our financial resources, the characteristics of our
portfolio, including the diversity of our tenant base, both geographically and
by industry, and the financial strength and resources of our tenants, will
enable us to withstand the COVID-19 pandemic.

The U.S. Federal Reserve recently raised interest rates in an effort to combat
high inflation, which could result in negative consequences in the U.S. economy,
and concerns about a potential recession are becoming more pronounced. It is
unclear whether the U.S. economy will be able to withstand such challenges and
continue sustained growth. A recession could adversely affect our financial
condition and that of our tenants, could adversely impact the ability of our
tenants to renew our leases or pay rent to us, would impair our ability to
effectively deploy our capital or realize upon investments on favorable terms
and may cause the values of our properties and of our securities to decline. We
could also be affected by any overall weakening of, or disruptions in, the
financial markets.

The ultimate adverse impact of the COVID-19 pandemic, including the extent to
which alternative work arrangements such as work from home will be continued and
what impact that may have on demand for office space at our properties, and
recently rising interest rates, is highly uncertain and subject to change. As a
result, we do not yet know the full extent of potential impacts on our business
and operations, our tenants' businesses and operations or the global economy as
a whole. For more information and risks relating to the COVID-19 pandemic on us
and our business, see Part I, Item 1A, "Risk Factors", of our 2021 Annual
Report.

Property Operations


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

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

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

                                                            All Properties (1)(2)                            Comparable Properties (3)
                                                                   June 30,                                           June 30,
                                                        2022                      2021                     2022                      2021
Total properties                                                 172                      181                    153                      153
Total rentable square feet (4)                             22,491                   24,091                    19,228                   19,226
Percent leased (5)                                           89.4  %                  89.5  %                   94.3  %                  93.0  %



(1)Based on properties we owned on June 30, 2022 and 2021, respectively.
(2)Includes one leasable land parcel.
(3)Based on properties we owned continuously since January 1, 2021; excludes
properties classified as held for sale and properties undergoing significant
redevelopment, if any, and three properties owned by two unconsolidated joint
ventures in which we own 51% and 50% interests.
(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.

The average effective rental rate per square foot for our properties for the three and six months ended June 30, 2022 and 2021 are as follows:


                                                    Three Months Ended June 30,                 Six Months Ended June 30,
                                                     2022                  2021                  2022                 2021
Average effective rental rate per
square foot (1):
 All properties (2)                            $        28.80          $    

26.46 $29.11 $26.20

 Comparable properties (3)                     $        27.71          $    

26.85 $27.57 $27.09




(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, 2022 and 2021, respectively.
(3)Based on properties we owned continuously since April 1, 2021 and January 1,
2021, respectively; excludes properties classified as held for sale and
properties undergoing significant redevelopment, if any, and three properties
owned by two unconsolidated joint ventures in which we own 51% and 50%
interests.

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

                                                             Three Months Ended June 30, 2022                                                 Six Months Ended June 30, 2022
                                           Leased                    Available for Lease                 Total                Leased                Available for Lease                Total
Beginning of period                        20,373                           2,568                        22,941               20,817                       2,454                       23,271
Changes resulting from:

Disposition of properties                    (359)                            (89)                         (448)                (522)                       (256)                        (778)
Lease expirations                            (592)                            592                             -               (1,445)                      1,445                            -
Lease renewals (1)                            553                            (553)                            -                  889                        (889)                           -
New leases (1)                                126                            (126)                            -                  362                        (362)                           -

Remeasurements (2)                             (1)                             (1)                           (2)                  (1)                         (1)                          (2)
End of period                              20,100                           2,391                        22,491               20,100                       2,391                       22,491


(1)Based on leases entered within three and six months of completion June 30, 2022. (2) Rentable square feet are subject to changes when the space is sized or reconfigured for tenants.


Leases at our properties totaling approximately 592,000 and 1,445,000 rentable
square feet expired during the three and six months ended June 30, 2022,
respectively. During the three and six months ended June 30, 2022, we entered
into new and renewal leases as summarized in the following tables (square feet
in thousands):

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Three Months are over June 30, 2022

                                                              New Leases               Renewals            Total
Rentable square feet leased                                         126                    553               679
Weighted average rental rate change (by rentable                    8.7  %                 4.0  %            4.9  %
square feet)
Tenant leasing costs and concession commitments (1)         $    11,199     

$26,170 $37,369
Tenant leasing expenses and concession commitments per rentable square foot (1)

                                    $     89.01               $  47.36          $  55.08
Weighted (by square feet) average lease term (years)                8.3                    9.4               9.2

Total leasing expenses and concession commitments per rental square foot per year (1)

                           $     10.79               $   5.05          $   6.00


                                                                      Six Months Ended June 30, 2022
                                                              New Leases          Renewals            Total
Rentable square feet leased                                        362                889             1,251
Weighted average rental rate change (by rentable                   7.3  %             3.9  %            5.0  %
square feet)
Tenant leasing costs and concession commitments (1)         $   38,054      

$32,063 $70,117
Tenant leasing expenses and concession commitments per rentable square foot (1)

                                    $   105.09           $  36.10          $  56.08
Weighted (by square feet) average lease term (years)               9.6               10.0               9.9

Total leasing expenses and concession commitments per rental square foot per year (1)

                           $    10.90      

$3.63 $5.69

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



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

                                                Three Months Ended June 30, 2022                                                 Six Months Ended June 30, 2022
                              Old Effective                                                                   Old Effective
                                Rent Per            New Effective Rent                                          Rent Per            New Effective Rent
                             Square Foot (1)        Per Square Foot (1)        Rentable Square Feet          Square Foot (1)        Per Square Foot (1)        Rentable Square Feet
New leases                  $        12.63          $          20.58                       8                $         8.60          $           8.26                     260
Lease renewals              $        27.90          $          29.06                     536                $        27.68          $          29.07                   1,028
Total leasing
activity                    $        27.67          $          28.93                     544                $        23.82          $          24.86                   1,288

(1) Effective rental rates include base contractual rents from our tenants pursuant to our lease agreements, including straight-line rent adjustments and estimated expense payments payable in us, and does not include amortization in the lease amount.

Within three and six months completed June 30, 2022 and 2021, the amounts capitalized on our properties for costs related to leasing, building improvements and development, redevelopment and other activities are as follows:

                                                       Three Months Ended June 30,                  Six Months Ended June 30,
                                                        2022                  2021                  2022                  2021

Lease related costs (1)                           $       16,131          $ 

11,215 $24,795 $18,185
Building improvements (2)

                                  4,702               7,765                   7,485              12,291
Recurring capital expenditures                            20,833              18,980                  32,280              30,476
Development, redevelopment and other
activities (3)                                            40,302              12,738                  77,826              17,644
Total capital expenditures                        $       61,135          $ 

31,718 $110,106 $48,120



(1)Lease related costs generally include capital expenditures used to improve
tenants' space or amounts paid directly to tenants to improve their space and
leasing related costs, such as brokerage commissions and other tenant
inducements.
(2)Building improvements generally include expenditures to replace obsolete
building components and expenditures that extend the useful life of existing
assets.
(3)Development, redevelopment and other activities generally include capital
expenditure projects that reposition a property or result in new sources of
revenue.

In addition to the capital expenditures described above, we contributed $1,132
and $2,202 to one of our unconsolidated joint ventures during the three and six
months ended June 30, 2022, respectively. Also, as of June 30, 2022, we have
estimated unspent leasing related obligations of $130,726, of which we expect to
spend $82,543 over the next 12 months.

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As of June 30, 2022, we had leases at our properties totaling approximately
1,913,000 rentable square feet that were scheduled to expire through June 30,
2023. As of July 27, 2022, we expect tenants with leases totaling approximately
817,000 rentable square feet that are scheduled to expire through June 30, 2023,
to not renew their leases upon expiration and we cannot be sure as to whether
other tenants will renew their leases upon expiration. As a result of the
COVID-19 pandemic, its economic impact and the uncertainty of whether certain
market practices and trends in response to the pandemic will be sustained or
increased, including the extent to which alternative work arrangements such as
work from home practices may be continued, overall leasing activity has been
volatile and may remain so until office property market conditions meaningfully
improve and stabilize for a sustained period. However, we remain focused on
proactive dialogues with our existing tenants and overall tenant retention.
Prevailing market conditions and government and other tenants' needs at the time
we negotiate and enter leases or lease renewals will generally determine rental
rates and demand for leased space at our properties, and market conditions and
our tenants' needs are beyond our control. Whenever we renew or enter into new
leases for our properties, we intend to seek rents which are equal to or higher
than our historical rents for the same properties; however, our ability to
maintain or increase the rents for our current properties will depend in large
part upon market conditions, which are beyond our control. We cannot be sure of
the rental rates which will result from our ongoing negotiations regarding lease
renewals or any new or renewed leases we may enter; also, we may experience
material declines in our rental income due to vacancies upon lease expirations
or early terminations or lower rents upon lease renewal or reletting.
Additionally, we may incur significant costs to renew our leases with current
tenants or lease our properties to new tenants.

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

                                                                                                                                         Annualized
                                 Number of Leases                  Leased                   Percent of            Cumulative            Rental Income         Percent of            Cumulative
         Year (1)                    Expiring             Square Feet Expiring (2)            Total            Percent of Total           Expiring               Total           Percent of Total
2022                                       42                         944                         4.7  %                  4.7  %       $     23,716                 4.2  %                  4.2  %
2023                                       60                       2,305                        11.5  %                 16.2  %             76,154                13.5  %                 17.7  %
2024                                       51                       3,063                        15.2  %                 31.4  %             79,437                14.1  %                 31.8  %
2025                                       44                       2,047                        10.2  %                 41.6  %             43,419                 7.7  %                 39.5  %
2026                                       37                       1,670                         8.3  %                 49.9  %             43,200                 7.7  %                 47.2  %
2027                                       37                       2,161                        10.8  %                 60.7  %             53,942                 9.6  %                 56.8  %
2028                                       14                       1,254                         6.2  %                 66.9  %             48,954                 8.7  %                 65.5  %
2029                                       20                       1,038                         5.2  %                 72.1  %             30,277                 5.4  %                 70.9  %
2030                                       19                         731                         3.6  %                 75.7  %             20,800                 3.7  %                 74.6  %
2031 and thereafter                        51                       4,887                        24.3  %                100.0  %            142,966                25.4  %                100.0  %
Total                                     375                      20,100                       100.0  %                               $    562,865               100.0  %

Weighted average remaining lease term (in years)                    5.9                                                                      6.2



(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, 2022,
tenants occupying approximately 3.9% of our rentable square feet and responsible
for approximately 4.3% of our annualized rental income as of June 30, 2022
currently have exercisable rights to terminate their leases before the stated
terms of their leases expire. Also, in 2022, 2023, 2024, 2025, 2026, 2027, 2028,
2029, 2030, 2031, 2035, 2037 and 2040, early termination rights become
exercisable by other tenants who currently occupy an additional approximately
0.9%, 3.4%, 2.6%, 4.0%, 1.3%, 0.8%, 1.5%, 0.5%, 0.7%, 0.1%, 0.4%, 0.1% and 0.3%
of our rentable square feet, respectively, and contribute an additional
approximately 0.9%, 4.2%, 2.9%, 7.8%, 1.6%, 1.2%, 1.6%, 1.0%, 0.9%, 0.1%, 0.5%,
0.2% and 0.4% of our annualized rental income, respectively, as of June 30,
2022. In addition, as of June 30, 2022, 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 6.2% of
our rentable square feet and contribute approximately 6.9% of our annualized
rental income as of June 30, 2022.
(2)Leased square feet is pursuant to leases existing as of June 30, 2022, and
includes (i) space being fitted out for tenant occupancy pursuant to our lease
agreements, if any, and (ii) space which is leased, but is not occupied or is
being offered for sublease by tenants, if any. Square feet measurements are
subject to changes when space is remeasured or reconfigured for new tenants.

We generally will seek to renew or extend the terms of leases at properties with
tenants when they expire. Because of the capital many of our single tenants have
invested in the properties they lease from us and because many of these
properties appear to be of strategic importance to such tenants' businesses, we
believe that it is likely that these tenants will renew or extend their leases
prior to when they expire. However, recent shifts in workplace practices,
including as a result of the COVID-19 pandemic, have resulted in a significant
increase in alternative work arrangements, including work from home practices.
It is uncertain to what extent and how long work from home arrangements may
continue, or if other hybrid work arrangements will continue or increase.
Despite these shifts in workplace practices, our recent leasing activity and
negotiations for vacant or expiring space may suggest that there is an improving
demand environment for office space. However, if these

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arrangements continue or increase, our tenants may not seek to renew or extend
their leases when they expire, or may seek to renew their leases for less space
than they currently occupy. If we are unable to extend or renew our leases, or
we renew leases for reduced space, it may be time consuming and expensive to
relet some of these properties.

We believe that recent government budgetary and spending priorities and
enhancements in technology have resulted in a decrease in government office use
for employees. Furthermore, over the past several years, government tenants have
reduced their space utilization per employee and consolidated government tenants
into existing government owned properties. This activity has reduced the demand
for government leased space. Our historical experience with respect to
properties of the type we own that are majority leased to government tenants has
been that government tenants frequently renew leases to avoid the costs and
disruptions that may result from relocating their operations. However, efforts
to manage space utilization rates may result in our tenants exercising early
termination rights under our leases, vacating our properties upon expiration of
our leases in order to relocate, or renewing their leases for less space than
they currently occupy. Also, our government tenants' desire to reconfigure
leased office space to manage utilization per employee may require us to spend
significant amounts for tenant improvements, and tenant relocations are often
more prevalent in those circumstances. Increasing uncertainty with respect to
government agency budgets and funding to implement relocations, consolidations
and reconfigurations has resulted in delayed decisions by some of our government
tenants and their reliance on short term lease renewals; however, activity prior
to the outbreak of the COVID-19 pandemic suggested that the U.S. government had
begun to shift its leasing strategy to include longer term leases and was
actively exploring 10 to 20 year lease terms at renewal, in some instances.
However, the COVID-19 pandemic and its aftermath have had negative impacts on
government budgets and resources. Although there have been indications that
certain of those impacts may not have been as negative as originally expected,
it is unclear what the effect of these impacts will be on government demand for
leasing office space. Given the significant uncertainties, including as to the
COVID-19 pandemic and its economic impact and the extent to which certain market
trends, such as work from home practices, may continue or increase, we are
unable to reasonably project what the financial impact of market conditions or
changing government circumstances will be on the demand for leased space at our
properties and our financial results for future periods.

As of June 30, 2022, we derive 22.1% of our annualized rental income from our
properties located in the metropolitan Washington, D.C. market area, which
includes Washington, D.C., Northern Virginia and suburban Maryland. A downturn
in economic conditions in this area could result in reduced demand from tenants
for our properties or reduce the rents that our tenants in this area are willing
to pay when our leases expire or terminate and when renewal or new terms are
negotiated. Additionally, in recent years there has been a decrease in demand
for new leased office space by the U.S. government in the metropolitan
Washington, D.C. market area, and that could increase competition for government
tenants and adversely affect our ability to retain government tenants when our
leases expire.

Our manager, RMR, employs a tenant review process for us. RMR assesses tenants
on an individual basis based on various applicable credit criteria. In general,
depending on facts and circumstances, RMR evaluates the creditworthiness of a
tenant based on information concerning the tenant that is provided by the tenant
and, in some cases, information that is publicly available or obtained from
third party sources. We consider investment grade tenants to include: (a)
investment grade rated tenants; (b) tenants with investment grade rated parent
entities that guarantee the tenant's lease obligations; and/or (c) tenants with
investment grade rated parent entities that do not guarantee the tenant's lease
obligations. As of June 30, 2022, tenants contributing 52.4% of annualized
rental income were investment grade rated (or their payment obligations were
guaranteed by an investment grade rated parent) and tenants contributing an
additional 11.0% of annualized rental income were subsidiaries of an investment
grade rated parent (although these parent entities were not liable for the
payment of rents).

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Number of June 30, 2022tenants representing 1% or more of our gross annual rental income are as follows (square feet in thousands):

                                                                                                                                               % of Total
                                                                                                  % of Leased           Annualized          Annualized Rental
                   Tenant                         Credit Rating                 Sq. Ft.             Sq. Ft.           Rental Income              Income
  1    U.S. Government                           Investment Grade               3,894                   19.4  %       $   104,402                      

18.5%

  2    Alphabet Inc. (Google)                    Investment Grade                 386                    1.9  %            23,713                      

4.2%

  3    Shook, Hardy & Bacon L.L.P.                  Not Rated                     596                    3.0  %            19,336                      

3.4%

  4    IG Investments Holdings LLC                  Not Rated                     336                    1.7  %            16,594                      

2.9%

  5    Bank of America Corporation               Investment Grade                 577                    2.9  %            15,766                       2.8  %
  6    State of California                       Investment Grade                 523                    2.6  %            15,740                       2.8  %
  7    Commonwealth of Massachusetts             Investment Grade                 311                    1.5  %            12,260                       2.2  %
  8    CareFirst Inc.                               Not Rated                     207                    1.0  %            11,498                       2.0  %
  9    Northrop Grumman Corporation              Investment Grade                 337                    1.7  %            11,465                       2.0  %
 10    Tyson Foods, Inc.                         Investment Grade                 248                    1.2  %            11,042                       2.0  %

Sonesta International Hotels

 11    Corporation (1)                              Not Rated                     230                    1.1  %            10,745                      

1.9%

12 CommScope Holding Company Inc. Non-Investment Grade

      228                    1.1  %             9,370                       1.7  %
 13    State of Georgia                          Investment Grade                 308                    1.5  %             7,383                       1.3  %
 14    PNC Bank                                  Investment Grade                 441                    2.2  %             6,924                       1.2  %
 15    Micro Focus International plc           Non Investment Grade               215                    1.1  %             6,905                       1.2  %
 16    Compass Group plc                         Investment Grade                 267                    1.3  %             6,703                       1.2  %
 17    ServiceNow, Inc.                          Investment Grade                 149                    0.7  %             6,637                       1.2  %
 18    Allstate Insurance Co.                    Investment Grade                 468                    2.3  %             6,479                       1.2  %
 19    Leidos Holdings Inc.                      Investment Grade                 159                    0.8  %             6,117                       1.1  %

Automatic Data Processing,

 20    Inc.                                      Investment Grade                 289                    1.4  %             6,087                      

1.1 %

 21    Church & Dwight Co., Inc.                 Investment Grade                 250                    1.2  %             6,037                       1.1  %
       Total                                                                   10,419                   51.6  %       $   321,203                      57.0  %


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

Disposition Activities

Within six months completed June 30, 2022we sold six properties containing approximately 778,000 rentable square feet for an aggregate sales price of
$77,720excluding closing costs.

In July 2022we sold a property located at Houston, TX containing approximately 206,000 rentable square feet for a sales price of $9,800excluding closing costs.


Based on current real estate market conditions, including rising interest rates,
we expect the pace of our 2022 dispositions to moderate. However, we continue to
evaluate our portfolio to strategically recycle capital and are currently in
various stages of marketing certain of our properties for sale. As of July 27,
2022, we have entered into agreements to sell nine properties containing
approximately 1,116,000 rentable square feet for an aggregate sales price of
$109,800, excluding closing costs. These sales are expected to occur before the
end of the third quarter of 2022. However, these sales are subject to
conditions; accordingly, we cannot be sure that we will complete these sales or
that these sales will not be delayed or the terms will not change.

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

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Financing Activities

In April 2022we prepaid, at par plus accrued interest, a mortgage note secured by a property with an outstanding principal balance of $24,863an annual interest rate of 4.22% and a maturity date of July 2022 with cash on hand.


In June 2022, we redeemed, at par plus accrued interest, all $300,000 of our
4.00% senior unsecured notes due July 2022 using cash on hand and borrowings
under our revolving credit facility.

Segment Information

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

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