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Table of Contents




UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 10-Q
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended June 30, 2020
 
OR
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
Commission File Number 1-34364
 
OFFICE PROPERTIES INCOME TRUST
(Exact Name of Registrant as Specified in Its Charter)
 
Maryland
 
26-4273474
(State or Other Jurisdiction of Incorporation or Organization)
 
(IRS Employer Identification No.)
 
Two Newton Place, 255 Washington Street, Suite 300, Newton, Massachusetts 02458-1634
(Address of Principal Executive Offices)  (Zip Code)
 
617-219-1440
(Registrant’s Telephone Number, Including Area Code)

Securities Registered Pursuant to Section 12(b) of the Act:
Title of Each Class
 
Trading Symbol(s)
 
Name Of Each Exchange On Which Registered
Common Shares of Beneficial Interest
 
OPI
 
The Nasdaq Stock Market LLC
5.875% Senior Notes due 2046
 
OPINI
 
The Nasdaq Stock Market LLC
6.375% Senior Notes due 2050
 
OPINL
 
The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes   No
 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes   No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. 
Large accelerated filer
 
Accelerated filer
 
 
 
 
 
Non-accelerated filer
 
Smaller reporting company
 
 
 
 
 
Emerging growth company
 
 
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes   No
 
Number of registrant’s common shares of beneficial interest, $.01 par value per share, outstanding as of July 29, 2020: 48,227,800



Table of Contents



OFFICE PROPERTIES INCOME TRUST

FORM 10-Q

June 30, 2020
 
INDEX
 
 
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
References in this Quarterly Report on Form 10-Q to “the Company”, “OPI”, “we”, “us” or “our” include Office Properties Income Trust and its consolidated subsidiaries unless otherwise expressly stated or the context indicates otherwise.


2

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PART I.    Financial Information 
Item 1.    Financial Statements
OFFICE PROPERTIES INCOME TRUST
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except per share data)
(unaudited) 
 
 
June 30,
 
December 31,
 
 
2020
 
2019
ASSETS
 
 

 
 

Real estate properties:
 
 

 
 

Land
 
$
843,418

 
$
840,550

Buildings and improvements
 
2,691,482

 
2,652,681

Total real estate properties, gross
 
3,534,900

 
3,493,231

Accumulated depreciation
 
(422,716
)
 
(387,656
)
Total real estate properties, net
 
3,112,184

 
3,105,575

Assets of properties held for sale
 

 
70,877

Investments in unconsolidated joint ventures
 
39,067

 
39,756

Acquired real estate leases, net
 
645,589

 
732,382

Cash and cash equivalents
 
24,485

 
93,744

Restricted cash
 
5,616

 
6,952

Rents receivable
 
95,005

 
83,556

Deferred leasing costs, net
 
45,029

 
40,107

Other assets, net
 
10,688

 
20,187

Total assets
 
$
3,977,663

 
$
4,193,136

 
 
 
 
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 

 
 

Unsecured revolving credit facility
 
$
200,000

 
$

Senior unsecured notes, net
 
1,766,387

 
2,017,379

Mortgage notes payable, net
 
210,539

 
309,946

Liabilities of properties held for sale
 

 
14,693

Accounts payable and other liabilities
 
115,593

 
125,048

Due to related persons
 
6,856

 
7,141

Assumed real estate lease obligations, net
 
11,858

 
13,175

Total liabilities
 
2,311,233

 
2,487,382

 
 
 
 
 
Commitments and contingencies
 


 


 
 
 
 
 
Shareholders’ equity:
 
 

 
 

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
 
482

 
482

Additional paid in capital
 
2,613,868

 
2,612,425

Cumulative net income
 
189,356

 
177,217

Cumulative other comprehensive loss
 
(85
)
 
(200
)
Cumulative common distributions
 
(1,137,191
)
 
(1,084,170
)
Total shareholders’ equity
 
1,666,430

 
1,705,754

Total liabilities and shareholders’ equity
 
$
3,977,663

 
$
4,193,136


The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.


3

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OFFICE PROPERTIES INCOME TRUST
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(amounts in thousands, except per share data)
(unaudited) 
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2020
 
2019
 
2020
 
2019
 
 
 
 
 
 
 
 
 
Rental income 
 
$
145,603

 
$
176,032

 
$
295,488

 
$
350,809

 
 
 
 
 
 
 
 
 
Expenses:
 
 
 
 
 
 
 
 
Real estate taxes
 
15,781

 
18,147

 
32,588

 
36,539

Utility expenses
 
5,201

 
7,470

 
12,213

 
16,851

Other operating expenses
 
25,787

 
29,692

 
51,667

 
59,828

Depreciation and amortization
 
64,170

 
73,913

 
127,113

 
151,434

Loss on impairment of real estate
 

 
2,380

 

 
5,584

Acquisition and transaction related costs
 

 
98

 

 
682

General and administrative
 
7,204

 
8,744

 
14,313

 
17,467

Total expenses
 
118,143

 
140,444

 
237,894

 
288,385

 
 
 
 
 
 
 
 
 
Gain (loss) on sale of real estate
 
66

 
(17
)
 
10,822

 
22,075

Dividend income
 

 
980

 

 
1,960

Loss on equity securities
 

 
(66,135
)
 

 
(44,007
)
Interest and other income
 
30

 
241

 
736

 
489

Interest expense (including net amortization of debt premiums, discounts and issuance costs of $2,402, $2,863, $4,685 and $5,704, respectively)
 
(25,205
)
 
(35,348
)
 
(52,364
)
 
(72,481
)
Loss on early extinguishment of debt
 
(557
)
 
(71
)
 
(3,839
)
 
(485
)
Income (loss) before income tax (expense) benefit and equity in net losses of investees
 
1,794

 
(64,762
)
 
12,949

 
(30,025
)
Income tax (expense) benefit
 
(235
)
 
130

 
(274
)
 
(353
)
Equity in net losses of investees
 
(260
)
 
(142
)
 
(536
)
 
(377
)
Net income (loss)
 
1,299

 
(64,774
)
 
12,139

 
(30,755
)
Other comprehensive income (loss):
 
 
 
 
 
 
 
 
Unrealized gain (loss) on financial instrument
 
176

 
(269
)
 
115

 
(367
)
Equity in unrealized gain of investees
 

 
71

 

 
137

Other comprehensive income (loss)
 
176

 
(198
)
 
115

 
(230
)
Comprehensive income (loss)
 
$
1,475

 
$
(64,972
)
 
$
12,254

 
$
(30,985
)
 
 
 
 
 
 
 
 
 
Weighted average common shares outstanding (basic and diluted)
 
48,106

 
48,049

 
48,101

 
48,040

 
 
 
 
 
 
 
 
 
Per common share amounts (basic and diluted):
 
 
 
 
 
 

 
 

Net income (loss)
 
$
0.03

 
$
(1.35
)
 
$
0.25

 
$
(0.64
)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.



4

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OFFICE PROPERTIES INCOME TRUST
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(dollars in thousands)
(unaudited)

 
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


The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.


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OFFICE PROPERTIES INCOME TRUST
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(dollars in thousands)
(unaudited)
 
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


The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.


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OFFICE PROPERTIES INCOME TRUST
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
(unaudited)
 
 
 
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
)
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.


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OFFICE PROPERTIES INCOME TRUST
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(dollars in thousands)
(unaudited)

 
 
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


SUPPLEMENTAL DISCLOSURE OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH:
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the condensed consolidated balance sheets to the amounts shown in the condensed consolidated statements of cash flows:
 
 
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


The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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OFFICE PROPERTIES INCOME TRUST
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share data)
(unaudited)


Note 1. Basis of Presentation
The accompanying condensed consolidated financial statements of Office Properties Income Trust and its subsidiaries, or OPI, we, us or our, are unaudited. Certain information and disclosures required by U.S. generally accepted accounting principles, or GAAP, for complete financial statements have been condensed or omitted. We believe the disclosures made are adequate to make the information presented not misleading. However, the accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes contained in our Annual Report on Form 10-K for the year ended December 31, 2019, or our 2019 Annual Report. In the opinion of management, all adjustments, consisting of normal recurring accruals considered necessary for a fair statement of results for the interim period have been included. All intercompany transactions and balances with or among our consolidated subsidiaries have been eliminated. Our operating results for interim periods are not necessarily indicative of the results that may be expected for the full year.
The preparation of these financial statements in conformity with GAAP requires us to make estimates and assumptions that affect reported amounts. Actual results could differ from those estimates. Significant estimates in the condensed consolidated financial statements include purchase price allocations, useful lives of fixed assets and assessment of impairment of real estate and the related intangibles.
Note 2. Recent Accounting Pronouncements
In June 2016, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which requires that entities use a new forward looking “expected loss” model that generally will result in the earlier recognition of allowance for credit losses. The measurement of expected credit losses is based upon historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. We adopted ASU No. 2016-13 on January 1, 2020 using the modified retrospective approach. The implementation of this standard did not have a material impact in our condensed consolidated financial statements.
Note 3. Per Common Share Amounts
We calculate basic earnings per common share by dividing net income (loss) by the weighted average number of our common shares outstanding during the period. We calculate diluted earnings per share using the more dilutive of the two class method or the treasury stock method. Unvested share awards and other potentially dilutive common shares, together with the related impact on earnings, are considered when calculating diluted earnings per share. For the three and six months ended June 30, 2020 and 2019, certain unvested common shares were not included in the calculation of diluted earnings per share because to do so would have been antidilutive.
Note 4. Real Estate Properties
As of June 30, 2020, our wholly owned properties were comprised of 184 properties with approximately 24,909,000 rentable square feet, with an aggregate undepreciated carrying value of $3,534,900 and we had noncontrolling ownership interests in three properties totaling approximately 444,000 rentable square feet through two unconsolidated joint ventures in which we own 51% and 50% interests. We generally lease space at our properties on a gross lease, modified gross lease or net lease basis pursuant to fixed term contracts expiring between 2020 and 2040. Some of our leases generally require us to pay all or some property operating expenses and to provide all or most property management services. During the three months ended June 30, 2020, we entered into 16 leases for approximately 642,000 rentable square feet for a weighted (by rentable square feet) average lease term of 6.1 years and we made commitments for approximately $16,529 of leasing related costs. During the six months ended June 30, 2020, we entered into 43 leases for approximately 1,231,000 rentable square feet for a weighted (by rentable square feet) average lease term of 5.4 years and we made commitments for approximately $29,459 of leasing related costs.
As of June 30, 2020, we have estimated unspent leasing related obligations of $61,720
We regularly evaluate whether events or changes in circumstances have occurred that could indicate an impairment in the value of our long lived assets. If there is an indication that the carrying value of an asset is not recoverable, we estimate the projected undiscounted cash flows to determine if an impairment loss should be recognized. The future net undiscounted cash

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OFFICE PROPERTIES INCOME TRUST
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(dollars in thousands, except per share data)
(unaudited)

flows are subjective and are based in part on assumptions regarding hold periods, market rents and terminal capitalization rates. We determine the amount of any impairment loss by comparing the historical carrying value to estimated fair value. We estimate fair value through an evaluation of recent financial performance and projected discounted cash flows using standard industry valuation techniques. In addition to the consideration of impairment upon the events or changes in circumstances described above, we regularly evaluate the remaining lives of our long lived assets. If we change our estimate of the remaining lives, we allocate the carrying value of the affected assets over their revised remaining lives.
Acquisition Activities
In February 2020, we acquired a property adjacent to a property we own in Boston, MA for $11,864, including $364 of acquisition related costs. This acquisition was accounted for as an asset acquisition. The purchase price of this acquisition was allocated to land and building in the amounts of $2,618 and $9,246, respectively.
In July 2020, we entered into an agreement to acquire an office property located in Denver, CO with approximately 68,000 rentable square feet for a purchase price of $38,100, excluding acquisition related costs. This acquisition is expected to occur before the end of the third quarter. However, this acquisition is subject to due diligence and other closing conditions; accordingly, we cannot be sure that we will complete this acquisition, that this acquisition will not be delayed or that the terms will not change.
Disposition Activities
During the six months ended June 30, 2020, we sold six properties with a combined 734,784 rentable square feet for an aggregate sales price of $85,363, excluding closing costs and including the repayment of one mortgage note with an outstanding principal balance of $13,095, an annual interest rate of 5.9% and a maturity date in August 2021.
The sales of these properties, as presented in the table below, do not represent significant dispositions individually or in the aggregate nor do they represent a strategic shift in our business. As a result, the results of operations of these properties are included in continuing operations through the date of sale in our condensed consolidated statements of comprehensive income (loss).
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.
In July 2020, we entered into an agreement to sell a four property business park located in Fairfax, VA containing approximately 171,000 rentable square feet for a gross sales price of $25,400, excluding closing costs. This sale is expected to occur before the end of the third quarter. However, this sale is subject to conditions; accordingly, we cannot be sure that we will complete this sale or that this sale will not be delayed or the terms will not change.



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OFFICE PROPERTIES INCOME TRUST
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(dollars in thousands, except per share data)
(unaudited)

Unconsolidated Joint Ventures
We own interests in two joint ventures that own three properties. We account for these investments under the equity method of accounting. As of June 30, 2020 and December 31, 2019, our investments in unconsolidated joint ventures consisted of the following:
 
 
 
 
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

The following table provides a summary of the mortgage debt of our two unconsolidated joint ventures:
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.
At June 30, 2020, the aggregate unamortized basis difference of our two unconsolidated joint ventures of $7,706 is primarily attributable to the difference between the amount we paid to purchase our interest in these joint ventures, including transaction costs, and the historical carrying value of the net assets of these joint ventures. This difference is being amortized over the remaining useful life of the related properties and the resulting amortization expense is included in equity in net losses of investees in our condensed consolidated statements of comprehensive income (loss).
Note 5. Leases
Revenue Recognition. Our leases provide for base rent payments and in addition may include variable payments. Rental income from operating leases, including any payments derived by index or market-based indices, is recognized on a straight line basis over the lease term when we have determined that the collectability of substantially all of the lease payments is probable. Some of our leases have options to extend or terminate the lease exercisable at the option of our tenants, which are considered when determining the lease term. In certain circumstances, some leases provide the tenant with the right to terminate if the legislature or other funding authority does not appropriate the funding necessary for the tenant to meet its lease obligations; we have determined the fixed non-cancelable lease term of these leases to be the full term of the lease because we believe the occurrence of early terminations to be remote contingencies based on both our historical experience and our assessments of the likelihood of lease cancellation on a separate lease basis.
We increased rental income to record revenue on a straight line basis by $3,468 and $5,667 for the three months ended June 30, 2020 and 2019, respectively, and $9,051 and $12,461 for the six months ended June 30, 2020 and 2019, respectively. Rents receivable, excluding properties classified as held for sale, include $63,829 and $54,837 of straight line rent receivables at June 30, 2020 and December 31, 2019, respectively.
We do not include in our measurement of our lease receivables certain variable payments, including payments determined by changes in the index or market-based indices after the inception of the lease, certain tenant reimbursements and other income until the specific events that trigger the variable payments have occurred. Such payments totaled $18,302 and $38,048 for the three and six months ended June 30, 2020, respectively, of which tenant reimbursements totaled $17,229 and $35,851, respectively. For the three and six months ended June 30, 2019, such payments totaled $22,696 and $46,090, respectively, of which tenant reimbursements totaled $21,540 and $43,663, respectively.

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OFFICE PROPERTIES INCOME TRUST
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(dollars in thousands, except per share data)
(unaudited)

As a result of the COVID-19 pandemic, some of our tenants have requested rent assistance. As of July 27, 2020, we have granted temporary rent assistance totaling $2,475 to 23 of our tenants who represent approximately 3.7% of our annualized rental income, as defined below, as of June 30, 2020, pursuant to a deferred payment plan whereby these tenants will be obligated to pay, in most cases, the deferred rent over a 12-month period beginning in September 2020. We have elected to use the FASB relief package regarding the application of lease accounting guidance to lease concessions provided as a result of the COVID-19 pandemic. The FASB relief package provides entities with the option to account for lease concessions resulting from the COVID-19 pandemic outside of the existing lease modification guidance if the resulting cash flows from the modified lease are substantially the same as or less than the original lease. Because the deferred rent amounts referenced above will be repaid over a 12-month period, the cash flows from the respective leases are substantially the same as before the rent deferrals. The deferred amounts did not impact our results for the three and six months ended June 30, 2020 and, as of June 30, 2020, we recognized an increase in our accounts receivable related to these deferred payments of $2,222.
Right of Use Asset and Lease Liability. For leases where we are the lessee, we are required to record a right of use asset and lease liability for all leases with an initial term greater than 12 months. As of June 30, 2020, we had one lease that met these criteria where we are the lessee, which expires on January 31, 2021. We sublease a portion of the space, which sublease expires on January 31, 2021. The values of the right of use asset and related liability representing our future obligation under the lease arrangement for which we are the lessee were $1,167 and $1,190, respectively, as of June 30, 2020, and $2,149 and $2,179, respectively, as of December 31, 2019. The right of use asset and related lease liability are included within other assets, net and accounts payable and other liabilities, respectively, within our condensed consolidated balance sheets. Rent expense incurred under the lease, net of sublease revenue, was $446 and $381 for the three months ended June 30, 2020 and 2019, respectively, and $892 and $815 for the six months ended June 30, 2020 and 2019, respectively.
Note 6. Concentration 
Tenant Concentration 
We define annualized rental income as the annualized contractual base rents from our tenants pursuant to our lease agreements as of the measurement date, plus straight line rent adjustments and estimated recurring expense reimbursements to be paid to us, and excluding lease value amortization. As of June 30, 2020, the U.S. Government, 11 state governments and two other government tenants combined were responsible for approximately 35.1% of our annualized rental income. As of June 30, 2019, the U.S. Government, 13 state governments and three other government tenants combined were responsible for approximately 35.7% of our annualized rental income. The U.S. Government is our largest tenant by annualized rental income and was responsible for approximately 25.2% and 25.6% of our annualized rental income as of June 30, 2020 and 2019, respectively. 
Geographic Concentration 
At June 30, 2020, our 184 wholly owned properties were located in 34 states and the District of Columbia. Properties located in Virginia, California, the District of Columbia, Texas and Maryland were responsible for 15.1%, 12.1%, 10.9%, 8.3% and 6.7% of our annualized rental income as of June 30, 2020, respectively.
Note 7. Indebtedness
Our principal debt obligations at June 30, 2020 were: (1) $200,000 of outstanding borrowings under our $750,000 unsecured revolving credit facility; (2) $1,810,000 aggregate outstanding principal amount of senior unsecured notes; and (3) $211,796 aggregate outstanding principal amount of mortgage notes.
Our $750,000 revolving credit facility is governed by a credit agreement, or our credit agreement, with a syndicate of institutional lenders that includes a feature under which the maximum aggregate borrowing availability may be increased to up to $1,950,000 in certain circumstances.
Our $750,000 revolving credit facility is available for general business purposes, including acquisitions. The maturity date of our revolving credit facility is January 31, 2023 and, subject to our payment of an extension fee and meeting certain other conditions, we have the option to extend the stated maturity date of our revolving credit facility by two additional six month periods. We can borrow, repay and reborrow funds available under our revolving credit facility until maturity and no principal repayment is due until maturity. We are required to pay interest at a rate of LIBOR plus a premium, which was 110 basis points per annum at June 30, 2020, on the amount outstanding under our revolving credit facility. We also pay a facility fee on the total

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OFFICE PROPERTIES INCOME TRUST
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(dollars in thousands, except per share data)
(unaudited)

amount of lending commitments under our revolving credit facility, which was 25 basis points per annum at June 30, 2020. Both the interest rate premium and facility fee are subject to adjustment based upon changes to our credit ratings. As of June 30, 2020 and December 31, 2019, the annual interest rate payable on borrowings under our revolving credit facility was 1.2% and 2.7%, respectively. The weighted average annual interest rate for borrowings under our revolving credit facility was 1.3% and 3.5% for the three months ended June 30, 2020 and 2019, respectively, and 2.1% and 3.5% for the six months ended June 30, 2020 and 2019, respectively. As of June 30, 2020 and July 29, 2020, we had $200,000 and $180,000, respectively, outstanding under our revolving credit facility, and $550,000 and $570,000, respectively, available for borrowing under our revolving credit facility.
Our credit agreement and senior unsecured notes indentures and their supplements provide for acceleration of payment of all amounts due thereunder upon the occurrence and continuation of certain events of default, such as, in the case of our credit agreement, a change of control of us, which includes The RMR Group LLC, or RMR LLC, ceasing to act as our business and property manager. Our credit agreement and senior unsecured notes indentures and their supplements also contain covenants, including covenants that restrict our ability to incur debts, require us to comply with certain financial covenants and, in the case of our credit agreement, restrict our ability to make distributions under certain circumstances. We believe we were in compliance with the terms and conditions of the respective covenants under our credit agreement and senior unsecured notes indentures and their supplements at June 30, 2020.
In January 2020, we redeemed, at par plus accrued interest, all $400,000 of our 3.60% senior unsecured notes due 2020. As a result of the redemption of our 3.60% senior unsecured notes due 2020, we recognized a loss on early extinguishment of debt of $61 during the six months ended June 30, 2020, to write off unamortized discounts.
In March 2020, in connection with the sale of one property, we prepaid, at a premium plus accrued interest, a mortgage note secured by that property with an outstanding principal balance of $13,095, an annual interest rate of 5.9% and a maturity date in August 2021, which was classified in liabilities of properties held for sale in our condensed consolidated balance sheet as of December 31, 2019. As a result of the prepayment of this mortgage note, we recognized a loss on early extinguishment of debt of $508 during the six months ended June 30, 2020, from a prepayment penalty and the write off of unamortized debt issuance costs.
In March 2020, we prepaid, at a premium plus accrued interest, a mortgage note secured by one property with an outstanding principal balance of $66,780, an annual interest rate of 4.0% and a maturity date in September 2030. As a result of the prepayment of this mortgage note, we recognized a loss on early extinguishment of debt of $2,713 during the six months ended June 30, 2020, from a prepayment penalty and the write off of unamortized discounts.
In April 2020, we prepaid, at par plus accrued interest, a mortgage note secured by one property with an outstanding principal balance of $32,677, an annual interest rate of 5.7% and a maturity date in July 2020. As a result of the prepayment of this mortgage note, we recognized a gain on early extinguishment of debt of $163 during the six months ended June 30, 2020, from the write off of unamortized premiums.
In June 2020, we issued $150,000 of our 6.375% senior unsecured notes due 2050 in an underwritten public offering, raising net proceeds of $144,772, after deducting underwriters’ discounts and estimated offering expenses. In connection with this offering, we granted the underwriters a 30 day option to purchase up to an additional $22,500 aggregate principal amount of these notes. In July 2020, the underwriters partially exercised this option for an additional $12,000 of these notes. These notes require quarterly payments of interest only through maturity and may be repaid at par (plus accrued and unpaid interest) on or after June 23, 2025.
At June 30, 2020, eight of our consolidated properties with an aggregate net book value of $354,773 were encumbered by mortgage notes with an aggregate principal amount of $211,796. Our mortgage notes are non-recourse, subject to certain limited exceptions and do not contain any material financial covenants.

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OFFICE PROPERTIES INCOME TRUST
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(dollars in thousands, except per share data)
(unaudited)

Note 8. Fair Value of Assets and Liabilities
Our financial instruments include our cash and cash equivalents, restricted cash, rents receivable, accounts payable, a revolving credit facility, senior unsecured notes, mortgage notes payable, amounts due to related persons, other accrued expenses and security deposits. At June 30, 2020 and December 31, 2019, the fair values of our financial instruments approximated their carrying values in our condensed consolidated financial statements, due to their short term nature or floating interest rates, except as follows:
 
 
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.
We estimated the fair value of our senior unsecured notes (except for our senior unsecured notes due 2046 and 2050) using an average of the bid and ask price of the notes (Level 2 inputs as defined in the fair value hierarchy under GAAP) as of the measurement date. We estimated the fair value of our senior unsecured notes due 2046 and 2050 based on the closing price on The Nasdaq Stock Market LLC, or Nasdaq, (Level 1 inputs as defined in the fair value hierarchy under GAAP) as of the measurement date. We estimated the fair values of our mortgage notes payable using discounted cash flow analyses and currently prevailing market rates (Level 3 inputs as defined in the fair value hierarchy under GAAP) as of the measurement date. Because Level 3 inputs are unobservable, our estimated fair value may differ materially from the actual fair value.
Note 9. Shareholders’ Equity
Share Awards
On May 27, 2020, in accordance with our Trustee compensation arrangements, we awarded to each of our eight Trustees 3,500 of our common shares, valued at $26.61 per share, the closing price of our common shares on Nasdaq on that day.
Share Purchases
During the three and six months ended June 30, 2020, we purchased an aggregate of 1,129 and 2,141 of our common shares, respectively, valued at weighted average share prices of $26.27 and $26.52 per share, respectively, from one of our Trustees and certain former officers and employees of RMR LLC in satisfaction of tax withholding and payment obligations in connection with the vesting of awards of our common shares.
 

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OFFICE PROPERTIES INCOME TRUST
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(dollars in thousands, except per share data)
(unaudited)

Distributions
During the six months ended June 30, 2020, we declared and paid regular quarterly distributions to common shareholders as follows:
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


On July 16, 2020, we declared a regular quarterly distribution to common shareholders of record on July 27, 2020 of $0.55 per share, or approximately $26,500. We expect to pay this distribution on or about August 20, 2020.
Note 10. Business and Property Management Agreements with RMR LLC
We have no employees. The personnel and various services we require to operate our business are provided to us by RMR LLC. We have two agreements with RMR LLC to provide management services to us: (1) a business management agreement, which relates to our business generally; and (2) a property management agreement, which relates to our property level operations.
Pursuant to our business management agreement with RMR LLC, we recognized net business management fees of $4,302 and $5,322 for the three months ended June 30, 2020 and 2019, respectively, and $9,001 and $11,044 for the six months ended June 30, 2020 and 2019, respectively. Based on our common share total return, as defined in our business management agreement, as of June 30, 2020 and 2019, no estimated incentive fees are included in the net business management fees we recognized for the three or six months ended June 30, 2020 or 2019. The actual amount of annual incentive fees for 2020, if any, will be based on our common share total return, as defined in our business management agreement, for the three year period ending December 31, 2020, and will be payable in 2021. We did not incur an incentive fee payable to RMR LLC for the year ended December 31, 2019. We include business management fees in general and administrative expenses in our condensed consolidated statements of comprehensive income (loss).
Pursuant to our property management agreement with RMR LLC, we recognized aggregate net property management and construction supervision fees of $5,128 and $5,534 for the three months ended June 30, 2020 and 2019, respectively, and $10,192 and $10,983 for the six months ended June 30, 2020 and 2019, respectively. These amounts are included in other operating expenses or have been capitalized, as appropriate, in our condensed consolidated financial statements.
We are generally responsible for all of our operating expenses, including certain expenses incurred or arranged by RMR LLC on our behalf. We are generally not responsible for payment of RMR LLC’s employment, office or administrative expenses incurred to provide management services to us, except for the employment and related expenses of RMR LLC’s employees assigned to work exclusively or partly at our properties, our share of the wages, benefits and other related costs of RMR LLC’s centralized accounting personnel, our share of RMR LLC’s costs for providing our internal audit function and as otherwise agreed. Our property level operating expenses are generally incorporated into the rents charged to our tenants, including certain payroll and related costs incurred by RMR LLC. We reimbursed RMR LLC $6,259 and $6,533 for these expenses and costs for the three months ended June 30, 2020 and 2019, respectively, and $12,250 and $13,157 for these expenses and costs for the six months ended June 30, 2020 and 2019, respectively. We included these amounts in other operating expenses and general and administrative expenses, as applicable, in our condensed consolidated statements of comprehensive income (loss).
Note 11. Related Person Transactions
We have relationships and historical and continuing transactions with RMR LLC, The RMR Group Inc., or RMR Inc., and others related to them, including other companies to which RMR LLC or its subsidiaries provide management services and some of which have trustees, directors or officers who are also our Trustees or officers. RMR LLC is a majority owned subsidiary of RMR Inc. The Chair of our Board of Trustees and one of our Managing Trustees, Adam Portnoy, is the sole trustee, an officer and the controlling shareholder of ABP Trust, which is the controlling shareholder of RMR Inc., a managing director, the president and chief executive officer of RMR Inc. and an officer and employee of RMR LLC. David Blackman,

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OFFICE PROPERTIES INCOME TRUST
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(dollars in thousands, except per share data)
(unaudited)

our other Managing Trustee and our President and Chief Executive Officer, also serves as an executive officer of RMR LLC, and each of our other officers is also an officer and employee of RMR LLC. Some of our Independent Trustees also serve as independent trustees or independent directors of other public companies to which RMR LLC or its subsidiaries provide management services. Adam Portnoy serves as chair of the boards of trustees or boards of directors of several of these public companies and as a managing director or managing trustee of these public companies. Other officers of RMR LLC, including Mr. Blackman and certain of our other officers, serve as managing trustees, managing directors or officers of certain of these companies. 
Our Manager, RMR LLC. We have two agreements with RMR LLC to provide management services to us. For more information regarding our management agreements with RMR LLC, see Note 10.
Leases with RMR LLC. We lease office space to RMR LLC in certain of our properties for RMR LLC’s property management offices. Pursuant to our lease agreements with RMR LLC, we recognized rental income from RMR LLC for leased office space of $274 and $287 for the three months ended June 30, 2020 and 2019, respectively, and $554 and $566 for the six months ended June 30, 2020 and 2019, respectively.
Affiliates Insurance Company, or AIC. Until its dissolution on February 13, 2020 we, ABP Trust and five other companies to which RMR LLC provides management services owned AIC in equal amounts. We and the other AIC shareholders historically participated in a combined property insurance program arranged and insured or reinsured in part by AIC. The policies under that program expired on June 30, 2019, and we and the other AIC shareholders elected not to renew the AIC property insurance program; we have instead purchased standalone property insurance coverage with unrelated third party insurance providers.
As of June 30, 2020 and December 31, 2019, our investment in AIC had a carrying value of $11 and $298, respectively. These amounts are included in other assets, net in our condensed consolidated balance sheets. In June 2020, we received an additional liquidating distribution of approximately $287 from AIC in connection with its dissolution. We did not recognize any income related to our investment in AIC for the three or six months ended June 30, 2020, respectively, and we recognized income of $130 and $534 for the three and six months ended June 30, 2019, respectively. These amounts are included in equity in net losses of investees in our condensed consolidated statements of comprehensive income (loss). Our other comprehensive loss for the 2019 period includes our proportionate part of unrealized gains (losses) on fixed income securities, which are owned by AIC, related to our investment in AIC.
For more information about these and other such relationships and certain other related person transactions, refer to our 2019 Annual Report.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following information should be read in conjunction with our condensed consolidated financial statements and accompanying notes included in Part I, Item 1 of this Quarterly Report on Form 10-Q and with our 2019 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, 2020, our wholly owned properties were comprised of 184 properties and we had noncontrolling ownership interests in three properties totaling approximately 444,000 rentable square feet through two unconsolidated joint ventures in which we own 51% and 50% interests. As of June 30, 2020, our properties are located in 34 states and the District of Columbia and contain approximately 24,909,000 rentable square feet. As of June 30, 2020, our properties were leased to 357 different tenants with a weighted average remaining lease term (based on annualized rental income) of approximately 5.5 years. The U.S. Government is our largest tenant, representing approximately 25.2% of our annualized rental income as of June 30, 2020. 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, 2020, plus straight line rent adjustments and estimated recurring expense reimbursements to be paid to us, and excluding lease value amortization.
COVID-19 Pandemic
In March 2020, the World Health Organization declared the outbreak of COVID-19 as a pandemic and, in response to the outbreak, the U.S. Health and Human Services Secretary declared a public health emergency in the United States and many states and municipalities declared public health emergencies. The virus that causes COVID-19 has continued to spread throughout the United States and the world. Various governmental responses attempting to contain and mitigate the spread of the virus have negatively impacted, and continue to negatively impact, the global economy, including the U.S. economy. As a result, most market observers believe the global economy and the U.S. economy are in a recession. States and municipalities across the United States have been allowing certain businesses to re-open and easing certain restrictions they had previously implemented in response to the COVID-19 pandemic, often in stages that are phased in over time. Recently, economic data have indicated that the U.S. economy has improved since the lowest periods experienced in March and April 2020. However, certain areas of the United States have experienced increased numbers of COVID-19 infections following the re-openings of their economies and easing of restrictions and, in some cases, certain states have imposed or re-imposed closings of certain business activities and other restrictions in response. It is unclear whether the increases in the number of COVID-19 infections will continue or amplify or whether any “second wave” of COVID-19 infection outbreaks will occur in the United States or elsewhere and, if so, what the impact of that would be on human health and safety, the economy, our tenants or our business.
Our business is focused on leasing office space to primarily single tenants and those with high credit quality characteristics such as government entities. Although, to date, the COVID-19 pandemic has not had a significant impact on our business, we have received requests from some of our tenants for rent assistance. As of July 27, 2020, we have granted temporary rent assistance totaling $2,475 to 23 tenants who represent approximately 3.7% of our annualized rental income as of June 30, 2020. As of June 30, 2020, we recognized an increase in our accounts receivable related to these deferred payments of $2,222. This assistance generally entails a deferral of, in most cases, one month of rent until September 2020 when the deferred rent amounts will begin to be payable over a 12-month period. For the quarter ended June 30, 2020, we collected approximately 98% of contractual rent obligations and 99% of contractual rent obligations after giving effect to such rent deferrals.
We are continuing to closely monitor the impact of the COVID-19 pandemic on all aspects of our business, including:
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.

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We believe that our current 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 and perhaps present opportunities for us to strategically deploy our capital. As of July 29, 2020, we had:
$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).
We do not have any employees and the personnel and various services we require to operate our business are provided to us by RMR LLC pursuant to our business and property management agreements with RMR LLC. RMR LLC has implemented enhanced cleaning protocols and social distancing guidelines at its corporate headquarters and its regional offices, as well as business continuity plans to ensure RMR LLC employees remain safe and able to support us and other companies managed by RMR LLC or its subsidiaries, including providing appropriate information technology such as notebook computers, smart phones, computer applications, information technology security applications and technology support.
With respect to our properties, RMR LLC has implemented enhanced cleaning protocols and has taken measures to reduce the possibility of persons gathering in groups and in close proximity to each other, for the purpose of mitigating the potential for spreading of COVID-19 infections. Included among these protocols and measures are the following:
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.
All RMR LLC property management and engineering personnel have been trained on COVID-19 precaution procedures. As states and local communities across the country moved to stay at home orders, RMR LLC worked to reduce and optimize our operating costs at our properties by:
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.
RMR LLC’s property management teams have also established business continuity plans to ensure operational stability at our properties. As stay at home orders have been lifted or loosened across the United States, RMR LLC has implemented additional procedures at our properties based on recommended guidelines from the U.S. Centers for Disease Control and Prevention and other regulatory agencies. For example:
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

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altering cleaning schedules to perform vacuuming at times intended to reduce the potential airborne spread of the virus.
RMR LLC has significantly reduced all non-essential work travel and its regional leadership personnel have not been allowed to work in the same locations at the same time. RMR LLC also requires its employees who work at our properties to use personal protective equipment and business continuity bonus payments have been provided to certain essential workers at our properties. RMR LLC’s regional management offices are currently limiting walk-in visitors and maintain maximum office occupancy limits as required by state and local guidelines, including weekly rotations of employees as needed.
There are extensive uncertainties surrounding the COVID-19 pandemic. These uncertainties include among others:
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.
As a result of these uncertainties, we are unable to determine what the ultimate impact will be on our, our tenants’ and other stakeholders’ businesses, operations, financial results and financial position. For further information and risks relating to the COVID-19 pandemic on us and our business, see Part II, Item 1A “Risk Factors,” in this Quarterly Report on Form 10-Q.
Property Operations
Unless otherwise noted, the data presented in this section excludes three properties owned by two unconsolidated joint ventures in which we own 51% and 50% interests. For more information regarding our two unconsolidated joint ventures, see Note 4 to the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.
As of June 30, 2020, 91.7% of our rentable square feet was leased, compared to 91.6% of our rentable square feet as of June 30, 2019. Occupancy data for our properties as of June 30, 2020 and 2019 was as follows (square feet in thousands):
 
 
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.

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The average effective rental rate per square foot for our properties for the three and six months ended June 30, 2020 and 2019 are as follows:
 
 
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.
During the three and six months ended June 30, 2020, 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, 2020
 
Six Months Ended June 30, 2020
 
 
Leased
 
Available for Lease
 
Total
 
Leased
 
Available for Lease
 
Total
Beginning of period
 
22,789

 
2,117