OFFICE PROPERTIES INCOME TRUST (OPI)·Q2 2025 Earnings Summary

Executive Summary

• Q2 2025 showed continued deterioration, but OPI delivered normalized FFO of $9.4M ($0.13/share), above the high end of its internal guidance due to lower seasonal operating expenses, while rental income declined year over year and leverage remained elevated .
• Management suspended the quarterly dividend ($0.01/share) to preserve cash and reiterated “substantial doubt” regarding going concern, highlighting constrained covenant headroom, fully drawn revolver, and upcoming 2026–2027 maturities as key risk catalysts .
• Leasing activity improved sequentially (416k sf; total rents +6.4%), but occupancy remains low (81.2% leased vs 83.5% in Q2 2024), and same-property cash-basis NOI margin contracted year over year (57.4% vs 61.0%) .
• Guidance was cautious: Q3 normalized FFO of $0.07–$0.09/share; recurring G&A ~$5M; quarterly interest expense $$52M ($41M cash, $11M non-cash); same-property cash-basis NOI down 7–9% vs 2024; 2025 capex ~$43M; cash from operations expected to be a use of $45–$55M for the remainder of 2025 .
• Potential near-term stock-moving catalysts: dividend suspension and explicit going-concern language, asset sale progress, leasing renewals vs non-renewals, and developments on debt exchanges/refinancing strategy .

What Went Well and What Went Wrong

What Went Well

• Normalized FFO of $9.4M ($0.13/share) beat OPI’s guidance high-end by $0.02/share, driven by lower seasonal operating expenses and improved performance at 20 Mass Ave’s hotel operations .
• Sequential improvement in leasing: 416k sf signed at a weighted average term of 5.4 years with total rents +6.4%; concessions/capex commitments per sf per year fell 24% QoQ to $3.53/sf/year .
• Renewals represented two-thirds of leasing and secured ~$7M of annualized revenue, supporting near-term cash flows in multi-tenant assets where net absorption is more feasible per management .

What Went Wrong

• Rental income fell year over year ($114,499k vs $123,686k), with net loss of $41,186k and diluted EPS of $(0.58), reflecting sector headwinds, higher interest expense, and vacancies; same-property cash-basis NOI declined 10.3% YoY .
• Leverage and coverage deteriorated: rolling 4Q Adjusted EBITDAre/interest fell to 1.3x; net debt/Adj. EBITDAre rose to 9.3x; secured debt/total assets increased to 54.4% .
• Liquidity remains thin and constrained by covenants: cash $78,176k at 6/30 and $90.1M as of 7/30; revolver fully drawn; going-concern doubt persists; Q3 quarter expected to be weaker seasonally and cash from operations projected to be a use of $45–$55M in H2 2025 .

Financial Results

KPIs and Leasing

Dividend, Liquidity, and Leverage

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “Annualized revenue of $398,000,000 is down $85,000,000 or nearly 18% compared to a year ago. Interest expense in the second quarter of $53,000,000 is up $14,000,000 or 37% year over year. We have little room under our debt covenants… Nearly $280,000,000 in debt principal payments are due in 2026… total liquidity is $90,000,000 of cash.” .
• “Normalized FFO of $9,400,000 or $0.13 per share, which came in $0.02 above the high end of our guidance range as a result of lower than anticipated seasonal operating expenses… We expect normalized FFO to be between $0.07 and $0.09 per share for Q3.” .
• “We continue to evaluate options to address these maturities with our financial advisor… projecting cash from operations to be a use of $45,000,000 to $55,000,000 during the balance of 2025 including capital expenditures.” .
• Dividend suspension: The Board “has suspended OPI’s quarterly cash distribution… expects to retain approximately $3.0 million of cash annually as a result.” .

Q&A Highlights

• The transcript provided only prepared remarks and ended without a Q&A session; no additional guidance clarifications beyond prepared comments were given .

Estimates Context

• Wall Street consensus via S&P Global was unavailable for Q2 2025 EPS and target price; revenue “actual” is reported, but no consensus was returned.

Values retrieved from S&P Global.*

Implications: With limited analyst coverage and no consensus, estimate-based beat/miss analysis is not feasible this quarter; internal guidance beat (normalized FFO +$0.02 vs OPI’s range) is the primary positive datapoint .

Key Takeaways for Investors

• Liquidity and solvency risk remain front-and-center: going-concern language, fully drawn revolver, and 2026 principal payments (~$280M) mean headline risk persists; watch for any debt exchange/refinance updates .
• Normalized FFO beat vs company guidance was the lone bright spot; however, Q3 guidance embeds weaker NOI, higher OpEx, and seasonality at 20 Mass Ave’s hotel, suggesting near-term earnings softness .
• Dividend suspension and constrained covenants are likely to keep equity risk premia high; dividend reinstatement seems unlikely near term given cash from operations projected to be a use of $45–$55M in H2 .
• Leasing momentum improved sequentially (416k sf; +6.4% rent), but occupancy (81.2%) and same-property cash NOI (-10.3% YoY) reflect continued structural office demand weakness; renewals dominate pipeline (>60%) .
• Interest burden is heavy (~$52M/quarter run-rate), with coverage down to 1.3x; rate relief and deleveraging via asset sales would be supportive, but buyer pools and timelines remain challenging per management .
• Asset sales: three properties under agreement ($28.9M), with two expected to close in Sep-2025; closing execution and use of proceeds (debt paydown) are key to monitoring covenant and liquidity headroom .
• Trading view: headlines around dividend suspension/going concern/debt exchanges can drive volatility; near term, stock is highly sensitive to leasing renewals, asset sale closings, and any covenant/performance updates .

Citations: Q2 2025 8-K press release and supplemental deck ; Q2 2025 earnings call transcript ; Dividend suspension press release ; Q1 2025 8-K ; Q4 2024 8-K .