Real Estate Properties (Tables)

12 Months Ended

Dec. 31, 2019

Real Estate [Abstract]

Schedule of Allocation of Purchase Price

The following table summarizes the total consideration paid and the estimated fair values of the assets acquired and liabilities assumed in the FPO Transaction:

Total Purchase Price:
	Cash consideration	$	1,175,140
	Acquisition related costs	9,575
	Total cash consideration	1,184,715
	Preferred units of limited partnership issued (1)	20,221
	Acquired net working capital	(1,596		)
	Assumed mortgage notes	167,548
	Non-cash portion of purchase price	186,173
	Gross purchase price	$	1,370,888
Purchase Price Allocation:
	Land	$	360,909
	Buildings and improvements	681,340
	Acquired real estate leases (2)	283,498
	Investment in unconsolidated joint ventures	51,305
	Cash	11,191
	Restricted cash	1,018
	Rents receivable	2,672
	Other assets	3,640
	Total assets	1,395,573
	Mortgage notes payable (3)	(167,936		)
	Assumed real estate lease obligations (2)	(5,776		)
	Accounts payable and accrued expenses	(10,640		)
	Rents collected in advance	(1,436		)
	Security deposits	(4,849		)
	Net assets acquired	1,204,936
	Assumed working capital	(1,596		)
	Assumed principal balance of debt	167,548
	Gross purchase price	$	1,370,888

(1) Pursuant to the terms of the FPO Transaction, each unit of limited partnership interest in FPO’s operating partnership that was not liquidated on the closing date was exchanged on a one-for-one basis for 5.5% Series A Cumulative Preferred Units of the surviving subsidiary. As of December 31,

2017, the carrying value of these Series A Cumulative Preferred Units was $20,496 and was recorded as temporary equity on our consolidated balance sheet. On May 1, 2018, we redeemed all 1,813,504 of the outstanding 5.5% Series A Cumulative Preferred Units for $11.15 per unit (plus accrued and unpaid distributions) for an aggregate of $20,310.

(2) As of the date acquired, the weighted average amortization periods for capitalized above market lease values, lease origination value and capitalized below market lease values were 3.2 years, 3.1 years and 3.8 years, respectively.

(3)

Includes fair value adjustments totaling $388 on $167,936 principal amount of mortgage notes we assumed in connection with the FPO Transaction.

Our allocation of the purchase price of this acquisition is based on the relative estimated fair value of the acquired assets and assumed liabilities is presented in the following table.

Acquisition Date	Location	Number of Properties	Square Feet	Purchase Price		Land		Building and Improvements		Other Assumed Assets
Jan 2017	Manassas, VA	1	69,374	$	12,657	$	1,562	$	8,253	$	2,842

The following table summarizes the purchase price allocation for SIR based on estimated fair values as of the December 31, 2018:

Purchase Price Allocation:
	Land	$	477,977
	Buildings and improvements	956,801
	Assets of properties held for sale	6,846
	Acquired real estate leases	854,431
	Cash	24,744
	Restricted cash	476
	Rents receivable	11,370
	Other assets (1)	88,658
	Total assets	2,421,303
	Unsecured revolving credit facility (2)	(108,000		)
	Senior unsecured notes (3)	(1,410,947		)
	Mortgage notes payable (4)	(159,490		)
	Accounts payable and other liabilities	(61,289		)
	Assumed real estate lease obligations	(11,879		)
	Due to related persons	(30,120		)
	Net assets acquired	639,578
	Assumed working capital	50,390
	Select Income REIT unsecured revolving credit facility repaid at closing (2)	108,000
	Assumed senior unsecured notes, principal balance	1,450,000
	Assumed mortgage notes payable, principal balance	161,772
	Consideration transferred and liabilities assumed (5)	$	2,409,740

(1) Other assets include $84,229 for SIR’s investment in shares of class A common stock of RMR Inc. which was recorded at fair value as of December 31, 2018.

(2) We repaid the outstanding balance under SIR’s revolving credit facility at the closing of the SIR Merger with borrowings under our revolving credit facility.

(3) The aggregate principal balance of the senior unsecured notes was $1,450,000 as of December 31, 2018.

(4) The aggregate principal balance of the mortgage notes payable was $161,772 as of December 31, 2018.

(5)

Purchase price excludes acquisition related costs.

The following table summarizes the consideration transferred and liabilities assumed:

Total Purchase Price (excluding acquisition costs):
	OPI common shares issued	23,282,704
	Closing price of OPI common shares on December 31, 2018	$	27.48
	Value of consideration transferred	$	639,809
	Cash consideration for fractional shares	8
	Equity issuance costs	(239		)
	Value of consideration transferred	639,578
	Assumed working capital	50,390
	Assumed senior unsecured notes, principal balance	1,450,000
	Assumed mortgage notes payable, principal balance	161,772
	Select Income REIT unsecured revolving credit facility repaid at closing	108,000
	Non-cash portion of purchase price	1,770,162
	Total consideration transferred and liabilities assumed	$	2,409,740

Schedule of Pro Forma Information

The following table presents our pro forma results of operations for the year ended December 31, 2018 as if the SIR Transactions and related financing activities, had occurred on January 1, 2018. The SIR results of operations included in this pro forma financial information have been adjusted to remove ILPT’s results of operations for the year ended December 31, 2018. The effect of these adjustments was to decrease pro forma rental income and pro forma net income by $152,735 and $46,237, respectively, for the year ended December 31, 2018.

This pro forma financial information is not necessarily indicative of what our actual financial position or results of operations would have been for the period presented or for any future period. Differences could result from numerous factors, including future changes in our portfolio of investments, capital structure, property level operating expenses and revenues, including rents expected to be received on our existing leases, leases we entered since December 31, 2018, or leases we may enter in the future, changes in interest rates and other reasons. Actual future results are likely to be different from amounts presented in this pro forma financial information and such differences could be significant.

	Year Ended December 31,
	2018
Rental income	$	758,596
Net loss	$	(87,240	)
Net loss per common share	$	(1.82	)

Schedule of Joint Ventures

As of December 31, 2019 and 2018, our investment in unconsolidated joint ventures consisted of the following:

	OPI Ownership	OPI Carrying Value of Investment at December 31,				Number of Properties	Location	Square Feet
Joint Venture		2019		2018
Prosperity Metro Plaza	51%	$	22,483	$	23,969	2	Fairfax, VA	328,456
1750 H Street, NW	50%	17,273		19,696		1	Washington, D.C.	115,411
Total		$	39,756	$	43,665	3		443,867

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 December 31, 2019 and 2018
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

Schedule of Disposal Groups

As a result, the results of operations of these properties are included in continuing operations through the date of sale in our consolidated statements of comprehensive income (loss).

Date of Sale	Number of Properties	Location	Square Feet	Gross  Sale Price (1)		Gain (Loss) on Sale of Real Estate			Loss on Impairment of Real Estate
February 2019	34	Northern Virginia and Maryland	1,635,868	$	198,500	$	—		$	732
March 2019	1	Washington, D.C.	129,035	70,000		22,075			—
May 2019	1	Buffalo, NY	121,711	16,900		—			5,137
May 2019	1	Maynard, MA	287,037	5,000		(227		)	—
June 2019	1	Kapolei, HI	416,956	7,100		—			—
July 2019	1	San Jose, CA	71,750	14,000		(270		)	—
July 2019	1	Nashua, NH	321,800	25,000		8,401			—
August 2019	1	Arlington, TX	182,630	14,900		187			—
August 2019	1	Rochester, NY	94,800	4,765		(104		)	—
August 2019	1	Hanover, PA	502,300	5,500		(417		)	—
August 2019	1	San Antonio, TX	618,017	198,000		3,869			—
September 2019	1	Topeka, KS	143,934	15,600		36			—
September 2019	1	Falling Waters, WV	40,348	650		—			2,179
September 2019	1	San Diego, CA	43,918	8,950		3,062			—
October 2019	3	Columbia, SC	180,703	10,750		—			3,581
November 2019	3	Metro DC - MD	372,605	61,938		1,177			—
December 2019	1	San Diego, CA	148,488	23,750		6,823			—
December 2019	1	Phoenix, AZ	122,646	12,850		860			—
December 2019	1	Houston, TX	497,477	130,000		59,992			—
December 2019	1	Kansas City, KS	170,817	11,700		—			1,172
December 2019	1	San Jose, CA	75,621	13,000		(333		)	—
	58		6,178,461	$	848,853	$	105,131		$	12,801

(1) Gross sale price is the gross contract price, includes purchase price adjustments, if any, and excludes closing costs.

As of December 31, 2019, we had six properties with an aggregate undepreciated carrying value of $61,900 under agreements to sell, as presented in the following table. We have classified these properties as held for sale in our consolidated balance sheet at December 31, 2019.

Date of Sale Agreement	Number of Properties	Location	Square Feet	Gross Sale Price (1)
October 2019 (2)	2	Stafford, VA	64,656	$	14,063
October 2019	1	Fairfax, VA	83,130	22,200
October 2019 (2)	1	Windsor, CT	97,256	7,000
November 2019 (3)	1	Trenton, NJ	267,025	30,100
November 2019	1	Lincolnshire, IL	222,717	12,000
	6		734,784	$	85,363

(1) Gross sale price is the gross contract price, includes purchase price adjustments, if any, and excludes closing costs.

(2) The sale of these properties was completed in January 2020.

(3)

We recorded a $9,454 loss on impairment of real estate during the year ended December 31, 2019 to adjust the carrying value of this property to its estimated fair value less costs to sell.

As a result, the results of operations of these properties are included in continuing operations through the date of sale in our consolidated statements of comprehensive income (loss).

Date of Sale	Number of Properties	Location	Square Feet	Gross  Sale Price (1)		Gain on Sale of Real Estate		Loss on Impairment of Real Estate
March 2018	1	Minneapolis, MN	193,594	$	20,000	$	—	$	640
May 2018	1	New York, NY	187,060	118,500		17,249		—
May 2018	1	Sacramento, CA	110,500	10,755		—		3,029
November 2018	1	Golden, CO	43,231	4,000		54		—
December 2018	15	Southern Virginia	1,640,252	167,000		3,358		—
	19		2,174,637	$	320,255	$	20,661	$	3,669

(1)

Gross sale price is the gross contract price, includes purchase price adjustments, if any, and excludes closing costs.

Summarized income statement information for this property is as follows:

Statements of Income (Loss)

	Year Ended
	December 31, 2017
Rental income	$	17
Real estate taxes	(88		)
Utility expenses	(97		)
Other operating expenses	(202		)
General and administrative	(76		)
Increase in carrying value of property included in discontinued operations	619
Income from discontinued operations	$	173

The following table presents the components of income from discontinued operations for the years ended December 31, 2019, 2018 and 2017:

	Year Ended December 31,
	2019		2018			2017
Equity in earnings of Select Income REIT	$	—	$	24,358		$	21,584
Net gain on issuance of shares by Select Income REIT	—		29			72
Loss on sale of Select Income REIT shares	—		(18,665		)	—
Income from property discontinued operations	—		—			173
Income from discontinued operations	$	—	$	5,722		$	21,829