Combination Agreement

6 Months Ended

Jun. 30, 2016

Business Combinations [Abstract]

Combination Agreement

Note 2 — Combination Agreement

On May 25, 2016, the Company and the OP entered into a Master Combination Agreement (the "Combination Agreement") with JBG Properties, Inc. and JBG/Operating Partners, L.P. (collectively "JBG Management Entities"), and certain pooled investment funds that are affiliates of the JBG Management Entities (collectively with the JBG Management Entities and certain affiliated entities "JBG"), providing for a series of transactions pursuant to which certain of JBG's real estate interests and management business interests would be contributed to the Company and the OP in exchange for an aggregate of up to approximately 319.9 million newly issued shares of common stock of the Company and newly issued units of limited partner interests in the OP, subject to certain adjustments (the “Combination Transactions”).

Concurrently and in connection with the entry into the Combination Agreement, the Company, the Advisor and certain of the Company’s directors and officers also entered into the following agreements generally effective upon the completion of the Combination Transactions and subject to automatic termination upon termination of the Combination Agreement:

• a transition services agreement (the "Transition Services Agreement") whereby the Advisor agreed to provide the Company with certain transition services through the date on which the Company's Annual Report on Form 10-K for the year ended December 31, 2016 is filed with the SEC for an aggregate fee in the amount of $7.0 million;

• a termination agreement (the "OPP Termination Agreement") terminating the Company's 2014 Advisor Multi-Year Outperformance Agreement with the Advisor (as amended and restated effective August 5, 2015, the "OPP") upon the occurrence of the closing of the Combination Transactions in exchange for an aggregate of 1,172,738 limited partnership units of the OP entitled "LTIP Units" ("LTIP units") that have been earned under the OPP through April 16, 2016 and an additional 2,865,916 LTIP units that would be deemed to be earned for the year ending April 16, 2017 converting into limited partnership units of the OP entitled "OP Units" ("OP units"), which would be exchanged for 4,038,654 shares of common stock;

• a termination agreement (the "Omnibus Termination Agreement") pursuant to which, subject to and effective as of the closing of the Combination Transactions, the property management agreement with the Property Manager and other agreements with the Advisor or its affiliates, would be terminated;

• a support agreement (the “Support Agreement”) whereby Michael A. Happel, the Company’s chief executive officer and president, and William M. Kahane, a member of the Company’s board of directors and a control person of the Advisor, agreed to vote in favor of the matters requiring stockholder approval with respect to the Combination Transactions; and

• a term sheet (the “Happel Term Sheet”) for a consulting agreement between Mr. Happel and the Company which by it terms would not become effective until the closing of the Combination Transactions.

On August 2, 2016, the Company and the OP entered into a termination and release agreement (the “Termination Agreement”) with JBG providing for termination of the Combination Agreement and the Confidentiality Agreement by and among the Company and the OP and JBG Properties, Inc., dated January 29, 2016. Effective upon the termination of the Combination Agreement, the Transition Services Agreement, the OPP Termination Agreement, the Omnibus Termination Agreement, the Support Agreement and the Happel Term Sheet also terminated automatically in accordance with their terms. See Note 17 — Subsequent Events.