Fresh Start Accounting

6 Months Ended

Jun. 30, 2026

Adoption of ASC 852

Effective on the Petition Date, we applied Financial Accounting Standards Board, or FASB, Accounting Standards Codification, or ASC, Topic 852, Reorganizations, or ASC 852, which specifies the accounting and financial reporting requirements for entities reorganizing through Chapter 11 bankruptcy proceedings. Beginning on the Petition Date, these requirements included distinguishing transactions directly associated with the reorganization reported separately as reorganization items, net in the condensed consolidated statement of comprehensive income (loss) and to distinguish certain liabilities subject to compromise, or LSTC, in the condensed consolidated balance sheet.

Fresh Start Accounting

In connection with our emergence from bankruptcy and in accordance with ASC 852, we qualified for and applied fresh start accounting on the Effective Date. We were required to apply fresh start accounting because (i) the holders of existing voting shares of OPI prior to its emergence received less than 50% of the voting shares of OPI outstanding following its emergence from bankruptcy and (ii) the reorganization value of our assets immediately prior to confirmation of the Plan of $2,364,978 was less than the post-petition liabilities and allowed claims of $2,739,137.

Under fresh start accounting, we allocated our reorganization value to our individual assets based on their estimated fair value in conformity with FASB ASC Topic 820, Fair Value Measurements and FASB ASC Topic 805, Business Combinations. Our condensed consolidated financial statements and notes segregate the financial position and results of operations of OPI up to and including its emergence from the Chapter 11 Cases on the Effective Date, or the Predecessor, and the financial position and results of operations of OPI subsequent to its emergence from the Chapter 11 Cases on the Effective Date, or the Successor. References to Successor relate to the financial position and results of operations of OPI after the Effective Date and references to Predecessor relate to the financial position and results of operations up to and including the Effective Date. As a result, the condensed consolidated financial statements subsequent to the Effective Date are not comparable with the condensed consolidated financial statements as of or prior to that date.

Reorganization Value

Reorganization value approximates the fair value of an entity immediately after a restructuring. As set forth in the disclosure statement with respect to the Chapter 11 Cases approved by the Bankruptcy Court, the enterprise value of the Successor is estimated to be in a range of $2,050,000 and $2,250,000. We engaged third-party valuation advisors to assist with the determination of the estimate of the enterprise value and the corresponding implied equity value of the Successor. The estimate of the enterprise value was derived using a discounted cash flow, or DCF, analysis based on financial projections for our properties. The DCF analysis estimated the present value of projected debt-free, after-tax free cash flows through December 31, 2030, together with an estimated terminal value, using discount rates based on our weighted average cost of capital. The most significant assumptions included projected operating cash flows, exit capitalization rates within a range of 9.50% to 12.50%, discount rates within a range of 8.75% to 11.00% and financing assumptions. Our third-party valuation advisors also considered market based valuation methodologies, including analyses of select market peers and comparable transactions. Management concluded that the appropriate estimate of the enterprise value was $2,150,000. Because the valuation is dependent on assumptions regarding future operating performance and market conditions, actual results could differ materially from those estimates. The following table reconciles the enterprise value to the implied value of the Successor equity as of the Effective Date:


Enterprise Value	$	2,150,000
Plus: Cash and cash equivalents	45,799
Plus: Fair value of our investment in unconsolidated joint venture	12,764
Less: Fair value of debt	(1,683,321)
Less: Fair value of New Warrants	(10,700)
Implied Successor equity value	$	514,542

The following table reconciles the enterprise value to the reorganization value of the Successor’s assets to be allocated to our individual assets as of the Effective Date:


Enterprise Value	$	2,150,000
Plus: Cash and cash equivalents	45,799
Plus: Accounts payable and other liabilities	167,115
Plus: Fair value of our investment in unconsolidated joint venture	12,764
Less: Fair value of New Warrants included in accounts payable and other liabilities	(10,700)
Reorganization value of Successor assets	$	2,364,978

Valuation Process

The fair values of our properties, investment in unconsolidated joint venture, long-term debt and warrants were estimated as of the Effective Date.

Real Estate Properties. We determined the fair value of each property with the engagement of a third-party valuation specialist and using methods similar to those used by independent appraisers, which involved estimated cash flows that are based on a number of factors, including capitalization rates and discount rates, among others. We allocated a portion of the fair value of our properties to above market and below market leases based on the present value (using an interest rate which reflects the risks associated with acquired in place leases) of the difference, if any, between (i) the contractual amounts to be paid pursuant to the acquired in place leases and (ii) our estimates of fair market lease rates for the corresponding leases, measured over a period equal to the terms of the respective leases. We allocated a portion of the fair value to acquired in place leases and tenant relationships based upon market estimates of the cost to lease up the property based on the leases in place.

Investment in Unconsolidated Joint Venture. The fair value of our investment in our unconsolidated joint venture was determined by valuing the underlying real estate properties owned by the joint venture through the same valuation methods outlined above. We then applied our percentage of ownership to the fair value of the assets and liabilities of the joint venture, which resulted in the fair value of our investment in the unconsolidated joint venture.

Senior Notes and Credit Facility. The estimated fair values of our senior secured notes and secured revolving credit facility and secured term loan were determined using income based valuation techniques that incorporated contractual cash flows, market interest rates and credit spreads for comparable debt instruments. Significant inputs included market based yield assumptions reflecting our credit risk and the terms and characteristics of the underlying debt instruments.

Warrants. We estimated the fair value of the New Warrants as of the Effective Date using an option-pricing valuation technique that considered the market value of the underlying common shares, the exercise price and contractual term of the warrants, as well as assumptions regarding expected volatility, risk-free interest rates and expected dividend yield. Enterprise value includes the value of warrants that are classified as liabilities.

Condensed Consolidated Balance Sheet

The following condensed consolidated balance sheet is as of June 17, 2026. This condensed consolidated balance sheet includes adjustments that reflect the consummation of the transactions contemplated by the Plan (reflected in the column “Reorganization Adjustments”), as well as fair value adjustments as a result of the adoption of fresh start accounting (reflected in the column “Fresh Start Adjustments”) as of the Effective Date. The explanatory notes following the table below provide further details on the adjustments, including the assumptions and methods used to determine fair value for the assets and liabilities.


	Predecessor		Reorganization Adjustments			Fresh Start Adjustments			Successor
ASSETS
Real estate properties:
Land	$	706,623	$	(218,408)	(a)	$	118,818	(k)	$	607,033
Buildings and improvements	2,955,273		(608,900)		(a)	(1,849,262)		(l)	497,111
Total real estate properties, gross	3,661,896		(827,308)		(a)	(1,730,444)			1,104,144
Accumulated depreciation	(777,430)		146,687			630,743		(m)	—
Total real estate properties, net	2,884,466		(680,621)			(1,099,701)			1,104,144

Investment in unconsolidated joint venture	17,457		—			(4,693)		(n)	12,764
Assets of properties held for sale	—		707,854		(a)	(412,740)		(o)	295,114
Acquired real estate leases, net	134,160		(7,409)		(a)	706,982		(p)	833,733
Cash and cash equivalents	68,349		(22,550)		(b)	—			45,799
Restricted cash	45,094		4,332		(c)	—			49,426
Rents receivable	165,849		(11,503)		(a)	(141,361)		(q)	12,985
Due from related persons	924		—			—			924
Deferred leasing costs, net	91,953		(6,919)		(a)	(85,034)		(r)	—
Other assets, net	23,668		(235)		(d)	(13,344)		(s)	10,089
Total assets	$	3,431,920	$	(17,051)		$	(1,049,891)		$	2,364,978

LIABILITIES AND SHAREHOLDERS’ EQUITY
Secured debt, net	$	1,010,588	$	677,188	(e)	$	(4,455)	(t)	$	1,683,321
Liabilities of properties held for sale	—		8,050		(a)	2,583		(o)	10,633
Accounts payable and other liabilities	151,873		(20,964)		(f)	(10,382)		(u)	120,527
Due to related persons	3,324		—			—			3,324
Assumed real estate lease obligations, net	7,867		(352)		(a)	25,116		(v)	32,631
Total liabilities not subject to compromise	1,173,652		663,922			12,862			1,850,436
Liabilities subject to compromise	1,565,485		(1,565,485)		(g)	—			—
Total liabilities	2,739,137		(901,563)			12,862			1,850,436

Commitments and contingencies

Shareholders’ equity:
Predecessor common shares	739		(739)		(h)	—			—
Predecessor additional paid in capital	2,659,524		(2,659,524)		(h)	—			—
Successor common shares	—		220		(i)	—			220
Successor additional paid in capital	—		514,322		(i)	—			514,322
Cumulative net loss	(497,564)		1,560,317		(j)	(1,062,753)		(w)	—
Cumulative common distributions	(1,469,916)		1,469,916		(h)	—			—
Total shareholders’ equity	692,783		884,512			(1,062,753)			514,542
Total liabilities and shareholders’ equity	$	3,431,920	$	(17,051)		$	(1,049,891)		$	2,364,978

Reorganization Adjustments

(a)Represents reclassification of properties that met the held for sale criteria as of the Effective Date.

(b)Changes in cash and cash equivalents include the following:


Cash proceeds from Rights Offering	$	33,584
Release of funds held in segregated bank accounts to cash and cash equivalents	22,768
Payment of lender professional fees and expenses, including lender success fees	(37,142)
Funding of the professional and success fee escrow, classified as restricted cash	(34,667)
Payment of accrued interest on certain prepetition debt	(5,876)
Payment of RMR business management fee	(1,167)
Payment of DIP Facility fees and expenses	(50)
Net change in cash and cash equivalents	$	(22,550)

(c)Changes in restricted cash include the following:


Funding of the professional and success fee escrow, classified as restricted cash	$	34,667
Release of funds held in segregated bank accounts to cash and cash equivalents	(22,768)
Payment of lender professional fees and expenses	(5,107)
Payment of accrued interest on certain prepetition debt	(2,460)
Net change in restricted cash	$	4,332

(d)Represents the payment of the RMR business management fee in accordance with the Amended Business Management Agreement, classified as a prepaid asset of $1,167 and reclassification of other assets, net for properties held for sale.

(e)Changes in secured debt include the following:


Issuance of 2031 Secured Exit Notes	$	420,000
Issuance of 2029 Secured Exit Notes	385,000
Settlement of DIP Facility	(127,812)
Net change in secured debt, net	$	677,188

(f)Changes in accounts payable and other liabilities include the following:


Accrual of certain success fee	$	14,825
Issuance of New Warrants	10,700
Accrual of settlement fee	10,000
Reinstatement of accounts payable from liabilities subject to compromise	4,186
Payment of accrued lender fees and expenses	(20,646)
Equitization of DIP Facility fees	(12,500)
Settlement of postpetition accrued interest	(11,495)
Reclassification of accounts payable and other liabilities for properties held for sale	(7,698)
Payment of accrued interest on certain prepetition debt from cash and cash equivalents	(5,876)
Payment of accrued interest on certain prepetition debt from restricted cash	(2,460)
Net change in accounts payable and other liabilities	$	(20,964)

(g)LSTC settled in accordance with the Plan and the resulting gain were determined as follows:


Liabilities subject to compromise	$	1,565,485
Less: Reinstatement of accounts payable from liabilities subject to compromise	(4,186)

Consideration provided to settle amounts per Plan:
Issuance of 2031 Secured Exit Notes	(420,000)
Issuance of 2029 Secured Exit Notes	(385,000)
Issuance of Reorganized Common Equity to holders of certain prepetition claims	(192,758)
Issuance of Reorganized Common Equity in connection with the Rights Offering	(48,856)
Cash proceeds from Rights Offering	33,584
Issuance of New Warrants	(10,700)
Recognition of settlement fee	(10,000)
Issuance of Reorganized Common Equity in connection with the Rights Offering backstop agreement	(3,500)
Net gain on settlement of liabilities subject to compromise	$	524,069

(h)Represents the cancellation of Predecessor equity.

(i)Changes in successor equity include the following:


Issuance of Reorganized Common Equity in connection with the settlement of DIP Facility and DIP Facility fee claims	$	259,137
Issuance of Reorganized Common Equity to holders of prepetition claims	192,758
Issuance of Reorganized Common Equity in connection with the Rights Offering	48,856
Issuance of Reorganized Common Equity to RMR in connection with Amended Business Management Agreement	10,291
Issuance of Reorganized Common Equity in connection with the Rights Offering backstop agreement	3,500
Net change in successor equity	$	514,542

(j)Reflects the Plan effects on cumulative net income as follows:


Gain on settlement of liabilities subject to compromise	$	524,069
Gain on settlement of postpetition accrued interest	11,495
Loss on settlement of DIP Facility claims, including fees and expenses	(118,825)
Recognition of lender professional fees and expenses, including lender success fees	(21,653)
Recognition of certain success fee	(14,825)
Issuance of Reorganized Common Equity to RMR in connection with Amended Business Management Agreement	(10,291)
Total reorganization items, net	369,970
Cancellation of Predecessor equity (direct to cumulative net income)	1,190,347
Net change in cumulative net income	$	1,560,317

Fresh Start Adjustments

We have applied fresh start accounting in accordance with ASC 852. Fresh start accounting requires the revaluation of our assets and liabilities on the basis of fair value and the assignment of the Successor's reorganization value to identifiable tangible and intangible assets. These adjustments reflect the actual amounts recorded as of the Effective Date.

(k)Reflects the removal of historical basis and step-down to estimated fresh start value of land under the purchase price allocation.

(l)Reflects the removal of historical basis and step-down to estimated fresh start value of buildings and improvements under the purchase price allocation.

(m)Reflects the elimination of historical accumulated depreciation in connection with the fresh start value of the related real estate.

(n)Reflects the fresh start adjustment to the investment in unconsolidated joint venture.

(o)Reflects the fresh start adjustment to assets and liabilities held for sale.

(p)Reflects the fresh start adjustment to acquired real estate leases, net, representing acquired in place leases and above-market lease intangibles recognized at emergence.

(q)Reflects the elimination of rents receivable, including straight line rent, which has no continuing fresh start value at emergence.

(r)Reflects the elimination of historical deferred leasing costs, net, which have no continuing fresh start value at emergence.

(s)Reflects the fresh start adjustment to other assets, net, consisting of adjustments to deferred financing fees on the secured line of credit and other assets.

(t)Reflects the fresh start adjustment to secured debt.

(u)Reflects the fresh start adjustment to accounts payable and other liabilities for below-market lease intangibles recognized at emergence.

(v)Reflects the fresh start adjustment to assumed real estate lease obligations, net.

(w)The table below reflects the fresh start adjustments impact on cumulative net income discussed above:


Fresh start adjustment to land	$	118,818
Fresh start adjustment to buildings and improvements	(1,849,262)
Fresh start adjustment to accumulated depreciation	630,743
Fresh start adjustment to investment in unconsolidated joint venture	(4,693)
Fresh start adjustment to assets of properties held for sale	(412,740)
Fresh start adjustment to acquired real estate leases, net	706,982
Fresh start adjustment to rents receivable	(141,361)
Fresh start adjustment to deferred leasing costs, net	(85,034)
Fresh start adjustment to other assets, net	(13,344)
Fresh start adjustment to secured debt, net	4,455
Fresh start adjustment to liabilities of properties held for sale	(2,583)
Fresh start adjustment to accounts payable and other liabilities	10,382
Fresh start adjustment to assumed real estate lease obligations, net	(25,116)
Total fresh start adjustments, net	$	(1,062,753)

Contractual interest. Effective as of the Petition Date, we ceased accruing interest expense on our unsecured debt instruments. As a result, we did not recognize $9,427 of aggregate contractual interest expense during the 2026 Predecessor period that would have otherwise been recorded under these instruments.

Reorganization items, net. Reorganization items, net represent amounts incurred after the Petition Date as a direct result of the Chapter 11 Cases and are comprised of bankruptcy-related professional fees and adjustments to reflect the carrying value of LSTC at their estimated allowed claim amounts. The following tables present reorganization items, net during the three and six months ended June 30, 2026:


	Successor		Predecessor		Successor		Predecessor
	Period from June 18 through June 30, 2026		Period from April 1 through June 17, 2026		Period from June 18 through June 30, 2026		Period from January 1 through June 17, 2026
Professional fees	$	894	$	84,919	$	894	$	142,748
Debt issuance costs	—		3,528		—		5,465
Interest income earned on debtor-in-possession borrowings	—		(72)		—		(306)
Net gain on the settlement of liabilities subject to compromise	—		(524,069)		—		(524,069)
Net loss on fresh start adjustments	—		1,062,753		—		1,062,753
Loss on settlement of DIP Facility claims, including fees and expenses	—		118,825		—		118,825
Other items, net	—		(542)		—		(542)
Total reorganization items, net	$	894	$	745,342	$	894	$	804,874

Income taxes. In connection with our emergence from the Chapter 11 Cases on the Effective Date, our net operating loss carryforwards and other tax attributes may be subject to limitation under section 382 of the Internal Revenue Code of 1986, as amended, or the Code, unless an exception applies. We believe that the specific circumstances of our bankruptcy reorganization may allow us to qualify for an exception to the general limitations of section 382 of the Code. We expect that our net operating loss carryforwards and other tax attributes will be reduced by the amount of discharge of indebtedness income arising from our Chapter 11 Cases that is excluded from our gross income under section 108 of the Code.