Merger With Tier REIT, Inc.

6 Months Ended

Jun. 30, 2020

MERGER WITH TIER REIT, INC.On June 14, 2019, pursuant to the Agreement and Plan of Merger dated March 25, 2019 (the “Merger Agreement”), by and among the Company and TIER REIT, Inc. (“TIER”), TIER merged with and into a subsidiary of the Company (the “Merger”) with this subsidiary continuing as the surviving corporation of the Merger. In accordance with the terms and conditions of the Merger Agreement, each share of TIER common stock issued and outstanding immediately prior to the Merger was converted into 2.98 newly-issued pre-reverse split shares of the Company’s common stock with fractional shares being settled in cash. In the Merger, former TIER common stockholders received approximately 166 million pre-reverse split shares of common stock of the Company. As discussed in note 1 to the condensed consolidated financial statements, immediately following the Merger, the Company completed a 1-for-4 reverse stock split.

The Merger has been accounted for as a business combination with the Company as the accounting acquirer, which requires, among other things, that the assets acquired and liabilities assumed be recognized at their acquisition date fair value. The total value of the transaction is based on the closing stock price of the Company's common stock on June 13, 2019, the day immediately prior to the closing of the Merger. Based on the shares issued in the transaction, the total fair value of the assets acquired and liabilities assumed in the Merger was $1.6 billion. For the three and six months ended June 30, 2020, the Company incurred expenses related to the Merger of $63,000 and $428,000, respectively. For the three and six months ended June 30, 2019, the Company incurred expenses related to the Merger of $49.8 million.

Management engaged a third party valuation specialist to assist with valuing the real estate assets acquired and liabilities assumed in the Merger. The third party used cash flow analyses as well as an income approach and a cost approach to determine the fair value of real estate assets acquired.

The purchase price was allocated as follows (in thousands):


Real estate assets	$	2,201,773
Real estate assets held for sale	21,005
Cash and cash equivalents	84,042
Restricted cash	1,947
Notes and other receivables	6,586
Investment in unconsolidated joint ventures	292
Intangible assets	141,184
Other assets	9,954
	2,466,783

Notes payable	747,549
Accounts payable and accrued expenses	51,748
Deferred income	8,131
Intangible liabilities	47,988
Other liabilities	7,676
Nonredeemable noncontrolling interests	5,329
	868,421

Total purchase price	$	1,598,362

During the three and six months ended June 30, 2020, the Company recorded revenues related to assets acquired in the Merger of $51.7 million and $102.7 million, respectively. During the three and six months ended June 30, 2019, the Company recorded revenues related to assets acquired in the Merger of $9.7 million. The following unaudited supplemental pro forma information is based upon the Company's historical condensed consolidated statements of operations, adjusted as if the Merger had occurred on January 1, 2018. The supplemental pro forma information is not necessarily indicative of future results, or of actual results, that would have been achieved had the Merger been consummated on January 1, 2018.


	Three Months Ended June 30, 2019		Six Months Ended June 30, 2019
Revenues	$	182,288	$	367,319
Net income	62,092		87,744
Net income available to common stockholders	61,211		86,576

Supplemental pro forma earnings were adjusted to exclude $49.8 million of transaction costs incurred in the three and six months ended June 30, 2019.