Office Properties Income Trust: $2.4B Office REIT Chapter 11

Office Properties Income Trust (OPI), a Maryland real estate investment trust owning 124 office properties comprising 17.2 million rentable square feet across 30 states, filed for chapter 11 bankruptcy on October 30, 2025 in the Northern District of Texas. The filing represents the first office REIT to file for Chapter 11 bankruptcy. With approximately $2.42 billion in funded debt and over $1.1 billion maturing within 24 months, OPI faced refinancing pressure in an environment where lenders have been reluctant to extend office exposure.

The restructuring proceeds under a pre-negotiated framework supported by approximately 80% of the company's September 2029 secured noteholders. This Restructuring Support Agreement targets roughly $1 billion in deleveraging through a combination of debt-for-equity conversion and secured debt takebacks. OPI has no employees and is externally managed by The RMR Group LLC, which has operated the REIT since 2009. The First Day Declaration describes the management structure and the terms of RMR's continued involvement post-emergence that are part of the restructuring negotiations.

Remote Work and Office Demand

OPI's bankruptcy follows broader shifts in office demand tied to remote and hybrid work. The COVID-19 pandemic accelerated remote and hybrid work adoption, and researchers estimate approximately $500 billion in office property value destruction from the remote work shift. Office attendance has stabilized at approximately 50% of pre-pandemic levels, and corporate tenants have reduced space as leases expire. National office vacancy rates have reached historic highs, with sublease availability continuing to climb.

OPI's financial performance reflects these market dynamics. The company reported a net loss of $136.1 million in 2024, and by Q2 2025, OPI reported a net loss of $41.2 million compared to net income of $76.2 million in the same quarter of 2024, while normalized FFO declined from $33.2 million to $9.4 million. The company's stock, which traded above $40 per share in 2022, had fallen over 95% by the time of the bankruptcy filing. With assets substantially encumbered to prepetition secured lenders and lender reluctance to extend any additional office exposure, refinancing options were limited.

OPI's debt maturity schedule was a factor in the filing timing. With over $1.1 billion in debt maturing within 24 months of the filing date, the company faced refinancing pressure as credit markets tightened for office-focused REITs, property valuations declined, higher interest rates raised debt service costs, and lender appetite for office exposure weakened. The company explored various alternatives before filing, but could not construct a capital structure that would satisfy all stakeholders. Interest expense had risen 37% year-over-year to approximately $53 million per quarter, further straining liquidity.

Pre-Petition Capital Structure

OPI entered bankruptcy with approximately $2.42 billion in company-wide funded debt, spanning multiple secured tranches with different collateral packages, interest rates, and maturities. The DIP Financing Motion details the prepetition capital structure.

Secured Debt Overview.

The 9.000% coupon on the September 2029 Notes and March 2029 Notes reflects the rate OPI paid to extend maturities and secure additional time.

The collateral allocation across 90 properties (with some overlap between facilities) meant that virtually every asset in OPI's portfolio was pledged to one or more secured lenders. This encumbrance left the company with limited flexibility to raise incremental financing or selectively dispose of assets outside of a comprehensive restructuring.

Unsecured and Other Obligations.

The unsecured notes, totaling nearly $500 million, are slated for equity treatment rather than cash under the restructuring framework.

The non-debtor CMBS debt relates to seven properties financed through securitized lending structures. These property-level financings remain outside the bankruptcy estate, though the company must continue servicing these obligations to avoid foreclosure on the underlying assets.

Restructuring Support Agreement

OPI's chapter 11 filing was pre-negotiated. The company entered bankruptcy with a Restructuring Support Agreement signed on the petition date by holders of approximately 80% of the September 2029 Notes. The Disclosure Statement and Chapter 11 Plan were filed on January 9, 2026.

The RSA contemplates a roughly six-month bankruptcy process. The restructuring targets approximately $1 billion in deleveraging—reducing OPI's funded debt from roughly $2.42 billion to approximately $1.4 billion through debt-for-equity conversion.

Creditor Treatment Under the RSA

The RSA establishes a detailed framework for treating each creditor class:

Secured Creditor Treatment.

The September 2029 Noteholders—who are also providing the DIP financing—receive $420 million in new secured notes plus $98 million in equity plus additional equity for any deficiency claim.

The March 2027 Notes treatment contemplates delivery of their collateral (35 properties) or equivalent value. Any deficiency claim (the amount by which the debt exceeds collateral value) converts to equity.

Unsecured and Other Treatment.

Unsecured noteholders receive no cash—only equity in the reorganized company. The Equity Rights Offering provides an opportunity to acquire additional shares at a discount.

Existing equity holders—OPI's common shareholders—receive nothing. Major institutional investors like Vanguard saw their holdings decline by over 88% in value during the year preceding the filing.

DIP Financing

DIP Facility Terms.

The September 2029 Noteholders are both DIP lenders and plan sponsors. The court entered an Interim DIP Order on November 5, 2025 authorizing the initial $10 million draw. By providing the DIP facility, these creditors gain additional rights tied to the financing and plan process.

DIP Fee Structure.

The fee structure has generated objections from other creditor constituencies. The 10% Anchor Capital Commitment Fee paid to the SteerCo (the steering committee of September 2029 Noteholders) compensates these creditors for organizing and committing to the DIP—a fee that other noteholders do not share. This differential treatment within the noteholder class has been challenged.

The equity payment option for fees provides flexibility. Fees paid in equity at a 37% discount to plan equity value increase the DIP lenders' equity allocation.

Collateral Structure.

The DIP facility is secured by:

• First-priority liens on unencumbered assets
• Junior liens on certain encumbered assets

Notably, the DIP liens exclude Credit Facility collateral, preserving the Credit Facility lenders' priority position on their 19 pledged properties.

RMR Group Management Structure

OPI has no employees. The RMR Group LLC has externally managed OPI since 2009, providing all business management and property-level services—every OPI employee is technically employed by RMR, not the REIT itself.

The prepetition fee structure generated approximately $2.2 million monthly in management fees—over $26 million annually—and the management agreement runs through 2035. The business management fee is $14 million annually for two years, and the property management fee is 3% of gross rents. The 2% equity stake provides RMR with an equity allocation under the plan.

Inter-Creditor Disputes and Litigation

OPI v. UMB Bank Adversary Proceeding.

OPI filed an adversary proceeding against UMB Bank, National Association (trustee for the March 2027 Notes) on November 2, 2025. The dispute centers on original issue discount (OID) treatment for the March 2027 Notes.

The OID issue relates to whether the notes were issued at a discount from face value in a manner that requires the discount to be treated as interest (deductible for tax purposes) rather than principal. The resolution affects both the secured claim amount and the unsecured deficiency claim.

The court ordered mediation to attempt resolution of this dispute. However, mediation terminated on December 22, 2025 without resolution, leaving the matter for judicial determination.

2027 Ad Hoc Group Objections.

The 2027 Notes Ad Hoc Group—representing holders of the $418 million March 2027 Notes—has filed objections to multiple aspects of the case:

• DIP Financing Terms: Challenging the fee structure and the preferential treatment of September 2029 Noteholders
• Adequate Protection: Disputing whether their collateral is adequately protected during the bankruptcy
• Valuation: Contesting the property valuations that determine their secured claim recovery

Individual noteholders have also filed objections citing concerns about value transfer to the September 2029 group at their expense.

Key Creditor Constituencies

The September 2029 Ad Hoc Group represents the largest creditor constituency and serves as both DIP lender and plan sponsor. The March 2027 Ad Hoc Group, representing holders of the $418 million March 2027 Notes, has objected to the proposed restructuring framework, with objections focusing on the allocation of value between secured creditor classes, the fees and other benefits flowing to September 2029 Noteholders as DIP lenders, and property valuations affecting their secured claim recovery.

The unsecured creditors' committee represents the interests of general unsecured creditors—primarily the holders of approximately $491 million in unsecured notes. Their recovery depends entirely on the equity value available after satisfying secured claims.

Property Portfolio and Dispositions

Portfolio Composition.

OPI's 124 office properties span 30 states, totaling 17.2 million rentable square feet. The portfolio includes:

• Single-tenant properties leased on long-term triple-net leases
• Multi-tenant office buildings with shorter-term leases
• Suburban office parks and urban office buildings

The U.S. government is OPI's largest tenant, accounting for 17.1% of annualized rental income.

Approved Property Sale.

Early in the bankruptcy, OPI filed a Sale Motion to sell a vacant office building in Tempe, Arizona:

The Tempe property had been vacant for over two years and generated ongoing carrying costs without offsetting revenue. The court entered a Sale Order approving the transaction on December 3, 2025.

Industry Context: Office REIT Distress

OPI's bankruptcy follows broader distress across the commercial office sector. National office vacancy rates have remained elevated, and lenders have been reluctant to extend or refinance office loans.

OPI is among the largest office REITs to file for bankruptcy. Capital Economics predicts office values are unlikely to recover to pre-pandemic peaks even by 2040.

Property valuations have declined across the office sector. Cap rates have expanded, vacancy assumptions have increased, tenant improvement and leasing costs have risen, and lender financing availability has contracted.

Key Timeline

Key Issues to Watch

Several issues remain contested in OPI's restructuring. OID litigation resolution will determine how original issue discount on the March 2027 Notes is treated, which affects the secured claim amount and any deficiency claim. Inter-creditor value allocation remains disputed between the September 2029 group (DIP lenders and plan sponsors) and the March 2027 group (objectors) over how enterprise value is divided, including the DIP fee structure, priority position, and valuation assumptions.

The U.S. government's status as OPI's largest tenant (17.1% of revenue) keeps government tenant lease renewals a focus in the case record. RMR relationship terms under the amended management agreement set RMR's ongoing role and compensation, including the 2% equity stake. Emergence valuation remains a point of dispute because the reorganized company's equity allocation depends on enterprise value assumptions.

Frequently Asked Questions

Why did Office Properties Income Trust file for bankruptcy? Remote work and reduced office demand contributed to pressure on cash flows and refinancing options. With over $1.1 billion maturing within 24 months and lenders reluctant to extend office exposure, the company filed to restructure the $2.42 billion debt load.

How much debt does OPI have? Approximately $2.42 billion in company-wide funded debt, including $1.75 billion in secured notes across multiple tranches, a $425 million credit facility, and $491 million in unsecured notes.

What happens to OPI's office properties? The 124 properties remain operational during bankruptcy. The Tempe property sale is part of the case, and other dispositions could occur.

Who manages OPI? The RMR Group LLC has externally managed OPI since 2009. OPI has no direct employees—all operations are conducted through RMR's personnel. RMR will continue managing the company post-emergence under amended terms.

What is the restructuring plan? The RSA with approximately 80% noteholder support targets roughly $1 billion in deleveraging through debt-for-equity conversion. September 2029 Noteholders receive new secured notes plus equity; unsecured noteholders receive equity only; existing equity is cancelled.

Who is providing DIP financing? The September 2029 Ad Hoc Group is providing up to $125 million in DIP financing, with $10 million drawn at interim approval and $115 million available at final approval.

What happens to existing stockholders? Existing OPI common equity is cancelled with no distribution.

Who is OPI's largest tenant? The U.S. government accounts for 17.1% of OPI's annualized rental income. Federal tenancy provides relatively stable cash flows, though government space needs have also declined post-pandemic.

What are the inter-creditor disputes about? The March 2027 Noteholders dispute the DIP fee structure, valuation allocations, and adequate protection terms. They argue that the September 2029 group is receiving preferential treatment as DIP lenders and plan sponsors.

What is the expected timeline for emergence? The RSA targets plan confirmation within 175 days and emergence within 185 days of the October 30, 2025 petition date, implying an effective date in late April 2026.

Who is the claims agent for Office Properties Income Trust?

Kroll Restructuring Administration LLC serves as the claims and noticing agent. The firm maintains the official claims register and distributes case notifications to creditors and parties in interest.

For more expert analysis of commercial real estate restructurings and chapter 11 developments, visit the ElevenFlo bankruptcy blog.