Battered Office REIT Rejects Board Nominations From Prospective Buyer
Executives at an embattled office REIT are fending off a push for board seats from one of its largest shareholders, which is also a spurned buyer.
Orion Properties, an office REIT with a portfolio just under 8M SF, said it was rejecting the nominations of five candidates for its five-member board of directors who were put up by Kawa Capital Management, a South Florida-based alternative asset manager that offered to take the firm private in July.
The Phoenix-based REIT acknowledged it had received the nominations on Nov. 19 but said Wednesday that the existing board had unanimously determined the notice submitted by Kawa was invalid. The private investment firm was no longer entitled to put up any candidates because the nomination window had closed, the REIT said Wednesday.
Kawa’s letter failed to provide proof it was an eligible stockholder and “did not comply with several other requirements of Orion’s bylaws,” the board said in a joint statement.
The statement didn’t list specific deficiencies but said “the requirements are clearly stated in the bylaws, have been in place for several years, and have been publicly available at all times.”
The vote on board members is planned for the REIT’s as-yet unscheduled 2026 annual meeting.
Orion’s portfolio of around 68 assets spans 7.8M SF and is spread across the United States, with clusters of properties in Texas, New Jersey and Kentucky. The firm posted a $105M loss for the first nine months of the year, compared to a $70M loss over the same period a year prior.
Kawa, which has a roughly 10% stake in Orion, offered to take the REIT private in July by purchasing all outstanding shares for $2.50 each, a price that would have valued the firm at roughly $141M and one that was unanimously rejected by the board of directors.
Executives at Kawa Capital and a representative for Orion Properties didn’t respond to a request for comment.
The leveraged REIT cut its dividend in March to two cents per share from 10 cents, and the stock swooned. Shares were trading above $4 each prior to the announcement but fell below $2 per share in the weeks that followed.
It has since peaked around $3 per share before sliding to around $2.25. Shares were trading up roughly 3% in early trading Wednesday but down 14% on the month.
Kawa’s take-private offer in July came a month after Orion disclosed for the first time in second-quarter results that the REIT would “continue as a going concern,” finance industry parlance signaling the company may not be able to meet its obligations over the next year without raising cash or refinancing debt.
It reiterated the position in third-quarter results earlier this month. Management said the risk would exist for at least a year while the REIT worked through the workout of a $110M revolving credit facility set to mature in May.
Interest in REITs is growing from investors looking to deploy large amounts of capital, leading to a string of recent bids from funds to take public firms private. Buyers in the space see REITs trading at discounts compared to the valuations their assets would fetch on the private market and are pouncing to fill the gap.
Rithm Capital agreed to pay $1.6B in cash and other assets in September to acquire Paramount Group, an office REIT with 13M SF in U.S. gateway markets.
