8M SF Office REIT Receives Offer To Take Portfolio Private
A South Florida-based alternative asset manager offered roughly $126M to acquire publicly traded office REIT Orion Properties.
Kawa Capital Management, which already owns roughly 10% of the REIT, offered to pay up to $2.50 per share to acquire all remaining shares, a 31.5% premium to its price at the time. Orion Properties confirmed Friday it had received the offer, sending the struggling stock soaring.
Orion said in a statement that it would “carefully review and evaluate the unsolicited indication of interest.”
The REIT owns a portfolio of 68 assets totaling 7.8M SF across the United States, with a concentration of office space in Texas, New Jersey and Kentucky.
It posted a $9.4M loss on $38M in revenue in first-quarter results released in early May. At the end of March, the REIT was bringing in $121M in annualized base rent, with 72% of that coming from investment-grade tenants. The firm also rebranded from its previous name, Orion Office REIT, in March.
Its largest tenant is the General Services Administration, which manages the federal government’s real estate footprint. The government occupied 16% of the firm’s owned space at the end of March, presenting a narrative challenge for the office REIT as the White House looks to slash federal spending and office space.
Weak earnings in Q4, which ended in March for the firm, led the REIT to cut its dividend by 80% to two cents, and analysts have flagged its high debt leverage as a risk for its profitability moving ahead.
The stock’s value halved in the next three months, from trading above $4 per share in early March to $1.90 per share in the middle of last week. News of the buyout offer sent the stock up more than 16% Monday to $2.38 per share.
Orion touted 450K SF of leasing volume at its properties across 2025 in its Q1 earnings report in May, with CEO Paul McDowell adding that the REIT maintained a strong pipeline of tenants in the process of signing deals.
“While we cannot control the potential impacts related to the recently volatile macro economy, the tenor around leasing continues to be positive,” he said in a statement.
Three of the four lease transactions the REIT closed in Q1 were renewals, while its largest deal was a 160K SF new lease in Buffalo, New York. Orion also sold three vacant properties totaling 287K SF for a combined $19M in Q1.
Hallandale Beach-based Kawa, led by Daniel Ades, was founded in 2007 and has roughly $3B in assets under management, according to the company.
The firm in March provided $60M in long-term debt to replace construction financing for The Sable, a hotel in Chicago’s Navy Yard. Kawa was reportedly in default in January on a $74M CMBS loan associated with a portion of the Braddock Metro Center in Alexandria, Virginia.
Private investors are eyeing the REIT market for potential deals after years of negative sentiment and macroeconomic headwinds have weighed on stock values relative to the underlying assets they represent.
