Office Properties Income Trust, a Massachusetts-based REIT with a nearly 20M SF portfolio, reached a deal to refinance debt that had threatened to push the firm into bankruptcy.
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OPI announced Monday that an ad hoc group of creditors had agreed to refinance $340M in debt set to mature in 2025, pushing the maturity date to 2027.
The move follows an Oct. 31 announcement in which OPI said there is “substantial doubt about its ability to continue as a going concern” due to unsecured senior notes scheduled to come due Feb. 1.
The group of undisclosed investors holds what OPI described as a significant amount of the $453.6M in outstanding unsecured debt due in 2025 and will receive a mix of cash and stock as part of the transaction.
“We believe this agreement is an important milestone in our ongoing efforts to address our debt maturities in the face of operational and market headwinds,” OPI Chief Financial Officer Brian Donley said in a statement. “We appreciate the constructive dialogue with our note holders and thank them for their ongoing support.”
The deal staves off what OPI executives had warned was the coming collapse of the firm's finances as losses mounted and its stock value collapsed early this year from more than $7 per share to less than $2 per share.
OPI’s stock was up more than 50% in early trading Monday following the announcement, jumping to roughly $1.75 per share.
In exchange for refinancing the debt, the creditor group will receive up to $445M in new senior secured notes with a 2027 maturity date, cash from any accrued interest on the existing debt, up to 11.5 million shares in OPI common stock, which amounts to 19.9% of all common stock, and other terms including a mandatory principal payment of $125M due by March 2026.
The notes will be secured by first-property liens on 35 OPI properties with a book value of $1.3B and second-property liens on 19 other properties that already secure $610M in senior debt due in 2029.
Some of the creditors have agreed to pay any remaining cash balance to fulfill the $340M in principal due on the 2025 loans should the refinancing plan not cover the total cost, according to OPI.
The REIT has a portfolio spanning 30 states and 19.5M SF of office space. The U.S. government is OPI’s largest tenant, and the slow return to the office for federal workers has been an ongoing headwind.
It remains unclear whether Donald Trump will call all workers back to the office full time after he returns to the White House in January, although there is widespread speculation that such a mandate is coming.
But OPI’s portfolio issues extend beyond utilization, with 66 leases totaling nearly 3M SF set to expire this year and another 43 leases encompassing 1.8M SF scheduled to roll over in 2025, according to its annual report to regulators.
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