Orion Properties rejected a takeover bid Wednesday, with executives at the REIT betting that the office sector’s recovery means a higher valuation is on the horizon.

The board of directors at the office REIT unanimously rejected the unsolicited bid from South Florida-based alternative asset manager Kawa Capital Management to pay $2.50 per share to take the company private at a roughly $141M valuation.

“After careful consideration, the Orion Board of Directors determined that Kawa Capital’s proposed transaction significantly undervalues the Company and is not in the best interests of Orion stockholders,” Reginald Gilyard, the nonexecutive chairman of the Orion board, said in a statement.

Kawa’s offer, acknowledged by Orion on June 20, was a 31.5% premium on the REIT's stock price at the time. Kawa already owns a roughly 10% stake in Orion and was offering $126M to buy all remaining public shares.

Orion Properties started the year trading around $4 per share, but a weak fourth-quarter earnings report in March pulled the floor out from under the stock, which has since languished for much of the year below $2 per share.

The unsolicited takeover bid pushed the stock up 16% as investors piled in below Kawa’s offer price. Stockholders shrugged off the board’s decision to reject the buyout offer, with the stock approaching its 30-day high of $2.43 per share in early trading Thursday.

The REIT has a 7.8M SF portfolio of 68 assets spread across the United States, with a concentration of office properties in Texas, New Jersey and Kentucky. It posted a $9.4M loss in first-quarter earnings in early May, with $121M in annualized base rent from tenants.

Its largest tenant is the General Services Administration, which manages the federal government’s real estate, and 16% of the REIT's space was leased to government tenants at the end of March. The concentration could present a headwind for the REIT as President Donald Trump’s administration continues an aggressive push to cut the size of the federal footprint.

Gilyard said Orion’s board was “always open to evaluating opportunities to enhance stockholder value” and would consider any incoming acquisition offers from investors. Wells Fargo is acting as a financial adviser for Orion on Kawa’s takeover bid.

Kawa was founded in 2007 by Daniel Ades in Hallandale Beach and has since amassed roughly $3B in assets under management, according to the company.

REITs were battered by skeptical investors in recent years, but they are once again beginning to warm up to the sector. Janus Henderson Investors analyst Greg Kuhl published a note this week highlighting U.S. REITs' 9% returns over the last 12 months and promoting them as a hedge against volatility.

The sector continues to have strong positive momentum, with S&P Global forecasting that 18 U.S. REITs will boost their dividend in the third quarter, while the remaining 119 REITs will keep their dividends flat.