Orion Properties may finally be giving in to pressure from a private investor that has been circling the beleaguered office REIT for months.
The company announced Monday that it is undergoing a “review of strategic options” and has signed a cooperation agreement with Kawa Capital Management, an alternative asset manager that is also one of its largest shareholders.
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As part of the agreement, Kawa will have the opportunity to take part in Orion’s review on the same terms as other parties, including receiving confidential information and submitting proposals, but will enter into a standstill that will prevent the asset manager from increasing its share position or attempting a takeover.
The review could still result in an acquisition, though that is not guaranteed. The company didn't set a deadline for the process.
Phoenix-based Orion began trading in November 2021 after spinning off from Realty Income. It owns 63 properties spanning nearly 8M SF, with an occupancy rate of 72.8%, according to a third-quarter investor presentation. The portfolio consists primarily of traditional offices, along with some governmental, medical and industrial properties.
Kawa already owns a roughly 10% stake in Orion. In July, the REIT’s board of directors unanimously rejected the South Florida-based alternative asset manager’s unsolicited bid to take the company private. Kawa offered to pay $2.50 per share, equating to a $141M valuation.
But that didn’t dissuade Kawa. The spurned buyer nominated five candidates for the company’s five-member board. In November, the nominations were also rejected as the existing board determined that the notice submitted by Kawa was invalid.
“We appreciate the dialogue with Kawa that enabled us to reach this agreement,” Orion board member, CEO and President Paul McDowell said in a statement Monday. “The Company and the Board remain steadfast in our commitment to delivering value for stockholders and continuing to take actions with stockholders’ best interests in mind.”
The REIT has tapped Wells Fargo as its lead financial adviser and JPMorgan Chase as an additional financial adviser. Hunton Andrews Kurth LLP is serving as its legal counsel.
A string of REIT mergers have taken place over the past year as their stock prices have lagged their asset values. Several deals are expected to result in public firms going private, including City Office REIT, Plymouth Industrial REIT and Sotherly Hotels.
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