Office Properties Income Trust NASDAQ: OPI reported third-quarter normalized funds from operations of $20.5 million, or $0.93 per share, as the office landlord expanded its asset-sale plans to help repay debt and support liquidity.
Same-property cash basis net operating income rose 14.8% from a year earlier to $51.5 million. Chief Financial Officer and Treasurer Brian Donley said the increase reflected higher cash rents from leasing activity and the expiration of rent-abatement periods on certain leases.
The company cautioned that financial statement amounts and operating metrics are not comparable with prior periods because of its recent restructuring and application of fresh start accounting.
Asset sales expand
President and CEO Yael Duffy said OPI had sold 14 of the 32 properties it identified for sale in June, generating approximately $156 million. Another 15 properties were under purchase and sale agreements for a combined $134 million, while the remaining three were under letters of intent with estimated proceeds of $22.5 million.
Duffy said pricing had met or exceeded expectations and that total gross proceeds from the 32 properties should exceed $300 million, compared with the company’s initial expectation of $275 million.
OPI has also identified another 26 properties for sale, totaling 3.5 million square feet and contributing approximately $87 million in annualized revenue. The company is in the early stages of marketing those properties and expects approximately $360 million in proceeds in 2027, Duffy said. The properties secure notes maturing in 2029 and 2031.
Management expects OPI to own 64 properties totaling approximately 10 million square feet after completing all 58 sales. Duffy projected that the retained portfolio would be 93% occupied and that more than 70% of its square footage would be in Class A buildings, compared with approximately 63% before the sales began.
The planned transactions would also reduce the Washington, D.C., metropolitan area’s share of annualized revenue to approximately 17%, from 24% before the sales, Duffy said. Government tenants would remain responsible for approximately 30% of annualized revenue.
Renewals dominate leasing
OPI signed 13 leases covering 400,000 square feet during the quarter, its strongest leasing quarter since the second quarter of 2025, according to Duffy. Renewals accounted for 97% of the volume, and the leases had a weighted average term of 8.7 years.
Leasing costs and concessions were $2.22 per square foot per lease year, more than 40% below the average for the preceding four quarters. Duffy said renewals help avoid downtime and lost rent.
As of September 30, the company’s portfolio included 109 wholly owned properties across 27 states and Washington, D.C., totaling approximately 15.6 million square feet. The portfolio was 80.7% leased, or 88.8% on a same-property basis, with a weighted average remaining lease term of 6.2 years.
Approximately 1.3 million square feet of leases, representing 11% of annualized revenue, is scheduled to expire through the end of 2027. Of that amount, 290,000 square feet is scheduled to vacate or downsize; after adjusting for planned property dispositions, the figure falls to 52,000 square feet, or less than 1% of annualized revenue, Duffy said.
Debt repayments and spending
Donley said OPI ended the quarter with approximately $61 million in unrestricted cash and $25 million in restricted cash. In September, it raised $425 million through senior secured notes and used the proceeds to repay and terminate a $325 million credit facility and a $100 million term loan due in January 2027. The company has no meaningful debt maturities until 2029, he said.
Since quarter-end, OPI repaid approximately $78 million of its 8.375% senior secured notes due in 2029, including payments tied to collateral sales. Donley said the next scheduled principal payment is $30 million on February 1, 2027, and that the company expects to fund it with cash and asset-sale proceeds. OPI also redeemed $32 million of its 10% senior secured notes due in June 2031 using a portion of proceeds from collateral sales.
Third-quarter recurring capital expenditures totaled $10.4 million. For 2026, OPI expects approximately $50 million in capital spending, including $40 million in leasing capital and $10 million in building capital, Donley said.
About Office Properties Income Trust (NASDAQ:OPI)
Office Properties Income Trust (OPI) is a real estate investment trust focused on owning and leasing office properties in the United States. Its properties serve government agencies and private-sector businesses, with tenants using the space for a range of administrative and corporate operations. OPI was formed in 2018 through the combination of Government Properties Income Trust and Select Income REIT. Its portfolio has included office buildings in markets across the country, and the trust's strategy has centered on leasing office space to a mix of public- and private-sector tenants.
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