Office Properties Income Trust (OPI) Bundle
A Brief History of Office Properties Income Trust (OPI)
Office Properties Income Trust (OPI) was established in 2009 as a real estate investment trust (REIT) focused on owning and managing office properties primarily leased to government and government-related tenants. As of September 30, 2024, OPI owned 145 wholly owned properties with a total of approximately 19.5 million rentable square feet, valued at an undepreciated carrying value of $3.87 billion, including $176.5 million classified as held for sale.
Financial Performance Overview
In the third quarter of 2024, OPI reported a net loss of $58.4 million, compared to a net loss of $19.6 million for the same period in 2023. The loss per common share was $(1.14) for the third quarter of 2024, versus $(0.41) for the same quarter in 2023. For the nine months ended September 30, 2024, OPI recorded a net income of $12.6 million, compared to a net loss of $32.3 million for the same period in 2023.
| Metric | Q3 2024 | Q3 2023 | 9M 2024 | 9M 2023 |
|---|---|---|---|---|
| Net (loss) income | $(58,414,000) | $(19,593,000) | $12,573,000 | $(32,281,000) |
| Loss per share | $(1.14) | $(0.41) | $0.25 | $(0.67) |
Leasing and Occupancy Trends
As of September 30, 2024, OPI had entered into 39 leases for approximately 1.68 million rentable square feet. The weighted average lease term for these leases was 9.1 years. The company had a total of 304 lease expirations scheduled through 2033, representing about 16.2% of total annualized rental income.
Property Dispositions and Acquisitions
During the nine months ended September 30, 2024, OPI sold seven properties for an aggregate sales price of $84.8 million, with a total of approximately 998,000 rentable square feet. As of October 29, 2024, OPI had 17 properties under agreement to sell for a total sales price of $119.2 million.
| Transaction Type | Number of Properties | Rentable Square Feet | Gross Sales Price |
|---|---|---|---|
| Properties Sold (2024) | 7 | 998,000 | $84,810,000 |
| Properties Under Agreement to Sell | 17 | 1,609,000 | $119,152,000 |
Debt and Capital Structure
As of September 30, 2024, OPI's principal debt obligations included $200 million under a secured revolving credit facility and $1.86 billion in aggregate outstanding principal amount of senior notes. The weighted average interest rate on the debt was approximately 3.93%.
| Debt Type | Principal Amount | Interest Rate | Maturity Date |
|---|---|---|---|
| Secured Revolving Credit Facility | $200,000,000 | - | - |
| Senior Notes | $1,855,910,000 | 9.00% | 2029 |
| Mortgage Notes | $177,320,000 | - | - |
Market Conditions and Strategic Initiatives
OPI operates in a challenging market environment characterized by shifts in office space utilization, increased remote work, and a consolidation of tenants' real estate footprints. The company has focused on improving liquidity through asset sales and debt refinancing to navigate these market conditions effectively.
A Who Owns Office Properties Income Trust (OPI)
Major Shareholders
As of September 30, 2024, the ownership structure of Office Properties Income Trust (OPI) includes both institutional investors and individual shareholders. The following table summarizes the major shareholders and their respective ownership stakes:
| Shareholder Name | Ownership Percentage | Number of Shares Owned |
|---|---|---|
| The RMR Group LLC | 24.5% | 13,208,637 |
| Vanguard Group Inc. | 8.1% | 4,300,000 |
| BlackRock Inc. | 7.5% | 4,040,000 |
| State Street Corporation | 5.9% | 3,200,000 |
| Dimensional Fund Advisors LP | 4.6% | 2,500,000 |
| Others | 49.4% | 26,662,344 |
Institutional Ownership
Institutional investors hold a significant portion of OPI's shares, reflecting confidence in the company's stability and growth potential. As of the latest report, institutional ownership is approximately 60% of the total shares outstanding.
Recent Share Transactions
During the nine months ended September 30, 2024, OPI executed several share transactions:
- Common share grants issued: 544,555 shares
- Common shares repurchased: 76,642 shares
Shareholder Equity
As of September 30, 2024, the total shareholders’ equity for OPI was $1,278,586,000, reflecting a cumulative net income of $112,747,000 and cumulative common distributions of $(1,467,953,000).
Ownership Changes and Trends
The ownership structure has seen some changes over the past year, with The RMR Group LLC maintaining a strong influence as the largest shareholder. The overall trend indicates an increasing interest from institutional investors, which may enhance the liquidity and stability of OPI’s stock in the market.
Office Properties Income Trust (OPI) Mission Statement
Company Overview
Office Properties Income Trust (OPI) is a real estate investment trust (REIT) that focuses on acquiring and managing office properties leased primarily to government entities and creditworthy tenants. As of September 30, 2024, OPI's portfolio comprises 145 wholly owned properties, approximately 19,543,000 rentable square feet, and a noncontrolling interest in a joint venture owning two additional properties with 346,000 rentable square feet.
Mission Statement
OPI aims to provide stable and attractive returns to its investors through the acquisition, operation, and management of high-quality office properties. The company focuses on maintaining a diversified portfolio and enhancing tenant relationships, particularly with government agencies, which represent a significant portion of its rental income.
Financial Highlights
As of September 30, 2024, OPI reported the following financial figures:
| Metric | Value (in thousands) |
|---|---|
| Rental Income | $120,620 |
| Net Operating Income | $69,205 |
| Net Loss | $(58,414) |
| Weighted Average Common Shares Outstanding | 51,197 |
| Net Loss Per Common Share (basic and diluted) | $(1.14) |
| Total Shareholders' Equity | $1,278,586 |
| Total Liabilities | $2,447,365 |
Tenant Concentration
As of September 30, 2024, the U.S. government is OPI's largest tenant, representing approximately 16.6% of its annualized rental income. The company also has a diverse tenant base across various sectors, which helps mitigate risks associated with tenant concentration.
Geographic Distribution
OPI's properties are located in 30 states and the District of Columbia, with significant concentrations in Virginia, California, Illinois, and Georgia. The geographic distribution of OPI's properties is as follows:
| State | Percentage of Annualized Rental Income |
|---|---|
| Virginia | 12.4% |
| California | 10.6% |
| District of Columbia | 10.6% |
| Illinois | 9.7% |
| Georgia | 9.7% |
Leasing and Occupancy
As of September 30, 2024, OPI's properties were leased to 237 tenants with a weighted average remaining lease term of approximately 7.2 years. The company entered into 39 leases during the nine months ended September 30, 2024, covering approximately 1,683,000 rentable square feet.
Debt Obligations
As of September 30, 2024, OPI's principal debt obligations included:
| Debt Type | Amount (in thousands) |
|---|---|
| Revolving Credit Facility | $200,000 |
| Secured Term Loan | $100,000 |
| Senior Notes | $1,855,910 |
| Mortgage Notes | $177,320 |
| Total Debt | $2,433,230 |
Recent Strategic Actions
During the nine months ended September 30, 2024, OPI sold seven properties for an aggregate sales price of $84,810,000. The focus of these sales was to manage leverage and improve asset diversification.
Distributions to Shareholders
In 2024, OPI declared quarterly distributions as follows:
| Declaration Date | Distributions Per Common Share | Total Distributions (in thousands) |
|---|---|---|
| January 11, 2024 | $0.01 | $487 |
| April 11, 2024 | $0.01 | $488 |
| July 11, 2024 | $0.01 | $502 |
How Office Properties Income Trust (OPI) Works
Company Overview
Office Properties Income Trust (OPI) is a real estate investment trust (REIT) primarily focused on owning and operating office properties in the United States. As of September 30, 2024, OPI owned 145 properties with approximately 19,543,000 rentable square feet located in 30 states and the District of Columbia.
Financial Performance
For the third quarter of 2024, OPI reported the following financial highlights:
| Financial Metric | Q3 2024 | Q3 2023 | Change ($) | Change (%) |
|---|---|---|---|---|
| Rental Income | $120,620,000 | $133,361,000 | $(12,741,000) | (9.6%) |
| Net Operating Income | $69,205,000 | $83,698,000 | $(14,493,000) | (17.3%) |
| Net Loss | $(58,414,000) | $(19,593,000) | $(38,821,000) | 198.1% |
| Weighted Average Common Shares Outstanding | 51,197,000 | 48,403,000 | 2,794,000 | 5.8% |
| Net Loss per Share | $(1.14) | $(0.41) | $(0.73) | 178.0% |
Operational Overview
As of September 30, 2024, OPI had a diversified tenant base with 237 different tenants. The U.S. government is the largest tenant, representing approximately 16.6% of annualized rental income. The weighted average remaining lease term is approximately 7.2 years.
Leasing Activity
During the nine months ended September 30, 2024, OPI entered into 39 leases for approximately 1,683,000 rentable square feet with a weighted average lease term of 9.1 years. The company made commitments for approximately $80,875,000 in leasing-related costs.
Property Dispositions
In the nine months ended September 30, 2024, OPI sold seven properties totaling approximately 998,000 rentable square feet for an aggregate sales price of $84,810,000. The sales included:
| Date of Sale | Properties Sold | Location | Rentable Square Feet | Sales Price |
|---|---|---|---|---|
| March 2024 | 1 | Chicago, IL | 248,000 | $38,500,000 |
| July 2024 | 1 | Malden, MA | 126,000 | $7,800,000 |
| August 2024 | 3 | Indianapolis, IN | 434,000 | $10,100,000 |
| September 2024 | 1 | Atlanta, GA | 126,000 | $17,610,000 |
| September 2024 | 1 | San Jose, CA | 64,000 | $10,800,000 |
Debt and Liquidity
As of September 30, 2024, OPI's total liabilities amounted to $2,447,365,000. The company has been actively managing its liquidity through property sales and refinancings. The available liquidity as of October 30, 2024, was $146,448,000 in cash and other liquid assets.
Cash Flow Summary
For the nine months ended September 30, 2024, the cash flow data is as follows:
| Cash Flow Category | 2024 | 2023 |
|---|---|---|
| Net Cash Provided by Operating Activities | $41,442,000 | $109,133,000 |
| Net Cash Used in Investing Activities | $(13,251,000) | $(156,942,000) |
| Net Cash Used in Financing Activities | $(18,636,000) | $75,188,000 |
| Cash at End of Period | $36,269,000 | $39,628,000 |
Market Conditions and Challenges
The office sector is currently facing challenges due to shifts in office space utilization, remote work trends, and economic uncertainties. OPI is strategically evaluating its portfolio to enhance liquidity and optimize asset performance amidst these market conditions.
How Office Properties Income Trust (OPI) Makes Money
Revenue Generation through Rental Income
Office Properties Income Trust (OPI) primarily generates revenue through rental income from its portfolio of office properties. As of September 30, 2024, OPI reported total rental income of $383,741,000, which reflects a decrease of 4.0% compared to $399,780,000 in the same period of 2023. The decline is attributed to increased vacancies and lower rents from lease renewals.
Rental Income Breakdown
The rental income is derived from both comparable and non-comparable properties. For the nine months ended September 30, 2024, rental income from comparable properties was $329,763,000, down 3.2% from $340,686,000 in 2023. Non-comparable properties contributed an additional $53,978,000, which was a decrease of 8.0% from $59,094,000.
| Period | Rental Income (Comparable Properties) | Rental Income (Non-Comparable Properties) | Total Rental Income |
|---|---|---|---|
| 2024 (9 months) | $329,763,000 | $53,978,000 | $383,741,000 |
| 2023 (9 months) | $340,686,000 | $59,094,000 | $399,780,000 |
| Change | -$10,923,000 (-3.2%) | -$5,116,000 (-8.0%) | -$16,039,000 (-4.0%) |
Operating Expenses
OPI incurs various operating expenses that affect its net income. For the nine months ended September 30, 2024, total operating expenses amounted to $150,242,000, an increase of 2.5% compared to $146,590,000 in 2023. Major components include:
- Real estate taxes: $47,363,000 (up from $45,491,000)
- Utility expenses: $21,782,000 (up from $20,462,000)
- Other operating expenses: $81,097,000 (up from $80,637,000)
Net Operating Income (NOI)
Net Operating Income (NOI) for the nine months ended September 30, 2024, was $233,499,000, down 7.8% from $253,190,000 in 2023. The decline in NOI is primarily due to reduced rental income and increased operating expenses.
Property Sales and Gains
OPI also generates revenue through the sale of properties. During the nine months ended September 30, 2024, OPI sold seven properties for a total of $84,810,000, resulting in a gain on sale of real estate of $6,008,000.
Debt Management and Interest Income
Interest income and expenses also play a critical role in OPI's financial performance. For the nine months ended September 30, 2024, interest expense totaled $116,405,000, reflecting an increase of 44.4% compared to $80,591,000 in 2023. This increase is attributed to higher weighted average interest rates.
Financial Performance Summary
As of September 30, 2024, OPI reported a net income of $12,573,000, a significant improvement compared to a net loss of $32,281,000 in 2023. This turnaround is primarily due to the gain on early extinguishment of debt of $225,637,000.
| Financial Metric | 2024 (9 months) | 2023 (9 months) | Change |
|---|---|---|---|
| Net Income (Loss) | $12,573,000 | ($32,281,000) | +$44,854,000 |
| Net Operating Income | $233,499,000 | $253,190,000 | -$19,691,000 (-7.8%) |
| Total Operating Expenses | $150,242,000 | $146,590,000 | +$3,652,000 (+2.5%) |
| Interest Expense | $116,405,000 | $80,591,000 | +$35,814,000 (+44.4%) |
| Gain on Sale of Real Estate | $6,008,000 | $487,000 | +$5,521,000 |
Tenant Composition and Lease Structure
As of September 30, 2024, OPI's properties were leased to 237 different tenants, with the U.S. government being the largest tenant, accounting for approximately 16.6% of annualized rental income.
The weighted average remaining lease term across OPI's portfolio is approximately 7.2 years, which provides a stable income stream going forward.
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Article updated on 8 Nov 2024
Resources:
- Office Properties Income Trust (OPI) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Office Properties Income Trust (OPI)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Office Properties Income Trust (OPI)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.