Office Properties Income Trust Announces $425 Million Amended and Restated Secured Credit Facilities

Rhea-AI Summary

Office Properties Income Trust (OPI) announced the replacement of its prior $750 million unsecured revolving facility with a new $325 million secured revolving credit facility and $100 million secured term loan. The Facilities have a maturity date of January 29, 2027, with an extension option for the revolving credit facility. The interest rate is set at SOFR plus a margin of 3.50%, and the Facilities are secured by 19 office properties with a gross carrying value of $942 million. Wells Fargo Securities, LLC, BofA Securities, Inc., and Citibank, N.A. are the Joint Lead Arrangers and Joint Lead Bookrunners for the Facilities, with Wells Fargo Bank, N.A. serving as the Administrative Agent. OPI currently has $232 million outstanding on the Facilities and $193 million available for borrowing.

Insights

Financial Analyst

Office Properties Income Trust's (OPI) new financing arrangement, comprising a $325 million secured revolving credit facility and a $100 million secured term loan, represents a strategic shift from its previous $750 million unsecured revolving credit facility. This move indicates a proactive approach to capital management, as the new facilities provide a more structured debt profile with a secured backing. It's critical to analyze the implications of this transition from an unsecured to a secured debt structure.

Secured loans often come with lower interest rates than unsecured loans due to the reduced risk for lenders, which can lead to cost savings in interest payments. However, securing the loan with office properties means that OPI has pledged specific assets as collateral, which could be seized in the event of default. This could potentially limit OPI's flexibility in managing those assets.

The SOFR-based interest rate, reflecting a risk-free rate plus a margin, is becoming more common as the financial markets transition away from LIBOR. The margin of 3.50% is within the normal range for such facilities, but it is essential to monitor market conditions, as fluctuations in SOFR will impact the cost of borrowing.

Lastly, the involvement of a broad consortium of banks, including well-known entities like Wells Fargo and Citibank, suggests a strong vote of confidence in OPI's creditworthiness and prospects. The availability of $193 million for future borrowing provides OPI with liquidity that can be used for strategic investments or other corporate needs.

Real Estate Market Analyst

The fact that the Facilities are secured by 19 office properties with a gross carrying value of $942 million provides a substantial asset coverage ratio, which is reassuring for lenders and investors. This coverage ratio indicates the degree to which the assets exceed the borrowed amount and is a crucial indicator of the loan's security. It is also reflective of OPI's asset quality and the value of its real estate portfolio.

Moreover, the real estate market, particularly the office sector, has been undergoing significant changes post-pandemic, with shifts towards remote work and evolving workspace requirements. OPI's decision to secure its credit facilities with office properties could be seen as a confident statement about the stability and resilience of its portfolio in this changing landscape.

However, the reliance on office properties as collateral also ties the company's financial flexibility to the performance of the office real estate market. A downturn in this market could affect the value of the collateral and, consequently, the terms of borrowing or future refinancing options. Stakeholders should consider the potential risks associated with the cyclical nature of real estate and the specific challenges faced by the office sector.

Risk Management Expert

From a risk management perspective, OPI's shift to a secured credit structure is a significant development. The move to secure the credit facilities with a portfolio of office properties indicates a more conservative approach to leverage and debt management. By securing the debt, OPI is likely aiming to reduce the cost of capital and mitigate the risk of credit default, potentially improving its financial stability and credit ratings.

However, this strategy is not without its trade-offs. The designated office properties are now encumbered, which could limit OPI's ability to sell or repurpose these assets without affecting the credit agreement. This could reduce operational flexibility, especially in response to market changes or unforeseen opportunities.

The maturity date of January 29, 2027, with a one-year extension option, provides a relatively short to medium-term horizon for repayment. This necessitates careful financial planning and cash flow management to ensure that OPI can meet its obligations when the debt matures or if it opts to extend the facility. Stakeholders should closely monitor OPI's debt management strategy and its impact on the company's overall risk profile.

$325 Million Revolving Credit Facility and $100 Million Term Loan Replace Prior $750 Million Unsecured Revolving Facility

NEWTON, Mass.--(BUSINESS WIRE)-- Office Properties Income Trust (Nasdaq: OPI) today announced that it has entered into a second amended and restated secured credit agreement that governs its new $325 million secured revolving credit facility and $100 million secured term loan, or the Facilities. The maturity date of the Facilities is January 29, 2027. OPI has a one-year extension option for the $325 million secured revolving credit facility, subject to the payment of an extension fee and satisfaction of certain other customary conditions. Interest paid on the Facilities is at a rate of SOFR plus a margin of 3.50%. The Facilities are secured by 19 office properties with a gross carrying value of $942 million. The Facilities replace OPI’s previous $750 million unsecured revolving credit facility that was scheduled to mature on January 31, 2024. OPI currently has $232 million outstanding on the Facilities and $193 million available for borrowing.

Wells Fargo Securities, LLC, BofA Securities, Inc. and Citibank, N.A. are the Joint Lead Arrangers and Joint Lead Bookrunners for the Facilities. Wells Fargo Bank, N.A. is the Administrative Agent. Bank of America, N.A. and Citibank, N.A. are the Syndication Agents. PNC Bank, National Association, Regions Bank, Mizuho Bank, Ltd., U.S. Bank, National Association, Sumitomo Mitsui Banking Corporation and Royal Bank of Canada are the Documentation Agents. Other participating banks in the Facilities include BMO Bank, N.A., Truist Bank, Associated Bank, National Association, Berkshire Bank, First Hawaiian Bank, First Horizon Bank, Morgan Stanley Senior Funding, Inc., UBS AG, Stamford Branch, Barclays Bank PLC and E.Sun Commercial Bank, Ltd.

About Office Properties Income Trust

OPI is a national REIT focused on owning and leasing high quality office and mixed-use properties in select growth-oriented U.S. markets. As of September 30, 2023, approximately 64% of OPI's revenues were from investment grade rated tenants. OPI owned and leased 154 properties as of September 30, 2023, with approximately 20.7 million square feet located in 30 states and Washington, D.C. In 2023, OPI was named as an Energy Star® Partner of the Year for the sixth consecutive year. OPI is managed by The RMR Group (Nasdaq: RMR), a leading U.S. alternative asset management company with approximately $36 billion in assets under management as of September 30, 2023, and more than 35 years of institutional experience in buying, selling, financing and operating commercial real estate. OPI is headquartered in Newton, MA. For more information, visit opireit.com.

WARNING REGARDING FORWARD-LOOKING STATEMENTS

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other securities laws. These forward-looking statements are based upon OPI’s present intent, beliefs and expectations, but these statements and the implications of these statements are not guaranteed to occur and may not occur for various reasons, some of which are beyond OPI’s control. For example:

• Continued availability of borrowings under the secured revolving credit facility is subject to OPI’s satisfying certain financial covenants and other credit facility conditions that it may be unable to satisfy,

• OPI has the option to extend the maturity date of the secured revolving credit facility upon payment of an extension fee and meeting certain other conditions. However, the applicable conditions may not be met, and

• Actual costs under the Facilities will be higher than the stated rates because of fees and expenses associated with such debt.

The information contained in OPI’s filings with the Securities and Exchange Commission, including under the caption “Risk Factors” in OPI’s periodic reports, or incorporated therein, identifies other important factors that could cause differences from OPI’s forward-looking statements. OPI’s filings with the SEC are available on the SEC’s website at www.sec.gov.

You should not place undue reliance upon forward-looking statements.

Except as required by law, OPI does not intend to update or change any forward-looking statements as a result of new information, future events or otherwise.

A Maryland Real Estate Investment Trust with transferable shares of beneficial interest listed on the Nasdaq.
No shareholder, Trustee or officer is personally liable for any act or obligation of the Trust.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240129163047/en/

Kevin Barry, Senior Director, Investor Relations

(617) 219-1410

Source: Office Properties Income Trust

FAQ

What is the new credit facility amount for OPI?

OPI's new credit facility consists of a $325 million secured revolving credit facility and a $100 million secured term loan.

What is the maturity date of the new facilities?

The maturity date of the Facilities is January 29, 2027, with an extension option for the revolving credit facility.

What is the interest rate on the Facilities?

Interest paid on the Facilities is at a rate of SOFR plus a margin of 3.50%.

How are the Facilities secured?

The Facilities are secured by 19 office properties with a gross carrying value of $942 million.

Who are the Joint Lead Arrangers and Joint Lead Bookrunners for the Facilities?

Wells Fargo Securities, LLC, BofA Securities, Inc., and Citibank, N.A. are the Joint Lead Arrangers and Joint Lead Bookrunners for the Facilities.

Which banks are the Documentation Agents for the Facilities?

PNC Bank, National Association, Regions Bank, Mizuho Bank, Ltd., U.S. Bank, National Association, Sumitomo Mitsui Banking Corporation, and Royal Bank of Canada are the Documentation Agents for the Facilities.