Office Properties Income Trust Announces Two Class A Acquisitions Totaling $550 Million

Rhea-AI Summary

Office Properties Income Trust (Nasdaq: OPI) has successfully acquired two Class A office properties totaling $550 million. The first property, 1K Fulton in Chicago, priced at $355 million, is 99% leased, primarily to Google, with a 4.7% cap rate. The second property, Twelve24 in Atlanta, acquired for $195 million, is 98% leased to Insight Global with a cap rate of 6.3%. Funded through cash and a $350 million credit facility, OPI aims to sell non-core properties to repay the facility. These acquisitions align with OPI's strategy to enhance portfolio metrics and cash flows.

Positive

• Acquisition of class A office properties enhances portfolio quality.
• 1K Fulton is 99% leased, primarily to Google, providing stable cash flow.
• Twelve24 is 98% leased to Insight Global with a long lease term.
• Strategic capital recycling program aims to boost financial metrics.

Negative

• Potential risks in successfully selling non-core properties.
• Possibility of not eliminating anticipated leasing downtime.
• Acquisitions may not be accretive to cash flows as expected.

Office Properties Income Trust (Nasdaq: OPI) today announced that it has completed the acquisition of two Class A office properties for a total of $550.0 million, excluding closing costs.

OPI acquired the approximately 531,190 square foot Class A office property known as 1K Fulton in Chicago, IL for $355.0 million, excluding closing costs, reflecting a current GAAP cap rate of 4.7% at closing. The property is 73% leased to Google as its Midwest headquarters and 99% leased overall, with a weighted average lease term of 6.6 years. This LEED certified property underwent a full redevelopment in 2015, is located one block from the Chicago Transit Authority rail stop, and features many amenities, including 157 subterranean parking spaces, ground-floor retail, a premier steak house restaurant, two fitness centers and multiple roof decks. The property is in the Fulton submarket of Chicago which has experienced strong population growth and modern residential and mixed-use development attracting Fortune 500 companies such as Google and McDonald’s.

OPI also acquired the approximately 345,917 square foot Class A office property known as Twelve24 in Atlanta, GA for $195.0 million, excluding closing costs, reflecting a current GAAP cap rate of 6.3% at closing. The property is 96% leased to Insight Global as its corporate headquarters and 98% leased overall, with a weighted average lease term of 14.2 years. The property was constructed in 2021, includes direct access to MARTA (Atlanta’s rail system), and features many amenities, including a fitness center, outdoor patio, café, ground-floor retail and a total of 1,023 parking spaces. The property is in Atlanta’s Central Perimeter submarket which is the largest employment center in Greater Atlanta and home to Fortune 500 headquarters for Mercedes, State Farm and Nasdaq.

OPI used cash and drew approximately $350 million under its unsecured credit facility to fund these acquisitions. OPI plans to sell additional non-core properties as part of its capital recycling program to repay drawings under its credit facility used to fund these acquisitions.

Chris Bilotto, President and Chief Operating Officer of OPI made the following statement:

“These two Class A office properties squarely fit our objective of owning, operating and leasing properties that are primarily leased on a long term basis to tenants with high credit quality characteristics. Since commencing our capital recycling strategy in 2020, we have sold more than $280 million of properties and now are pleased to redeploy the proceeds into these carefully selected acquisitions of newly constructed core real estate in strong, growing markets majority leased to high credit quality tenants. By selling older properties, those with shorter lease terms or upcoming vacancies, we have eliminated anticipated leasing downtime and significant capital expenditures over the next few years. These new acquisitions enhance our portfolio metrics and are accretive to our cash flows.”

Office Properties Income Trust is a real estate investment trust, or REIT, focused on owning, operating and leasing properties primarily leased to single tenants and those with high credit quality characteristics such as government entities. OPI is managed by the operating subsidiary of The RMR Group Inc. (Nasdaq: RMR), an alternative asset management company that is headquartered in Newton, Massachusetts.

Warning Concerning Forward-Looking Statements

This press release contains statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other securities laws. Also, whenever OPI uses words such as “believe”, “expect”, “anticipate”, “intend”, “plan”, “estimate”, “will”, “may” and negatives or derivatives of these or similar expressions, OPI is making forward-looking statements. These forward-looking statements are based upon OPI’s present intent, beliefs or expectations, but forward-looking statements are not guaranteed to occur and may not occur. Actual results may differ materially from those contained in or implied by OPI’s forward-looking statements as a result of various factors. Forward-looking statements involve known and unknown risks, uncertainties and other factors, some of which are beyond OPI's control. For example:

• This press release states that OPI plans to sell additional non-core properties as part of its capital recycling program to repay drawings under its revolving credit facility used to fund these acquisitions. However, OPI may not be able to successfully sell additional properties in the future or may not realize the proceeds it may target for any such property sales.
• Mr. Bilotto states that by selling older properties, OPI has eliminated anticipating leasing downtime and significant capital spend over the next few years. However, OPI may not eliminate leasing downtime or capital spend as much as it expects and it may have additional vacancies or required capital spend in the future.
• Mr. Bilotto states that these acquisitions are accretive to cash flows. However, for various reasons, these acquisitions may not be accretive to cash flows at expected levels or at all.

The information contained in OPI’s filings with the SEC, including under “Risk Factors” in OPI’s periodic reports, or incorporated therein, identifies other important factors that could cause OPI’s actual results to differ materially from those stated in or implied by 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/20210628005201/en/

FAQ

What properties did Office Properties Income Trust acquire?

OPI acquired 1K Fulton in Chicago for $355 million and Twelve24 in Atlanta for $195 million.

What is the total value of OPI's recent acquisitions?

The total value of the acquisitions is $550 million.

Who are the major tenants in the acquired properties?

Google leases 73% of 1K Fulton, and Insight Global occupies 96% of Twelve24.

How will OPI fund the acquisitions?

OPI utilized cash and drew approximately $350 million from its unsecured credit facility.

What are the expected benefits of these acquisitions?

The acquisitions are intended to enhance OPI's portfolio quality and cash flows.