Office Properties Income Trust Closes $300 Million Offering of Senior Secured Notes Due 2029

Rhea-AI Summary

Office Properties Income Trust (OPI) announced the offering of $300 million of 9.000% senior secured notes due 2029, guaranteed by subsidiaries and secured by first-priority liens. The net proceeds of approximately $272 million will be used to redeem $350 million of 4.250% Senior Unsecured Notes due 2024. The redemption date is March 9, 2024, with the redemption price paid on March 11, 2024. Joint book-running managers for the offering include B. Riley Securities, Barclays, BMO Capital Markets, and others.

Insights

Financial Analyst

The issuance of $300 million in senior secured notes by Office Properties Income Trust, with an interest rate of 9.000%, represents a significant financial move. The high interest rate indicates a potentially elevated risk profile or an increase in market interest rates. The fact that these notes are secured by first-priority liens on valuable office properties suggests a strategic choice to leverage assets to secure better borrowing terms.

From a financial perspective, the use of the net proceeds to redeem the existing 4.250% Senior Unsecured Notes due in 2024 appears to be a refinancing strategy. This action could be seen as a way to manage the company's debt profile by addressing upcoming maturities. However, it raises a question about the long-term cost implications, given the higher interest rate on the new debt.

Investors may view the redemption of the 2024 Notes as a positive step towards debt management, but they should also consider the impact of the increased interest expenses on future earnings. The involvement of multiple reputable financial institutions as joint book-running managers could be interpreted as a sign of market confidence in the offering.

Market Research Analyst

The decision by Office Properties Income Trust to secure the notes with a pledge of equity interests and first-priority liens on office properties underlines the current real estate market conditions. With a gross carrying value of approximately $574 million for the pledged properties, the loan-to-value ratio is an important metric for investors to consider. This ratio provides insights into the level of risk associated with the secured notes.

Moreover, the choice to secure financing through a private offering to qualified institutional buyers under Rule 144A and to non-U.S. investors under Regulation S suggests a targeted approach to fundraising. This could reflect a strategic effort to tap into a specific investor base that is comfortable with the company's risk profile and investment thesis.

Legal Expert

The legal structure of the transaction, involving the issuance of senior secured notes not registered under the Securities Act of 1933, as amended, indicates a reliance on exemptions provided by Rule 144A and Regulation S. This approach allows the company to raise capital more quickly than through a public offering, albeit from a more limited pool of investors.

The company's adherence to legal requirements for the sale of securities and the explicit statement that the press release does not constitute an offer to sell or a solicitation of an offer to buy ensures compliance with securities regulations. This is crucial to avoid potential legal pitfalls and maintain investor confidence in the company's governance practices.

Issued Notice of Redemption of $350 Million of Senior Unsecured Notes Maturing in 2024

NEWTON, Mass.--(BUSINESS WIRE)-- Office Properties Income Trust (Nasdaq: OPI) today announced that it has consummated the offering of $300 million aggregate principal amount of 9.000% senior secured notes due 2029. The notes are guaranteed by certain of OPI’s subsidiaries and secured by first-priority liens on 17 office properties with a gross carrying value of approximately $574 million and a pledge of the equity interests of the subsidiary guarantors. The net proceeds from this transaction, after initial purchaser discounts and offering costs, are approximately $272 million and will be used, together with borrowings under OPI's secured revolving credit facility, to redeem OPI's 4.250% Senior Unsecured Notes due 2024 (the "2024 Notes").

In connection with the offering, OPI issued a notice of early redemption for the 2024 Notes at a redemption price equal to the principal amount of $350 million, plus accrued and unpaid interest to, but excluding, the date of redemption. The redemption date will be March 9, 2024 and the redemption price will be paid on March 11, 2024. The notice of redemption is conditioned upon OPI borrowing under its secured revolving credit facility on or prior to the redemption date.

B. Riley Securities, Barclays, BMO Capital Markets, BofA Securities, Citigroup, PNC Capital Markets LLC and UBS Investment Bank acted as joint book-running managers for the offering.

The new notes have not been and will not be registered under the Securities Act of 1933, as amended (the “Securities Act”), or any state securities laws or the securities laws of any other jurisdiction, and may not be offered or sold in the United States absent registration or an applicable exemption from registration under the Securities Act or any applicable state securities laws. The new notes were offered only to persons reasonably believed to be qualified institutional buyers under Rule 144A under the Securities Act and outside the United States only to non-U.S. investors in compliance with Regulation S under the Securities Act.

This press release does not constitute an offer to sell, or a solicitation of an offer to buy, nor shall there be any sale of these securities in any state or jurisdiction in which such an offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or jurisdiction. This press release also does not constitute a notice of redemption with respect to the redemption of OPI’s 4.250% Senior Unsecured Notes due 2024.

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 over $41 billion in assets under management as of December 31, 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 statements include statements about the use of proceeds of the offering and a future draw on OPI's secured revolving credit facility to fund the redemption of the 4.250% Senior Unsecured Notes due 2024. 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. OPI’s current intentions with respect to the use of the net proceeds from the offering and borrowings under its secured revolving credit facility to redeem OPI’s outstanding 4.250% Senior Unsecured Notes due 2024 are dependent on the availability of borrowings under OPI’s secured revolving credit facility and may not occur.

The information contained in OPI’s filings with the Securities and Exchange Commission (“SEC”), 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/20240212209118/en/

Kevin Barry, Senior Director, Investor Relations

(617) 219-1410

Source: Office Properties Income Trust

FAQ

What is the principal amount of the senior secured notes due 2029 offered by OPI?

OPI offered $300 million of 9.000% senior secured notes due 2029.

How much are the net proceeds from the transaction used for redeeming OPI's 4.250% Senior Unsecured Notes due 2024?

The net proceeds of approximately $272 million will be used to redeem $350 million of OPI's 4.250% Senior Unsecured Notes due 2024.

When is the redemption date for OPI's 4.250% Senior Unsecured Notes due 2024?

The redemption date for OPI's 4.250% Senior Unsecured Notes due 2024 is March 9, 2024.

Who are the joint book-running managers for the offering of the senior secured notes due 2029 by OPI?

B. Riley Securities, Barclays, BMO Capital Markets, and others acted as joint book-running managers for the offering.