Office Properties Income Trust (NASDAQ:OPI) reported a strong third quarter in their recent earnings call, with normalized Funds From Operations (FFO) of $1.02 per share, surpassing the high end of their guidance. The company's portfolio occupancy stood at 89.9% at the end of the quarter, supported by 586,000 square feet of new and renewal leasing, primarily with government and industry tenants.
Key takeaways from the call:
- The company reported a normalized FFO of $49.4 million or $1.02 per share for the quarter, exceeding their guidance.
- Office Properties Income Trust sold one property for $10.5 million, totaling $23.6 million in asset sales for the year.
- The company is actively discussing a new credit facility with their banking group and exploring additional financing options to manage their debt maturities.
- An active leasing pipeline of nearly 2.8 million square feet is in place, including potential absorption of 735,000 square feet.
- The company expects normalized FFO to be between $0.96 and $0.98 per share in the fourth quarter.
- Same-property cash basis Net Operating Income (NOI) decreased 9.2% compared to the third quarter of 2022 and is expected to be down 11% to 13% in the fourth quarter.
- Office Properties Income Trust declared a regular quarterly distribution of $0.25 per share.
During the call, the company also announced the completion and delivery of the hotel portion of a Class A mixed-use development in Washington, D.C., and ongoing construction of a Life Science Tree Development in Seattle. The company has upcoming lease expirations and vacancies to address, with ongoing discussions with expiring tenants.
Office Properties Income Trust has an active leasing pipeline, including 650,000 square feet associated with 2024 renewals. The company also closed on two mortgage loans during the quarter, with a total principal balance of $69.2 million, using the net proceeds to repay amounts outstanding under their revolving credit facility.
Additionally, the company is evaluating properties for their capital recycling program and is under agreement to sell two buildings, reflecting 177,000 square feet and proceeds of $21.3 million. They expect recurring capital expenditures of $25 million to $35 million and redevelopment capital expenditures of approximately $15 million to $20 million in the fourth quarter.
The company also mentioned the remaining capital expenditure (CapEx) of $90 million for two development projects. Out of this, $25-30 million will be spent on construction capital and tenant improvement (TI) allowance, primarily allocated to the Seattle project. The remaining amount will be used for leasing capital. The company also hinted at the possibility of a secured revolver, which could put some pressure on the unencumbered asset ratios but still within the acceptable range.
InvestingPro Insights
Drawing from the latest InvestingPro data, Office Properties Income Trust (NASDAQ:OPI) has a market cap of 218.91M USD and a negative P/E ratio of -7.79. The company has demonstrated a significant dividend yield of 22.27% as of Q3 2023, which aligns with one of our InvestingPro Tips indicating that the company pays a significant dividend to shareholders. This is further reinforced by the fact that the company has maintained dividend payments for 15 consecutive years.
Another InvestingPro Tip points out that the company's liquid assets exceed short term obligations, suggesting a strong financial stance for the company. However, the company's price has fallen significantly over the last year, with a decrease of 65.8% according to InvestingPro data.
In conclusion, while Office Properties Income Trust has shown strong dividend consistency and liquidity, potential investors should be aware of its recent price performance. For more insights, consider exploring the additional tips provided by the InvestingPro platform.
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