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Stock Performance in Focus – Office Properties Income Trust (Nasdaq: OPI)

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Office Properties Income Trust (Nasdaq: OPI) recently stated its fiscal results for the quarter and nine months finished September 30, 2k19.

David Blackman, President and Chief Executive Officer of OPI, made the following statement:

“Since the end of the 2nd-quarter, we continued to make steady progress on our disposition plan, selling 12 properties for a total of $298.10M. The 60 properties we have sold or have under an agreement to sell for $731.50M since January 1, 2k19 are at an average cap rate of 5.60 percent and have an average age of 22.0 years, average occupancy of 71.00 percent and a weighted average lease term of 4.50 years. As formerly declared, we also sold our 2.8M shares of The RMR Group Inc. for net proceeds of $104.70M. With the proceeds of these asset sales, we have reduced our leverage below the midpoint of our targeted leverage range. Our 3rd-quarter operating activity also generated continued leasing momentum as we entered new and renewal leases for 759,000 square feet and our merged occupancy turned up to 93.30 percent from 91.60 percent previous quarter.”

Results for the Quarter finished September 30, 2k19:

Net loss available for common shareholders for the quarter finished September 30, 2k19 was $3.90M, or $0.080 for each diluted share, a contrast to a net loss available for common shareholders of $0.40M, or $0.020 for each diluted share, for the quarter finished September 30, 2k18. Net loss available for common shareholders for the quarter finished September 30, 2k19 includes an $8.50M, or $0.180 for each diluted share, loss on impairment of real estate, partially offset by an $11.50M, or $0.240 for each diluted share, gain on sale of real estate. Net loss available for common shareholders for the quarter finished September 30, 2k18 includes a $17.40M, or $0.700 for each diluted share, unrealized gain on equity securities related to OPI’s investment in The RMR Group Inc., or RMR Inc., which was sold on July 1, 2k19, and $16.20M, or $0.660 for each diluted share, of estimated business administration incentive fee cost. The weighted average number of diluted common shares outstanding was 48.10M for the quarter finished September 30, 2k19 and 24.80M for the quarter finished September 30, 2k18.

Normalized funds from operations, or Normalized FFO, available for common shareholders for the quarter finished September 30, 2k19 were $69.70M, or $1.450 for each diluted share, contrast to Normalized FFO available for common shareholders for the quarter finished September 30, 2k18 of $53.00M, or $2.140 for each diluted share.

Reconciliations of net income (loss) available for common shareholders determined in accordance with U.S. generally accepted accounting principles, or GAAP, to funds from operations, or FFO, available for common shareholders and Normalized FFO available for common shareholders for the quarters finished September 30, 2k19 and 2k18 appear later in this press release.

Results for the Nine Months finished September 30, 2k19:

Net loss available for common shareholders for the nine months finished September 30, 2k19 was $34.70M, or $0.720 for each diluted share, a contrast to net income available for common shareholders of $35.40M, or $1.430 for each diluted share, for the nine months finished September 30, 2k18. Net loss available for common shareholders for the nine months finished September 30, 2k19 includes a $44.00M, or $0.920 for each diluted share, realized loss on equity securities related to the sale of OPI’s investment in RMR Inc. on July 1, 2k19 and a $14.10M, or $0.290 for each diluted share, loss on impairment of real estate, partially offset by a $33.50M, or $0.700 for each diluted share, gain on sale of real estate and certain net revenue events throughout the 2nd-quarter of 2k19 totalling $8.20M, or $0.170 for each diluted share, counting a $7.40M early termination fee, net of costs, related to a single-tenant property located in San Jose, CA. Net income available for common shareholders for the nine months finished September 30, 2k18 includes a $40.70M, or $1.640 for each diluted share, unrealized gain on equity securities and a $17.30M, or $0.70 for each diluted share, net gain on sale of real estate, partially offset by $17.00M, or $0.690 for each diluted share, of estimated business administration incentive fee cost and a $5.8M, or $0.230 for each diluted share, loss on impairment of real estate. The weighted average number of diluted common shares outstanding was 48.10M for the nine months finished September 30, 2k19 and 24.80M for the nine months finished September 30, 2k18.

Normalized FFO available for common shareholders for the nine months finished September 30, 2k19 were $222.30M, or $4.630 for each diluted share, contrast to Normalized FFO available for common shareholders for the nine months finished September 30, 2k18 of $158.40M, or $6.390 for each diluted share.

Leasing and Occupancy Results:

Throughout the quarter finished September 30, 2k19, OPI entered new and renewal leases for an aggregate of 759,000 rentable square feet at weighted (by rentable square feet) average rents that were 5.00 percent above prior rents for the similar space. The weighted (by rentable square feet) average lease term for these leases was 12.70 years and leasing concessions and capital commitments for these leases were $17.60M, or $1.820 for each square foot, for each lease year.

As of September 30, 2k19, 93.30 percent of OPI’s total rentable square feet was leased, contrast to 91.60 percent as of June 30, 2k19 and 93.30 percent as of September 30, 2k18.

Pro Forma Similar Property Results:

Pro forma results combine the results of OPI and Select Income REIT, or SIR, for the quarters finished September 30, 2k19 and 2k18 as if the merger of SIR with OPI that closed on December 31, 2k18, or the Merger, had occurred on January 1, 2k18. Pro forma similar property occupancy was 93.30 percent as of September 30, 2k19, contrast to 95.80 percent as of September 30, 2k18. Pro Forma Similar Property Cash Basis net operating income, or NOI, was $99.30M for the quarter finished September 30, 2k19, which was a 7.10 percent decline contrast to a similar duration in 2k18.

Recent Investment Activities:

As formerly declared, on July 1, 2k19, OPI accomplished the sale of all of its 2,801,060 shares of Class A common stock of RMR Inc., or RMR Inc. common stock, in an underwritten public offering at a price to the public of $40.00 for each common share. OPI received $104.70M in net proceeds, after deducting underwriting fees and other offering costs, that is used to repay debt.

As formerly declared, in July 2k19, OPI reached a contract to acquire a land parcel near one of its properties located in Boston, MA for $2.90M, apart from acquisition-related costs.

Recent Financing Activities:

Throughout the quarter finished September 30, 2k19, OPI repaid the $170.00M remaining principal balance outstanding under its $300.00M unsecured term loan due 2k20 with cash on hand, proceeds from its property dispositions and proceeds from the sale of its shares of RMR Inc. common stock.

As formerly declared, on July 15, 2k19, OPI redeemed, at par plus accrued interest, all $350.00M of its 3.750 percent senior notes due 2k19 using cash on hand and borrowings under its revolving credit facility.

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