In a dramatic turn of events, Office Properties Income Trust (OPI) saw its stock plummet by a third of its value last week, marking a significant downturn for the real estate investment trust (REIT). This steep decline comes in the wake of the company’s announcement regarding a substantial reduction in its dividend, a move driven by worsening market conditions.
OPI shares tumbled as much as 38 percent in early-afternoon trading last Thursday, setting the stage for potentially the largest single-day drop in the company’s history, according to a report in MarketWatch. This surpasses its previous record decline of 24.8 percent on September 17, 2018. The company’s stock reflects a volatile market response to its latest financial strategy.
The newly announced dividend rate is set to bolster OPI’s liquidity by approximately $47 million annually. This strategic move, as described by Chief Operating Officer Yael Duffy, is a response to the deteriorating market conditions since the first half of 2023. The aim is to enhance the company’s financial flexibility in managing future leasing costs, capital expenditures, and debt maturities.
In a striking reduction, the company’s quarterly dividend has been slashed to a mere one penny per share, down from the previous quarter’s 25 cents per share. This new distribution, scheduled for on or about February 15 to shareholders of record as of January 22, marks a significant shift from the first quarter of 2023, where OPI’s cash distribution stood at 55 cents a share, or $2.20 annually.
OPI noted the ongoing challenges in the leasing sector, with heightened vacancy and sublease levels, during its third-quarter earnings call on October 31. However, the company expressed optimism about the return-to-office mandates across various industries, indicating an improving outlook with property utilization rates nearing 70 percent.
In a move to navigate the current market landscape, OPI is exploring options, including the sale of its property at 400 South Jefferson Street in Chicago. This decision follows the lease-termination notice from tenant Tyson Foods Inc. in July, effective January 2025.
As of September 30, OPI’s portfolio consisted of 154 properties across approximately 20.7 million square feet in 30 states and Washington, D.C. Notably, about 64 percent of its revenues were derived from investment-grade-rated tenants. The REIT is managed by The RMR Group, a significant player in alternative asset management with around $36 billion in assets under management.
The past year has seen RMR’s stock decline by 7.8 percent, in contrast to the S&P 500’s (SPX) gain of 20.5 percent, MarketWatch reported. This disparity highlights the ongoing challenges faced by real estate investment trusts, particularly in the office space sector, which has experienced higher vacancies due to the shift towards remote work following the COVID-19 pandemic.
