Office Properties Income Trust’s stock lost a third of its value Thursday, after the real estate investment trust said “deterioration in market conditions” is forcing it to slash its dividend to a fraction of its earlier level.
Office Properties Income Trust
OPI,
shares fell by as much as 38% in early-afternoon trading Thursday. If the losses hold until the close, the stock would eclipse its previously largest one-day drop of 24.8% on Sept. 17, 2018, according to FactSet data.
The new dividend rate will immediately increase OPI’s liquidity by about $47 million per year, the company said.
“Given the deterioration in market conditions since we last addressed our dividend rate in the first half of 2023, we believe it is prudent to further reduce the dividend to increase our liquidity and financial flexibility when addressing future leasing costs, capital expenditures and debt maturities,” said Chief Operating Officer Yael Duffy.
The company said its new quarterly dividend will be one penny per share, down from 25 cents a share in the previous quarter. The distribution will take place on or about Feb. 15 to shareholders of record as of Jan. 22.
In the first quarter of 2023, OPI’s cash distribution stood at 55 cents a share, or a rate of $2.20 a year.
“Leasing across the sector remains challenged with elevated vacancy and sublease levels,” the company said Oct. 31 on its third-quarter earnings call with analysts.
On the plus side, OPI said it was encouraged with efforts supporting return-to-office mandates across industries. It noted that its outlook was improving and that its properties had an estimated utilization rate close to 70%.
It added that it was evaluating options including the sale of 400 South Jefferson Street in Chicago, after tenant Tyson Foods Inc.
TSN,
gave notice in July that it was exercising its lease-termination option, effective in January 2025.
As of Sept. 30, about 64% of OPI’s revenues were from investment-grade-rated tenants.
The company’s portfolio includes 154 properties spanning approximately 20.7 million square feet located in 30 states and Washington, D.C.
OPI is managed by The RMR Group
RMR,
an alternative-asset management company with about $36 billion in assets under management as of Sept. 30.
RMR stock has been down 7.8% in the past year, compared to a 20.5% gain by the S&P 500
SPX.
Office space has been subject to higher vacancies as more workers are doing their jobs from home in the wake of the COVID-19 pandemic.
Also read: Medical Properties Trust’s stock drops to 14-year low as tenant falls $50 million behind on rent
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