OPI Posts $0.93 Normalized FFO, Lifts Disposal Target Above $300 Million

Office Properties Income Trust (NASDAQ:OPI) reported third-quarter normalized funds from operations of $20.5 million, or $0.93 per share, and raised its asset-sale program above the $300 million mark. The numbers arrive with a caveat the company itself attached: financial statement amounts and operating metrics are not comparable with prior periods because of its recent restructuring and fresh start accounting. Investors should read the improvement against that warning, not against last year's reported figures.

Same-property cash basis net operating income rose 14.8% year over year to $51.5 million. Chief Financial Officer and Treasurer Brian Donley said the increase reflected higher cash rents from leasing activity and the expiration of rent-abatement periods on certain leases. Abatements expire; they do not repeat. What replaces them once they run off is the question the release does not answer.

What does the enlarged sale program deliver?

President and CEO Yael Duffy said OPI had sold 14 of the 32 properties it identified for sale in June, generating approximately $156 million. Another 15 properties sit under purchase and sale agreements for a combined $134 million. The remaining three sit under letters of intent with estimated proceeds of $22.5 million.

Duffy said pricing had met or exceeded expectations and that total gross proceeds from the 32 properties should exceed $300 million, against an initial expectation of $275 million. A raise of roughly 9% on target is welcome; letters of intent, however, are not contracts, and $22.5 million of the total still rests on them.

The company has also identified another 26 properties for sale, totaling 3.5 million square feet and contributing approximately $87 million in annualized revenue. Marketing of those assets is in its early stages. Duffy said OPI expects approximately $360 million in proceeds in 2027. Those properties secure notes maturing in 2029 and 2031, which gives the sales a deadline the company cannot easily move.

After completing all 58 sales, management expects OPI to own 64 properties totaling approximately 10 million square feet. Duffy projected a retained portfolio that is 93% occupied, with more than 70% of square footage in Class A buildings, compared with approximately 63% before the sales began. The Washington, D.C., metropolitan area's share of annualized revenue would fall to approximately 17%, from 24%. Government tenants would remain responsible for approximately 30% of annualized revenue.

The plan promises a smaller, better-quality company; it also promises $87 million of revenue that leaves the building.

What did leasing show?

OPI signed 13 leases covering 400,000 square feet during the quarter, its strongest leasing quarter since the second quarter of 2025, according to Duffy. Renewals accounted for 97% of the volume, with a weighted average term of 8.7 years.

Leasing costs and concessions ran at $2.22 per square foot per lease year, more than 40% below the average for the preceding four quarters. Duffy said renewals help avoid downtime and lost rent. They also mean fewer new tenants testing the market's appetite for the space.

As of September 30, the portfolio included 109 wholly owned properties across 27 states and Washington, D.C., totaling approximately 15.6 million square feet. It was 80.7% leased, or 88.8% on a same-property basis, with a weighted average remaining lease term of 6.2 years. Approximately 1.3 million square feet of leases, representing 11% of annualized revenue, expires through the end of 2027. Of that, 290,000 square feet is scheduled to vacate or downsize; adjusted for planned dispositions, the figure falls to 52,000 square feet, or less than 1% of annualized revenue, Duffy said.

How firm is the balance sheet?

Donley said OPI ended the quarter with approximately $61 million in unrestricted cash and $25 million in restricted cash. In September, the company raised $425 million through senior secured notes and used the proceeds to repay and terminate a $325 million credit facility and a $100 million term loan due in January 2027. He said OPI faces no meaningful debt maturities until 2029.

Since quarter-end, the trust repaid approximately $78 million of its 8.375% senior secured notes due in 2029, including payments tied to collateral sales. Donley said the next scheduled principal payment is $30 million on February 1, 2027, which the company expects to fund with cash and asset-sale proceeds. OPI also redeemed $32 million of its 10% senior secured notes due in June 2031 using part of the proceeds from collateral sales.

Third-quarter recurring capital expenditures totaled $10.4 million. For 2026, OPI expects approximately $50 million in capital spending, split between $40 million in leasing capital and $10 million in building capital, Donley said.

The maturity wall is quiet until 2029; the collateral sales that service it must keep closing on schedule.