S&P snips Office Properties Income Trust

S&P said it lowered its ratings on Office Properties Income Trust and its senior unsecured notes to CCC+ from B-. The agency also lowered the recovery rating on this debt to 3 from 2 and placed the ratings on CreditWatch with negative implications.

“OPI's operating performance has been weak, a trend we expect to continue. For the three months and nine months ended Sept. 30, 2023, same-property cash net operating income (NOI) declined by 9.2% and 5.5%, respectively. The company expects a year-over-year same-property cash NOI decline of 11%-13% in the fourth quarter. Operating performance has been impacted by lease expirations, high free rent levels, and higher operating costs. Same-property leased percentage has declined by 140 basis points (bps) to 93.3% over the past 12 months, while total portfolio leased percentage has declined 80 bps to 89.9% over the same time frame,” S&P said in a press release.

The agency warned it anticipates “OPI's operating performance and occupancy to remain under significant stress over the next few years and for the company to underperform relative to office REIT peers given our view of its weaker asset quality.”

S&P said it could downgrade OPI within the next few months if OPI does not obtain adequate liquidity sources to meet its $350 million of senior unsecured notes due May 2024 and its $650 million of senior unsecured notes due February 2025.

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