Asset sales and a $425 million note deal are reshaping the trust's portfolio.
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Office Properties Income Trust (OPI +20.18%) reported its third quarter results, highlighting a strategic transition toward a reduced, higher-quality asset base through a multi-phase property disposition program. Management reported the company is prioritizing cash flow maximization and debt reduction by divesting noncore properties and utilizing proceeds to address near-term maturities. The trust successfully refinanced its credit facility and term loan with $425 million in senior secured notes, extending its weighted average debt maturity. The company stated that the execution of its asset sale plan will lead to a portfolio with higher occupancy and increased concentration in Class A office buildings.
Operator: Good day, and welcome to the Office Properties Income Trust third quarter 2026 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. Please note, this event is being recorded. I would now like to hand the call over to Matt Murphy, Manager of Investor Relations. Please go ahead.
Matt Murphy: Good morning. Thank you for joining us today. With me on the call are OPI's President and Chief Executive Officer, Yael Duffy, and Chief Financial Officer and Treasurer, Brian Donley. In just a moment, they will provide details about OPI's business and performance for the third quarter of 2026. I would like to note that the recording and retransmission of today's conference call is prohibited without the prior written consent of the company. Also note that today's conference call contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other securities laws.
These forward-looking statements are based on OPI's beliefs and expectations as of today, Tuesday, November 10th, 2026, and actual results may differ materially from those that we project. The company undertakes no obligation to revise or publicly release the results of any revision to the forward-looking statements made in today's conference call. Additional information concerning factors that could cause those differences is contained in OPI's filings with the Securities and Exchange Commission, which can be accessed from the company's website. Investors are cautioned not to place undue reliance upon any forward-looking statements. In addition, as a result of OPI's recent restructuring and the application of fresh start accounting, financial statement amounts and operating metrics are not comparable to prior periods.
Please refer to our earnings materials and SEC filings for additional information regarding the impact of fresh start accounting on our reported results. We will also be discussing non-GAAP financial measures during this call, including normalized FFO and cash basis net operating income, or Cash Basis NOI. Reconciliations of these non-GAAP figures to net income are available in OPI's earnings presentation that we issued last night, which can be found on our website. I will now turn the call over to Yael.
Yael Duffy: Thank you, Matt, and good morning. For the third quarter, OPI reported normalized FFO of $20.5 million, or $0.93 per share. Same property Cash Basis NOI increased 14.8% year over-year to $51.5 million, which Brian will discuss in further detail later on this call. Turning to our portfolio leasing and disposition activity. As of September 30th, 2026, OPI's portfolio consisted of 109 wholly owned properties across 27 states and the District of Columbia, totaling approximately 15.6 million square feet. The portfolio was 80.7% leased, or 88.8% on a same property basis, with a weighted average remaining lease term of 6.2 years. Over 60% of OPI's annualized revenue comes from investment grade rated tenants and government leases.
During our earnings call last quarter, we outlined OPI's priorities, which included maximizing cash flow through leasing, occupancy growth, and proactive asset management, executing on asset sales and applying those proceeds towards liquidity and addressing debt maturities, and driving long-term value by maintaining strong tenant relationships and efficient property operations. OPI signed 13 leases totaling 400,000 sq ft with a weighted average remaining lease term of 8.7 years, its best leasing quarter since Q2 2025. Renewals made up 97% of that volume, which showed leasing costs and concessions down to just $2.22 per square foot per lease year, more than 40% below our prior four-quarter average.
Renewals avoid downtime and lost rent, which reflects continued progress on our third priority, fostering strong tenant relationships. Looking ahead, roughly 1.3 million square feet of leases, representing 11% of annualized revenue, is scheduled to expire between now and the end of 2027. We plan to address these expirations through leasing and asset sales. Of the 1.3 million square feet scheduled to roll, 290,000 sq ft is currently scheduled to vacate or downsize. After adjusting for planned property disposition, that figure declines to just 52,000 sq ft, representing less than 1% of annualized revenue. Today, our leasing pipeline sits at 1.6 million square feet, with 1.1 million square feet, or 70%, related to renewals.