Orion Properties Dismisses $126M Buyout Offer

An office real estate investment trust dependent on federal government leases was offered an offramp via buyout. It didn’t take it.

Phoenix-based office REIT Orion Properties rejected a buyout offer from Kawa Capital Management, Bisnow reported. The board of directors of the office landlord unanimously rejected the buyout bid, which came unsolicited from the South Florida-based alternative asset manager.

Kawa’s offer, acknowledged by Orion several weeks ago, would’ve seen Kawa pay $2.50 per share to take Orion private at a $141 million valuation. The offer represented a 31.5 percent premium on the stock price at the time the offer was acknowledged.

Since Kawa already owns a 10 percent stake in Orion, the offer to buy the remaining public shares worked out to $126 million.

Orion’s portfolio spans 7.8 million square feet, concentrated in markets such as Texas, Kentucky and New Jersey. It has 68 assets in its portfolio; the company posted a $9.4 million loss in the first quarter.

It’s been a challenging year for Orion, at least on the public markets. At the start of the year, shares were trading for around $4. But the price dropped precipitously after a detrimental fourth-quarter earnings report, pushing the stock below $2 for much of the year since.

The stock jumped up 16 percent after the buyout bid. The rejection of the offer did little to dampen the stock, which was at $2.43 per share in early trading on Thursday morning, approaching a 30-day high. It ultimately closed the day at $2.37 per share.

The biggest concern for the REIT is the status of the General Services Administration, which made a lot of noise in the last six months about paring down the federal government’s office holdings. As of the end of March, 16 percent of Orion’s space was leased to the government, so further reductions by the GSA could have disastrous effects on the firm.

REITs are generally performing well, though. Janus Henderson Investors analyst Greg Kuhl recently published a note on U.S. REITs’ 9 percent returns over the last 12 months.

— Holden Walter-Warner