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Office Properties Income Trust merges with healthcare REIT

Firm aims to limit exposure to “weakening office market”

Office Properties Income Trust's Christopher Bilotto, Diversified Healthcare Trust's Jennifer Francis (Getty, Office Properties Income Trust, Diversified Healthcare Trust)
Office Properties Income Trust's Christopher Bilotto, Diversified Healthcare Trust's Jennifer Francis (Getty, Office Properties Income Trust, Diversified Healthcare Trust)

A real estate investment trust focused on offices agreed to acquire another REIT to reduce its exposure to the embattled market.

Office Properties Income Trust and Diversified Healthcare Trust have agreed to merge, the companies announced. The office REIT’s acquisition in an all-stock transaction would create a new entity, Diversified Properties Trust; both REITs are managed by Adam Portnoy’s RMR Group.

JPMorgan Chase agreed to provide a $368 million bridge loan to finance the acquisition, though the companies are trying to find alternative ways to finance the deal.

OPI president Christopher Bilotto in a statement made no bones about the rationale behind the merger, noting the importance of limiting exposure to a “weakening office market.”

“Against a challenging backdrop for traditional office assets, this merger provides OPI access to stabilized cash flows,” Bilotto added.

OPI shareholders would come out with more of the novel entity, owning 58 percent against DHT shareholders’ 42 percent. DHT shareholders would receive 0.147 shares of OPI per each common share of DHT.

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OPI’s portfolio spans 21 million square feet, including 160 office properties, Bisnow reported. The REIT has honed in on buildings with a single tenant that boast a strong credit rating, such as government agencies. OPI plans to reduce its dividend payout rate upon merging, cautious of the 41 percent of its portfolio leases expiring by 2026.

DHT has 105 properties, including healthcare, life sciences and senior housing across 8.8 million square feet. The REIT violated its debt covenants — $700 million in debt is due to mature next year.

Upon closing of the merger, the combined portfolio of the entity would be $12.4 billion, according to an investor presentation. The combined company would have $5 billion in debt; the combined market capitalization on Tuesday afternoon was below $1 billion and both REIT stocks declined upon the merger announcement.

The transaction is expected to close during the third quarter.

— Holden Walter-Warner

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