Orion Office REIT receives $2.50/share take-private offer from Kawa Capital

Investing.com - Orion Office REIT Inc (NYSE:ONL) has received a take-private offer from its largest shareholder, Kawa Capital Management, for $2.50 per share, according to a 13D filing on June 20. The offer comes as InvestingPro data shows the company trading significantly below book value, with a Price/Book ratio of just 0.15x.

Kawa Capital Management accumulated its position over the past 60 days before submitting the proposal, which was disclosed near the end of the trading session on Friday. The stock has faced significant pressure, declining 46% over the past six months, though InvestingPro analysis indicates the company is currently undervalued. Citizens JMP has maintained its Market Perform rating on Orion stock following the announcement.

The board of Orion Office REIT is expected to review the proposal, according to management discussions that followed the filing. With a market capitalization of $113.5 million and a strong current ratio of 2.58, indicating solid short-term liquidity, Citizens JMP believes the offered price "falls short of suitably valuing the single-tenant office portfolio." Get access to 12 additional key insights about ONL with an InvestingPro subscription.

Orion’s CEO brings significant REIT merger experience, having previously founded and sold a diversified net-lease REIT at approximately 20% premium in 2013, and was part of senior leadership at a net-lease REIT acquired by Realty Income (NYSE:O) in 2021.

Citizens JMP maintains its Market Perform rating on Orion stock due to "continued office rationalization efforts and risk associated with changing the portfolio composition," factors that could dilute earnings and support the current valuation of 3x 2025 estimated FFO per share. Analysts anticipate a 12% revenue decline for the current year.

In other recent news, Orion Office Reit reported its first-quarter 2025 earnings, showing a revenue of $38 million, which surpassed analyst expectations of $36.8 million. Despite this revenue beat, the company experienced a net loss of $0.17 per share. Orion’s revenue decreased from $47.2 million in the first quarter of 2024, reflecting ongoing challenges in the office real estate sector. The company’s strategic focus is shifting towards Dedicated Use Assets (DUA) to enhance long-term growth prospects. Additionally, Orion’s management has projected Core FFO for 2025 to be between $0.61 and $0.70 per diluted share. The company has also been active in asset sales, closing the sale of three vacant properties for a total of $19.1 million. Analysts from Citizens Bank highlighted that Orion’s recent property sales include both vacant and occupied assets. The company continues to explore potential sales and redevelopments, including former Walgreens assets expected to be converted into retail and entertainment spaces by 2026.

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