OFC Gains on Colorado Springs Market Exit

Zacks

Corporate Office Properties Trust (OFC) – the real estate investment trust (:REIT) – has exited the Colorado Springs market. This was achieved through a secured loan settlement and recent disposition of 15 assets. Reflecting positive sentiment following the announcement of the news on Dec 27, the shares moved north 0.95% during yesterday's regular trading session.

Transactions in Details

In particular, Corporate Office Properties transferred 14 operating assets (spanning 1.0 million square feet) as a part of the settlement of its secured loan of $146.5 million. Of the 14 assets, 5 were in Colorado Springs, Colo. and 9 in Linthicum, Md.    

Earlier this month, the company concluded the sale of 15 Colorado Springs-based operating assets. Altogether, the 20 disposed properties, spanning 1.6 million square feet, were sold for a total of $177 million.

The Impact

The resolving of loan would lead to estimated non-cash accounting gain of around $67 million or 74 cents per share in fourth-quarter 2013. Consequently, the company raised its guidance for fourth-quarter and full-year 2013 FFO per share to $1.21–$1.23 and $2.39–$2.41, respectively from 47–49 cents and $1.65–$1.67, respectively.

Nevertheless, Corporate Office Properties reiterated its adjusted FFO per share guidance for fourth-quarter and full-year 2013 in the range of 47–49 cents and $1.96–$1.98, respectively.

In Conclusion

The efficient debt management effort through transfer of non-core assets is appreciable and depicts the flexible business model of Corporate Office Properties. We believe that these moves will provide the company the opportunity to divert its resources to support its growth needs, going forward.

Of late, many REITs are revamping their portfolio to shift focus on higher growth markets. Highwoods Properties Inc. (HIW) recently disclosed the disposition of 8 assets in the Greenville market, with the divestiture of one remaining property by early 2014, to exit this market. Another REIT, Kimco Realty Corporation (KIM) has been divesting assets from time to time to narrow down its exposure to the Mexican assets.

Currently, Corporate Office Properties carries a Zacks Rank #3 (Hold). A better-ranked stock in the REIT-Equity Trust – Other sector includes First Industrial Realty Trust Inc. (FR) carrying a Zacks Rank #2 (Buy).

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Read the Full Research Report on OFC


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