A real estate investment trust with a swath of Silicon Valley commercial properties has filed for Chapter 11 bankruptcy.
Office Properties Income Trust, managed by The RMR Group, entered an agreement with several senior secure noteholders to restructure and reduce approximately $1 billion in debt obligations, the Silicon Valley Business Journal reported.
The Newton, Massachusetts-based REIT and some of its subsidiaries filed Chapter 11 bankruptcy petitions in U.S. Bankruptcy Court for the Southern District of Texas.
By restructuring the debt, the REIT can improve its capital structure and shave down its debt service obligations. The process would convert about $1 billion of existing loans into equity, thereby increasing liquidity.
The move comes as the firm faces looming debt maturities. Nearly $280 million of debt is set to mature next year, and more than $771 million in debt is set to mature the following year. The REIT had about $90 million in available liquidity as of the second quarter, per its second-quarter earnings report.
The firm’s portfolio consists of 124 wholly owned properties. The sites in Silicon Valley include the Bayside Technology Park at 47131 Bayside Parkway in Fremont; 51, 77 and 145 Rio Robles Drive in San Jose; 2115 O’Nel Drive in San Jose; 245 and 2500 Walsh Avenue in Santa Clara; 3250 and 3260 Jay Street in Santa Clara; 350 West Java Drive in Sunnyvale; and 100 Redwood Shores Parkway in Redwood City.
The RMR Group will lease and maintain Office Properties Income Trust’s portfolio throughout the restructuring process. The REIT plans to keep its agreements with tenants, brokers and vendors.
Although the office market is bouncing back quickly amid demand from AI firms, the office distress story in Silicon Valley has been marked by foreclosures and discounted sales.
AllianceBernstein took over a Santa Clara office building this summer after landlord PCCP defaulted on a $21.7 million loan balance. Goodwill of Silicon Valley bought an empty office building in San Jose in January for just $85 per square foot.
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