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The Trump administration’s “broad-based and unpredictable” plans to slash the federal government’s office footprint add a new element of uncertainty to the finances of a Newton-based office REIT.
Office Properties Income Trusts’ largest tenant is the federal government, comprising 17 percent of its annualized rental income in 2024.
The Elon Musk-led Department of Government Efficiency is targeting federal office leases for cuts as the new administration reshapes the federal government’s real estate footprint.
During a call last week to discuss OPI’s fourth quarter earnings, executives noted growing risk tied to DOGE’s real estate cuts. Agency tenants with “mission critical” status including the Secret Service, Veterans Affairs, Department of Justice and Social Security Administration could be spared cuts, but uncertainty is weighing over the fast-moving process.
“The essential nature of the work these agencies do and their need to physically occupy our properties has historically provided OPI with stable cash flows, although the Department of Government Efficiency’s efforts are broad-based and unpredictable,” OPI President Yael Duffy said.
Federal properties managed by the General Services Administration total 2.4 million square feet and account for approximately $70 million of annual revenues. Included within that figure is $10.5 million from leases that the federal government can terminate without penalty, OPI executives noted during a discussion of the company’s fourth quarter earnings.
The administration already has supposedly canceled 22 leases, as claimed in a recent post by DOGE on social media.
OPI owns 128 properties totaling nearly 18 million square feet of office space. OPI’s concentration of properties in the Washington, D.C. area was cited as a risk factor in its fourth quarter report. Approximately 25 percent of its annualized rental income comes from properties in the metro area, and the vacancy rate on its Washington, D.C. area portfolio is nearly 33 percent.
Among other risk disclosures listed in the fourth quarter report, OPI noted that 9.9 percent of its leases are scheduled to expire this year. The portfolio-wide weighted average remaining lease term is 7.4 years.
OPI is one of five publicly traded REITs managed by The RMR Group of Newton.
Additionally, the Trump administration has ordered the GSA to review all federally-owned real estate as it prepares to sell more than 500 buildings occupied by federal agencies, Wired reported.
According to a list obtained by Wired, properties identified as “non-core assets” include the John F. Kennedy Building in Boston’s Government Center. The Walter Gropius-designed office tower was completed in 1966 and totals 853,000 square feet.
