Orion Properties has secured critical financial backing, led by an extension of its $355 million commercial mortgage-backed securities loan at a fixed interest rate just under 5% through at least 2029 — a favorable outcome in a troubled office market where defaults have become commonplace.
The deal, finalized Tuesday, extends a loan that had been set to mature in February 2027. The new terms push that deadline out two years, with borrower extension options stretching the maturity as far as August 2030. The fixed rate stays unchanged throughout.
This transaction avoids a potential default on the CMBS loan that could have triggered losses across a web of bondholders, servicers and investors.
The result is a deal that prioritizes a workout while the office sector navigates its way out of a prolonged period of distress.
Separately, Orion also closed a new $215 million revolving credit facility.
The 19 properties securing the CMBS loan recently received a sobering reappraisal. Morningstar Credit reported that the portfolio's value dropped 18%, falling from $556.8 million in 2021 to $455 million now. That erosion in value reflects the broader collapse in office demand that has hammered property owners since the pandemic normalized remote work.
The loan transferred to special servicing in December. By January, online reports hinted at a potential sale of the company itself, according to Morningstar. Against that backdrop, closing any extension deal represented a significant accomplishment. The lender extracted meaningful concessions to grant the extension.
Upon closing, Phoenix-based Orion made a $2.05 million partial prepayment of the loan's principal balance, according to a Securities and Exchange Commission filing. The company also deposited an additional $7.74 million into a newly established all-purpose reserve, bringing total reserves to about $45.4 million. Those funds will cover leasing costs, capital expenditures and any property operating expenses not covered by rental income.
The lender further tightened its grip on cash flows. Under the new terms, the lender sweeps all excess monthly cash from the properties after paying interest and operating expenses.
To exercise the first additional one-year extension, Orion must prepay $2.5 million of outstanding principal. The final six-month extension requires a $10 million prepayment.
Despite the concessions, Orion walked away with something increasingly difficult to find — time and a favorable fixed interest rate.
Paul McDowell, Orion's CEO and president, called the extension a strategic priority.
"Proactively addressing our near-term maturities has been a key priority," McDowell said in a statement. "The extension of the CMBS loan at a sub-5% fixed rate along with accompanying principal amortization will serve to reduce our previously expected interest rate expense in coming periods."
At the same time, Orion secured a new $215 million line of credit, backed by 28 properties, which runs through February 2029. The company negotiated a lower borrowing cost on the new line — cutting its interest rate margin by half a percentage point compared to its previous arrangement. Orion had already tapped $113 million of the available credit as of Thursday.
McDowell said the combined transactions "materially enhance" the company's capital structure and "eliminate near-term maturity risk."
Orion did not respond to a request for additional comment.