ONL - Could Orion Office Be in Trouble?
When net-lease giant Realty Income (NYSE: O) bought peer VEREIT , they both had office assets in their portfolio mix. However, Realty Income decided that, with more office assets, it could spin off these properties as a stand-alone company, and spun off Orion Office (NYSE: ONL) late last year. Orion's stock is down roughly 50% since Realty Income completed the spin off. And that's just the start of the story here.
Looking at Orion Office, it's hard not to think that this real estate investment trust (REIT) was basically stuffed with assets that Realty Income didn't want to own. Given the nature of office buildings, that actually makes a lot of sense. Offices are large, so it can be hard, costly, and time-consuming to replace tenants when they leave. Meanwhile, upgrading a building is expensive, and may be necessary to retain a current tenant or find a new one. Offices are pretty much the exact opposite of the retail properties (small, generic, and easy to sell or lease) that Realty Income favors.
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Could Orion Office Be in Trouble?