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In a dramatic turn for the U.S. office real estate sector, Office Properties Income Trust (OPI), a Massachusetts-based real estate investment trust managing 124 office properties nationwide, filed for Chapter 11 bankruptcy protection late Thursday in a Texas court. The company disclosed over $1 billion in debt and unveiled a sweeping equity swap agreement with its senior noteholders.

The Friday announcement detailed that OPI’s restructuring plan hinges on converting approximately $1 billion in notes into equity, effectively handing partial ownership of the company to its creditors in a bid to stabilize finances and reposition for long-term recovery.

$125 Million Lifeline and a Promise of Stability

Despite the bankruptcy filing, CEO Yael Duffy struck an optimistic tone, assuring investors and tenants that operations will continue without interruption.

“We expect no disruptions to our business or properties during the proceedings and anticipate OPI will emerge more stable, financially flexible, and strategically stronger,” Duffy said in the statement.

Backing the restructuring, the noteholders have agreed to infuse $125 million in new-money debtor-in-possession (DIP) financing — a vital injection that will sustain OPI’s day-to-day operations during its reorganization.

Massive Real Estate Footprint Under Protection

The company’s sprawling portfolio includes 124 properties across 29 states and the District of Columbia, totaling 17.2 million square feet of rentable office space. The Chapter 11 petition lists the REIT’s assets and liabilities between $1 billion and $10 billion, placing it among the largest commercial real estate restructurings of the year.

The bankruptcy underscores the mounting challenges facing the office property sector, as rising interest rates, remote work trends, and declining occupancy continue to strain landlords nationwide.

Legal and Financial Advisors Step In

To navigate the complex restructuring, OPI has tapped Moelis & Co. as its investment banker and AlixPartners as its restructuring advisor. The debtor is represented by Timothy A. Davidson II of Hunton Andrews Kurth LLP, a seasoned bankruptcy attorney known for steering large-scale corporate reorganizations.

A Battle for Reinvention in a Shifting Market

With its court-supervised restructuring now underway, OPI is betting that its noteholder-backed equity conversion and fresh financing package will allow it to weather the storm that has rocked commercial real estate since the pandemic.

If successful, the move could transform OPI from a debt-burdened landlord into a leaner, equity-driven REIT ready to adapt to a new era of office space demand — a high-stakes gamble that could redefine its future or mark another casualty in the industry’s ongoing reset.