OPI - Earnings call transcript Q4 2018 | Office Properties Income Trust

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Operator

Good morning. And welcome to the Office Properties Income Trust Fourth Quarter 2018 Financial Results Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Olivia Snyder, Manager of Investor Relations. Please go ahead.

Olivia Snyder

morning, good and you, everyone. Thank us Thanks for joining today. OPI's me Chief Executive Chief the Financial are on call President Officer, and Jeff and Treasurer, With Officer Leer. David Blackman; and moment, fourth quarter XXXX. our a In details of will performance the our about just for business they and provide

We then call questions. to will your the open

conference to statements that company. recording prohibited statements forward-looking written call. revision project. These the of the and the to I the Litigation undertakes the in no and without of on XXXX, today's First, actual any expectations and Private prior results forward-looking note XXXX Reform would or made today's retransmission results note call that conference meaning of obligation Act may today's Also of like laws. to within The as and company is revise from the contains beliefs publicly we conference of are call differ Securities release securities other the consent Thursday, that XX, based today, statements February materially forward-looking OPI's those of

website. website, not in statements. or factors upon can Additional contained differences be is SEC, Securities filings from forward-looking Commission, with cause to the accessed place our those undue concerning that and SEC's which cautioned could the Exchange information Investors any our are or opireit.com, reliance

be A operations, NOI. we data David. cash call will will And basis FFO, normalized supplemental, in package, calculate turn or and net website. from to of the call, this also distribution, available can now or our income cash-based on figures funds cash our to the addition, CAD, In and operating available normalized be or for discussing during found these I non-GAAP components including financial are and over which operating to net income, non-GAAP numbers reconciliation

David Blackman

to Select culmination Good for Olivia. first On Welcome to OPI Trust of results. our Income Government the you, and which and the before merger of morning. of overview call is Office recycling Properties Income an program Income REIT. Properties the provide will an earnings I turning Trust, capital call between the Leer on financial an call, today's provide Jeff overview update to over Thank

operating begin, day the results. quarter, To had to results this, merger balance like the pro X due fourth closing business reflect would as GOV's closed instead last supplemental I the package. provided highlight help of and on October rectify sheet to the in XX consolidated of on forma a we December quarter merger only Before earnings if I release disclosure but combined that our results

to for and sales capital operating ongoing differ strategy will recycle properties, companies. age our the for our lease plan requirements. shape be average but actively our through leverage and our OPI remaining term to from strategies stand-alone doing weighted we to GOV of at the OPI, so, expect average reduce portfolio. reduce One manage asset to operating difference In Our SIR to increase material as capital will first future

should debt. to and lease average U.S. creating reduced our and lengthening growth of concentration is remaining by floating lowering risk we greater our reducing of flow ongoing create and well-covered OPI and maintaining have with a strategy OPI diversification. impact focus foster this These expiration Entering and a OPI's the believe tenants, Another broader increasing which renewing at will the expected to accretion two company long-term first-generation are have leasing contribute cash more will likelihood We acquisition buildings. well-laddered term, lease strategy weighted tenants a a investment favoring scale occupancy be shift XXXX, on geographic schedule a has believe government rate to to to increase capital. strategies reduce leases, increased exposure of We diversification, positive on dividend. our

paid XXX buildings trustees, building years. term independent rent a of pre-merger, also XX, is for more have square trustees largest size no December trustees XX.X% We tenant, increased other in were and investment-grade rent. and our consisted tenant rated million On board, the X.X XX% the XX%. with X.X% portfolio the reduction an annualized two our government the of number is independent number for our OPI's by to containing percentages tenants, is which of than feet tenants to believe of total of sector. female highest of of XXXX, XX.X% of U.S. XX REIT which The annualized adding XX.X and of increases age a of is years accounting office the rent. XX.X% paid we rated approximately average weighted one average This investment-grade that XX% rent remaining accounts from lease by annualized occupied of

We build-to-suit high remaining of acquisitions is will and evaluation to or the minimum tenants a capital. is include the seven meaningful will corporate leased invested include end and strong growth of strategic both the how at have that lease from on leases expiring to properties building the tenants also Key properties for leased on Single-tenant XXXX to OPI's tenant will a property of of rent strategic tenant's have the have government and leased also include buildings business, single-tenant the quality through entities. that the of properties pre-merger credit acquiring that the multi-tenant fundamentals mission end will focus tenants properties percentage will properties focusing annualized multi-tenant high have focus of a to to investment include strategy XX.X% support will headquarters, office to XX% single-tenant and reduced government security to location. years. economic Properties needs on and agencies building's markets and criteria like quarter. single buildings term where

and acquire We primarily compared are renewing expected older ongoing high to be buildings. reasonably expect capital is a relatively the to where where buildings to first-generation place of there tenant in probability needs modest

Turning recycling. to our capital

capital an to key recycling initially program capital shape requirements. metrics have of ongoing reduce addition portfolio manage to million and leverage, to our $XXX ongoing to to In $XXX we selling million annually to properties plan

are disposition This of of will of X.X properties than various Today, capital we remain to proceeds, buildings the our the acquisition. This under OPI of flexibility. opportunities to approximately finance second gross a are to completion we our second summary, company $XXX sold associated these permanently shape that re-enter properties position with $XXX.X announcing we will plan since of with feet company quarter the the program. in the recently recycling approximately proceeds we merger, square of earnings. the our in for of and greater market portfolio quarter we the fourth OPI gross stronger buildings the balance million substantially OPI As Trust on announced we selling are before of for properties this sale the of the sell XX $XXX believe in million XXXX with Potomac disposition while a aggregate, to gross finance and Two confident the financial as sale D.C. Considering acquisition plan stages marketing. in reminder, of scale available excited $XX comfortably million. in the completed that has to completing agreement In are progress a permanently aggregate, with XXXX. In continuing to half plan million In the buildings of about the of acquisition a million First complete SIR. proceeds. buildings more generate in XX disposition market the Realty will metro in merger these

I overview of growth provide We XXXX. to results. returning the an and also forward to to capital financial on in second of our look the turn executing will to half call over recycling plan now Jeff

Jeffrey Leer

David. accordance consolidated accepted of to in are acquired principles, and assumed with of SIR December XX, you, U.S. in XX, generally included as reiterate begin, accounting the Thank the the SIR to assets in I GOV on the merger due sheet closing just XXXX, December To balance XXXX. and OPI's want liabilities that from merger

However, of nonrecurring loss the from management were costs non-cash $XX.X the QX; by all on previously non-cash were impacted offset GOV's partially an a quarter certain in SIR OPI's to are results from historical and OPI's million. Inc.; shares loss fourth were of related investment expense financial with items of periods. related incentive income RMR by which SIR's underlying The excluded of items, million results transaction $XX.X of consolidated for in fee accrued business OPI's $XX.X These million reversal actual the operations Group of merger. the associated sale million to: $XX

SIR includes business as the for the a remainder was As would've a the to been October $XX.X million occurred management as discussion merger subsequently funds fee result $X.XX results, covering pro plan forma December of of the timing incurred focus results incentive by by normalized quarter overall to OPI. operations XXXX, forma this the XX, per XXXX. million X, QX merger of paid I $XX.X and that XXXX if on Pro the and had from of share or impact

Our second in third and incentive accrued when are calculations fourth quarter normalized exclude included business determined. the FFO and amounts management the fees are first, quarter

to of higher the share million, the a or days basis fee Pro million pro consecutive basis, $XX.X been consolidated the by operating basis the price driven for for On SIR calculate basis an forma cash period. as legacy rents to the compared $XXX.X to highest average of used of cash primarily would've ending quarter. is approximately the As return the XX year, the a previous in same or the over period measurement closing forma which increase final same-property X.X% cash $XXX,XXX incentive would've fourth NOI day NOI, equated income, reminder, total been XXth which is the portfolio. price net

million business net improvements rate improvements $XX.X recurring expected was G&A within would've per tenant of which $XX $XX pro leasing is capital a attributable to to for the be forma million our $XX.X quarter. forma to of million million range related and building basis, Excluding expenditures been incentive On impact run management million, expense $XX.X and to pro costs. of a fees,

end, EBITDA quarter leasing-related we of obligations. million capital was adjusted $XX.X to times. debt have forma the X.X As approximately of Pro approximately unspent

from $XXX.X XXXX, our been sales would debt in However, EBITDA have debt to the including repayment closed when times. of asset the X.X million February adjusted that

As of obligations our in using to by debt rate X EBITDA to the and pay to to we portfolio, due X fixed between are half target ratio delever be times begin debt from to that target to strategy sales debt proceeds current our to floating off adjusted all second disposition XXXX. on execute by XXXX rate asset the expect achieve our we

we per with ability rate greater to our provide cash for financial is increase which in of available of As our to declared us prepared distribution expected concludes level a a that XX% $X.XX the January, a the time. Operator, is quarterly dividend and for XXXX, approximately expected reminder, dividend flexibility share. This over remarks.

call up the open to for questions. ready are We

Operator

question FBR. Thank you. first Please with ahead. Maher go [Operator The B. Instructions] Riley from comes Bryan

Bryan Maher

When Good recurring Yes. I the thinking $XX.X be morning, CapEx, it you and million, CapEx? full should entity What million guys. it to improvements. think $XX million mentioned we comes for relates as for tenant combined the year about with $XX.X to

David Blackman

I you square lease I what feet Bryan, $X.XX of would around during per million question. that X.X that's to per square average guess a And tell going square think expect foot. about we we capital to foot XXXX. is be good is the leasing space

Bryan Maher

Okay.

David Blackman

capital? building Jeff,

Jeffrey Leer

we million And in capital. approximately addition, capital, building to $XX have then in $XX of a million for range building

Bryan Maher

$XX million? say million to you $XX Did

Jeffrey Leer

Correct.

Bryan Maher

regular And portfolio? that recurring would for be the CapEx just

Jeffrey Leer

Correct.

Bryan Maher

Okay.

on moving you that rates reported. renewal to lease So your

had rents I To GOV? clear, was clear, that fourth that be SIR? think for just down to below prior Or was those for quarter. properties and GOV be Just like X.X% that was renewals it the

David Blackman

just Bryan, think renewal. GOV. lease one have was I we said, that That But with only

Jeffrey Leer

SIR.

David Blackman

it At small. SIR, and was

So it would have impact. material not a

Bryan Maher

really should renewal but XXXX, not out I'm look this magnitude-wise, give number, we to be about you want rates? and for as sure what And thinking and to you directionally lease

David Blackman

be leases will we think today. flat in leases to place compared roughly and both renewal that Well, new for XXXX

Bryan Maher

prepared a comments, press get exactly or the after Okay. number closer and million it I million then Great. $XXX $XXX what said sales, in like done of think I Is $XXX in the lastly, looking million. to you That's saw just sales? on release, I the million new with for. And $XXX was your you -

David Blackman

for The we expected expect million. XXXX, exceed to $XXX sales

Bryan Maher

of $XXX than XXXX, round capital pretty to the And look recycling, Okay. much current kind at XXXX the you dispositions. of half as of Is of to then this and we done correct? just be after $XXX million with other clear, million are back that sales,

David Blackman

is than leverage. Bryan, thing, right-size have that capital important the think fact expect I the XXXX Well, program. focus ongoing recycling to $XXX of on an our dispositions The to million for we will more

accretion CAD portfolio dispositions. through exercise a to opportunity becomes an it that, Beyond and shaping create

Bryan Maher

Right. to That's regular material what Is expect would term, but a no million, million I $XXX portfolio dispositions way the the it? in I near about $XXX million said. basis think After it's pretty or, other much $XXX acquisitions. on the that meaningful to

David Blackman

Yes.

in We half expect game to of be XXXX. in the second back the acquisition

So see in how we'll half looks second of the the market year. the

Bryan Maher

all Okay. Thanks. from me. That's

Operator

question next The Morgan Stanley. Please Instructions] [Operator from comes Gabalski Okay. Adam go ahead. with

Adam Gabalski

guys. million This you it's bit for wanted occupancy in about Adam what going assets? to guys mean trying Are stabilized I is to for this more Vikram. to talk Hey, dispositions. is planned going million $XXX on little dispositions a sense be to get once a completed? just to $XXX of the just I'm selling portfolio

David Blackman

at year tell occupancy. Adam. on a it's we Adam, Well, I good that would question, you we - and the I think is ended XX% what Well,

of XXXX, XX.X%. occupancy We quarter about in to fourth expect the be,

throughout it end year. vacant. are expect of reduce of a handful XX.X% by kind because to then that year occupancy of XX% large get that's the that The We under just the parcel the we it include vacant properties but selling than the is higher a land of to includes buildings average to

Adam Gabalski

Thank That's you. one just very helpful. it. then Got And more.

dividend you documents, in the outlined a guys merger moving ratio. the as payout XX% target far As forward, CAD

that gate? the that sort now way dividend is Just do see an with of the forward the out you target achievable set the portfolio of you've moving guys integrated, as

David Blackman

payout expect dividend around specifically for declared CAD XXXX. the was be We we what upon based in dividend Yes. January the ratio XX% set or - a we to

Adam Gabalski

you. Thank it. Got

Operator

concludes David no this to session. further our remarks. Seeing questions, conference for to the any I back Blackman turn like question-and-answer over closing would Okay.

David Blackman

And a couple activity to months. you. Thank quarter today. our Great. joining forward thank first you concludes us look for our you of We in updating That on call.

Operator

now you has attending conference for presentation. Thank today's The concluded.

You may now disconnect.

Office Properties Income Trust (OPI) 1 Mar 192018 Q4 Earnings call transcript