Earnings call transcript Q2 2023

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Operator

Greetings. Welcome to Orion Office REIT's Second Quarter 2023 Earnings Call.

As a reminder, this conference is being recorded.

I would now like to turn the call over to, Paul Hughes, General Counsel for Orion. Thank you, Mr. Hughes.

begin. may You

Paul Hughes

posted Difficulty]. morning, These Investor for the on Good calendar current certain of to its in SEC earnings and [Technical Orion our its are uncertainties include materially site that are I Commission statements, released XX-Q XXXX expectations Web year well our onlreit.com. to Thank These at of our site. quarter everyone. as differ a Form release everyone the XX-Q to ended remind uncertainties to from and statements results and documents and Exchange and the for are which the could in filed like estimates. earnings June estimates financial discussed that supplement guidance with its company's the results filings. you. other available risks as Securities Yesterday, cause beliefs are its in number Section management's XX, based would Form and Web XXXX, subject actual risks and The company's

the place this not and forward-looking call. statements, made to undertakes forward-looking no on duty these should undue update during reliance any You company statements

of measure. conference comparable as non-GAAP core or directly certain be we today, financial measures, these financial Company's earnings FFO most non-GAAP FFO. core measures the GAAP include such Additionally, will reconciliation funds supplement the funds during a or call operations operations to from discussing and from and release

Day, Officer; company's Chief for joining the is Q&A today Our intended Chief Gary Operating presented McDowell, Landriau, the Chris financial Executive the with information the Investment the GAAP. Chief Paul Officer. Financial accordance And isolation Officer; presentation be our Officer. for are of us substitute information company's Gavin a or this is not call as and in to session in our considered Hosting and Chief Brandon,

going to call am turn over I McDowell. Paul With Paul? the that, now to

Paul McDowell

our continued On will our call. Office team, want REIT’s behalf for acceleration for I to on operations rest our of focused to I pace of Realty inherited earnings and continuing financial second Orion's our an all will are the this the our our The few and access but will appreciate more morning, thank quarter strategy to market extend in the position momentum. over update of revolver discuss properties. XXXX highlight secured outlook amendment financing that an for most and proactive With in loan our a and in utilization our on sustained And was us timing, our building average portfolio our that call remain allowed structure quarter business us for Orion welcome since to credit term, form and our midst gives then We lease in provide second and economic and liquidity to schedule, performance term of from the welcome that company ultimately a and provide today. flows on amendment of news we retain we to plan you of important into to office improvement well quarter in in we tight necessary office in us environment year. by to support strategy. significant and results for At difficult. we that everyone. Good business the in to lenders commercial mind, executing our incentives Gavin cannot XXXX. allowances executing steps ahead us challenging joining the turn the I to our an the progress details extend to the the close estate take continued certainly and would the real But to all backdrop from sector control leasing portfolio's term XXXX Income. spinoff the to support retired we the agreement, for the for properties Orion portfolio Orion, specifically continued loan grow. the of successfully which office credit we produce capital core our reinforce of cash tenants investments remains reposition the Gavin weighted ability and to lease on

that in in and located will high remain portfolio confident We a well growth but properties contribute will to take it quality time. the diversified steadfast markets of future, owning our

We maturities properties than of sell to XX across years seek cycles extend, pending across we continue to re-lease more vacancy teams’ lease or leverage with as or our experience multiple portfolio. economic our

capital, quarter XX.X% predominantly or that long of At thoughtful and stabilize properties decisions are We to XX properties return in comprising we which properties the net recycle and leased feet believe and greatest that best tenants. by cost the will either of properties our The capital the to portfolio were continue provide strategy. unconsolidated occupied. credit portfolio quickly as with venture our rising the our allocation align not determining of capital time. required use with through properties double worthy do reposition be the million to With is square term that over end, joint we capital owned six appropriate to the triple X.X existing still sale are

from XX, as a percentage investment base As June June of grade, up XXXX, annualized as of were XXXX. XX.X% XX.X% rent, of XX,

and of strong diversified tenant, industry geography. is assets Our portfolio well tenant by

respectively. of United derived markets. from Government by is tenant tenant Over of largest Sunbelt government, base annualized XX.X% and largest rent annualized are healthcare our States XX% is base XX.X% our rent industries the two and representing base and Our annualized rent

of and represents rent Jersey, markets annualized base largest New which Texas respectively. XX.X% are state and by Our XX.X%

efforts some being the increasingly show a for these has enforce initiatives we data corporations yet to While to the successful. as heard by have and employees, many of mandate large broadly office return to

see begun appreciable of while of in portfolio. yet vacant result, our leasing a in acceleration have to As an interest we good, activity is not tenant some properties our

for over catalyst return demand a will sustained office of changing these a be time for space. believe more we However, attitudes

Additionally, will as gains continue utilization are and practices to evolve office the traction, office space as even industry hybrid adapts. to not return away work going

result, As sector tenants will future. that square office continue trend seeking on the less office likely a renewal, the foreseeable is some for seeing a footage

of renewals Nonetheless, the discussed As and making proactive remains quarter, we on lengthened. signing the remain slow pace has front. we early last tenant the decision leasing process

one renewed California for year we quarter, Redding, square our the the X,XXX three and with in lease square new US multi-tenant in feet During a five foot lease XX,XXX for signed years at government property spreads period granular given significant during about nature the were the portfolio. the the any quarter Woodlands, though, there variability we in of leasing given very on Texas. X%, caution second spreads will Overall be

some was as of second remain of stages in momentum muted and square decent leasing of XXX,XXX our and negotiation discussions quarter, have properties renewals over in feet. mentioned, we for we leases and While various activity the new at I

leases and size of timing portfolio, tenant of on retention volatile the needs be Given and the tenants’ our timing will also depending decisions. of the quarter-over-quarter,

weighted was X.X average quarter end. term lease Our years at portfolio's

price one underwriting. noncore We million of we aggressive at vacant $X.X the square dispositions. maximized to we sales closed a sale a Turning of price foot where to identified maintained the relative end, dispose value have per our after of property for assets quarter gross Shortly our stance of vacant $XX. believe we to and

number million it’s contract term of and selling of with maximize progress building operating negatively price but earning was the sale of XXXX. ended modest for noncore short in Campus drag is said, sold sale other with smaller a This quarter an the six lease. given one That now our towards quarter seven risk. grow in operating that and after are to ability buyer properties, as portion includes earnings, the close the does which in which property previously in the vacant We sales portfolio. properties under right reduces aggregate pressure impact has properties the eight size. have expenses early towards know for approach of particularly environment the discussed. negotiating deposit the vacant steadily expense The at continues this long the the actively marketing also $XX end moving Illinois, the for assets of or purchase been redevelopment Vacant a of We to properties overall Walgreens price we our and it its term anticipated value in future, to plans has gross so

remains look sustain Orion's We pursuing term to remain direction we towards our noncore off vacant about Our retain beyond today's are tenants, us flow. clear, portfolio to space core dispose our optimistic long and shareholders. prospects and for and dedicated value cash to and term long position fill growing challenges assets

call now to over Gavin. With will that, I the Gavin? turn

Gavin Brandon

per first of This quarter benefited compared prior to or share in Adjusted XXXX. in versus by million second of quarter, $X.X from the year-to-date benefit million the expense to million $X.XX a per or reported of quarter $XX.X per in in share second XXXX million to $X.XX reimbursement, million was second as million $X.XX vacancies reported quarter. per Core changes net loss for EBITDA to of results Thanks, loss of discussing the The disposition compared $X.XX thus $XX.X timing $X.XX G&A funds XXXX. million as We quarter $XX.X year Orion's compared quarter the to quarter of that a Paul. revenues properties. primarily we when incurred per total operations GAAP the was I was to related or generated of as $XX.X or the by $XX.X start Due XXXX. offset of the share million reserved by the We XXXX. in full in share of was the having in of the year-over-year the reimbursement to $XX.X in we million our an and $XX $X.XX same stockholders share quarter the no common impact. are quarter. expense attributable results same million compared for received the will $XX.X against net or year. is same $X.X

and comparisons. the or related and the second income, $X.X from based to this the company's improvements $X.X leasing compensation year-over-year the expiration with $XX,XXX. quarter optimal quarter associated activity million property including million compared $X.X As XXXX we stock commissions additional leasing discussed expense in realty an year CapEx of XXXX an additional have XXXX, was headcount of million spin will achievement of calls, of prior subsidies the impact expense on of during

reminder, will a will and when rollover leases upon likely CapEx time completed improvement work on and over new As as properties. draw signed and increase allowances. is leases dependent tenants be are timing existing on tenant CapEx

XX, $XX.X quarter Turning liquidity on million $XXX.X fixed Net our X.XX%. of debt in sheet. XXX% $XXX.X million, revolving to of is and the of or joint We debt including XX, November case was of and swapped credit Orion’s debt. available revolving fixed venture weighted million venture. end Street $XXX our cash ended cash available average had Arch of of annualized EBITDA the rate the at $XXX and XXXX consisting in from credit capacity times facility of million the at our the total mortgage joint X.XX share revolving the and and million equivalents, in until cash debt adjusted the million XXXX interest with of on the We was balance rate outstanding to Street case credit facility. May until quarter the facility $XXX Arch rate

term intention provides to an amendment which us to agreement. option facility revolving amendment November May borrowings repay loan, the with terms business dislocated, amendment, $XXX flexibility of balance is November our estate on liquidity on plan. The extend of customary the mentioned, the this significant closed it in future, our retire the our real scheduled million commitments mature used of leasing financial market is on of XXXX. to including year. in Because our XXXX the extension the we to from successfully financing for expected and maintain company an Under the XX Paul and execute option was also future our necessary credit for to the given revolving capital additional months an sheet our The the for foreseeable this credit remains efforts fee. to the conditions, from credit of office facility As to extension payment subject assets

on as Orion's record XX, be XXXX quarterly a dividend Board on $X.XX stockholders of paid per to Directors for XXXX. the XX, quarter cash of of third to September declared October XXXX share

expected G&A to million to diluted FFO, $X.XX million, from We to million. full per updating per to now up for is our and XXXX core now are to FFO Core from our $X.XX anticipated range range million year G&A share. $XX.XX $XX.XX expectations is to for from adjusted $XX.XX debt net $X.XX from diluted to guidance EBITDA. down share, $X.XX $XX.XX

of to adjusted quarterly X.X years of year, by from to in property cash the We creating sales line the financial debt sequential for executing excited plan our while during not term the us reductions business down note, effectively we given and X.X now through near the year. earnings reach With our our open operations company's X position we the rest long the we'll move strong expect range guidance, questions. expected share and One in supported we about to vacancies that, should as on value core do objectives. FFO from enable lease to net and remain scheduled on focused Operator? to times ahead. have times, The and a and EBITDA additional from per is times. times basis X.X Lastly, provide amount the quarterly to

Operator

from Instructions] JMP Mitch of Securities. question with line Germain [Operator And first comes the the

Unidentified Analyst

Judy is Mitch. from This on

could The light here, ‘XX, in cetera? of maybe it first the tenant geography, lease for you et on one some looks terms shed ‘XX, just quality, what expiration like

Paul McDowell

couple few neither of the coming Experian on Illinois, which got year. this far We've in and expires we The big in primarily got tenants lease a property expirations one One of so Deerfield, in has Kansas up. -- a then one Illinois, have X/XX, which those Schaumburg, and renewed. a X/XX few Lawrence, expires on is Walgreens campus we've

due I next ABR we've of about expirations. think, A in of of working renew obviously but Next will year. it -- likely that advance coming year or won't through XX% portion about XX% our got a renew portion way actually XX% of still it's maybe, those total that our

Unidentified Analyst

the my so answering out, one was that Walgreens of on And that. for questions move thanks

shorter did trend in the So year it a when we government the right GSA it you're past? how this seeing is quarter, renewal. taking now five was leased during it leases or a Is saw the that is just

Paul McDowell

negotiation one's that been extensions. tried generally what In much agency, property have they as will nine been renewal a likely year, just that property in time execute an to The the quarter Well with or GSA lease case on hence or lease shorter few to from this rather, to expect interim with year the actually little that is the be will have think executing on extensions which this the lease past the years I extension. two. us from GSA, a a we probably time our a the expectation they average that Judy. years eight longer longer step lease of occupied execute year transfer we some the really has in to successful renewed lease unusual, five But them or extension, that's term

Unidentified Analyst

me. for one last The

assets What JV? maturities maybe offensive and but on in deal done, the congratulations buying on the down with thoughts that the further Firstly, getting perhaps Arch line. Street's up growing view debt now perspective and rear it's like the are and stepping hopefully are on your discuss

Paul McDowell

perspective, a about line of have Since $XX refinance we've capital. credit, off revolver. we on outstanding buying balances we the million paid recycled a lot no assets down Yes, had we of of our When debt. from spun we

We have the $XX and of disposition beginning part and have next of cash some scheduled we year later million of the year. additional this at

depending assets see compared upon other as market or consider down recycling into our paying capital. the opportunities and there uses some where will of capital of new we debt that So we to

on balance to venture, that Arch will the but said coming the with continues, periods into go the prepared existing think Arch will recycling respect With some actually capital still remarks, the most into capital Street. in that we As to we we sheet. that Street assets intent are consider we joint our we portfolio, utilize back in of active

for to are We opportunities that continuing look acquisition at JV. potential

of is One market that impediments the pretty to challenging. the remains financing

we to can are accretive sure a trying we perspective. that from is So in extent to that a JV, financing the additional make assets add we to that do manner so that,

Operator

for Ladies comments. back closing question-and-answer the Paul floor session. to any McDowell over would and like the to gentlemen, concludes I that turn

Paul McDowell

for results after this And Thank all updating are published. forward us you we to you QX our look joining quarter.

Operator

conclude gentlemen, does and Ladies today's this teleconference.

you lines this Thank You your time. at participation, may a day. disconnect and great for your have

Paul Hughes	General Counsel
Paul McDowell	Chief Executive Officer
Gavin Brandon	Chief Financial Officer
Gary Landriau	Chief Investment Officer
Chris Day	Chief Operating Officer

Orion Office REIT (ONL) 10 Aug 232023 Q2 Earnings call transcript