Financial Data and Key Metrics Changes - Orion generated total revenues of $38 million in the first quarter compared to $47.2 million in the same quarter of the prior year [17] - The company reported a net loss attributable to common stockholders of $9.4 million or $0.17 per share, an improvement from a net loss of $26.2 million or $0.47 per share in the first quarter of 2024 [17] - Core FFO for the quarter was $10.7 million or $0.19 per share, down from $20.4 million or $0.36 in the same quarter of 2024 [17] - Adjusted EBITDA was $17.4 million versus $26.7 million in the same quarter of 2024 [17] - G&A expenses in the first quarter were $4.9 million, consistent with the same quarter of 2024 [18] Business Line Data and Key Metrics Changes - The company completed over 450,000 square feet of leasing as of May 6, which includes both new and renewal transactions with a weighted average lease term of 7.4 years [5] - Initial rent spreads on renewal leases during the first quarter were down about 18%, while average ending rent spreads were up about 7% since the spin [7] - The operating property occupancy rate was 74.3% at quarter end, with a leased rate of 77.4% and a weighted average lease term of 5.2 years [7] Market Data and Key Metrics Changes - The company noted significant variability in leasing spreads quarter to quarter due to the smaller size of its portfolio [7] - The demand for dedicated use assets, which include medical, lab, R&D flex, and non-CBD government properties, is increasing, with approximately 32% of the portfolio by annualized base rent being dedicated use assets [10] Company Strategy and Development Direction - Orion is shifting its portfolio concentration away from traditional suburban office assets towards dedicated use assets, which are expected to provide more stable cash flows [9] - The company plans to continue monetizing non-core assets and redeploying capital to improve the quality of its remaining portfolio [9] - The strategy includes maintaining significant liquidity to support ongoing leasing efforts and capital expenditures [12][19] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the significant macroeconomic uncertainty affecting the broader markets and its impact on tenant retention [6] - The company anticipates that the next year or two will represent the low point for revenue and core FFO earnings, followed by accelerating growth into 2027 and beyond [13] - Management remains focused on investing in well-located properties within target markets and enhancing asset value through capital expenditures [13] Other Important Information - Orion's liquidity remains strong at $244.5 million, comprised of cash on hand and available balance on the revolver [12] - The company declared a quarterly cash dividend of $0.02 per share for the second quarter of 2025 [20] Q&A Session Summary Question: What is the tone of discussions with prospects and is there a lengthening of the deal pipeline for leases? - Management noted that decision-making periods for tenants have been long since the market collapse, but no significant change has been observed recently [24] Question: Can you provide background on the recent property sales? - Management expressed satisfaction with the sales of vacant properties and indicated that they are testing the market for both vacant and occupied assets [26][28] Question: What is happening with the former Walgreens assets? - Management confirmed that they are under an agreement with an institutional group to market the site for retail and entertainment development, with demolition of existing buildings starting to reduce carrying costs [31][32]

Company Strategy & Portfolio - Orion Properties Inc is shifting its focus to properties with specialized use components, targeting sectors like government, medical, laboratory, R&D, and flex operations[7, 27] - The company aims to reduce exposure to traditional office properties and recycle capital into dedicated use assets[7, 23] - Orion is focused on key growth markets with strong fundamentals and demographic tailwinds[28] - The company seeks to build and maintain a sustainable investment-grade tenant base[30] Portfolio Highlights & Financials - As of March 31, 2025, Orion Properties Inc operated 68 properties with 8,037,000 rentable square feet and an occupancy rate of 74.3%[31] - The annualized base rent (ABR) was $14.95 per rentable square foot, totaling $120,121,000, with 72.3% from investment-grade tenants and a weighted average remaining lease term of 5.2 years[31] - The company had $227,800,000 in liquidity as of March 31, 2025, including $9,800,000 in cash and cash equivalents and $218,000,000 available on the credit facility revolver[57] Recent Activities - Orion completed 380,000 square feet of lease renewals and new leases during the first quarter of 2025, with a weighted average lease term of 6.7 years[57] - In April 2025, the company closed on the sale of three vacant properties for an aggregate gross sales price of $19,100,000[57] - As of May 7, 2025, agreements were in place to sell two operating properties for an aggregate gross sale price of $27,300,000[57]

[PART I - FINANCIAL INFORMATION](index=3&type=section&id=PART%20I) [Item 1. Unaudited Financial Statements](index=3&type=section&id=Item%201.%20Unaudited%20Financial%20Statements) Presents Orion Properties Inc.'s unaudited consolidated financial statements for Q1 2025 and 2024, covering balance sheets, operations, cash flows, and notes [Consolidated Balance Sheets](index=3&type=section&id=Orion%20Properties%20Inc.%20Consolidated%20Balance%20Sheets) Total assets decreased to $1.328 billion as of March 31, 2025, with liabilities increasing and equity decreasing Consolidated Balance Sheet Summary (in thousands) | Account | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | | :--- | :--- | :--- | | Total real estate investments, net | $1,095,910 | $1,104,546 | | Cash and cash equivalents | $9,384 | $15,600 | | **Total assets** | **$1,327,866** | **$1,336,422** | | Mortgages payable, net | $371,403 | $371,222 | | Credit facility revolver | $132,000 | $119,000 | | **Total liabilities** | **$573,070** | **$571,166** | | **Total equity** | **$754,796** | **$765,256** | [Consolidated Statements of Operations](index=4&type=section&id=Orion%20Properties%20Inc.%20Consolidated%20Statements%20of%20Operations) Net loss improved to $9.4 million in Q1 2025, primarily due to reduced impairment charges despite lower revenues Consolidated Statements of Operations Summary (in thousands, except per share data) | Metric | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | | :--- | :--- | :--- | | Total revenues | $38,001 | $47,197 | | Total operating expenses | $39,141 | $65,247 | | Impairments | $1,709 | $19,685 | | Net loss attributable to common stockholders | $(9,361) | $(26,232) | | Basic and diluted net loss per share | $(0.17) | $(0.47) | [Consolidated Statements of Cash Flows](index=7&type=section&id=Orion%20Properties%20Inc.%20Consolidated%20Statements%20of%20Cash%20Flows) Q1 2025 saw net cash used in operations of $2.2 million, a shift from Q1 2024, with increased investing and financing activities Consolidated Cash Flow Summary (in thousands) | Cash Flow Activity | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | $(2,247) | $11,022 | | Net cash used in investing activities | $(13,113) | $(3,751) | | Net cash provided by (used in) financing activities | $6,667 | $(5,826) | | **Net change in cash and cash equivalents** | **$(8,693)** | **$1,445** | [Notes to Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Orion%20Properties%20Inc.%20Consolidated%20Financial%20Statements) Detailed notes cover organization, accounting policies, real estate portfolio, debt, and leasing commitments, highlighting a strategic shift - Name changed to Orion Properties Inc., reflecting a strategic shift to **dedicated use assets** (government, medical, lab, flex)[18](index=18&type=chunk) - As of March 31, 2025, the company owned **68 operating properties** (7.8 million sq. ft.) and a **20% equity interest** in a 6-property joint venture[21](index=21&type=chunk) - Subsequent to quarter-end in April 2025, the company sold **three vacant properties** for a gross price of **$19.1 million**[44](index=44&type=chunk)[151](index=151&type=chunk) Debt Summary as of March 31, 2025 (in thousands) | Debt Instrument | Outstanding Balance (in thousands) | Maturity | | :--- | :--- | :--- | | Mortgages payable, net | $371,403 | 2027 & Thereafter | | Credit facility revolver | $132,000 | 2026 | | **Total Debt** | **$503,403** | | Estimated Outstanding Leasing Cost Commitments as of March 31, 2025 (in thousands) | Commitment Type | Amount (in thousands) | | :--- | :--- | | Tenant improvement allowances | $49,241 | | Reimbursable landlord work | $11,077 | | Non-reimbursable landlord work | $14,310 | | **Total** | **$74,628** | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=26&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses financial condition and operations, highlighting a strategic shift, tenant retention challenges, Q1 2025 revenue decrease, and reduced net loss [Overview and Strategy](index=27&type=section&id=Overview%20and%20Strategy) Orion Properties, an internally managed REIT, is strategically shifting its portfolio from traditional office to **dedicated use assets**, with 74.3% occupancy in Q1 2025 - The company is strategically shifting from traditional office properties to **dedicated use assets** (government, medical, lab, R&D, flex)[158](index=158&type=chunk)[168](index=168&type=chunk) - Key challenges include **tenant retention** (11.3% of ABR expiring in 2025), hybrid work impacts, and **indebtedness risks**[164](index=164&type=chunk)[167](index=167&type=chunk) [Portfolio and Operating Performance](index=32&type=section&id=Portfolio%20and%20Operating%20Performance) Q1 2025 portfolio occupancy was 74.3%, with total revenues of $38.0 million and Core FFO per diluted share at $0.19 Portfolio Metrics as of March 31, 2025 | Metric | Value | | :--- | :--- | | Rentable square feet (in thousands) | 8,037 | | Occupancy rate | 74.3% | | Leased rate | 77.4% | | Investment-grade tenants (by ABR) | 72.3% | | Weighted average remaining lease term (years) | 5.2 | Q1 2025 Leasing Activity | Metric | New Leases | Renewals | Total | | :--- | :--- | :--- | :--- | | Rentable square feet leased (in thousands) | 160 | 220 | 380 | | Weighted avg. rental rate change (cash, in percent) | N/A | (17.9)% | (17.9)% | | Weighted avg. lease term (years) | 10.0 | 4.3 | 6.7 | Key Financial Metrics (in thousands, except per share) | Metric | Q1 2025 (in thousands) | Q1 2024 (in thousands) | | :--- | :--- | :--- | | Total revenues | $38,001 | $47,197 | | Net loss attributable to common stockholders | $(9,361) | $(26,232) | | Core FFO attributable to common stockholders | $10,653 | $20,365 | | Core FFO per diluted share | $0.19 | $0.36 | [Results of Operations Analysis](index=35&type=section&id=Results%20of%20Operations%20Analysis) Q1 2025 rental revenue decreased by $9.2 million due to lease expirations, while operating expenses decreased by $26.1 million, primarily from reduced impairment charges - Rental revenue decreased by **$9.2 million** YoY, primarily due to **$7.1 million** from expired leases and a non-recurring **$2.7 million** reimbursement[209](index=209&type=chunk) - Depreciation and amortization expenses decreased by **$8.5 million** YoY as certain intangible assets related to expired leases became fully amortized[215](index=215&type=chunk) - Impairment charges dropped significantly to **$1.7 million** in Q1 2025 from **$19.7 million** in Q1 2024, driving the reduced net loss[216](index=216&type=chunk) [Liquidity and Capital Resources](index=38&type=section&id=Liquidity%20and%20Capital%20Resources) As of March 31, 2025, the company had **$9.4 million** cash, **$218.0 million** available credit, and **$505.0 million** total debt, maintaining covenant compliance - Primary liquidity sources include **$9.4 million** cash, cash from operations, dispositions, and **$218.0 million** borrowing capacity under the Revolving Facility[227](index=227&type=chunk) Consolidated Debt Summary as of March 31, 2025 (in thousands) | Debt Type | Principal Amount (in thousands) | Weighted Avg. Interest Rate (in percent) | Maturity | | :--- | :--- | :--- | :--- | | Credit facility revolver | $132,000 | 7.66% | 2026 | | Mortgages payable | $373,000 | 5.02% | 2027 & Thereafter | | **Total** | **$505,000** | | | - The company was in compliance with all financial covenants for its Revolving Facility as of March 31, 2025[248](index=248&type=chunk) - The Board authorized a **$50.0 million** share repurchase program, with **$45.0 million** remaining, though no shares were repurchased in Q1 2025[271](index=271&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=44&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk is interest rate risk from **$132.0 million** in variable-rate debt, partially mitigated by interest rate collars - The company's main market risk is interest rate risk from **$132.0 million** of variable-rate debt under the Revolving Facility[276](index=276&type=chunk)[279](index=279&type=chunk) - A **100 basis point increase** in variable interest rates would increase annual interest expense by approximately **$1.3 million**[279](index=279&type=chunk) - To manage interest rate risk, the company has interest rate collar agreements on a notional amount of **$60.0 million**, effective until May 12, 2025[280](index=280&type=chunk) [Item 4. Controls and Procedures](index=46&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls and procedures were effective as of March 31, 2025, with no material changes to internal control - The CEO and CFO concluded that disclosure controls and procedures were **effective** at a reasonable assurance level as of March 31, 2025[287](index=287&type=chunk) - No material changes occurred during the quarter affecting the company's internal control over financial reporting[288](index=288&type=chunk) [PART II - OTHER INFORMATION](index=47&type=section&id=PART%20II) [Item 1. Legal Proceedings](index=47&type=section&id=Item%201.%20Legal%20Proceedings) The company is not a party to any material pending legal proceedings as of the end of the quarter - As of March 31, 2025, the company is not involved in any **material pending legal proceedings**[290](index=290&type=chunk) [Item 1A. Risk Factors](index=47&type=section&id=Item%201A.%20Risk%20Factors) No material changes to risk factors, except for expanded discussion on risks from government tenants and potential lease impacts from DOGE and GSA initiatives - A key risk is government tenants reducing leased space due to initiatives like DOGE, aiming to shrink the federal real estate portfolio[292](index=292&type=chunk) - GSA could exercise termination options or not renew leases, with a recent suspension of funded obligations causing delays in negotiations and landlord work[292](index=292&type=chunk) [Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities](index=47&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%2C%20Use%20of%20Proceeds%2C%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company reported no unregistered sales or issuer purchases of equity securities during the period - The company did not conduct any unregistered sales or repurchase its own equity securities during Q1 2025[293](index=293&type=chunk)[295](index=295&type=chunk) [Item 5. Other Information](index=48&type=section&id=Item%205.%20Other%20Information) No directors or officers adopted or terminated Rule 10b5-1 trading arrangements during Q1 2025 - No directors or officers adopted or terminated a Rule 10b5-1 trading arrangement during the quarter[298](index=298&type=chunk)

Orion Properties Inc. Q1 2025 Results Announcement [Management Commentary](index=1&type=section&id=Management%20Commentary) Management emphasized strong leasing, strategic dispositions, and a portfolio shift to dedicated-use assets for stable cash flows - The company has achieved strong leasing of over **450,000 square feet** so far in 2025, with a robust pipeline of further transactions under discussion[2](index=2&type=chunk) - Since 2021, Orion has sold **22 vacant properties**, totaling **2.2 million square feet**, including three properties sold subsequent to the quarter's end[2](index=2&type=chunk) - The company is strategically focusing on increasing its portfolio concentration in dedicated-use assets like flex, laboratory, medical, and governmental properties to support long-term cash flow stability[2](index=2&type=chunk) Q1 2025 Operating and Financial Performance [Financial Highlights](index=1&type=section&id=Financial%20Highlights) Q1 2025 revenues decreased to $38.0 million, net loss improved to $(9.4) million, but Core FFO declined to $10.7 million ($0.19/share) Q1 2025 vs Q1 2024 Financial Results | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | **Total Revenues** | $38.0 million | $47.2 million | | **Net Loss (to common stockholders)** | $(9.4) million | $(26.2) million | | **Net Loss per Share** | $(0.17) | $(0.47) | | **Core FFO** | $10.7 million | $20.4 million | | **Core FFO per Diluted Share** | $0.19 | $0.36 | Key Financial Metrics for Q1 2025 | Metric | Value | | :--- | :--- | | **FFO** | $8.8 million ($0.16/share) | | **EBITDA** | $15.9 million | | **Adjusted EBITDA** | $17.4 million | | **Net Debt to Annualized YTD Adj. EBITDA** | 7.48x | [Leasing and Disposition Activity](index=1&type=section&id=Leasing%20and%20Disposition%20Activity) Q1 2025 leasing totaled 380,000 sq ft, with further post-quarter activity and significant property dispositions and pending sales Q1 2025 Leasing Transactions (in thousands sq ft) | Location | Type | Square Feet | Term | | :--- | :--- | :--- | :--- | | Buffalo, New York | New Lease | 160 | 10.0 years | | Denver, Colorado | Renewal | 145 | 2.0 years | | East Windsor, New Jersey | Renewal | 42 | 8.0 years | | Lincolnshire, Illinois | Renewal | 33 | 10.0 years | - Completed an additional **73,000 square feet** of leasing activity subsequent to quarter end, including a **15.7-year lease** for **46,000 square feet** in Parsippany, New Jersey[8](index=8&type=chunk) - In April 2025, the company sold three vacant properties (**287,000 sq ft**) for a gross sales price of **$19.1 million**[9](index=9&type=chunk) [Real Estate Portfolio](index=3&type=section&id=Real%20Estate%20Portfolio) The portfolio as of March 31, 2025, featured 68 operating properties at 74.3% occupancy, $120.1 million Annualized Base Rent, and a fully occupied JV portfolio Portfolio Snapshot (as of March 31, 2025) | Metric | Value | | :--- | :--- | | **Operating Properties** | 68 | | **Occupancy Rate** | 74.3% | | **Annualized Base Rent** | $120.1 million | | **% from Investment-Grade Tenants** | 72.3% | | **Weighted Avg. Remaining Lease Term** | 5.2 years | - The Arch Street Joint Venture portfolio of six properties was **100% occupied**, with a weighted average remaining lease term of **7.1 years**[11](index=11&type=chunk) [Arch Street Joint Venture](index=3&type=section&id=Arch%20Street%20Joint%20Venture) Orion provided an $8.3 million member loan to the Arch Street Joint Venture in February 2025, bringing the total receivable to $8.9 million at 15.0% annual interest - In February 2025, the Company made an **$8.3 million** member loan to the Arch Street Joint Venture to fund leasing costs[12](index=12&type=chunk) - The total member loan receivable from the joint venture was **$8.9 million** as of March 31, 2025, earning **15.0% annual interest**[12](index=12&type=chunk) [Balance Sheet and Liquidity](index=3&type=section&id=Balance%20Sheet%20and%20Liquidity) As of March 31, 2025, total debt was $531.2 million, with $227.8 million in liquidity, including $9.8 million cash and $218.0 million credit facility capacity Total Debt Composition (as of March 31, 2025) | Debt Instrument | Amount | | :--- | :--- | | CMBS Loan | $355.0 million | | Credit Facility Revolver | $132.0 million | | San Ramon Loan | $18.0 million | | Proportionate Share of JV Debt | $26.2 million | | **Total Debt** | **$531.2 million** | - Total liquidity as of March 31, 2025, was **$227.8 million**, consisting of **$9.8 million** in cash and cash equivalents and **$218.0 million** available on the credit facility revolver[14](index=14&type=chunk) Corporate Updates and Outlook [Dividend Declaration](index=3&type=section&id=Dividend) The Board of Directors declared a Q2 2025 quarterly cash dividend of $0.02 per share, payable July 15, 2025, to stockholders of record as of June 30, 2025 - The Board of Directors declared a Q2 2025 quarterly cash dividend of **$0.02 per share**[15](index=15&type=chunk) [2025 Outlook](index=4&type=section&id=2025%20Outlook) Orion Properties reaffirmed its 2025 full-year guidance, projecting Core FFO per share between $0.61 and $0.70, and Net Debt to Adjusted EBITDA between 8.0x and 8.8x Reaffirmed 2025 Full-Year Guidance | Metric | Low | High | | :--- | :--- | :--- | | **Core FFO per share** | $0.61 | $0.70 | | **General and Administrative Expenses** | $19.5 million | $20.5 million | | **Net Debt to Adjusted EBITDA** | 8.0x | 8.8x | Appendix: Financial Statements and Reconciliations [Consolidated Balance Sheets](index=12&type=section&id=Consolidated%20Balance%20Sheets) As of March 31, 2025, total assets were $1.328 billion, with total liabilities at $573.1 million and stockholders' equity at $753.5 million Key Balance Sheet Items (in thousands) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Total Assets** | $1,327,866 | $1,336,422 | | **Total Liabilities** | $573,070 | $571,166 | | **Total Stockholders' Equity** | $753,480 | $763,916 | [Consolidated Statements of Operations](index=13&type=section&id=Consolidated%20Statements%20of%20Operations) Q1 2025 total revenues were $38.0 million, with net loss attributable to common stockholders improving to $(9.4) million, or $(0.17) per share, due to lower impairment charges Consolidated Statements of Operations (in thousands, except per share data) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | **Total Revenues** | $38,001 | $47,197 | | **Total Operating Expenses** | $39,141 | $65,247 | | **Impairments** | $1,709 | $19,685 | | **Net Loss Attributable to Common Stockholders** | $(9,361) | $(26,232) | | **Net Loss Per Share (Basic and Diluted)** | $(0.17) | $(0.47) | [Reconciliation of FFO, Core FFO, and FAD](index=14&type=section&id=FFO%2C%20CORE%20FFO%20AND%20FAD) This section reconciles net loss to non-GAAP metrics, showing Q1 2025 FFO of $8.8 million, Core FFO of $10.7 million, and negative FAD of $(1.5) million, all declining year-over-year Reconciliation of Key Performance Metrics (in thousands) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | **Net Loss Attributable to Common Stockholders** | $(9,361) | $(26,232) | | **FFO Attributable to Common Stockholders** | $8,805 | $18,389 | | **Core FFO Attributable to Common Stockholders** | $10,653 | $20,365 | | **FAD Attributable to Common Stockholders** | $(1,475) | $16,035 | [Reconciliation of EBITDA, EBITDAre, and Adjusted EBITDA](index=15&type=section&id=EBITDA%2C%20EBITDAre%20AND%20ADJUSTED%20EBITDA) Q1 2025 EBITDA was $15.9 million, EBITDAre $17.6 million, and Adjusted EBITDA $17.4 million, with Adjusted EBITDA decreasing from Q1 2024 due to lower revenues EBITDA Reconciliation (in thousands) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | **Net Loss Attributable to Common Stockholders** | $(9,361) | $(26,232) | | **EBITDA** | $15,860 | $7,355 | | **EBITDAre** | $17,569 | $27,040 | | **Adjusted EBITDA** | $17,426 | $26,729 | [Financial and Operations Statistics and Ratios](index=16&type=section&id=FINANCIAL%20AND%20OPERATIONS%20STATISTICS%20AND%20RATIOS) Q1 2025 key financial ratios, including Interest Coverage (2.25x) and Fixed Charge Coverage (2.12x), declined from Q1 2024, with Net Debt at $521.4 million and Net Debt to Annualized Adjusted EBITDA at 7.48x Key Coverage Ratios | Ratio | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | **Interest Coverage Ratio** | 2.25x | 3.52x | | **Fixed Charge Coverage Ratio** | 2.12x | 3.52x | Key Leverage Ratios (as of March 31, 2025) | Ratio | Value | | :--- | :--- | | **Net Debt** | $521.4 million | | **Net Debt to Annualized Adj. EBITDA** | 7.48x | | **Net Debt Leverage Ratio** | 33.5% | | **Unencumbered Asset Ratio** | 58.4% | Appendix: Definitions and Important Disclosures [Definitions of Key Terms and Non-GAAP Measures](index=4&type=section&id=Non-GAAP%20Financial%20Measures%20and%20Definitions) This section defines non-GAAP financial measures like FFO, Core FFO, FAD, EBITDAre, and Adjusted EBITDA, along with key operational terms, clarifying their use and adjustments - The report includes non-GAAP financial measures such as FFO, Core FFO, FAD, EBITDAre, and Adjusted EBITDA to supplement GAAP results and provide a basis for comparison with other REITs[19](index=19&type=chunk)[37](index=37&type=chunk) - Definitions are provided for key operational and financial terms, including Annualized Base Rent, Occupancy Rate, Net Debt, and Weighted Average Remaining Lease Term, to clarify the metrics used in the report[23](index=23&type=chunk)[49](index=49&type=chunk)[52](index=52&type=chunk) [Forward-Looking Statements](index=10&type=section&id=Forward-Looking%20Statements) This section outlines risks and uncertainties for forward-looking statements, including rising interest rates, inflation, office oversupply, tenant credit risk, and remote work impacts - The report contains forward-looking statements regarding future events, financial conditions, and results of operations, which are based on current assumptions and subject to risks[59](index=59&type=chunk) - Identified risks include rising interest rates, inflation, oversupply of office space, tenant credit risk, and the continued impact of remote and hybrid work arrangements on office demand[60](index=60&type=chunk)

Portfolio Overview - Orion Properties operates 69 properties with 8,112,000 rentable square feet and an occupancy rate of 73.7%[31] - The portfolio's annualized base rent (ABR) is $1483 per rentable square foot, totaling $120,293,000[31] - Investment-grade tenancy accounts for 74.4% of the ABR, with a weighted average remaining lease term of 52 years[31] Tenant and Industry Diversification - The top 10 tenants comprise 53.9% of the ABR[36] - The largest tenant accounts for 16.3% of the ABR and has a credit rating of AA+[36] - Government & Public Services is the top industry, accounting for 16.8% of ABR[35] Geographic Diversification - Texas represents the largest geographic concentration, accounting for 16.5% of the ABR[40] - New Jersey accounts for 12.5% of the ABR[40] Balance Sheet and Liquidity - The company has $247,000,000 in liquidity, including $16,000,000 in cash and $231,000,000 available on the credit facility[57] - Total principal outstanding debt is $518,329,000 with a weighted average interest rate of 5.73%[52]

Financial Data and Key Metrics Changes - Orion Office REIT Inc. reported total revenues of $38.4 million in Q4 2024, down from $43.8 million in Q4 2023 [31] - The net loss attributable to common stockholders was $32.8 million or $0.59 per share, compared to a net loss of $16.2 million or $0.29 per share in the same quarter of the previous year [32] - Core FFO for Q4 was $10.2 million or $0.18 per share, down from $18.5 million or $0.33 per share in Q4 2023 [32] - For the full year, revenues were $164.9 million, with a net loss of $103 million or $1.84 per share, and core FFO of $56.8 million or $1.01 per share [33] Business Line Data and Key Metrics Changes - The company signed 287,000 square feet of new leases in 2024, significantly up from 21,000 square feet in 2023 [11] - Renewal rent spreads for 2024 leasing activity decreased by 6.6%, but renewal rent spreads on a GAAP basis showed a positive increase of just over 2% [12] - The weighted average lease term (WALT) increased to 5.2 years from 4 years year-over-year, indicating a stabilizing portfolio [11] Market Data and Key Metrics Changes - The overall market tone improved, reflected in the leasing performance which totaled approximately 1.1 million square feet, more than four times the leasing delivered in 2023 [8] - The company faced significant competition to retain and find new tenants in specific markets, impacting renewal rent spreads [12] Company Strategy and Development Direction - The company plans to shift focus from traditional office properties to dedicated use assets (DUA), which include medical, lab, R&D, and non-CBD government properties [16] - Approximately 32% of properties by annualized base rent are now dedicated use, with plans to increase this percentage over time through property sales and selective acquisitions [17] - The company is rebranding to Orion Properties to better reflect its current portfolio mix and strategic direction [17] Management's Comments on Operating Environment and Future Outlook - Management believes that 2025 and into 2026 will be the nadir of revenue and core FFO earnings declines, followed by growth starting in 2027 [14] - The company recognizes the need to maintain liquidity and expects to see rising debt levels, offset by anticipated earnings growth in the future [24] - Management remains cautiously optimistic about the impact of the new presidential administration on the GSA portfolio, as most properties are not in the immediate Washington, D.C. area [23] Other Important Information - The company will incur a restructuring charge in 2025 related to changes in G&A costs, with expected annualized savings of approximately $1 million following the retirement of the Chief Investment Officer [19][21] - The board of directors declared a quarterly cash dividend of $0.02 per share for Q1 2025, reflecting the strategic shift towards maintaining and growing existing tenancy [40] Q&A Session Summary Question: What gives you the confidence that 2026 is going to start a rebound? - Management cited intensive portfolio analysis and leasing trends, indicating stabilization and expected revenue growth in 2025 or 2026 [46][47] Question: Is the thought that over the next 36 months, you'll pursue significant asset sales? - Management confirmed the strategy to sell outdated office properties and replace them with dedicated use assets, aiming for a longer weighted average lease term [48][51] Question: What is happening with the joint venture and its capital situation? - Management reassured that they maintain a strong relationship with the joint venture partner and have structured a loan to mitigate risks associated with capital access [52][55] Question: Will the restructuring charge be included in G&A or smoothed out in the bottom line next year? - The restructuring charge will be added back into core FFO, smoothing its impact throughout the year [58]

Debt and Financial Obligations - The company has incurred debt under the Revolving Facility and the CMBS Loan, with a minimum debt yield test of 8.0% that must be satisfied to avoid cash flow diversion to the lender[79]. - As of September 30, 2024, the company satisfied the minimum debt yield test, but future compliance will depend on lease extensions and re-leasing pace[79]. - The company is dependent on external capital sources for significant investments in its portfolio, as cash flows from operations are insufficient to fund future capital needs[81]. - The company’s ability to pay dividends is limited by the credit agreement governing its Revolving Facility, which may negatively impact its REIT status[103]. - The company must maintain its REIT qualification by distributing at least 90% of its taxable income annually, or face significant tax consequences[116]. - The company is subject to a 4% non-deductible excise tax if it fails to distribute at least 85% of its ordinary income and 95% of its capital gain net income for the calendar year[117]. - The company intends to continue making distributions to stockholders to comply with tax requirements and reduce exposure to federal income taxes[118]. - Distributions may be made in cash and/or common stock, which could lead to stockholders selling shares to pay taxes, potentially putting downward pressure on the stock price[119]. - The company may face a 100% penalty tax on net income from prohibited transactions, which could limit its ability to engage in certain sales[120]. - The ability to pay dividends is limited by Maryland law, which may affect the market price of common stock if dividends cannot be paid[131]. - Future dividends will be at the discretion of the Board of Directors and may change based on various factors, potentially impacting stockholder interest[132]. Risks and Compliance - The company faces risks of increased expenses that may not decrease even if revenues decline, potentially adversely affecting financial condition[83]. - Property taxes may increase unexpectedly, impacting financial condition and cash flows, especially for vacant properties[84]. - Compliance with various regulatory requirements, including environmental laws, may incur significant costs and affect financial condition[87]. - The company is subject to risks associated with climate change, which could impact property demand and operating costs[90]. - Increased scrutiny regarding sustainability practices may lead to additional costs and affect investor interest and tenant retention[91]. - The company carries comprehensive insurance coverage on all properties, but may face uninsured losses from events like riots or acts of God, which could materially affect its financial condition[95]. - The company is exposed to risks from cyber-attacks and security breaches, which could lead to operational interruptions and increased costs, adversely impacting its business[96]. - The company faces risks related to deficiencies in its disclosure controls and procedures, which could harm its financial reporting and market confidence[99]. - Legislative changes affecting REITs could negatively impact the company and its investors, including changes to tax laws that may affect REIT qualification[121]. - The company has ownership limits in its charter to maintain REIT qualification, which may inhibit acquisition proposals and change of control[122]. Investment and Market Risks - Real estate investments are illiquid, limiting the company's ability to sell properties quickly or at favorable terms, which could adversely affect financial results[85]. - The market price of the company's common stock may fluctuate widely due to various factors, including changes in revenues or earnings estimates[106]. - Future offerings of debt or equity securities may adversely affect the per share trading price of common stock and dilute existing stockholders[130]. Interest Rate Management - The company manages interest rate risk through a combination of fixed and variable rate borrowings and may enter into interest rate hedge contracts[305]. - As of December 31, 2024, the company had fixed-rate debt with a fair value of $352.5 million and a carrying value of $373.0 million[306]. - A 100 basis point increase in market interest rates would decrease the fair value of the fixed-rate debt by $7.2 million, while a decrease would increase it by $7.5 million[306]. - The company had variable-rate debt with a fair value and carrying value of $119.0 million, which is subject to interest rate fluctuations[307]. - A 100 basis point change in variable interest rates would affect the fair value of the variable-rate debt by less than $0.1 million and increase or decrease annual interest expense by $1.2 million[307]. - The company has interest rate collar agreements on a total notional amount of $60.0 million to hedge against interest rate volatility[308]. - Outstanding derivative agreements had a fair value resulting in net liabilities of less than $0.1 million as of December 31, 2024[308]. Tenant and Credit Risk - Credit risk concentrations arise from tenants engaged in similar business activities or located in the same geographic region, which could impact cash flows[311]. - Factors determining tenant credit risk include payment history, credit status, and economic conditions in specific regions[312]. - The company believes credit risk is mitigated by a high-quality and diverse tenant base and consistent monitoring of the portfolio[312]. Management and Personnel - The company’s success is significantly dependent on retaining key personnel, such as its CEO, with potential adverse effects on operations if key employees leave[100]. - The company may amend its investment strategy without stockholder approval, which could increase exposure to various risks and adversely affect its financial condition[102]. - Failure to hedge effectively against interest rate changes may have a material adverse effect on the company's financial condition and results of operations[101]. - As of the filing date, the company qualifies as an "emerging growth company," allowing it to take advantage of certain reporting exemptions until December 31, 2026, after which compliance costs may increase[98].

Financial Performance - Total revenues for Q4 2024 were $38.4 million, down from $43.8 million in Q4 2023[7] - Net loss attributable to common stockholders for Q4 2024 was $(32.8) million, or $(0.59) per share, compared to $(16.2) million, or $(0.29) per share in Q4 2023[7] - Core FFO for Q4 2024 was $10.2 million, or $0.18 per diluted share, down from $18.5 million, or $0.33 per diluted share in Q4 2023[7] - For the full year 2024, total revenues were $164.9 million, compared to $195.0 million in 2023[8] - Total revenues for the year ended December 31, 2024, were $164,862, a decrease of 15.4% compared to $195,041 in 2023[79] - Net loss attributable to common stockholders for the year ended December 31, 2024, was $103,012, compared to a net loss of $57,302 in 2023, representing an increase of 79.8%[79] - Funds from Operations (FFO) attributable to common stockholders decreased to $7,642,000 in Q4 2024 from $16,447,000 in Q4 2023, a decline of 53.6%[84] - Core FFO attributable to common stockholders for Q4 2024 was $10,192,000, down from $18,499,000 in Q4 2023, reflecting a 44.9% decrease[84] - Adjusted EBITDA for Q4 2024 was $16,579,000, compared to $24,647,000 in Q4 2023, indicating a decline of 32.8%[84] - Full Year Adjusted EBITDA decreased from $118,542 million in 2023 to $82,849 million in 2024, a decline of about 30.2%[90] Leasing and Property Management - The company completed 1.1 million square feet of leasing in 2024, which is four times the leasing volume of 261,000 square feet in 2023[3] - The occupancy rate as of December 31, 2024, was 73.7%, with 74.4% of Annualized Base Rent derived from Investment-Grade Tenants[14] - The company acquired a 97,000 square foot property for $34.6 million in 2024, fully leased to a single tenant with a remaining term of 15 years[11] - The company sold two vacant properties in 2024 for a total gross sales price of $5.3 million[12] Financial Metrics and Ratios - The Company utilizes Adjusted EBITDA as a non-GAAP measure to evaluate operating performance, which excludes non-routine items and certain non-cash items[38] - Funds Available for Distribution (FAD) is defined as Core FFO modified to exclude capital expenditures and leasing costs, providing insight into the Company's ability to fund its dividend[41] - The Company calculates Net Debt as Adjusted Principal Outstanding minus cash and cash equivalents, which aids in assessing financial flexibility and capital structure[60] - The Net Debt Leverage Ratio equals Net Debt divided by Gross Real Estate Investments, providing a measure of leverage[61] - The Company reported a Fixed Charge Coverage Ratio, which is Adjusted EBITDA divided by the sum of Interest Expense and secured debt principal amortization, indicating its ability to meet fixed financing obligations[39] - The Company defines Cash NOI as total revenues less property operating expenses, excluding certain GAAP adjustments, providing a clearer view of property-level performance[62] - The Interest Coverage Ratio decreased to 2.13x in Q4 2024 from 3.35x in Q4 2023, indicating a decline in the company's ability to cover interest expenses[86] - Net Debt to Annualized Most Recent Quarter Adjusted EBITDA Ratio rose significantly from 4.82x in 2023 to 7.57x in 2024[90] - Net Debt to Full Year Adjusted EBITDA Ratio increased from 4.01x in 2023 to 6.06x in 2024[90] Expenses and Liabilities - Property operating expenses for the year ended December 31, 2024, increased to $65,151, up 7.3% from $60,783 in 2023[79] - The Company reported a net interest expense of $32,637 for the year ended December 31, 2024, compared to $29,669 in 2023, indicating an increase of 9.9%[79] - The Company experienced impairments totaling $47,552 for the year ended December 31, 2024, compared to $33,112 in 2023, an increase of 43.8%[79] - Total debt as reported increased to $490,222,000 as of December 31, 2024, from $468,856,000 in the previous year, marking a 4.5% rise[88] - Net Debt rose to $502,304,000 in Q4 2024, up from $475,209,000 in Q4 2023, an increase of 5.5%[88] Company Changes and Future Outlook - The Company changed its name from Orion Office REIT Inc. to Orion Properties Inc. on March 5, 2025, to reflect a broader investment strategy[31] - The Company anticipates potential risks from rising interest rates and inflation affecting future financial performance and operational costs[72] - The Company expects 2025 Core FFO per diluted share to range between $0.61 and $0.70[92] - General & Administrative Expenses are projected to be between $19.5 million and $20.5 million[95]

Financial Data and Key Metrics Changes - Revenues for Q3 2024 were $39.2 million, down from $49.1 million in Q3 2023 [33] - Net loss attributable to common stockholders was $10.2 million or $0.18 per share, compared to a loss of $16.5 million or $0.29 per share in the previous year [33] - Core funds from operations (FFO) decreased to $12 million or $0.21 per share from $24.1 million or $0.43 per share [33] - Adjusted EBITDA fell to $19.1 million from $30 million year-over-year [33] Business Line Data and Key Metrics Changes - The company signed four leases totaling 254,000 square feet during the quarter, with a weighted average lease term of 8.9 years [7] - Year-to-date leasing efforts resulted in over 830,000 square feet leased, more than three times the total for the entire year of 2023 [8] - Portfolio weighted average lease term (WALT) increased to five years from 3.9 years year-over-year [8] Market Data and Key Metrics Changes - Net office absorption turned positive in Q2 2024 for the first time in two years, indicating a potential recovery in the office market [11] - The availability of space in the newest and highest quality buildings is declining rapidly, now below pre-pandemic levels [11] - 79% of CEOs polled in September expect a full-time return to work over the next three years, up from 34% in April [12] Company Strategy and Development Direction - The company is focusing on extending existing leases and improving the quality of its portfolio by selling non-core assets [14][19] - A total of 18 properties, representing about 1.9 million square feet, have been sold, amounting to over 15% of the portfolio [14] - The company aims to maintain a low leverage balance sheet while investing in capital expenditures to enhance asset competitiveness [26] Management's Comments on Operating Environment and Future Outlook - The company anticipates fluctuations in leasing activity and expects to carry substantial vacancy for the foreseeable future [13] - Management expects cumulative impacts on core FFO could be as much as $20 million to $24 million lower in 2025 compared to 2024 [29] - Despite challenges, the company remains profitable on an FFO and core FFO basis and expects to stabilize and grow in the future [31] Other Important Information - The company declared a quarterly cash dividend of $0.10 per share for Q4 2024, payable on January 15, 2025 [40] - Total liquidity at quarter end was $237.3 million, including $17.3 million in cash and $220 million available on the revolving credit facility [37] Q&A Session Summary Question: Can a new buyer leverage the work done from the previous buyer for the Walgreens property? - Management confirmed that a new buyer can leverage the previous redevelopment work and tax increment financing established [42] Question: Was there anything unique about the seller in the recent acquisition? - Management indicated that the seller was not under distress, and the ability to purchase the property for an all-cash transaction provided additional pricing power [44] Question: How does the company balance investment opportunities against cash requirements for CapEx? - Management emphasized that the primary focus is on existing assets, using capital to lease up vacancies, which is seen as the most accretive use of capital [49]

Property Portfolio - As of September 30, 2024, the company owned and operated 70 office properties with an aggregate of 8.1 million leasable square feet and an occupancy rate of 74.0%[138] - The occupancy rate, including the company's pro rata share from the Arch Street Joint Venture, is 74.6%, or 76.9% adjusted for properties under agreement to be sold[138] - As of September 30, 2024, 63.3% of the company's office buildings by square feet were classified as class A, while class B and class C properties accounted for 31.7% and 5.0%, respectively[143] - As of September 30, 2024, the company had 70 operating properties, down from 75 as of December 31, 2023, with a total rentable square footage of 8,299,000 square feet[161] - The portfolio occupancy rate was 74.0% with 70 operating properties and 8.1 million leasable square feet as of September 30, 2024, compared to 80.1% with 79 properties and 9.3 million leasable square feet as of September 30, 2023[179] Financial Performance - Total revenues for the three months ended September 30, 2024, were $39.2 million, compared to $49.1 million for the same period in 2023, representing a decrease of approximately 20%[162] - The net loss attributable to common stockholders for the three months ended September 30, 2024, was $10.2 million, compared to a loss of $16.5 million for the same period in 2023[162] - The annualized base rent as of September 30, 2024, was $124.0 million, a decrease from $141.3 million as of December 31, 2023[161] - The occupancy rate as of September 30, 2024, was 74.6%, down from 80.4% as of December 31, 2023[161] - Rental revenues decreased by $9.9 million and $24.8 million for the three and nine months ended September 30, 2024, respectively, primarily due to a decrease in occupied square footage and property dispositions[178][179] Debt and Financing - The company has incurred significant indebtedness, with non-recourse mortgage notes associated with the Arch Street Joint Venture amounting to $135.7 million, maturing on November 27, 2024[144] - The company extended the maturity date of its Revolving Facility for 18 months, now set to mature on May 12, 2026[144] - Total consolidated debt outstanding as of September 30, 2024, was $485.0 million, consisting of a $355.0 million CMBS Loan and $130.0 million under the Revolving Facility[210] - The company entered into a Third Amendment to the Credit Agreement, reducing the borrowing capacity of the Revolving Facility to $350.0 million from $425.0 million[203] - The company maintained a total indebtedness to total asset value ratio of 39.2%, well below the required maximum of 60%[220] Lease and Tenant Activity - Approximately 2.8% and 13.0% of the company's annualized base rent are scheduled to expire during the remainder of 2024 and in 2025, respectively[142] - The weighted-average remaining lease term for the company's properties is 5.0 years as of September 30, 2024[138] - The weighted-average remaining lease term for the company's properties increased to 5.0 years as of September 30, 2024, from 4.0 years as of December 31, 2023[161] - The company completed approximately 832,000 square feet of lease renewals and new leases across 10 different properties during the nine months ended September 30, 2024[158] - During the nine months ended September 30, 2024, seven leases across six properties expired, totaling 1.1 million square feet[174] Cash and Liquidity - As of September 30, 2024, the company had $220.0 million of borrowing capacity under the Revolving Facility, with $130.0 million of outstanding borrowings[159] - As of September 30, 2024, the company had $16.6 million in cash and cash equivalents and $220.0 million of borrowing capacity under the Revolving Facility[201] - The company had restricted cash reserves of $34.7 million as of September 30, 2024, allocated for tenant improvement allowances and rent concessions[169] Expenses and Costs - Property operating expenses increased by $1.1 million and $2.1 million during the three and nine months ended September 30, 2024, respectively, due to property vacancies[182] - General and administrative expenses rose by $0.1 million and $0.7 million during the three and nine months ended September 30, 2024, respectively, primarily due to increased stock compensation expenses[183] - Depreciation and amortization expenses decreased by $7.1 million during the three months ended September 30, 2024, due to the full amortization of certain intangible assets[184] Dividends and Shareholder Returns - The company declared a quarterly cash dividend of $0.10 per share for the first three quarters of 2024, with the fourth quarter dividend also set at $0.10 per share[160] - The company declared quarterly cash dividends of $0.10 per share during the nine months ended September 30, 2024, with a fourth quarter dividend also declared for January 15, 2025[238] - The Company had approximately $45.0 million available under the Share Repurchase Program[244] Market Conditions and Risks - The company anticipates continued challenges in tenant retention due to significant lease expirations and changing office space utilization trends[142] - The company faces risks associated with rising interest rates and inflation, which may impact operating costs and borrowing[133] - The company anticipates that tenant improvement allowances may increase in future periods due to competitive market conditions[165] Impairments and Charges - Impairment charges totaled $25.4 million for the nine months ended September 30, 2024, related to eight properties, a decrease from $27.0 million for the same period in 2023[185] Interest Rate Management - The company entered into interest rate swap agreements totaling $175.0 million to hedge interest rate volatility, fixing the interest rate at 3.92% per annum until November 12, 2023[213] - Following the expiration of the interest rate swap agreements, the company established interest rate collar agreements on a total notional amount of $60.0 million, with rates floating between 5.50% and 4.20% per annum[213]