ORION OFFICE REIT INC. For the quarterly period ended September 30, 2023 | | Page | | --- | --- | | PART I | | | Item 1. Unaudited Financial Statements | 3 | | Orion Office REIT Inc. Consolidated Balance Sheets as of September 30, 2023 and December 31, 2022 | 3 | | Orion Office REIT Inc. Consolidated Statements of Operations for the Three and Nine Months Ended | | | September 30, 2023 and 2022 | 4 | | Orion Office REIT Inc. Consolidated Statements of Comprehensive Income (Loss) for the Three and Nine | | | ...

Orion Office REIT Inc. (NYSE:ONL) Q2 2023 Results Conference Call August 10, 2023 10:00 AM ET Company Participants Paul Hughes - General Counsel Paul McDowell - Chief Executive Officer Gavin Brandon - Chief Financial Officer Gary Landriau - Chief Investment Officer Chris Day - Chief Operating Officer 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 f ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________ to __________ Commission file number: 001-40873 Orion Office REIT Inc. (Exact name of registrant as specified in its charter) Maryland 87-1656425 (St ...

Financial Data and Key Metrics Changes - Core funds from operations for the quarter were $25.3 million or $0.45 per share, down from $29.3 million or $0.52 per share in Q1 2022 [12] - Adjusted EBITDA was $31.2 million compared to $34.7 million in the same quarter of 2022 [12] - Total revenue for the quarter was $50.2 million, down from $53.2 million in the same quarter of the prior year [30] - The net loss attributable to common stockholders was $8.9 million or $0.16 per share, compared to a net loss of $9.9 million or $0.17 per share in 2022 [30] - General and administrative expenses were $4.3 million compared to $3.5 million in Q1 2022 [12] Business Line Data and Key Metrics Changes - The company signed four leases for 83,000 square feet in the first quarter [26] - Renewed a 64,000 square foot lease with the U.S. government for 15 years [26] - Leasing spreads during the first quarter were about 20%, with variability expected [9] Market Data and Key Metrics Changes - As of March 31, 2023, 73.6% of annualized base rent was from investment-grade tenants, up from 67% a year earlier [7] - The largest tenant industries are healthcare and government, representing 13.5% and 12.5% of annualized base rent, respectively [7] - Over 30% of annualized base rent is derived from Sunbelt markets [7] Company Strategy and Development Direction - The company is focused on stabilizing and repositioning its portfolio while avoiding over-leverage [23][24] - Plans to dispose of non-core vacant assets to maximize long-term value [11][27] - The strategy includes maintaining significant liquidity and operating on a low leverage basis [14][40] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the challenging economic backdrop for real estate, particularly for office spaces, but remains confident in the long-term strategy [23] - There is an expectation of sequential reductions in quarterly earnings and core FFO due to scheduled lease vacancies [33] - Management is optimistic about the potential for a sustained return to office work as corporate attitudes shift [25] Other Important Information - The company ended the quarter with $557.3 million of outstanding debt and no borrowings on the revolving credit facility [13] - Total liquidity was $449.5 million, consisting of $425 million available on the revolving credit facility and $24.5 million in cash [40] - A quarterly cash dividend of $0.10 per share was declared for Q2 2023 [41] Q&A Session Summary Question: How has leasing transpired since going public? - Management indicated that leasing has been largely in line with expectations, but attracting new tenants to vacant properties has been slower than anticipated [42] Question: Can you elaborate on the improvement in asset pricing? - Management noted that cap rates are widening for well-leased properties, indicating a shift in the market dynamics [43] Question: Will acquisitions be considered before determining the status of the term loan? - Management stated that they have the capacity to add assets if they choose to, but have not made any acquisitions since going public due to cautious market conditions [45]

PART I - FINANCIAL INFORMATION [Unaudited Financial Statements](index=3&type=section&id=Item%201.%20Unaudited%20Financial%20Statements) Q1 2023 financials show decreased revenue to $50.2 million, a slightly improved net loss of $8.9 million, and reduced operating cash flow [Consolidated Balance Sheets](index=3&type=section&id=Orion%20Office%20REIT%20Inc.%20Consolidated%20Balance%20Sheets) Total assets decreased to $1.55 billion and total equity declined to $960 million as of March 31, 2023 Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | **Total Assets** | **$1,546,872** | **$1,571,073** | | Total real estate investments, net | $1,223,463 | $1,233,246 | | Cash and cash equivalents | $23,755 | $20,638 | | **Total Liabilities** | **$586,925** | **$595,215** | | Mortgages payable, net | $352,337 | $352,167 | | Credit facility term loan, net | $174,153 | $173,815 | | **Total Equity** | **$959,947** | **$975,858** | [Consolidated Statements of Operations](index=4&type=section&id=Orion%20Office%20REIT%20Inc.%20Consolidated%20Statements%20of%20Operations) Q1 2023 revenue fell to $50.2 million, while net loss improved to $8.9 million due to lower depreciation expenses Q1 2023 vs Q1 2022 Statement of Operations (in thousands, except per share data) | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Total revenues | $50,190 | $53,206 | | Total operating expenses | $51,678 | $55,605 | | Depreciation and amortization | $28,166 | $34,353 | | Impairments | $3,754 | $1,602 | | Net loss attributable to common stockholders | $(8,885) | $(9,906) | | Basic and diluted net loss per share | $(0.16) | $(0.17) | [Consolidated Statements of Comprehensive Income (Loss)](index=5&type=section&id=Orion%20Office%20REIT%20Inc.%20Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)) Total comprehensive loss widened to $10.7 million in Q1 2023 from $5.8 million in Q1 2022, driven by derivative losses Q1 2023 vs Q1 2022 Comprehensive Income (Loss) (in thousands) | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Net loss | $(8,874) | $(9,882) | | Total other comprehensive income (loss) | $(1,768) | $4,057 | | **Total comprehensive loss** | **$(10,653)** | **$(5,849)** | [Consolidated Statements of Cash Flows](index=7&type=section&id=Orion%20Office%20REIT%20Inc.%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operating activities decreased significantly to $11.4 million in Q1 2023 from $28.2 million in the prior year Q1 2023 vs Q1 2022 Cash Flows (in thousands) | Cash Flow Activity | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $11,441 | $28,153 | | Net cash used in investing activities | $(2,467) | $(1,235) | | Net cash used in financing activities | $(5,844) | $(2,168) | [Notes to Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Orion%20Office%20REIT%20Inc.%20Consolidated%20Financial%20Statements) Notes detail the 81-property portfolio, $3.8 million in impairments, $526.5 million in debt, and a $0.10 dividend - As of March 31, 2023, the company owned and operated **81 office properties** totaling approximately **9.5 million leasable square feet**[22](index=22&type=chunk) - The company recorded impairment charges of **$3.8 million** on three properties during Q1 2023, compared to $1.6 million on two properties in Q1 2022[60](index=60&type=chunk)[61](index=61&type=chunk) - Total debt outstanding was **$526.5 million** as of March 31, 2023, with a weighted-average interest rate of 4.38% and a **$175.0 million term loan maturing in November 2023**[70](index=70&type=chunk)[71](index=71&type=chunk) - As of March 31, 2023, the company had outstanding commitments of **$50.0 million for tenant improvement allowances** and $0.3 million for leasing commissions[102](index=102&type=chunk) - The Board of Directors declared a quarterly cash dividend of **$0.10 per share** for Q1 2023[114](index=114&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=23&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses a challenging environment with declining occupancy, though Core FFO remains sufficient for near-term obligations [Overview and Business Environment](index=24&type=section&id=Overview%20and%20Business%20Environment) The company faces headwinds from rising interest rates and remote work, causing occupancy to fall to 87.5% - The company's efforts to address lease maturities and vacancies are **adversely impacted by rising interest rates, inflation, and remote working trends**, which are expected to continue to slow new leasing[136](index=136&type=chunk) Portfolio Metrics | Metric | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Operating properties | 81 | 81 | | Rentable square feet (in thousands) | 9,732 | 9,732 | | Occupancy rate | 87.5% | 89.0% | | Weighted-average remaining lease term (in years) | 4.0 | 4.1 | [Results of Operations](index=30&type=section&id=Results%20of%20Operations) Q1 2023 rental revenue decreased by $3.0 million year-over-year, while operating expenses fell due to lower depreciation Revenue and Operating Expense Changes (Q1 2023 vs Q1 2022, in thousands) | Account | 2023 | 2022 | Increase/(Decrease) | | :--- | :--- | :--- | :--- | | **Total revenues** | **$50,190** | **$53,206** | **$(3,016)** | | Rental | $49,990 | $53,017 | $(3,027) | | **Total operating expenses** | **$51,678** | **$55,605** | **$(3,927)** | | Depreciation and amortization | $28,166 | $34,353 | $(6,187) | | Impairments | $3,754 | $1,602 | $2,152 | [Non-GAAP Measures (FFO & Core FFO)](index=32&type=section&id=Non-GAAP%20Measures) Core FFO per diluted share declined to $0.45 in Q1 2023 from $0.52 in Q1 2022, reflecting operational challenges Reconciliation of Net Loss to FFO and Core FFO (in thousands) | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Net loss attributable to common stockholders | $(8,885) | $(9,906) | | **FFO attributable to common stockholders** | **$23,473** | **$26,494** | | **Core FFO attributable to common stockholders** | **$25,283** | **$29,289** | | FFO per diluted share | $0.41 | $0.47 | | Core FFO per diluted share | $0.45 | $0.52 | - Beginning in 2023, the company **revised its definition of Core FFO** to exclude non-cash charges such as amortization of deferred financing costs and equity-based compensation, applying the change retrospectively[188](index=188&type=chunk)[192](index=192&type=chunk) [Liquidity and Capital Resources](index=33&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains sufficient liquidity with $23.8 million in cash and $425.0 million available on its credit facility - Principal liquidity sources include **$23.8 million in cash**, operating cash flows, and **$425.0 million of borrowing capacity** under the Revolving Facility[193](index=193&type=chunk) - The **$175.0 million Term Loan Facility matures on November 12, 2023**, and the company has sufficient capacity under its Revolving Facility to repay it if needed[71](index=71&type=chunk)[138](index=138&type=chunk) - The company was **in compliance with all financial covenants** for its Revolver/Term Loan Facilities as of March 31, 2023[207](index=207&type=chunk) [Cash Flow Analysis](index=39&type=section&id=Cash%20Flow%20Analysis) Net cash from operating activities decreased by $16.7 million year-over-year due to working capital changes and lower income Cash Flow Summary (in thousands) | Cash Flow Activity | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | Change | | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | $11,441 | $28,153 | $(16,712) | | Net cash used in investing activities | $(2,467) | $(1,235) | $(1,232) | | Net cash used in financing activities | $(5,844) | $(2,168) | $(3,676) | [Quantitative and Qualitative Disclosures About Market Risk](index=39&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market exposure is interest rate risk, which is actively managed through hedging instruments - The primary market risk is **interest rate risk** related to variable-rate borrowings, which is mitigated through interest rate hedge contracts[233](index=233&type=chunk) - As of March 31, 2023, the company's **$175.0 million of variable-rate debt** on the Term Loan Facility was **effectively fixed** through the use of interest rate swap agreements[197](index=197&type=chunk)[235](index=235&type=chunk) - A **100 basis point increase** in market interest rates would result in a decrease in the fair value of the company's fixed-rate debt of **$11.2 million**[234](index=234&type=chunk) [Controls and Procedures](index=40&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective, with no material changes to internal controls - Management, including the CEO and CFO, concluded that **disclosure controls and procedures were effective** as of March 31, 2023[242](index=242&type=chunk) - There were **no changes in internal control over financial reporting** during Q1 2023 that have materially affected, or are reasonably likely to materially affect, internal controls[243](index=243&type=chunk) PART II - OTHER INFORMATION [Legal Proceedings](index=40&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently a party to any material pending legal proceedings - The company is **not a party to any material pending legal proceedings**[244](index=244&type=chunk) [Risk Factors](index=41&type=section&id=Item%201A.%20Risk%20Factors) No material changes have been identified regarding the risk factors disclosed in the 2022 Annual Report on Form 10-K - **No material changes** to the risk factors disclosed in the Annual Report on Form 10-K for the year ended December 31, 2022[245](index=245&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=41&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported no unregistered sales of equity securities during the period - None[246](index=246&type=chunk) [Defaults Upon Senior Securities](index=41&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults upon senior securities during the period - None[246](index=246&type=chunk) [Mine Safety Disclosures](index=41&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company's operations - Not applicable[247](index=247&type=chunk) [Other Information](index=41&type=section&id=Item%205.%20Other%20Information) The company reported no other information for the period - None[248](index=248&type=chunk) [Exhibits](index=41&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including required certifications and XBRL data - The exhibits filed with the report include **CEO and CFO certifications** (31.1, 31.2, 32.1, 32.2) and **Inline XBRL data files** (101 series)[250](index=250&type=chunk)

Financial Data and Key Metrics Changes - For Q4 2022, the company generated total revenues of $50.3 million and reported a net loss attributable to common stockholders of $19 million, or a loss of $0.33 per share [8] - For the full year 2022, total revenues were $208.1 million with a net loss of $97.5 million, or a loss of $1.72 per share; Core Funds from Operations (FFO) was $101.8 million or $1.80 per share, exceeding guidance by $0.02 per share [8][42] - Adjusted EBITDA for Q4 was $30.7 million, while for the full year it was $132.2 million [8] Business Line Data and Key Metrics Changes - The company leased 805,000 square feet of space in 2022 with positive cash rent spreads of over 4% and a weighted average lease term of more than seven years [6] - The portfolio ended the year with 81 properties and six unconsolidated joint venture properties, totaling 9.7 million square feet, with an occupancy rate of 89%, up from 88.2% in the previous quarter [5] Market Data and Key Metrics Changes - The company has a diversified tenant base with 73.3% of annualized base rent from investment-grade tenants and approximately 83.4% of leases being triple or double net [38] - The largest markets by state are Texas and New Jersey, representing 15% and 12% of annualized base rent, respectively, with 33% of annualized base rent derived from Sunbelt markets [38] Company Strategy and Development Direction - The company aims to focus on owning mission-critical suburban office properties in high-quality suburban markets, with a strategy to sell vacant and non-core assets to reduce carry costs [37][39] - The company plans to maintain leasing momentum while addressing the challenges posed by the current economic environment, including rising interest rates and inflation [24][25] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term value of their core assets despite current headwinds, emphasizing the importance of tenant retention and proactive lease negotiations [5][24] - For 2023, the company expects occupancy to remain stable but may experience temporary declines due to lease expirations, particularly with the Walgreens leases [18][42] Other Important Information - The company declared a quarterly cash dividend of $0.10 per share for Q1 2023, indicating a strong financial position to achieve near and long-term objectives [9] - The company has reduced debt by approximately $90 million or 15% since its spin-off, with a net debt to gross real estate investments ratio of 31% [7][41] Q&A Session Summary Question: What is the outlook for G&A expenses? - Management indicated that G&A expenses are expected to normalize, with an additional year of stock-based compensation impacting 2023 [51] Question: How is the company handling property sales? - The company is selling properties through various channels, including auctions, which may impact pricing; they expect to sell a significant number of properties in 2023 [12][58] Question: What is the status of the Walgreens campus sale? - The company has entered into a definitive agreement to sell the Walgreens campus, with leases expiring in August 2023 [58]

Property Portfolio - As of December 31, 2022, the company owned 81 office properties with a total of 9.5 million leasable square feet and an occupancy rate of 88.8%[159] - The company completed approximately 0.8 million square feet of lease renewals, expansions, and new leases during the year ended December 31, 2022, with a decline in occupancy from 91.9% to 89.0%[162] - As of December 31, 2022, the company had 81 operating properties with a total of 9,732 thousand rentable square feet and an occupancy rate of 89.0%[182] - The weighted-average remaining lease term was consistent at 4.1 years as of December 31, 2022[162] Financial Performance - Total revenues for the year ended December 31, 2022, were $208.1 million, a significant increase of $128.4 million compared to $79.7 million in 2021[201] - The company reported a net loss of $97.5 million for 2022, compared to a net loss of $47.5 million in 2021[187] - Funds from operations (FFO) attributable to common stockholders for 2022 were $99.7 million, translating to $1.76 per diluted share, up from $46.6 million or $0.82 per diluted share in 2021[187] - Core Funds from Operations (Core FFO) will be redefined starting in 2023, with an expected increase of $6.4 million for 2022 if the new definition had been applied[222] - For the year ended December 31, 2022, the net loss attributable to common stockholders was $97.494 million, compared to a loss of $47.481 million in 2021[225] - Funds from Operations (FFO) attributable to common stockholders for 2022 was $99.657 million, up from $46.572 million in 2021, representing a 113% increase[225] - Core FFO attributable to common stockholders for 2022 was $101.764 million, compared to $58.263 million in 2021, reflecting a 74% increase[225] Expenses and Costs - General and administrative expenses were modestly below budget for 2022 but are expected to increase in 2023 due to expiring subsidies and rising compliance costs[160] - Total operating expenses surged by $157.9 million to $276.8 million in 2022, driven by increases in property operating expenses, general and administrative expenses, and depreciation[205] - Property operating expenses increased by $48.1 million in 2022, mainly due to the expanded portfolio size[206] - General and administrative expenses rose by $12.1 million in 2022, reflecting the costs of operating as a standalone business post-distribution[207] - Depreciation and amortization expenses increased by $87.4 million in 2022, primarily due to the larger portfolio size following the mergers[208] - Impairments recorded were $66.4 million in 2022, up from $49.9 million in 2021, affecting 18 properties[209] Debt and Financing - Interest expense was in line with budget, as increases in interest rates were offset by lower debt outstanding due to cash utilization from operations and real estate dispositions[161] - The company refinanced a $355.0 million Bridge Facility with a CMBS Loan at a fixed rate of 4.971%, maturing on February 11, 2027[185] - As of December 31, 2022, the company had $425.0 million available under its Revolving Facility, with no borrowings outstanding[185] - Total consolidated debt outstanding as of December 31, 2022, was approximately $530.0 million, consisting of a $355.0 million CMBS Loan and $175.0 million borrowed under the Term Loan Facility[233] - The Term Loan Facility is scheduled to mature on November 12, 2023, with a current outstanding principal of $175.0 million[229] - The company maintained a total indebtedness to total asset value ratio of 29.0%, well below the required maximum of 60%[240] - The ratio of adjusted EBITDA to fixed charges was 4.94x, exceeding the required minimum of 1.5x[240] Cash Flow - Net cash provided by operating activities increased by $58.1 million to $114.2 million for the year ended December 31, 2022, compared to $56.1 million in 2021, primarily due to an increase in portfolio size from mergers[267] - Net cash provided by investing activities increased by $34.7 million to $22.5 million for the year ended December 31, 2022, compared to $(12.3) million in 2021, mainly due to proceeds from real estate dispositions[268] - Net cash used in financing activities increased by $92.3 million to $(110.7) million for the year ended December 31, 2022, compared to $(18.4) million in 2021, primarily due to net repayments on the Revolving Facility and dividend payments[269] Dividends and Shareholder Returns - The company declared quarterly cash dividends of $0.10 per share for four quarters in 2022, totaling $0.40 per share for the year[260] - A Share Repurchase Program was authorized for up to $50.0 million of the company's outstanding common stock until December 31, 2025, although no shares were repurchased under this program as of March 8, 2023[265][266] Market Conditions and Future Outlook - The company anticipates continued challenges in leasing due to economic conditions, including rising interest rates and inflation[162] - The company did not acquire any new properties during 2022, primarily due to rising interest rates and disruptions in financing markets[161] - The company plans to fund new acquisitions, including those related to the Arch Street Joint Venture, through cash flows from operations and proceeds from real estate dispositions[228] Risk Management - The company entered into interest rate swap agreements with an aggregate notional amount of $175.0 million to hedge interest rate volatility, effective December 1, 2022[257] - The company’s interest rate risk management includes entering into interest rate hedge contracts to mitigate risks associated with variable-rate borrowings[284] - As of December 31, 2022, fixed-rate debt had a fair value of $332.3 million and a carrying value of $355.0 million, with a sensitivity analysis indicating a potential decrease in fair value of $11.6 million with a 100 basis point increase in interest rates[285]

Financial Data and Key Metrics Changes - Orion generated total revenues of $51.8 million for Q3 2022 and reported a net loss attributable to common stockholders of $53 million, equating to a loss of $0.94 per share [26] - Core funds from operations (FFO) were $24 million or $0.42 per share, with adjusted EBITDA at $32.1 million [26] - The company ended the quarter with $588.3 million of outstanding debt, having reduced debt by approximately $69 million or 11% since the spin-off [28] Business Line Data and Key Metrics Changes - At quarter end, Orion owned 87 properties and 6 unconsolidated joint venture properties, totaling 10.1 million square feet, with an occupancy rate of 88.2% [13] - The portfolio had 69.9% investment-grade tenancy, with approximately 80% of leases being triple or double net [13] - The weighted average lease term slightly declined to 3.9 years [17] Market Data and Key Metrics Changes - The largest markets by state for Orion are Texas and New Jersey, representing 14.6% and 11.4% of annualized base rent, respectively [14] - Approximately 31.8% of annualized base rent is derived from Sun Belt markets, a proportion the company intends to grow over time [14] Company Strategy and Development Direction - Orion aims to reposition and align its suburban-focused office portfolio, which requires intensive asset management and capital to address lease maturities and vacancies [8][9] - The company is actively selling vacant and non-core assets to reduce carry costs and avoid significant capital expenditures associated with retenanting [18] - A $50 million share repurchase program has been approved to potentially enhance shareholder value during sustained market weakness [24] Management's Comments on Operating Environment and Future Outlook - Management noted an uptick in negative trends impacting the portfolio due to rising interest rates, inflation, and recession fears, which have led to hesitancy among businesses to sign new leases [10][11] - Despite current challenges, management remains optimistic about long-term prospects for owning a suburban net lease office portfolio [12] - The anticipated timeline for stabilizing the portfolio may take longer than initially expected due to the changing economic environment [20] Other Important Information - The company has total liquidity of $418 million, consisting of $394 million available on its revolving credit facility and $24 million in cash [28] - The quarterly dividend declared for Q4 2022 is $0.10 per share, payable on January 17, 2023 [29] Q&A Session Summary Question: Insights on the profile of dispositions and whether they are one-off sales - Management indicated that the dispositions were generally one-off transactions, with buyers being a mix of investors looking to reposition assets and users intending to occupy them [36] Question: Clarification on tenant renewals and lease terms - Management confirmed that the recent lease signed was a straight extension option for 5 years, with efforts to encourage longer-term leases [38][40] Question: Impact of tenant behavior on leasing decisions - Management noted that tenants are taking longer to make decisions and are requesting smaller spaces, which reflects broader market trends [44] Question: Opportunities for shifting towards a multi-tenant approach - While the preference remains for single-tenant assets, management is open to multi-tenant arrangements if it makes sense for filling vacancies [45] Question: Details on the properties sold and their occupancy status - Management clarified that the sold properties included both vacant and tenanted assets, with short lease terms for those with tenants [46][47]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2022 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________ to __________ Commission file number: 001-40873 Orion Office REIT Inc. (Exact name of registrant as specified in its charter) Maryland 87-165642 ...

Financial Data and Key Metrics Changes - Orion generated total revenue of $52.8 million for Q2 2022, with a net loss attributable to common stockholders of $15.6 million, or a loss of $0.27 per share [25] - Core funds from operations (FFO) were reported at $26.8 million, or $0.47 per share, with adjusted EBITDA at $34.7 million [25] - General and administrative expenses (G&A) for Q2 2022 were $3.3 million, while capital expenditures (CapEx) were $2.4 million [26] Business Line Data and Key Metrics Changes - The portfolio consisted of 91 properties and six unconsolidated joint venture properties, totaling 10.5 million square feet, with an occupancy rate of 86.7% [11] - The weighted average lease term for the portfolio was 4.1 years, with 67.3% of tenants being investment-grade [11][15] - Lease extensions and expansions totaled 206,000 square feet in Nebraska and Illinois, with a new weighted average lease term of 7.8 years [13] Market Data and Key Metrics Changes - The largest markets by state for Orion are Texas and New Jersey, representing 14.3% and 11.2% of annualized base rent, respectively [12] - Approximately 31.1% of annualized base rent is derived from Sun Belt markets [12] Company Strategy and Development Direction - The company is focused on asset management and repositioning to address lease maturities and vacancies, with a strategy to sell vacant and non-core assets [16][19] - Orion aims to maintain a disciplined approach to acquisitions, considering the macroeconomic environment and current valuation [20][21] - The company has declared a quarterly dividend of $0.10 per share for Q3 2022, with plans to increase the payout ratio over time [22][29] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the suburban net lease office market and the company's ability to grow and maximize long-term shareholder value [9][10] - The company anticipates continued pressure on earnings performance due to lease expirations and the need for capital expenditures [19][30] - Updated guidance for core FFO is now expected to range from $1.74 to $1.78 per share, reflecting adjustments based on lease expirations and G&A expenses [33] Other Important Information - The company ended the quarter with $628.3 million of outstanding debt, with over 84% of the debt fixed or swapped to fixed rate [28] - Total liquidity was reported at $374 million, consisting of available capacity on the revolving credit facility and cash [28] Q&A Session Summary Question: Insights on asset dispositions and market conditions - Management noted that the assets targeted for sale are specialized and have received strong interest, with six properties under contract and more under LOI [35][36] Question: Guidance on future revenue and capital expenditures - Management indicated that lease expirations earlier in the year would impact revenues, and capital expenditures are expected to range between $5 and $10 per square foot for new and renewed leases [37][38] Question: Details on vacant properties and carrying costs - Approximately half of the properties under contract for sale are currently vacant, with carrying costs averaging around $7 per square foot per year [42][44] Question: Renewal probabilities for tenants with expirations in 2023 and 2024 - Management expects volatility in renewal rates but believes there will be strong renewal opportunities over time [49]