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Office Properties me Trust(OPI) - 2022 Q1 - Quarterly Report
OPIOffice Properties me Trust(OPI)2022-04-28 20:36
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Property and Occupancy - As of March 31, 2022, the company owned 174 properties with a total of approximately 22,941,000 rentable square feet, leased to 298 tenants[60] - The occupancy rate for all properties was 88.8% as of March 31, 2022, down from 90.8% in 2021[64] - During Q1 2022, the company experienced lease expirations totaling approximately 853,000 rentable square feet, with new and renewal leases totaling 572,000 square feet[70] - As of March 31, 2022, the company has 392 leases expiring, totaling 20,373 thousand square feet, with an annualized rental income of 572,029thousand[78]−Approximately4.2572,029 thousand[78] - Approximately 4.2% of rentable square feet and 4.6% of annualized rental income are from tenants with exercisable rights to terminate their leases early[78] - The weighted average remaining lease term is 5.9 years for square feet and 6.1 years for rental income[78] Rental Income and Financial Performance - Rental income for the three months ended March 31, 2022, was 125,387, a decrease of 607or0.5607 or 0.5% compared to 125,994 in the same period of 2021[92] - Net operating income (NOI) for the three months ended March 31, 2022, was 96,481,aslightdecreaseof96,481, a slight decrease of 18 or 0.02% compared to 96,499inthesameperiodof2021[109]−Thecompanyreportedanetlossof96,499 in the same period of 2021[109] - The company reported a net loss of 13,407 for the three months ended March 31, 2022, compared to a net income of 37,860inthesameperiodof2021,representingadecreaseof37,860 in the same period of 2021, representing a decrease of 51,267 or 135.4%[92] - Total operating expenses increased to 50,873forthethreemonthsendedMarch31,2022,upby50,873 for the three months ended March 31, 2022, up by 2,848 or 5.9% from 48,025inthesameperiodof2021[92]−Generalandadministrativeexpensesdecreasedby48,025 in the same period of 2021[92] - General and administrative expenses decreased by 5,566 or 49.4% to 5,706inthethreemonthsendedMarch31,2022,comparedto5,706 in the three months ended March 31, 2022, compared to 11,272 in the same period of 2021[100] - The company recorded a loss on impairment of real estate totaling 17,047inthethreemonthsendedMarch31,2022,comparedtoalossof17,047 in the three months ended March 31, 2022, compared to a loss of 7,660 in the same period of 2021, representing an increase of 122.5%[99] - Interest expense decreased to 27,439forthethreemonthsendedMarch31,2022,downby27,439 for the three months ended March 31, 2022, down by 1,359 or 4.7% from 28,798inthesameperiodof2021[103]−Thecompanyrecordedanetgainonthesaleofrealestateof28,798 in the same period of 2021[103] - The company recorded a net gain on the sale of real estate of 2,149 in the three months ended March 31, 2022, compared to a net gain of 54,004inthesameperiodof2021,adecreaseof96.054,004 in the same period of 2021, a decrease of 96.0%[101] - Funds From Operations (FFO) for Q1 2022 was 62,722,000, an increase of 10.4% from 56,609,000inQ12021[112]−NormalizedFFOforQ12022was56,609,000 in Q1 2021[112] - Normalized FFO for Q1 2022 was 62,722,000, slightly up from 61,809,000inQ12021,resultinginaNormalizedFFOpershareof61,809,000 in Q1 2021, resulting in a Normalized FFO per share of 1.30[112] Capital Expenditures and Investments - The total capital expenditures for Q1 2022 were 48.971million,significantlyhigherthan48.971 million, significantly higher than 16.402 million in Q1 2021[73] - The company has estimated unspent leasing-related obligations of 128.009million,with128.009 million, with 78.134 million expected to be spent over the next 12 months[75] - Estimated total project costs for the redevelopment of a property in Washington, D.C. are approximately 215,000,000,with54215,000,000, with 54% of the project pre-leased[124] - The company expects to incur approximately 144,000,000 in costs for the redevelopment of a three-property campus in Seattle, WA, with completion anticipated in Q2 2023[125] - The company is currently marketing over 30 properties containing over 3,000,000 rentable square feet for sale[88] - The company sold four properties during the three months ended March 31, 2022, for an aggregate sales price of 29,470thousand[87]−Thecompanyhasenteredintoagreementstoselltwopropertiescontainingapproximately470,000rentablesquarefeetforanaggregatesalespriceof29,470 thousand[87] - The company has entered into agreements to sell two properties containing approximately 470,000 rentable square feet for an aggregate sales price of 38,300 thousand[88] Debt and Liquidity - As of March 31, 2022, the company had debt maturities totaling 2,609,996,000,withsignificantmaturitiesin2025andthereafter[121]−Thecompanymaintainsestimatedunspentleasing−relatedobligationsof2,609,996,000, with significant maturities in 2025 and thereafter[121] - The company maintains estimated unspent leasing-related obligations of 128,009,000, with 78,134,000expectedtobespentoverthenext12months[123]−AsofMarch31,2022,thecompanyhadanaggregateoutstandingprincipalbalanceof78,134,000 expected to be spent over the next 12 months[123] - As of March 31, 2022, the company had an aggregate outstanding principal balance of 2,512,000 in public senior unsecured notes and 97,996inmortgagenotes[130]−Thecompany’sfixedratedebttotaled97,996 in mortgage notes[130] - The company’s fixed rate debt totaled 2,609,996, with an annual interest expense of 100,612[136]−Ahypotheticalonepercentagepointincreaseininterestrateswouldincreasetheannualinterestcostbyapproximately100,612[136] - A hypothetical one percentage point increase in interest rates would increase the annual interest cost by approximately 26,100[138] - The company had no outstanding floating rate debt as of March 31, 2022, but its revolving credit facility matures on January 31, 2023[143] - If fully drawn on the revolving credit facility, a one percentage point increase in interest rates would raise annual interest expense from 12,000to12,000 to 19,500[145] - The company has a 750,000,000revolvingcreditfacilitywithnoamountsoutstandingasofMarch31,2022,providingsignificantliquidityforfutureacquisitions[118]MarketandEconomicConditions−ThecompanycontinuestomonitortheimpactoftheCOVID−19pandemiconitsoperations,notingthatithasnothadasignificantadverseimpacttodate[61]−ThecompanyexpectstofacerisksrelatedtotheCOVID−19pandemicaffectingtenants′abilitytopayrentandoverallleasingactivity[153]−Thecompanybelievesthatrecentshiftsinworkplacepracticesmayimpactleaserenewalsandspaceutilizationbytenants[80]−Thecompanyanticipatesthatoverallnewleasingvolumemayremainvolatile,particularlyduetotheongoingeffectsoftheCOVID−19pandemicandinflationarypressures[160]−Thecompanybelievesitiswellpositionedtoweathercurrenteconomicconditions,butthefutureimpactoftheCOVID−19pandemicremainsuncertain[160]ShareholderDistributions−Quarterlydistributionstoshareholderstotaled750,000,000 revolving credit facility with no amounts outstanding as of March 31, 2022, providing significant liquidity for future acquisitions[118] Market and Economic Conditions - The company continues to monitor the impact of the COVID-19 pandemic on its operations, noting that it has not had a significant adverse impact to date[61] - The company expects to face risks related to the COVID-19 pandemic affecting tenants' ability to pay rent and overall leasing activity[153] - The company believes that recent shifts in workplace practices may impact lease renewals and space utilization by tenants[80] - The company anticipates that overall new leasing volume may remain volatile, particularly due to the ongoing effects of the COVID-19 pandemic and inflationary pressures[160] - The company believes it is well positioned to weather current economic conditions, but the future impact of the COVID-19 pandemic remains uncertain[160] Shareholder Distributions - Quarterly distributions to shareholders totaled 26,634,000 for the three months ended March 31, 2022, with a declared distribution of 0.55pershareforQ22022[128]−Thecompanybelievesitisinapositiontomaintainorincreasedistributionstoshareholders[153]−Thecompany’sabilitytosustaindistributionstoshareholdersandmeetdebtobligationsisinfluencedbyfactorssuchastenantrentreceipts,futureearnings,andcapitalcosts[156]CreditandCompliance−Thecompany’screditagreementincludescrossdefaultprovisionsforotherdebtsexceeding0.55 per share for Q2 2022[128] - The company believes it is in a position to maintain or increase distributions to shareholders[153] - The company’s ability to sustain distributions to shareholders and meet debt obligations is influenced by factors such as tenant rent receipts, future earnings, and capital costs[156] Credit and Compliance - The company’s credit agreement includes cross default provisions for other debts exceeding 25,000[132] - The company is currently in compliance with the terms of its credit agreement and senior unsecured notes indentures[130] - The company’s credit ratings will impact borrowing costs, and any downgrade could increase the cost of debt capital[160] Management and Governance - The company’s business and property management agreements with RMR have 20-year terms but allow for early termination under certain circumstances[160] - The company expects to benefit from RMR's Environmental, Social and Governance (ESG) initiatives, but the realization of these benefits is uncertain[160]