Orion Office REIT (US:ONL)2024-08-08 20:22Property Portfolio and Occupancy - As of June 30, 2024, the company owned and operated 69 office properties with an aggregate of 8.0 million leasable square feet and an occupancy rate of 79.2%[111]. - The occupancy rate, including the pro rata share from the Arch Street Joint Venture, is 79.7%, or 80.9% adjusted for one operating property currently under agreement to be sold[111]. - As of June 30, 2024, the occupancy rate of operating properties was 79.7%, down from 80.4% as of December 31, 2023[133]. - The portfolio occupancy rate dropped to 79.2% with 69 operating properties and 8.0 million leasable square feet as of June 30, 2024, down from 86.2% and 81 properties with 9.5 million leasable square feet as of June 30, 2023[151]. - As of June 30, 2024, 64.1% of the company's office buildings by square feet were classified as class A, 30.9% as class B, and 5.0% as class C[116]. Financial Performance - For the six months ended June 30, 2024, total revenues were $87.321 million, a decrease of 14.6% compared to $102.214 million for the same period in 2023[135]. - Total revenues for the three and six months ended June 30, 2024 were $40.1 million and $87.3 million, respectively, representing decreases of $11.9 million (29.1%) and $14.9 million (14.4%) compared to the same periods in 2023[150]. - The net loss attributable to common stockholders for the three months ended June 30, 2024, was $33.801 million, or $(0.60) per diluted share, compared to a net loss of $15.730 million, or $(0.28) per diluted share, for the same period in 2023[135]. - Net loss attributable to common stockholders for Q2 2024 was $33.8 million, compared to a loss of $15.7 million in Q2 2023, representing a 115% increase in losses year-over-year[171]. - Funds from Operations (FFO) attributable to common stockholders for Q2 2024 was $10.9 million, down from $24.4 million in Q2 2023, a decline of 55%[171]. - Core FFO attributable to common stockholders for Q2 2024 was $14.2 million, compared to $26.9 million in Q2 2023, reflecting a decrease of 47%[171]. Debt and Financing - The company has incurred significant amounts of indebtedness, with non-recourse mortgage notes associated with the Arch Street Joint Venture totaling $136.4 million, maturing on November 27, 2024[117]. - The company has extended the maturity date of its Revolving Facility for 18 months, now set to mature on May 12, 2026[117]. - The company may face increased borrowing costs and challenges in refinancing its debt obligations due to rising interest rates and market conditions[106]. - Total consolidated debt outstanding as of June 30, 2024, was $462.0 million, consisting of a $355.0 million CMBS Loan and $107.0 million under the Revolving Facility[180]. - The company reduced the borrowing capacity of the Revolving Facility from $425.0 million to $350.0 million, effective May 3, 2024[173]. - The interest rate for the Revolving Facility is SOFR + 3.35%, with a maturity date extended to May 12, 2026[176]. - The average debt outstanding was $471.0 million and $466.5 million for the three and six months ended June 30, 2024, compared to $530.0 million for the same periods in 2023[161]. Asset Management and Dispositions - The company expects to continue its non-core asset disposition strategy through the remainder of 2024, focusing on selling vacant and identified non-core assets[120]. - Pending agreements are in place to sell one operating property and six non-operating properties for an aggregate gross sales price of $39.0 million, subject to various conditions[129]. - The company completed approximately 578,000 square feet of lease renewals and new leases during the six months ended June 30, 2024, including a new lease with the U.S. Government for approximately 86,000 square feet[130]. - The company had a total of nine fully vacant operating properties as of June 30, 2024, with five leases expiring consisting of 597,000 square feet during the same period[130]. Cash Flow and Liquidity - As of June 30, 2024, the company had $24.2 million in cash and cash equivalents and $243.0 million of borrowing capacity under the Revolving Facility[172]. - Net cash provided by operating activities decreased by $15.9 million to $28.0 million for the six months ended June 30, 2024, compared to $43.9 million in the same period of 2023[208]. - Net cash used in investing activities decreased by $0.3 million to $(4.8) million for the six months ended June 30, 2024, primarily due to proceeds from the sale of a real estate asset of $2.1 million[209]. - Net cash used in financing activities increased by $4.2 million to $(21.4) million for the six months ended June 30, 2024, primarily due to repayments on the Revolving Facility of $9.0 million[209]. Dividends and Shareholder Returns - The company declared a quarterly cash dividend of $0.10 per share for the first and second quarters of 2024, with the third quarter dividend also set at $0.10 per share[131]. - The Company authorized a Share Repurchase Program of up to $50.0 million until December 31, 2025, with approximately $45.0 million available as of June 30, 2024[207]. Market Conditions and Risks - The company anticipates continued challenges in tenant retention due to significant lease expirations and changing office space utilization trends[115]. - The Company is subject to credit risk concentrations due to tenants engaged in similar business activities or geographic regions, which could materially affect cash flows[215]. - The Company believes credit risk is mitigated by the high quality and diversity of its tenant base and consistent monitoring of potential problem tenants[216].