Orion Office REIT (US:ONL)2024-11-07 21:20Property 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]