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Office Properties me Trust(OPI) - 2024 Q4 - Annual Results

Quarterly Results OPI announced Q4 2024 financial results, showing progress in asset disposition and refinancing despite ongoing sector headwinds and liquidity concerns Fourth Quarter 2024 Financial Results Announcement OPI announced Q4 2024 financial results, highlighting asset disposition, debt refinancing, and leasing progress amidst sector headwinds - OPI advanced asset disposition and refinancing objectives by selling 17 office properties for approximately $114 million and closing private debt exchanges for all 2025 debt maturities7 - During Q4 2024, OPI completed 359,000 square feet of new and renewal leasing at a 24.3% roll-up in rent and a weighted average lease term of 7.1 years8 - Same-property portfolio occupancy grew to 89.4%, and same-property cash basis NOI increased 4.9% year over year8 - OPI continues to face sector headwinds and pending debt maturities, remaining focused on tenant retention, attracting new tenants, and evaluating strategies for future debt maturities amidst liquidity concerns and debt covenant constraints9 Fourth Quarter 2024 Highlights OPI's Q4 2024 highlights include significant leasing activity, improved same-property occupancy, a net loss, and substantial debt exchanges - Executed 359,000 square feet of total leasing at a weighted average lease term of 7.1 years, with lease renewals accounting for 91% of leased square footage15 - Ended the quarter with same property portfolio occupancy of 89.4% and a weighted average lease term of 7.4 years (by annualized revenue)15 Q4 2024 Financial Results Highlights | Metric | Value | | :-------------------------------- | :------------------- | | Net loss | $(148.7) million | | Net loss per common share | $(2.52) | | Normalized FFO | $20.9 million | | Normalized FFO per common share | $0.36 | | Same property cash basis NOI | $60.9 million | | Same property cash basis NOI YoY increase | 4.9% | - Sold 17 properties, totaling approximately 1,791,000 square feet, for an aggregate sales price of $114.5 million15 - As of February 13, 2025, OPI's total available liquidity was $113.0 million of cash, and the company continues to conclude there is substantial doubt about its ability to continue as a going concern15 - Exchanged $37.8 million of 2025 senior unsecured notes for $42.6 million of new 9.0% senior secured notes due 2029 and 4.4 million common shares15 - Issued $445.0 million of new 3.25% senior secured notes due 2027 and 11.5 million common shares in exchange for $340.0 million of 2025 notes15 Financials OPI's financial performance for Q4 2024 reflects significant losses, increased debt, and a shift in debt structure, alongside reduced asset values Key Financial Data OPI's Q4 2024 key financial data indicates a net loss, negative FFO and CAD, decreased assets, and substantial liabilities Selected Income Statement Data (Q4 2024 vs. Q4 2023, in thousands) | Metric | 12/31/2024 | 12/31/2023 | | :-------------------- | :------------------------ | :------------------------ | | Rental income | $118,238 | $133,773 | | Net (loss) income | $(148,680) | $(37,151) | | NOI | $71,244 | $80,871 | | Adjusted EBITDAre | $68,152 | $76,216 | | FFO | $(78,679) | $44,590 | | Normalized FFO | $20,946 | $45,872 | | CAD | $(16,296) | $8,560 | Selected Per Common Share Data (Q4 2024 vs. Q4 2023) | Metric | 12/31/2024 | 12/31/2023 | | :-------------------- | :--------- | :--------- | | Net (loss) income | $(2.52) | $(0.77) | | FFO | $(1.34) | $0.92 | | Normalized FFO | $0.36 | $0.95 | | CAD | $(0.28) | $0.18 | Selected Balance Sheet Data (as of 12/31/2024 vs. 12/31/2023, in thousands) | Metric | 12/31/2024 | 12/31/2023 | | :-------------------- | :------------------------ | :------------------------ | | Total assets | $3,822,286 | $3,989,669 | | Total liabilities | $2,669,482 | $2,733,990 | | Total shareholders' equity | $1,152,804 | $1,255,679 | | Cash and cash equivalents | $261,318 | $12,315 | Consolidated Statements of Income (Loss) OPI reported a significant net loss of $148.7 million for Q4 2024, primarily due to debt extinguishment and real estate sales losses, with declining rental income Consolidated Statements of Income (Loss) (in thousands) | Metric | Three Months Ended Dec 31, 2024 | Three Months Ended Dec 31, 2023 | Year Ended Dec 31, 2024 | Year Ended Dec 31, 2023 | | :------------------------------------------------------------------------------------------------ | :------------------------------ | :------------------------------ | :---------------------- | :---------------------- | | Rental income | $118,238 | $133,773 | $501,979 | $533,553 | | Total expenses | $108,391 | $124,479 | $595,823 | $474,592 | | (Loss) gain on sale of real estate | $(13,418) | $3,293 | $(7,410) | $3,780 | | Interest expense | $(47,340) | $(30,056) | $(163,745) | $(110,647) | | (Loss) gain on early extinguishment of debt | $(99,452) | $- | $126,185 | $- | | Net loss | $(148,680) | $(37,151) | $(136,107) | $(69,432) | | Weighted average common shares outstanding (basic and diluted) | 58,888 | 48,463 | 51,806 | 48,389 | | Net loss per common share | $(2.52) | $(0.77) | $(2.63) | $(1.44) | Consolidated Balance Sheets OPI's balance sheet shows total assets decreased to $3.82 billion, a significant shift from unsecured to secured debt, and a decline in shareholders' equity Consolidated Balance Sheets (in thousands) | Metric | December 31, 2024 | December 31, 2023 | | :-------------------------------- | :------------------ | :------------------ | | Total real estate properties, gross | $3,657,559 | $4,065,679 | | Total real estate properties, net | $3,038,909 | $3,415,500 | | Cash and cash equivalents | $261,318 | $12,315 | | Total assets | $3,822,286 | $3,989,669 | | Unsecured debt, net | $662,277 | $2,400,478 | | Secured debt, net | $1,872,357 | $172,131 | | Total liabilities | $2,669,482 | $2,733,990 | | Total shareholders' equity | $1,152,804 | $1,255,679 | Debt Summary As of December 31, 2024, OPI's total debt was $2.45 billion with a 6.67% weighted average coupon, showing a significant shift towards secured debt Debt Summary as of December 31, 2024 (in thousands) | Debt Type | Principal Balance | Weighted Average Coupon Rate | Weighted Average Years to Maturity | | :-------------------------- | :------------------ | :--------------------------- | :-------------------------------- | | Secured Floating Rate Debt | $425,000 | 7.910% | 2.1 | | Secured Fixed Rate Debt | $1,532,311 | 7.190% | 4.0 | | Unsecured Fixed Rate Debt | $497,627 | 4.006% | 10.6 | | Total / Weighted Average | $2,454,938 | 6.669% | 4.8 | Debt Maturity Schedule OPI's debt maturity schedule reveals substantial maturities in 2027 and 2029, primarily secured fixed rate debt, indicating concentrated refinancing risk Debt Maturity Schedule (in thousands) | Year | Secured Floating Rate Debt | Secured Fixed Rate Debt | Unsecured Fixed Rate Debt | Total | | :--- | :------------------------- | :---------------------- | :------------------------ | :---------- | | 2025 | $- | $- | $140,488 | $140,488 | | 2026 | $- | $- | $80,784 | $80,784 | | 2027 | $425,000 | $267,992 | $217,286 | $910,278 | | 2028 | $- | $123,487 | $- | $123,487 | | 2029 | $- | $910,278 | $- | $910,278 | | 2030 and thereafter | $- | $151,000 | $276,355 | $427,355 | Leverage Ratios, Coverage Ratios and Public Debt Covenants OPI's leverage ratios show increased secured debt and declining coverage ratios, yet the company remains compliant with public debt covenants Leverage Ratios (as of 12/31/2024) | Metric | 12/31/2024 | 12/31/2023 | | :----------------------------------- | :--------- | :--------- | | Net debt / total gross assets | 53.3% | 55.6% | | Net debt / gross book value of real estate assets | 50.7% | 49.3% | | Secured debt / total assets | 51.2% | 4.4% | | Variable rate debt / net debt | 18.0% | 7.9% | Coverage Ratios (as of 12/31/2024) | Metric | 12/31/2024 | 12/31/2023 | | :------------------------------------------------------ | :--------- | :--------- | | Rolling four quarter Adjusted EBITDAre / rolling four quarter interest expense | 1.7x | 2.8x | | Net debt / rolling four quarter Adjusted EBITDAre | 8.5x | 8.2x | Public Debt Covenants (as of 12/31/2024) | Covenant | 12/31/2024 | Minimum/Maximum | | :------------------------------------------------ | :--------- | :-------------- | | Total unencumbered assets / unsecured debt | 169.2% | 150.0% (minimum) | | Total debt / adjusted total assets | 49.8% | 60.0% (maximum) | | Secured debt / adjusted total assets | 39.7% | 40.0% (maximum) | | Consolidated income available for debt service / debt service | 1.6x | 1.50x (minimum) | Capital Expenditures Summary OPI's Q4 2024 capital expenditures decreased to $36.1 million, with lease-related costs as the largest component, alongside reduced rentable square footage Capital Expenditures Summary (in thousands) | Category | For the Three Months Ended 12/31/2024 | For the Three Months Ended 12/31/2023 | | :----------------------------------- | :------------------------------------ | :------------------------------------ | | Lease related costs | $27,107 | $18,497 | | Building improvements | $6,229 | $10,877 | | Recurring capital expenditures | $33,336 | $29,374 | | Development, redevelopment and other activities | $2,813 | $19,371 | | Total capital expenditures | $36,149 | $48,745 | | Average rentable sq. ft. during period | 18,653 | 20,623 | Property Dispositions Since January 1, 2024, OPI disposed of 25 properties totaling 2.89 million square feet for $205.1 million, averaging $70.99 per square foot Property Dispositions Since January 1, 2024 (in thousands) | Metric | Value | | :-------------------- | :------------------ | | Total Number of Properties Sold | 25 | | Total Sq. Ft. Sold | 2,889 | | Aggregate Gross Sales Price | $205,101 | | Average Gross Sales Price Per Sq. Ft. | $70.99 | - Key dispositions include properties in Chicago, IL (248k sq. ft. for $38.5M), Colorado Springs, CO (156k sq. ft. for $26.2M), and Sacramento, CA (338k sq. ft. for $21.0M)31 Investment in Unconsolidated Joint Venture OPI holds a 51% stake in the Prosperity Metro Plaza joint venture, reporting $17.37 million investment, 73.5% occupancy, and Q4 2024 equity in losses Unconsolidated Joint Venture Details (as of 12/31/2024) | Metric | Value | | :-------------------------- | :------------------ | | Joint Venture | Prosperity Metro Plaza | | OPI Ownership | 51% | | OPI Investment | $17,370 (in thousands) | | Sq. Ft. | 346 (in thousands) | | Occupancy | 73.5% | | Weighted Average Remaining Lease Term | 3.1 years | | Outstanding Unconsolidated Debt (Principal Balance) | $50,000 (in thousands) | | OPI Share of Principal Balance | $25,500 (in thousands) | Results of Operations - Prosperity Metro Plaza (in thousands) | Metric | For the Three Months Ended Dec 31, 2024 | For the Year Ended Dec 31, 2024 | | :-------------------------- | :------------------------------------ | :---------------------------- | | Equity in losses | $(182) | $(758) | | NOI | $676 | $2,662 | | Cash Basis NOI | $670 | $2,549 | Portfolio Information OPI's portfolio information details same-property performance, occupancy, leasing trends, tenant diversity, and lease expiration schedules Summary Same Property Results OPI's same-property portfolio experienced a slight decrease in occupancy to 89.4%, with quarterly NOI and Cash Basis NOI increases, but full-year declines Summary Same Property Results (in thousands, except percentages) | Metric | For the Three Months Ended 12/31/2024 | For the Three Months Ended 12/31/2023 | For the Year Ended 12/31/2024 | For the Year Ended 12/31/2023 | | :-------------------------- | :------------------------------------ | :------------------------------------ | :---------------------------- | :---------------------------- | | Properties (end of period) | 118 | 118 | 118 | 118 | | Rentable sq. ft. | 16,455 | 16,444 | 16,455 | 16,444 | | Percent leased | 89.4% | 91.7% | 89.4% | 91.7% | | Rental income | $108,771 | $109,930 | $430,752 | $441,813 | | Same Property NOI | $67,308 | $66,295 | $264,487 | $277,954 | | Same Property Cash Basis NOI | $60,873 | $58,007 | $241,194 | $249,008 | | Same Property NOI % change | 1.5% | - | (4.8%) | - | | Same Property Cash Basis NOI % change | 4.9% | - | (3.1%) | - | Occupancy and Leasing Summary OPI's Q4 2024 leasing activity totaled 359,000 square feet, with 91% renewals, an overall portfolio occupancy of 85.0%, and a 24.3% increase in GAAP rent Occupancy and Leasing Summary (Q4 2024 vs. Q4 2023) | Metric | 12/31/2024 | 12/31/2023 | | :------------------------------------------ | :--------- | :--------- | | Properties (end of period) | 128 | 152 | | Rentable sq. ft. (in thousands) | 17,763 | 20,541 | | Percentage leased | 85.0% | 86.9% | | Leasing Activity (Sq. Ft. in thousands): | | | | New leases | 33 | 11 | | Renewals | 326 | 185 | | Total | 359 | 196 | | % Change in GAAP Rent (Total) | 24.3% | 0.6% | | Weighted Average Lease Term by Sq. Ft. (years) (Total) | 7.1 | 7.0 | | Leasing Cost and Concession Commitments (Total in thousands) | $15,060 | $7,458 | Tenant Diversity and Credit Characteristics OPI's annualized rental income is diversified across industries, with 57.9% from investment-grade tenants and significant exposure to Real Estate & Financial, Legal, and Technology sectors Percentage of Total Annualized Rental Income by Tenant Credit Character (as of 12/31/2024) | Credit Character | Percentage | | :----------------------- | :--------- | | Investment Grade | 57.9% | | Not Rated | 37.1% | | Non-Investment Grade | 5.0% | - Top tenant industries by annualized rental income include U.S. Government (17.0%), Real Estate & Financial (16.3%), Legal & Other Professional Services (15.1%), Technology & Communications (14.4%), and Government Contractors (8.2%)40 Tenants Representing 1% or More of Total Annualized Rental Income The U.S. Government is OPI's largest tenant at 16.6% of leased square footage, with the top 25 tenants accounting for 60.7% of the portfolio Top Tenants by Leased Square Footage (as of 12/31/2024) | Tenant | Credit Rating | % of Leased Sq. Ft. | | :------------------------------------------ | :-------------- | :------------------ | | U.S. Government | Investment Grade | 16.6% | | Alphabet Inc. (Google) | Investment Grade | 2.6% | | Shook, Hardy & Bacon L.L.P. | Not Rated | 3.9% | | Bank of America Corporation | Investment Grade | 3.8% | | Northrop Grumman Corporation | Investment Grade | 2.2% | | State of California | Investment Grade | 2.4% | | State of Georgia | Investment Grade | 2.0% | | Automatic Data Processing, Inc. | Investment Grade | 1.9% | | Allstate Insurance Corporation | Investment Grade | 3.0% | | Compass Group plc | Investment Grade | 1.8% | | Church & Dwight Co., Inc. | Investment Grade | 1.7% | | Leidos Holdings Inc. | Investment Grade | 1.1% | | Primerica, Inc. | Investment Grade | 2.3% | | BAE Systems plc | Investment Grade | 1.1% | | Total for Top 25 Tenants | | 60.7% | Lease Expiration Schedule OPI faces significant lease expirations in 2025 (13.7% of leased square feet), with a weighted average remaining lease term of 7.4 years by rental income Lease Expiration Schedule (as of 12/31/2024) | Year | % of Total Leased Square Feet Expiring | % of Total Annualized Rental Income Expiring | | :--- | :------------------------------------- | :------------------------------------------- | | 2025 | 13.7% | 9.9% | | 2026 | 3.5% | 4.2% | | 2027 | 11.9% | 10.8% | | 2028 | 3.8% | 6.8% | | 2029 | 7.1% | 7.6% | | 2030 | 6.8% | 6.3% | | 2031 | 9.6% | 8.1% | | 2032 | 3.3% | 4.1% | | 2033 | 7.1% | 4.8% | | 2034 and thereafter | 33.2% | 37.4% | | Total | 100.0% | 100.0% | | Weighted average remaining lease term (in years) | 6.9 (by Sq. Ft.) | 7.4 (by Rental Income) | Appendix The appendix provides detailed calculations for non-GAAP financial measures, property collateral pool information, company profile, and forward-looking statement warnings Company Profile and Governance Information OPI is managed by The RMR Group, with a Board of Trustees and executive officers, and its credit is rated by Moody's and S&P Global - OPI is managed by The RMR Group, an alternative asset management company focused on commercial real estate with over $40 billion in assets under management as of December 31, 202447 - The Board of Trustees includes Donna D. Fraiche, William A. Lamkin, Mark A. Talley, Barbara D. Gilmore, Elena B. Poptodorova (Lead Independent Trustee), and Jennifer B. Clark (Managing Trustee)48 - Executive Officers are Yael Duffy (President and Chief Operating Officer) and Brian E. Donley (Chief Financial Officer)48 - OPI's credit is rated by Moody's Investors Service and S&P Global4849 Calculation and Reconciliation of NOI and Cash Basis NOI For Q4 2024, OPI reported NOI of $71.2 million and Cash Basis NOI of $62.7 million, reconciled from net loss by adjusting for non-cash expenses Calculation of NOI and Cash Basis NOI (in thousands) | Metric | For the Three Months Ended 12/31/2024 | | :------------------------------------------------------ | :------------------------------------ | | Rental income | $118,238 | | Property operating expenses | $(46,994) | | NOI | $71,244 | | Non-cash straight line rent adjustments included in rental income | $(7,306) | | Lease value amortization included in rental income | $(372) | | Lease termination fees included in rental income | $(744) | | Non-cash amortization included in other operating expenses | $(121) | | Cash Basis NOI | $62,701 | Reconciliation of Net (Loss) Income to NOI and Cash Basis NOI (in thousands) | Metric | For the Three Months Ended 12/31/2024 | | :------------------------------------------------------ | :------------------------------------ | | Net (loss) income | $(148,680) | | Add back: Interest expense | $47,340 | | Add back: Loss on early extinguishment of debt | $99,452 | | Add back: Loss on impairment of real estate | $7,999 | | Add back: Depreciation and amortization | $47,958 | | NOI | $71,244 | | Adjustments for Cash Basis NOI | $(8,543) | | Cash Basis NOI | $62,701 | Reconciliation and Calculation of Same Property NOI and Same Property Cash Basis NOI For Q4 2024, OPI's Same Property NOI was $67.3 million and Same Property Cash Basis NOI was $60.9 million, derived by excluding non-same-property NOI and adjusting for non-cash items Reconciliation of NOI to Same Property NOI (in thousands) | Metric | For the Three Months Ended 12/31/2024 | For the Year Ended 12/31/2024 | | :------------------------------------------------------ | :------------------------------------ | :---------------------------- | | NOI | $71,244 | $304,743 | | Less: NOI of properties not included in same property results | $(3,936) | $(40,256) | | Same Property NOI | $67,308 | $264,487 | Calculation of Same Property Cash Basis NOI (in thousands) | Metric | For the Three Months Ended 12/31/2024 | For the Year Ended 12/31/2024 | | :------------------------------------------------------ | :------------------------------------ | :---------------------------- | | Same Property NOI | $67,308 | $264,487 | | Adjustments for Cash Basis NOI | $(6,435) | $(23,293) | | Same Property Cash Basis NOI | $60,873 | $241,194 | Property Details (by Collateral Pool) OPI's property portfolio, totaling 128 properties and 17.76 million square feet with 85.0% occupancy, is detailed by various secured and unencumbered collateral pools Summary of Properties by Collateral Pool (as of 12/31/2024) | Collateral Pool | Number of Properties | Sq. Ft. (in thousands) | Occupancy | Annualized Rental Income (in thousands) | | :-------------------------------- | :------------------- | :--------------------- | :-------- | :------------------------------------ | | Credit Agreement | 19 | 3,603 | 98.4% | $117,566 | | $445M Senior Notes due 2027 | 37 | 4,521 | 83.8% | $97,331 | | $300M Senior Notes due 2029 | 17 | 2,126 | 97.5% | $67,630 | | $610M Senior Notes due 2029 | 19 | 3,218 | 82.8% | $65,628 | | Mortgage Notes | 7 | 1,334 | 100.0% | $34,284 | | Subtotal Secured | 99 | 14,802 | 90.6% | $382,439 | | Unencumbered Properties | 25 | 2,712 | 62.2% | $45,508 | | Unencumbered Properties Held for Sale | 4 | 249 | 0.0% | $- | | Subtotal Unencumbered | 29 | 2,961 | 57.0% | $45,508 | | Total / Weighted Average | 128 | 17,763 | 85.0% | $427,947 | Encumbered Properties - Credit Agreement Properties under the Credit Agreement collateral pool comprise 19 properties with 3.6 million square feet and 98.4% occupancy Credit Agreement Properties (as of 12/31/2024) | Metric | Value | | :-------------------------- | :------------------ | | Number of Properties | 19 | | Sq. Ft. (in thousands) | 3,603 | | Occupancy | 98.4% | | Weighted Average Remaining Lease Term | 6.8 years | | Annualized Rental Income (in thousands) | $117,566 | | Trailing Twelve Months NOI (in thousands) | $70,671 | Encumbered Properties - $445M Senior Notes due 2027 Properties collateralizing the $445 million Senior Notes due 2027 include 37 properties totaling 4.52 million square feet with 83.8% occupancy $445M Senior Notes due 2027 Properties (as of 12/31/2024) | Metric | Value | | :-------------------------- | :------------------ | | Number of Properties | 37 | | Sq. Ft. (in thousands) | 4,521 | | Occupancy | 83.8% | | Weighted Average Remaining Lease Term | 6.9 years | | Annualized Rental Income (in thousands) | $97,331 | | Trailing Twelve Months NOI (in thousands) | $63,241 | Encumbered Properties - $300M Senior Notes due 2029 Properties collateralizing the $300 million Senior Notes due 2029 consist of 17 properties totaling 2.13 million square feet with 97.5% occupancy $300M Senior Notes due 2029 Properties (as of 12/31/2024) | Metric | Value | | :-------------------------- | :------------------ | | Number of Properties | 17 | | Sq. Ft. (in thousands) | 2,126 | | Occupancy | 97.5% | | Weighted Average Remaining Lease Term | 9.1 years | | Annualized Rental Income (in thousands) | $67,630 | | Trailing Twelve Months NOI (in thousands) | $46,005 | Encumbered Properties - $610M Senior Notes due 2029 Properties collateralizing the $610 million Senior Notes due 2029 include 19 properties totaling 3.22 million square feet with 82.8% occupancy $610M Senior Notes due 2029 Properties (as of 12/31/2024) | Metric | Value | | :-------------------------- | :------------------ | | Number of Properties | 19 | | Sq. Ft. (in thousands) | 3,218 | | Occupancy | 82.8% | | Weighted Average Remaining Lease Term | 7.7 years | | Annualized Rental Income (in thousands) | $65,628 | | Trailing Twelve Months NOI (in thousands) | $42,569 | Encumbered Properties - Mortgage Notes Properties under Mortgage Notes collateral comprise 7 properties totaling 1.33 million square feet with 100.0% occupancy Mortgage Notes Properties (as of 12/31/2024) | Metric | Value | | :-------------------------- | :------------------ | | Number of Properties | 7 | | Sq. Ft. (in thousands) | 1,334 | | Occupancy | 100.0% | | Weighted Average Remaining Lease Term | 11.8 years | | Annualized Rental Income (in thousands) | $34,284 | | Trailing Twelve Months NOI (in thousands) | $25,094 | Unencumbered Properties Unencumbered properties consist of 25 properties totaling 2.71 million square feet with 62.2% occupancy Unencumbered Properties (as of 12/31/2024) | Metric | Value | | :-------------------------- | :------------------ | | Number of Properties | 25 | | Sq. Ft. (in thousands) | 2,712 | | Occupancy | 62.2% | | Weighted Average Remaining Lease Term | 3.5 years | | Annualized Rental Income (in thousands) | $45,508 | | Trailing Twelve Months NOI (in thousands) | $26,892 | Unencumbered Properties Held for Sale Unencumbered properties held for sale include 4 properties totaling 249,000 square feet with 0.0% occupancy Unencumbered Properties Held for Sale (as of 12/31/2024) | Metric | Value | | :-------------------------- | :------------------ | | Number of Properties | 4 | | Sq. Ft. (in thousands) | 249 | | Occupancy | 0.0% | | Annualized Rental Income (in thousands) | $- | | Trailing Twelve Months NOI (in thousands) | $(199) | Calculation of EBITDA, EBITDAre and Adjusted EBITDAre For Q4 2024, OPI reported negative EBITDA of $53.4 million, EBITDAre of $31.8 million, and Adjusted EBITDAre of $68.2 million, reconciled from net loss Calculation of EBITDA, EBITDAre and Adjusted EBITDAre (in thousands) | Metric | For the Three Months Ended 12/31/2024 | | :------------------------------------------------------ | :------------------------------------ | | Net (loss) income | $(148,680) | | Add: Interest expense | $47,340 | | Add: Income tax expense (benefit) | $24 | | Add: Depreciation and amortization | $47,958 | | EBITDA | $(53,358) | | Add (less): Loss on impairment of real estate | $7,999 | | Add (less): Loss (gain) on sale of real estate | $13,418 | | Add (less): Equity in net losses of investees | $182 | | EBITDAre | $(31,759) | | Add (less): Transaction related costs | $173 | | Add (less): General and administrative expense paid in common shares | $286 | | Add (less): Loss (gain) on early extinguishment of debt | $99,452 | | Adjusted EBITDAre | $68,152 | Calculation of FFO, Normalized FFO and CAD For Q4 2024, OPI reported negative FFO of $78.7 million, Normalized FFO of $20.9 million, and negative CAD of $16.3 million, with full-year figures also provided Calculation of FFO, Normalized FFO and CAD (in thousands) | Metric | For the Three Months Ended 12/31/2024 | For the Year Ended 12/31/2024 | | :------------------------------------------------------ | :------------------------------------ | :---------------------------- | | Net (loss) income | $(148,680) | $(136,107) | | Add (less): Depreciation and amortization (consolidated) | $47,958 | $194,737 | | Add (less): Depreciation and amortization (unconsolidated JV) | $626 | $2,495 | | Add (less): Loss on impairment of real estate | $7,999 | $181,578 | | Add (less): Loss (gain) on sale of real estate | $13,418 | $7,410 | | FFO | $(78,679) | $250,113 | | Add (less): Transaction related costs | $173 | $1,144 | | Add (less): Loss (gain) on early extinguishment of debt | $99,452 | $(126,185) | | Normalized FFO | $20,946 | $114,548 | | Add (less): Non-cash expenses | $14 | $(394) | | Add (less): Non-cash straight line rent adjustments | $(7,306) | $(31,102) | | Add (less): Net amortization of debt premiums, discounts and issuance costs | $4,202 | $13,463 | | Add (less): Recurring capital expenditures | $(33,336) | $(119,001) | | CAD | $(16,296) | $(14,101) | Non-GAAP Financial Measures and Certain Definitions This section defines OPI's non-GAAP financial measures (NOI, FFO, CAD, EBITDAre) and key terms, explaining their calculation and purpose as supplemental REIT performance indicators - OPI presents non-GAAP financial measures (NOI, Cash Basis NOI, EBITDAre, Adjusted EBITDAre, FFO, Normalized FFO, CAD) as supplemental indicators of operating performance for a REIT, not as alternatives to net income (loss) or liquidity measures73 - NOI and Cash Basis NOI exclude certain components of net income (loss) to focus on property-level operations, with Cash Basis NOI further excluding non-cash straight-line rent adjustments, lease value amortization, and lease termination fees74 - FFO and Normalized FFO are calculated based on Nareit's definition, adjusting net income (loss) for depreciation, amortization, and gains/losses on real estate sales, with Normalized FFO further adjusting for transaction-related costs and early debt extinguishment76 - CAD (Cash Available for Distribution) is defined as Normalized FFO minus real estate-related capital expenditures and adjusted for certain recurring items and cash-settled amounts excluded from Normalized FFO77 - Investment grade tenants include those with investment-grade ratings or investment-grade parent entities, accounting for 57.9% of annualized rental income as of December 31, 202482 - Net debt is defined as total debt less cash82 - Weighted average remaining lease term is the average remaining lease term in years, weighted based on annualized rental income85 Warning Concerning Forward-Looking Statements This section warns that the presentation contains forward-looking statements subject to inherent uncertainties and risks, including OPI's ability to address going concern doubts and manage liquidity - The presentation contains forward-looking statements subject to inherent uncertainties and risks, which could cause OPI's actual results to differ materially from expectations8687 - Key risks include OPI's ability to address substantial doubt about its going concern, comply with debt agreements and meet financial covenants, make required debt payments, maintain sufficient liquidity, and effectively raise and balance debt and equity capital87 - Other risks involve tenant retention, future leasing activity, demand for office space, asset dispositions, unfavorable market and commercial real estate industry conditions, competition, and the impact of economic downturns or changes in real estate utilization87 - Readers should not place undue reliance on forward-looking statements, and OPI does not intend to update or change them unless required by law89