Orion Office REIT (ONL) - 2025 Q1 - Quarterly Results

Orion Properties Inc. Q1 2025 Results Announcement Management Commentary Management emphasized strong leasing, strategic dispositions, and a portfolio shift to dedicated-use assets for stable cash flows - The company has achieved strong leasing of over 450,000 square feet so far in 2025, with a robust pipeline of further transactions under discussion[2] - Since 2021, Orion has sold 22 vacant properties, totaling 2.2 million square feet, including three properties sold subsequent to the quarter's end[2] - The company is strategically focusing on increasing its portfolio concentration in dedicated-use assets like flex, laboratory, medical, and governmental properties to support long-term cash flow stability[2] Q1 2025 Operating and Financial Performance Financial Highlights Q1 2025 revenues decreased to $38.0 million, net loss improved to $(9.4) million, but Core FFO declined to $10.7 million ($0.19/share) Q1 2025 vs Q1 2024 Financial Results | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Total Revenues | $38.0 million | $47.2 million | | Net Loss (to common stockholders) | $(9.4) million | $(26.2) million | | Net Loss per Share | $(0.17) | $(0.47) | | Core FFO | $10.7 million | $20.4 million | | Core FFO per Diluted Share | $0.19 | $0.36 | Key Financial Metrics for Q1 2025 | Metric | Value | | :--- | :--- | | FFO | $8.8 million ($0.16/share) | | EBITDA | $15.9 million | | Adjusted EBITDA | $17.4 million | | Net Debt to Annualized YTD Adj. EBITDA | 7.48x | Leasing and Disposition Activity Q1 2025 leasing totaled 380,000 sq ft, with further post-quarter activity and significant property dispositions and pending sales Q1 2025 Leasing Transactions (in thousands sq ft) | Location | Type | Square Feet | Term | | :--- | :--- | :--- | :--- | | Buffalo, New York | New Lease | 160 | 10.0 years | | Denver, Colorado | Renewal | 145 | 2.0 years | | East Windsor, New Jersey | Renewal | 42 | 8.0 years | | Lincolnshire, Illinois | Renewal | 33 | 10.0 years | - Completed an additional 73,000 square feet of leasing activity subsequent to quarter end, including a 15.7-year lease for 46,000 square feet in Parsippany, New Jersey[8] - In April 2025, the company sold three vacant properties (287,000 sq ft) for a gross sales price of $19.1 million[9] Real Estate Portfolio The portfolio as of March 31, 2025, featured 68 operating properties at 74.3% occupancy, $120.1 million Annualized Base Rent, and a fully occupied JV portfolio Portfolio Snapshot (as of March 31, 2025) | Metric | Value | | :--- | :--- | | Operating Properties | 68 | | Occupancy Rate | 74.3% | | Annualized Base Rent | $120.1 million | | % from Investment-Grade Tenants | 72.3% | | Weighted Avg. Remaining Lease Term | 5.2 years | - The Arch Street Joint Venture portfolio of six properties was 100% occupied, with a weighted average remaining lease term of 7.1 years[11] Arch Street Joint Venture Orion provided an $8.3 million member loan to the Arch Street Joint Venture in February 2025, bringing the total receivable to $8.9 million at 15.0% annual interest - In February 2025, the Company made an $8.3 million member loan to the Arch Street Joint Venture to fund leasing costs[12] - The total member loan receivable from the joint venture was $8.9 million as of March 31, 2025, earning 15.0% annual interest[12] Balance Sheet and Liquidity As of March 31, 2025, total debt was $531.2 million, with $227.8 million in liquidity, including $9.8 million cash and $218.0 million credit facility capacity Total Debt Composition (as of March 31, 2025) | Debt Instrument | Amount | | :--- | :--- | | CMBS Loan | $355.0 million | | Credit Facility Revolver | $132.0 million | | San Ramon Loan | $18.0 million | | Proportionate Share of JV Debt | $26.2 million | | Total Debt | $531.2 million | - Total liquidity as of March 31, 2025, was $227.8 million, consisting of $9.8 million in cash and cash equivalents and $218.0 million available on the credit facility revolver[14] Corporate Updates and Outlook Dividend Declaration The Board of Directors declared a Q2 2025 quarterly cash dividend of $0.02 per share, payable July 15, 2025, to stockholders of record as of June 30, 2025 - The Board of Directors declared a Q2 2025 quarterly cash dividend of $0.02 per share[15] 2025 Outlook Orion Properties reaffirmed its 2025 full-year guidance, projecting Core FFO per share between $0.61 and $0.70, and Net Debt to Adjusted EBITDA between 8.0x and 8.8x Reaffirmed 2025 Full-Year Guidance | Metric | Low | High | | :--- | :--- | :--- | | Core FFO per share | $0.61 | $0.70 | | General and Administrative Expenses | $19.5 million | $20.5 million | | Net Debt to Adjusted EBITDA | 8.0x | 8.8x | Appendix: Financial Statements and Reconciliations Consolidated Balance Sheets As of March 31, 2025, total assets were $1.328 billion, with total liabilities at $573.1 million and stockholders' equity at $753.5 million Key Balance Sheet Items (in thousands) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Assets | $1,327,866 | $1,336,422 | | Total Liabilities | $573,070 | $571,166 | | Total Stockholders' Equity | $753,480 | $763,916 | Consolidated Statements of Operations Q1 2025 total revenues were $38.0 million, with net loss attributable to common stockholders improving to $(9.4) million, or $(0.17) per share, due to lower impairment charges Consolidated Statements of Operations (in thousands, except per share data) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Total Revenues | $38,001 | $47,197 | | Total Operating Expenses | $39,141 | $65,247 | | Impairments | $1,709 | $19,685 | | Net Loss Attributable to Common Stockholders | $(9,361) | $(26,232) | | Net Loss Per Share (Basic and Diluted) | $(0.17) | $(0.47) | Reconciliation of FFO, Core FFO, and FAD This section reconciles net loss to non-GAAP metrics, showing Q1 2025 FFO of $8.8 million, Core FFO of $10.7 million, and negative FAD of $(1.5) million, all declining year-over-year Reconciliation of Key Performance Metrics (in thousands) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net Loss Attributable to Common Stockholders | $(9,361) | $(26,232) | | FFO Attributable to Common Stockholders | $8,805 | $18,389 | | Core FFO Attributable to Common Stockholders | $10,653 | $20,365 | | FAD Attributable to Common Stockholders | $(1,475) | $16,035 | Reconciliation of EBITDA, EBITDAre, and Adjusted EBITDA Q1 2025 EBITDA was $15.9 million, EBITDAre $17.6 million, and Adjusted EBITDA $17.4 million, with Adjusted EBITDA decreasing from Q1 2024 due to lower revenues EBITDA Reconciliation (in thousands) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net Loss Attributable to Common Stockholders | $(9,361) | $(26,232) | | EBITDA | $15,860 | $7,355 | | EBITDAre | $17,569 | $27,040 | | Adjusted EBITDA | $17,426 | $26,729 | Financial and Operations Statistics and Ratios Q1 2025 key financial ratios, including Interest Coverage (2.25x) and Fixed Charge Coverage (2.12x), declined from Q1 2024, with Net Debt at $521.4 million and Net Debt to Annualized Adjusted EBITDA at 7.48x Key Coverage Ratios | Ratio | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Interest Coverage Ratio | 2.25x | 3.52x | | Fixed Charge Coverage Ratio | 2.12x | 3.52x | Key Leverage Ratios (as of March 31, 2025) | Ratio | Value | | :--- | :--- | | Net Debt | $521.4 million | | Net Debt to Annualized Adj. EBITDA | 7.48x | | Net Debt Leverage Ratio | 33.5% | | Unencumbered Asset Ratio | 58.4% | Appendix: Definitions and Important Disclosures Definitions of Key Terms and Non-GAAP Measures This section defines non-GAAP financial measures like FFO, Core FFO, FAD, EBITDAre, and Adjusted EBITDA, along with key operational terms, clarifying their use and adjustments - The report includes non-GAAP financial measures such as FFO, Core FFO, FAD, EBITDAre, and Adjusted EBITDA to supplement GAAP results and provide a basis for comparison with other REITs[19][37] - Definitions are provided for key operational and financial terms, including Annualized Base Rent, Occupancy Rate, Net Debt, and Weighted Average Remaining Lease Term, to clarify the metrics used in the report[23][49][52] Forward-Looking Statements This section outlines risks and uncertainties for forward-looking statements, including rising interest rates, inflation, office oversupply, tenant credit risk, and remote work impacts - The report contains forward-looking statements regarding future events, financial conditions, and results of operations, which are based on current assumptions and subject to risks[59] - Identified risks include rising interest rates, inflation, oversupply of office space, tenant credit risk, and the continued impact of remote and hybrid work arrangements on office demand[60]