Orion Office REIT (ONL) - 2021 Q3 - Quarterly Report

Company Overview - Orion Office REIT Inc. owns and operates 92 office properties totaling approximately 10.5 million leasable square feet across 29 states and Puerto Rico [190]. - The company has an equity interest in a joint venture with Arch Street Capital Partners, which owns a portfolio of five office properties totaling approximately 0.8 million leasable square feet [190]. - Orion Office REIT Inc. is classified as an "emerging growth company" under the JOBS Act, allowing it to take advantage of certain reporting exemptions [192]. Financial Position - The company has $620.0 million in consolidated outstanding indebtedness and approximately $15.6 million in cash as of the completion of the Separation and Distribution [206]. - The company expects liquidity needs to be satisfied by cash flows from operations and borrowings under the Revolving Facility [204]. - Approximately $595 million of the net proceeds from the credit facilities was distributed to Realty Income in accordance with the Separation and Distribution Agreement [206]. - The ratio of total debt to total asset value must not exceed 0.60 to 1.00 as per the Credit Agreements [214]. - The company has no material off-balance sheet arrangements that could affect its financial condition [221]. Revenue and Income - Total revenues for the three months ended September 30, 2021, were $40.655 million, a decrease of $1.817 million (4.3%) compared to $42.472 million for the same period in 2020 [226]. - Rental revenue decreased by $1.9 million (4.4%) for the three months ended September 30, 2021, and by $7.2 million (5.6%) for the nine months ended September 30, 2021, compared to the same periods in 2020, primarily due to the sale of three properties [227]. - Net income for the three months ended September 30, 2021, was $6.384 million, down $3.281 million (33.9%) from $9.665 million for the same period in 2020 [226]. - Net income was $6.4 million and $8.5 million for the three and nine months ended September 30, 2021, respectively, representing a decrease of $3.3 million and $33.7 million compared to the same periods in 2020 [239]. Expenses - Property operating expenses decreased by $2.0 million and $3.8 million for the three and nine months ended September 30, 2021, respectively, compared to the same periods in 2020 [229]. - Depreciation and amortization expense decreased by $0.3 million and $3.1 million for the three and nine months ended September 30, 2021, respectively, compared to the same periods in 2020 [231]. - Interest expense decreased by $0.7 million and $1.9 million for the three and nine months ended September 30, 2021, respectively, compared to the same periods in 2020 [233]. - The company recorded impairments of $6.440 million for the three months ended September 30, 2021, compared to no impairments in the same period in 2020 [226]. Cash Flow - Net cash provided by operating activities decreased by $0.9 million during the nine months ended September 30, 2021, compared to the same period in 2020 [247]. - Net cash used in investing activities was $5.9 million during the nine months ended September 30, 2021, compared to net cash provided of $106.4 million during the same period in 2020 [248]. - Net cash provided by operating activities decreased by $0.9 million during the nine months ended September 30, 2021, primarily due to decreased revenues from vacancies [270]. - Net cash used in investing activities decreased by $0.2 million during the nine months ended September 30, 2021, primarily due to less capital expenditures [271]. Dividends and Distributions - The company intends to elect to be taxed as a REIT, requiring it to distribute at least 90% of its REIT taxable income to stockholders [198]. - The company has not paid any dividends as of the date of the report, but intends to make regular distributions to satisfy REIT qualification requirements [218]. - The company expects that initial dividends may exceed net income due to non-cash expenses like depreciation and amortization [219]. Commitments and Obligations - Total contractual obligations as of September 30, 2021, amount to $14.9 million, with $1.3 million due in less than one year and $3.4 million due in more than five years [273]. - Realty Income Office Assets has commitments of $0.8 million for building improvements and $0.4 million for leasing commissions included in other obligations [273]. Legal and Compliance - The company’s management evaluated the effectiveness of disclosure controls and procedures as of September 30, 2021, concluding they were effective at a reasonable assurance level [284]. - As of the end of the reporting period, Realty Income Office Assets is not involved in any material pending legal proceedings [286].