Office Properties me Trust(US:OPI)2022-04-28 20:36Property and Occupancy - As of March 31, 2022, the company owned 174 properties with a total of approximately 22,941,000 rentable square feet, leased to 298 tenants[60] - The occupancy rate for all properties was 88.8% as of March 31, 2022, down from 90.8% in 2021[64] - During Q1 2022, the company experienced lease expirations totaling approximately 853,000 rentable square feet, with new and renewal leases totaling 572,000 square feet[70] - As of March 31, 2022, the company has 392 leases expiring, totaling 20,373 thousand square feet, with an annualized rental income of $572,029 thousand[78] - Approximately 4.2% of rentable square feet and 4.6% of annualized rental income are from tenants with exercisable rights to terminate their leases early[78] - The weighted average remaining lease term is 5.9 years for square feet and 6.1 years for rental income[78] Rental Income and Financial Performance - Rental income for the three months ended March 31, 2022, was $125,387, a decrease of $607 or 0.5% compared to $125,994 in the same period of 2021[92] - Net operating income (NOI) for the three months ended March 31, 2022, was $96,481, a slight decrease of $18 or 0.02% compared to $96,499 in the same period of 2021[109] - The company reported a net loss of $13,407 for the three months ended March 31, 2022, compared to a net income of $37,860 in the same period of 2021, representing a decrease of $51,267 or 135.4%[92] - Total operating expenses increased to $50,873 for the three months ended March 31, 2022, up by $2,848 or 5.9% from $48,025 in the same period of 2021[92] - General and administrative expenses decreased by $5,566 or 49.4% to $5,706 in the three months ended March 31, 2022, compared to $11,272 in the same period of 2021[100] - The company recorded a loss on impairment of real estate totaling $17,047 in the three months ended March 31, 2022, compared to a loss of $7,660 in the same period of 2021, representing an increase of 122.5%[99] - Interest expense decreased to $27,439 for the three months ended March 31, 2022, down by $1,359 or 4.7% from $28,798 in the same period of 2021[103] - The company recorded a net gain on the sale of real estate of $2,149 in the three months ended March 31, 2022, compared to a net gain of $54,004 in the same period of 2021, a decrease of 96.0%[101] - Funds From Operations (FFO) for Q1 2022 was $62,722,000, an increase of 10.4% from $56,609,000 in Q1 2021[112] - Normalized FFO for Q1 2022 was $62,722,000, slightly up from $61,809,000 in Q1 2021, resulting in a Normalized FFO per share of $1.30[112] Capital Expenditures and Investments - The total capital expenditures for Q1 2022 were $48.971 million, significantly higher than $16.402 million in Q1 2021[73] - The company has estimated unspent leasing-related obligations of $128.009 million, with $78.134 million expected to be spent over the next 12 months[75] - Estimated total project costs for the redevelopment of a property in Washington, D.C. are approximately $215,000,000, with 54% of the project pre-leased[124] - The company expects to incur approximately $144,000,000 in costs for the redevelopment of a three-property campus in Seattle, WA, with completion anticipated in Q2 2023[125] - The company is currently marketing over 30 properties containing over 3,000,000 rentable square feet for sale[88] - The company sold four properties during the three months ended March 31, 2022, for an aggregate sales price of $29,470 thousand[87] - The company has entered into agreements to sell two properties containing approximately 470,000 rentable square feet for an aggregate sales price of $38,300 thousand[88] Debt and Liquidity - As of March 31, 2022, the company had debt maturities totaling $2,609,996,000, with significant maturities in 2025 and thereafter[121] - The company maintains estimated unspent leasing-related obligations of $128,009,000, with $78,134,000 expected to be spent over the next 12 months[123] - As of March 31, 2022, the company had an aggregate outstanding principal balance of $2,512,000 in public senior unsecured notes and $97,996 in mortgage notes[130] - The company’s fixed rate debt totaled $2,609,996, with an annual interest expense of $100,612[136] - A hypothetical one percentage point increase in interest rates would increase the annual interest cost by approximately $26,100[138] - The company had no outstanding floating rate debt as of March 31, 2022, but its revolving credit facility matures on January 31, 2023[143] - If fully drawn on the revolving credit facility, a one percentage point increase in interest rates would raise annual interest expense from $12,000 to $19,500[145] - The company has a $750,000,000 revolving credit facility with no amounts outstanding as of March 31, 2022, providing significant liquidity for future acquisitions[118] Market and Economic Conditions - The company continues to monitor the impact of the COVID-19 pandemic on its operations, noting that it has not had a significant adverse impact to date[61] - The company expects to face risks related to the COVID-19 pandemic affecting tenants' ability to pay rent and overall leasing activity[153] - The company believes that recent shifts in workplace practices may impact lease renewals and space utilization by tenants[80] - The company anticipates that overall new leasing volume may remain volatile, particularly due to the ongoing effects of the COVID-19 pandemic and inflationary pressures[160] - The company believes it is well positioned to weather current economic conditions, but the future impact of the COVID-19 pandemic remains uncertain[160] Shareholder Distributions - Quarterly distributions to shareholders totaled $26,634,000 for the three months ended March 31, 2022, with a declared distribution of $0.55 per share for Q2 2022[128] - The company believes it is in a position to maintain or increase distributions to shareholders[153] - The company’s ability to sustain distributions to shareholders and meet debt obligations is influenced by factors such as tenant rent receipts, future earnings, and capital costs[156] Credit and Compliance - The company’s credit agreement includes cross default provisions for other debts exceeding $25,000[132] - The company is currently in compliance with the terms of its credit agreement and senior unsecured notes indentures[130] - The company’s credit ratings will impact borrowing costs, and any downgrade could increase the cost of debt capital[160] Management and Governance - The company’s business and property management agreements with RMR have 20-year terms but allow for early termination under certain circumstances[160] - The company expects to benefit from RMR's Environmental, Social and Governance (ESG) initiatives, but the realization of these benefits is uncertain[160]