Orion Office REIT (US:ONL)2022-08-05 22:20Financial Data and Key Metrics Changes - Orion generated total revenue of $52.8 million for Q2 2022, with a net loss attributable to common stockholders of $15.6 million, or a loss of $0.27 per share [25] - Core funds from operations (FFO) were reported at $26.8 million, or $0.47 per share, with adjusted EBITDA at $34.7 million [25] - General and administrative expenses (G&A) for Q2 2022 were $3.3 million, while capital expenditures (CapEx) were $2.4 million [26] Business Line Data and Key Metrics Changes - The portfolio consisted of 91 properties and six unconsolidated joint venture properties, totaling 10.5 million square feet, with an occupancy rate of 86.7% [11] - The weighted average lease term for the portfolio was 4.1 years, with 67.3% of tenants being investment-grade [11][15] - Lease extensions and expansions totaled 206,000 square feet in Nebraska and Illinois, with a new weighted average lease term of 7.8 years [13] Market Data and Key Metrics Changes - The largest markets by state for Orion are Texas and New Jersey, representing 14.3% and 11.2% of annualized base rent, respectively [12] - Approximately 31.1% of annualized base rent is derived from Sun Belt markets [12] Company Strategy and Development Direction - The company is focused on asset management and repositioning to address lease maturities and vacancies, with a strategy to sell vacant and non-core assets [16][19] - Orion aims to maintain a disciplined approach to acquisitions, considering the macroeconomic environment and current valuation [20][21] - The company has declared a quarterly dividend of $0.10 per share for Q3 2022, with plans to increase the payout ratio over time [22][29] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the suburban net lease office market and the company's ability to grow and maximize long-term shareholder value [9][10] - The company anticipates continued pressure on earnings performance due to lease expirations and the need for capital expenditures [19][30] - Updated guidance for core FFO is now expected to range from $1.74 to $1.78 per share, reflecting adjustments based on lease expirations and G&A expenses [33] Other Important Information - The company ended the quarter with $628.3 million of outstanding debt, with over 84% of the debt fixed or swapped to fixed rate [28] - Total liquidity was reported at $374 million, consisting of available capacity on the revolving credit facility and cash [28] Q&A Session Summary Question: Insights on asset dispositions and market conditions - Management noted that the assets targeted for sale are specialized and have received strong interest, with six properties under contract and more under LOI [35][36] Question: Guidance on future revenue and capital expenditures - Management indicated that lease expirations earlier in the year would impact revenues, and capital expenditures are expected to range between $5 and $10 per square foot for new and renewed leases [37][38] Question: Details on vacant properties and carrying costs - Approximately half of the properties under contract for sale are currently vacant, with carrying costs averaging around $7 per square foot per year [42][44] Question: Renewal probabilities for tenants with expirations in 2023 and 2024 - Management expects volatility in renewal rates but believes there will be strong renewal opportunities over time [49]