Orion Office REIT (US:ONL)2022-05-05 17:52Financial Data and Key Metrics Changes - Orion generated total revenue of $53.2 million for Q1 2022, with a net loss attributable to common stockholders of $9.9 million or $0.17 per share [21] - Core funds from operations (FFO) were reported at $28 million or $0.49 per share, and adjusted EBITDA was $34.9 million [21] - General and administrative expenses (G&A) for Q1 2022 were $3.5 million, with capital expenditures (CapEx) at $1.4 million [22] Business Line Data and Key Metrics Changes - The portfolio consists of 92 properties and 6 unconsolidated joint venture properties, totaling 10.6 million square feet with an occupancy rate of 88.3% [10] - 67% of the annualized base rent comes from investment-grade tenants, and over 80% of leases are either triple or double net [10] - The weighted average lease term remained steady at 4.1 years at quarter-end [13] Market Data and Key Metrics Changes - The largest markets by state are Texas and New Jersey, representing 14.1% and 12% of annualized base rent, respectively [11] - Over 25% of annualized base rent is derived from Sun Belt markets, indicating a strategic focus on high-quality suburban office properties [11] Company Strategy and Development Direction - The company aims to retain tenants, lease vacant space, and grow its joint venture with Arch Street Capital while selling non-core assets to maximize long-term value [8][10] - Orion is positioned as a specialized opportunity in suburban net lease office properties, focusing on demographic and economic tailwinds [11] - The strategy includes active asset management and targeted capital recycling to unlock and maximize value [18][20] Management's Comments on Operating Environment and Future Outlook - Management acknowledges significant challenges ahead but expresses confidence in the team's ability to execute the business plan [16] - The current economic outlook presents challenges, but there are opportunities for value creation through active management [17] - The company intends to position the portfolio for upward pressure on the payout ratio over time, although this will take time [19] Other Important Information - The company ended the quarter with 10 vacant properties, which are considered a drag on earnings, and plans to dispose of non-core assets [15] - Orion's Board of Directors declared a quarterly dividend of $0.10 per share for Q2 2022 [24] Q&A Session Summary Question: Regarding net debt and guidance - Management indicated that the net debt of 4.5x is a combination of expected spending on the portfolio and potential acquisition activity [31] Question: Non-core properties for potential recycling - Management estimates that 10 to 15 properties are considered non-core, which may be sold to recycle capital into better long-term yield assets [32] Question: Tenant decision-making process - Management noted that while tenant renewals are still occurring, the decision-making process has lengthened due to various factors, including the pandemic [33] Question: Timing of tenant decisions - Management confirmed that the decision-making timelines for tenants remain fluid and have not significantly changed [37] Question: Property sales expectations - Management expects to have property sales flowing through in the next couple of quarters, with ongoing discussions on several properties [38]