Office Properties me Trust(US:OPI)2021-04-30 18:51Financial Data and Key Metrics Changes - Normalized FFO for Q1 2021 was $61.8 million or $1.28 per share, exceeding expectations and consensus estimates by $0.04 due to higher than forecasted NOI [27] - CAD for Q1 2021 was $47.7 million or $0.99 per share, with a rolling four-quarter CAD payout ratio of 59% [27] - G&A expense for Q1 was $11.3 million, including $5.2 million of estimated business management incentive fees, down from $7.1 million in the same period last year [28] Business Line Data and Key Metrics Changes - Same property cash basis NOI decreased by $1.6 million or 1.8% compared to Q1 2020, slightly outperforming guidance [32] - Leasing results included 575,000 square feet of new and renewal leasing with a 3.2% roll-up in rent and a consolidated occupancy of 90.8% at the end of the quarter [16][27] Market Data and Key Metrics Changes - Current building utilization is at 30% of portfolio square footage, with expectations for tenants to advance re-entry plans into Q3 and Q4 [15] - The overall leasing pipeline remains robust with discussions covering 3.1 million square feet, including 106,000 square feet of new and renewal leasing signed since quarter end [18] Company Strategy and Development Direction - The company is focused on capital recycling, with a plan to dispose of $100 million to $300 million of properties to invest in newer, less capital-intensive buildings [13] - The acquisition pipeline is trending in excess of $400 million, with an active market for acquisitions and a disciplined approach to transactions [11][10] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the portfolio's performance despite challenges from the COVID-19 pandemic, with rent collections trending above 99% [9] - The company anticipates a decline in same property cash basis NOI for Q2 2021 between 3.5% and 5.5% compared to Q2 2020, driven by known vacancies and lease expirations [33] Other Important Information - The company received the 2021 ENERGY STAR Partner of the Year Sustained Excellence Award, marking the fourth consecutive year of recognition [25] - Interest expense for Q1 was $28.8 million, flat sequentially but up $1.6 million from the prior year due to previous unsecured senior notes issuance [31] Q&A Session Summary Question: On the Boston property that you bought, is there any opportunity to increase occupancy? - Management indicated the goal is to pursue short-term leases while evaluating a larger plan for the consolidated assets in Boston [38] Question: Is the occupancy decline due to the Boston project? - Management clarified that the decline was primarily driven by known move-outs in the Chicago submarket, not the Boston project [39] Question: What are the updated costs and timing for the redevelopment of the vacated property? - The plan is to move forward with redevelopment, targeting Q1 2023 for delivery, with total construction costs around $150 million [41] Question: How competitive is the acquisition pipeline? - Management noted that cap rates for targeted assets remain competitive, with many buyers chasing similar types of assets [42][43] Question: Was the tenant that moved out included in the occupancy numbers? - Management confirmed that the tenant was included in the numbers and will reflect in Q2 [48] Question: What is the expected trajectory for occupancy throughout the year? - Management anticipates occupancy to end the year around 89% to 90%, depending on various factors including asset dispositions [50] Question: Can you break down the leasing pipeline in terms of new leasing versus renewals? - Management indicated that the pipeline is approximately 60% renewal and 40% new leasing [66] Question: What is the coverage of the dividend post-incentive fees? - The year-end projection, including the incentive fee, would result in a payout ratio of about 84% [61]