Office Properties me Trust(US:OPI)2020-05-01 19:28Financial Data and Key Metrics Changes - Normalized FFO for Q1 2020 was $67.6 million or $1.40 per share, exceeding consensus estimates of $1.33 per share [33] - CAD for Q1 2020 was $47.4 million or $0.98 per share, resulting in a CAD payout ratio of 56.1% [35] - April rent collections remained strong with 96% of rent obligations collected [31] Business Line Data and Key Metrics Changes - The company completed almost 600,000 square feet of new and renewal leasing with a 4.1% loss in rent [12] - Consolidated occupancy increased by almost 200 basis points year-over-year to 91.5% [12][26] - Same property cash basis NOI increased by 1.2% year-over-year, beating guidance [41] Market Data and Key Metrics Changes - 62.2% of annualized rents are paid by investment-grade rated tenants, including over 38% from government tenants [11][18] - Approximately 78% of annualized rents are from tenants in essential industries [18] Company Strategy and Development Direction - The company has completed its disposition program to reduce leverage and plans to reinvigorate its capital recycling program once liquidity returns to the market [14] - The acquisition program will remain dormant until attractive opportunities arise [14] - The company aims to maintain its focus on investment-grade tenants and essential industries to mitigate risks [18] Management Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to weather the economic shock from COVID-19 due to low lease expirations and strong liquidity [11][30] - The management anticipates a potential increase in office space demand as companies may require more space for physical distancing [54] - The company expects normalized FFO per share for Q2 2020 to be between $1.33 and $1.36, excluding potential impacts from tenant bankruptcies [43] Other Important Information - The company received the 2020 ENERGY STAR Partner of the Year Sustained Excellence Award for its energy management efforts [29] - 100% of properties remain operational, with protocols in place to ensure tenant and employee safety [23] Q&A Session Summary Question: Are you effectively done with the disposition process? - Yes, the company completed the deleveraging disposition process at the end of 2019 and is not bringing anything to market until liquidity returns [46][47] Question: How do you expect operating expenses to trend? - Operating expenses are expected to decline due to fewer people in buildings, but specific numbers are not overly material [52] Question: What are your thoughts on future space needs from tenants? - Government tenants may need to rethink utilization rates, but overall, most employees prefer returning to the office [54] Question: Are you seeing any stressed owners of assets? - There are distressed owners looking to sell, but pricing has not yet capitulated [60][61] Question: What is the status of your top tenant, Tailor Brands? - The company agreed to defer rent for Tailor Brands for two months [68][70] Question: Any indications of non-renewals from tenants? - A few tenants are expected to vacate, representing about 60 basis points of annualized rent, with some at risk [73]