8-K
Orion Properties Inc. (ONL)
| UNITED STATES |
|---|
| SECURITIES AND EXCHANGE COMMISSION |
| Washington, D.C. 20549 |
________________________
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): August 3, 2022
| ORION OFFICE REIT INC. | |||||||
|---|---|---|---|---|---|---|---|
| (Exact name of Registrant as specified in its charter) | |||||||
| Maryland | 001-40873 | 87-1656425 | |||||
| (State or Other Jurisdiction of Incorporation or Organization | (Commission File Number) | (I.R.S. Employer Identification No.) | 2325 E. Camelback Road, Suite 850 | ||||
| --- | --- | --- | |||||
| Phoenix, | AZ | 85016 | |||||
| (Address of principal executive offices, including zip code) | (602) | 698-1002 | |||||
| --- | --- | ||||||
| (Registrant’s telephone number, including area code) | |||||||
| N/A | |||||||
| (former name or former address, if changed since last report) |
________________
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
| Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934: | |||
|---|---|---|---|
| Title of each class: | Trading symbol(s): | Name of each exchange on which registered: | |
| Common Stock | $0.001 par value per share | ONL | New York Stock Exchange |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company x
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Item 2.02. Results of Operations and Financial Condition.
On August 3, 2022, Orion Office REIT Inc. furnished the following documents: (i) a press release relating to its second quarter 2022 financial results and related matters, attached hereto as Exhibit 99.1; and (ii) supplemental information for the quarter ended June 30, 2022, attached hereto as Exhibit 99.2. The information set forth in this Item 2.02 and in the attached Exhibits 99.1 and 99.2 is deemed to be “furnished” and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that Section. The information set forth in this Item 2.02, including Exhibits 99.1 and 99.2, shall not be deemed incorporated by reference into any filing under the Exchange Act or the Securities Act of 1933, as amended, regardless of any general incorporation language in such filing.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
| Exhibit No. | Description |
|---|---|
| 99.1 | Press Release issued August 3, 2022 relating to Second Quarter 2022 Financial Results and Related Matters |
| 99.2 | Supplemental Information for the Quarter Ended June 30, 2022 |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, each registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| ORION OFFICE REIT INC. | |
|---|---|
| By: | /s/ Gavin B. Brandon |
| Name: | Gavin B. Brandon |
| Title: | Chief Financial Officer, Executive Vice President and Treasurer |
Date: August 3, 2022
Document
Exhibit 99.1
FOR IMMEDIATE RELEASE
Orion Office REIT Inc.® Announces Second Quarter 2022 Results
Total Revenue of $52.8 million -
Core FFO of $26.8 million, or $0.47 Per Share -
Secured 206,000 Square Feet of Lease Extensions -
Sold Two Properties for $9.2 million and Agreements in Place to Sell Six Additional Properties for $18.9 million -
Phoenix, AZ, August 3, 2022 -- Orion Office REIT Inc. (NYSE: ONL) (“Orion” or the “Company”), a fully-integrated real estate investment trust focused on the ownership, acquisition and management of single-tenant net lease mission-critical suburban office properties located across the U.S., announced today its operating results for the second quarter ended June 30, 2022. Orion commenced operations on November 12, 2021 after being spun-off by Realty Income Corporation.
“In the second quarter, we continued to lease up the portfolio, as we secured multiple lease extensions and are actively negotiating on several more. We also made further progress in disposing of non-core or vacant properties that we inherited in our November 2021 spin-off, with the sale of two properties for net proceeds of $9.2 million and agreements now in place to sell six additional properties for $18.9 million”, commented Paul McDowell, Orion’s Chief Executive Officer and President.
“We remain keenly focused on capital allocation and dedicating our efforts to optimally positioning Orion for future success. While we recognize that these initiatives take time, we are pleased with our progress through our second full quarter of operations and remain excited about the potential of our platform and the opportunity in suburban net lease office.”
Second Quarter 2022 Financial and Operating Highlights
•Total revenue of $52.8 million
•Net Loss Attributable to Common Stockholders of $(15.6) million, or $(0.27) per share
•Funds from Operations (“FFO”) of $26.5 million, or $0.47 per share
•Core FFO of $26.8 million, or $0.47 per share
•EBITDA of $27.0 million, EBITDAre of $34.7 million and Adjusted EBITDA of $34.7 million
Real Estate Portfolio
As of June 30, 2022, Orion’s real estate portfolio consisted of 91 properties as well as a 20% ownership interest in a joint venture comprising six properties. As of June 30, 2022, the Company’s portfolio occupancy rate was 86.7%, with 67.3% of annualized base rent derived from tenants with an investment grade credit rating, and the portfolio’s weighted average remaining lease term was 4.1 years.
Leasing Activity
Orion continues to believe that lease maturities and vacant assets may represent a value creation opportunity in the coming years for the Company. Orion will employ active asset management strategies to attract and retain high-quality creditworthy tenants, drive re-leasing and renewal activity and maximize tenant retention rates.
The Company had the following leasing activity during the quarter ended June 30, 2022:
•A 5.5-year extension covering 75,000 square feet at the Company’s property in Lincoln, Nebraska;
•A 9.5-year extension covering 131,000 square feet at the Company’s property in Waukegan, Illinois.
Inclusive of leasing activity during the quarter ended March 31, 2022, the Company has renewed a total of 344,000 square feet of office space across five different office properties this year and has entered into a lease expansion with an existing tenant at one office property covering an additional 41,000 square feet.
Additionally, Orion is in various stages of negotiation and documentation for additional leases and renewals at multiple properties.
On April 1, 2022, the lease at Orion’s Dublin, Ohio property expired as scheduled, and this property is now vacant and scheduled to be sold this month.
Acquisitions and Dispositions
As previously disclosed, Orion and Arch Street Capital Advisors have entered into a joint venture focused on the acquisition of long-term net leased, single-tenant office properties (the “Joint Venture”). Orion’s 20% interest in the Joint Venture was assumed from Realty Income as part of the Company’s spin-off.
Through June 30, 2022, the Joint Venture has acquired six assets for total real estate investments of approximately $227.1 million. Orion is actively reviewing a number of potential property acquisitions for both its balance sheet and the Joint Venture.
During the quarter and shortly thereafter, Orion closed two dispositions, representing a total of 210,000 square feet, for net proceeds of approximately $9.2 million. The Company also has agreements in place to sell six additional properties, representing 338,000 square feet, for an aggregate purchase price of $18.9 million.
Balance Sheet
As of June 30, 2022, the Company has total debt of $628.3 million, comprised of $175.0 million under the bank term loan, $71.0 million under the Company’s $425.0 million-capacity revolving credit facility, $355.0 million under the CMBS loan, and $27.3 million which represents Orion’s pro rata share of indebtedness of the Joint Venture. During the quarter, the Company repaid $20 million on its outstanding revolving credit facility balance.
As of June 30, 2022, Orion had $374.0 million of liquidity, comprised of $20.0 million cash on hand, including the Company’s pro rata share of cash from the Joint Venture, as well as $354.0 million of undrawn availability on Orion’s revolving credit facility.
Dividend
On August 2, 2022, Orion’s Board of Directors declared a quarterly cash dividend of $0.10 per share for the third quarter of 2022, payable on October 17, 2022, to stockholders of record as of September 30, 2022. The dividend was sized to permit future growth while preserving meaningful free cash flow for reinvestment into the current portfolio and for accretive investments.
2022 Outlook
Due primarily to the impact of a variety of accounting and one-time items such as the recent finalization of purchase price allocations related to the spin-off from Realty Income, the timing of amortization of stock-based compensation under GAAP, an additional one year delay in the SEC requirement for an internal control audit, and a delay in hiring for a number of roles that are now filled, the Company is updating its outlook for 2022 as follows:
| Low | High | ||
|---|---|---|---|
| Core FFO per share | $1.74 | - | $1.78 |
| General and Administrative Expenses | $16 million | - | $16.5 million |
| Net Debt to Adjusted EBITDA | 4.7x | - | 5.0x |
Webcast and Conference Call Information
Orion will host a webcast and conference call to review its financial results at 10:00 a.m. ET on Thursday, August 4, 2022. The call will be led by Paul McDowell, Chief Executive Officer and President, and Gavin Brandon, Chief Financial Officer, Executive Vice President and Treasurer. To participate, the webcast may be accessed live by visiting the “Investors” section of Orion’s website at https://www.onlreit.com/investors. To join the conference call, callers from the United States and Canada should dial 1-877-407-3982, and international callers should dial 1-201-493-6780, ten minutes prior to the scheduled call time.
Replay Information
A replay of the call may be accessed via the web by visiting the “Investors” section of Orion’s website at
https://www.onlreit.com/investors. The conference call replay will be available after 1:00 p.m. ET on Thursday, August 4, 2022 through 11:59 a.m. ET on Thursday, August 18, 2022. To access the replay, callers may dial 1-844-512-2921 (domestic) or 1-412-317-6671 (international) and use passcode, 13730303.
Non-GAAP Financial Measures
To supplement the presentation of the Company’s financial results prepared in accordance with U.S. generally accepted accounting principles ("GAAP"), this press release and the accompanying quarterly supplemental information as of and for the period ended June 30, 2022 contain certain financial measures that are not prepared in accordance with GAAP, including Funds from Operations (“FFO”), Core Funds from Operations (“Core FFO”), Funds Available for Distribution (“FAD”), Earnings Before Interest, Taxes, Depreciation and Amortization for Real Estate (“EBITDAre”), and Adjusted EBITDA. Please see the attachments to this press release for how Orion defines these non-GAAP financial measures and a reconciliation to the most directly comparable GAAP measure.
About Orion Office REIT Inc.
Orion Office REIT Inc. (NYSE: ONL) is an internally-managed real estate investment trust engaged in the ownership, acquisition and management of a diversified portfolio of mission-critical and headquarters office buildings located in high-quality suburban markets across the U.S. and leased primarily on a single-tenant net lease basis to creditworthy tenants. The company was founded on July 1, 2021, spun-off from Realty Income (NYSE: O) on November 12, 2021 and began trading on the New York Stock Exchange on November 15, 2021. The company is headquartered in Phoenix, Arizona and has an office in New York, New York. For additional information on the company and its properties, please visit onlreit.com.
Investor Relations:
Email: investors@onlreit.com
Phone: 602-675-0338
About the Data
This data and other information described herein are as of and for the three and six months ended June 30, 2022, unless otherwise indicated. Future performance may not be consistent with past performance and is subject to change and inherent risks and uncertainties. This information should be read in conjunction with the financial statements and the Management's Discussion and Analysis of Financial Condition and Results of Operations sections contained in Orion Office REIT Inc.'s (the "Company," "Orion," "us," "our" and "we") Quarterly Report on Form 10-Q for the quarter ended June 30, 2022 and Annual Report on Form 10-K for the year ended December 31, 2021.
Definitions
Annualized Base Rent is the monthly aggregate cash amount charged to tenants under our leases (including monthly base rent receivables and certain contractually obligated reimbursements by our tenants), as of the final date of the applicable period, multiplied by 12, including the Company's pro rata share of such amounts related to the Unconsolidated Joint Venture. Annualized Base Rent is not indicative of future performance.
CPI refers to a lease in which base rent is adjusted based on changes in a consumer price index.
Double Net Lease ("NN") is a lease under which the tenant agrees to pay all operating expenses associated with the property (e.g., real estate taxes, insurance, maintenance), but excludes some or all major repairs (e.g., roof, structure, parking lot, in each case, as further defined in the applicable lease).
Earnings Before Interest, Taxes, Depreciation and Amortization for Real Estate ("EBITDAre") and Adjusted EBITDA
Due to certain unique operating characteristics of real estate companies, as discussed below, the National Association of Real Estate Investment Trusts, Inc. ("Nareit"), an industry trade group, has promulgated a supplemental performance measure known as Earnings Before Interest, Taxes, Depreciation and Amortization for Real Estate. Nareit defines EBITDAre as net income or loss computed in accordance with GAAP, adjusted for interest expense, income tax expense (benefit), depreciation and amortization, impairment write-downs on real estate, gains or losses from disposition of property and our pro rata share of EBITDAre adjustments related to the Unconsolidated Joint Venture. We calculated EBITDAre in accordance with Nareit's definition described above.
In addition to EBITDAre, we use Adjusted EBITDA as a non-GAAP supplemental performance measure to evaluate the operating performance of the Company. Adjusted EBITDA, as defined by the Company, represents EBITDAre, modified to exclude non-routine items such as acquisition-related expenses and transaction costs. We also exclude certain non-cash items such as impairments of intangible and right of use assets, gains or losses on derivatives, gains or losses on the extinguishment or forgiveness of debt, amortization of intangibles, above-market lease assets and deferred lease incentives, net of amortization of below-market lease liabilities and our pro rata share of Adjusted EBITDA adjustments related to the Unconsolidated Joint Venture. Management believes that excluding these costs from EBITDAre provides investors with supplemental performance information that is consistent with the performance models and analysis used by management, and provides investors a view of the performance of our portfolio over time. Therefore, EBITDAre and Adjusted EBITDA should not be considered as an alternative to net income, as computed in accordance with GAAP. The Company uses Adjusted EBITDA as one measure of its operating performance when formulating corporate goals and evaluating the effectiveness of the Company's strategies. EBITDAre and Adjusted EBITDA may not be comparable to similarly titled measures of other companies.
Occupancy Rate equals the sum of Leased Square Feet divided by Rentable Square Feet and includes the Company's pro rata share of such amounts related to the Unconsolidated Joint Venture, in each case, as of an applicable date.
Enterprise Value equals the sum of the Implied Equity Market Capitalization and Net Debt, in each case, as of an applicable date.
Fixed Charge Coverage Ratio is (a) the sum of (i) Interest Expense, excluding non-cash amortization and (ii) secured debt principal amortization on Adjusted Principal Outstanding, divided by (b) Adjusted EBITDA. Management believes that Fixed Charge Coverage Ratio is a useful supplemental measure of our ability to satisfy fixed financing obligations.
Fixed Dollar or Percent Increase refers to a lease that requires contractual rent increases during the initial term of the lease agreement. A Fixed Dollar or Percent Increase lease may include a period of free rent at the beginning or end of the lease.
Flat refers to a lease that requires equal rent payments, with no contractual increases, throughout the initial term of the lease agreement. A Flat Lease may include a period of free rent at the beginning or end of the lease.
Funds Available for Distribution ("FAD")
Funds available for distribution, as defined by the Company, represents Core FFO, as defined below, modified to exclude capital expenditures, as well as certain non-cash items such as amortization of deferred financing costs, amortization of above market leases and deferred lease incentives, net of amortization of below market lease liabilities, straight-line rental revenue, equity-based compensation, equity in income or losses of the Unconsolidated Joint Venture and our pro rata share of FAD adjustments related to the Unconsolidated Joint Venture. Management believes that adjusting these items from Core FFO provides investors with supplemental performance information that is consistent with the performance models and analysis used by management and provides useful information regarding the Company's ability to fund its dividend.
However, not all REITs calculate FAD and those that do may not calculate FAD the same way, so comparisons with other REITs may not be meaningful. FAD should not be considered as an alternative to net income (loss) or cash flow provided by operating activities as determined under GAAP.
Nareit Funds from Operations ("Nareit FFO" or "FFO") and Core Funds from Operations ("Core FFO")
Due to certain unique operating characteristics of real estate companies, as discussed below, Nareit has promulgated a supplemental performance measure known as FFO, which we believe to be an appropriate supplemental performance measure to reflect the operating performance of a REIT. FFO is not equivalent to our net income or loss as determined under GAAP.
Nareit defines FFO as net income or loss computed in accordance with GAAP adjusted for gains or losses from disposition of real estate assets, depreciation and amortization of real estate assets, impairment write-downs on real estate, and our pro rata share of FFO adjustments related to the Unconsolidated Joint Venture. We calculate FFO in accordance with Nareit's definition described above.
In addition to FFO, we use Core FFO as a non-GAAP supplemental financial performance measure to evaluate the operating performance of the Company. Core FFO, as defined by the Company, excludes from FFO non-recurring or infrequent items such as acquisition-related expenses, transaction costs and gains or losses on extinguishment of swaps and/or debt. Core FFO allows for a comparison of the performance of our operations with other publicly-traded REITs, as Core FFO, or an equivalent measure, is routinely reported by publicly-traded REITs, and we believe often used by analysts and investors for comparison purposes.
For all of these reasons, we believe FFO and Core FFO, in addition to net income (loss), as defined by GAAP, are helpful supplemental performance measures and useful in understanding the various ways in which our management evaluates the performance of the Company over time. However, not all REITs calculate FFO and Core FFO the same way, so comparisons with other REITs may not be meaningful. FFO and Core FFO should not be considered as alternatives to net income (loss) and are not intended to be used as a liquidity measure indicative of cash flow available to fund our cash needs. Neither the SEC, Nareit, nor any other regulatory body has evaluated the acceptability of the exclusions used to adjust FFO in order to calculate Core FFO and its use as a non-GAAP financial performance measure.
GAAP is an abbreviation for generally accepted accounting principles in the United States.
Gross Lease is a lease under which the landlord is responsible for all expenses associated with the property (e.g., real estate taxes, insurance, maintenance and repairs).
Gross Real Estate Investments represent total gross real estate and related assets of Operating Properties and the Company's pro rata share of such amounts related to properties owned by the Unconsolidated Joint Venture, net of gross intangible lease liabilities. Gross Real Estate Investments should not be considered as an alternative to the Company's real estate investments balance as determined in accordance with GAAP or any other GAAP financial measures and should only be considered together with, and as a supplement to, the Company's financial information prepared in accordance with GAAP.
Implied Equity Market Capitalization equals shares of common stock outstanding as of an applicable date, multiplied by the closing sale price of the Company's stock as reported on the New York Stock Exchange on such date.
Industry is derived from the Global Industry Classification Standard ("GICS") Methodology that was developed by Morgan Stanley Capital International ("MSCI") in collaboration with S&P Dow Jones Indices to establish a global, accurate, complete and widely accepted approach to defining industries and classifying securities by industry.
Interest Coverage Ratio equals Adjusted EBITDA divided by Interest Expense, excluding non-cash amortization. Management believes that Interest Coverage Ratio is a useful supplemental measure of our ability to service our debt obligations.
Interest Expense, excluding non-cash amortization is a non-GAAP measure that represents interest expense incurred on the outstanding principal balance of our debt and the Company's pro rata share of the Unconsolidated Joint Venture's interest expense incurred on its outstanding principal balance. This measure excludes the amortization of deferred financing costs, premiums and discounts, which is included in interest expense in accordance with GAAP. Interest Expense, excluding non-cash amortization should not be considered as an alternative to the Company's interest expense as determined in accordance with GAAP or any other GAAP financial measures and should only be considered together with and as a supplement to the Company's financial information prepared in accordance with GAAP.
Investment-Grade Tenants are those with a Standard & Poor’s credit rating of BBB- or higher or a Moody’s credit rating of Baa3 or higher. The ratings may reflect those assigned by Standard & Poor’s or Moody’s to the lease guarantor or the parent company, as applicable. Where we refer to the “Credit Rating” of a tenant, we refer to the Standard & Poor’s or Moody’s credit rating and such rating also may reflect the rating assigned by Standard & Poor’s or Moody’s to the lease guarantor or the parent company, as applicable.
Leased Square Feet is Rentable Square Feet leased and includes such amounts related to the Unconsolidated Joint Venture.
Modified Gross Lease is a lease under which the landlord is responsible for most expenses associated with the property (e.g., real estate taxes, insurance, maintenance and repairs), but passes through some operating expenses to the tenant.
Net Debt, Principal Outstanding and Adjusted Principal Outstanding
Principal Outstanding is a non-GAAP measure that represents the Company's outstanding principal debt balance, excluding certain GAAP adjustments, such as premiums and discounts, financing and issuance costs, and related accumulated amortization. Adjusted Principal Outstanding includes the Company's pro rata share of the Unconsolidated Joint Venture's outstanding principal debt balance. We believe that the presentation of Principal Outstanding and Adjusted Principal Outstanding, which show our contractual debt obligations, provides useful information to investors to assess our overall financial flexibility, capital structure and leverage. Principal Outstanding and Adjusted Principal Outstanding should not be considered as alternatives to the Company's consolidated debt balance as determined in accordance with GAAP or any other GAAP financial measures and should only be considered together with, and as a supplement to, the Company's financial information prepared in accordance with GAAP.
Net Debt is a non-GAAP measure used to show the Company's Adjusted Principal Outstanding, less all cash and cash equivalents and the Company's pro rata share of the Unconsolidated Joint Venture's cash and cash equivalents. We believe that the presentation of Net Debt provides useful information to investors because our management reviews Net Debt as part of its management of our overall liquidity, financial flexibility, capital structure and leverage.
Net Debt Leverage Ratio equals Net Debt divided by Gross Real Estate Investments.
Net Operating Income ("NOI") and Cash NOI
NOI is a non-GAAP performance measure used to evaluate the operating performance of a real estate company. NOI represents total revenues less property operating expenses and excludes fee revenue earned for services to the Unconsolidated Joint Venture, impairment, depreciation and amortization, general and administrative expenses, acquisition-related expenses and transaction costs. Cash NOI excludes the impact of certain GAAP adjustments included in rental revenue, such as straight-line rent adjustments and amortization of above-market intangible lease assets and below-market lease intangible liabilities. Cash NOI includes the pro rata share of such amounts from properties owned by the Unconsolidated Joint Venture. It is management's view that NOI and Cash NOI provide investors relevant and useful information because it reflects only income and operating expense items that are incurred at the property level and presents them on an unleveraged basis. NOI and Cash NOI should not be considered as an alternative to operating income in accordance with GAAP. Further, NOI and Cash NOI may not be comparable to similarly titled measures of other companies.
Operating Properties refers to all properties owned and consolidated by the Company as of the applicable date.
Property Operating Expense includes reimbursable and non-reimbursable costs to operate a property, including real estate taxes, utilities, insurance, repairs, maintenance, legal, property management fees, etc.
Rentable Square Feet is leasable square feet of Operating Properties and the Company's pro rata share of leasable square feet of properties owned by the Unconsolidated Joint Venture.
Triple Net Lease ("NNN") is a lease under which the tenant agrees to pay all expenses associated with the property (e.g., real estate taxes, insurance, maintenance and repairs in accordance with the lease terms).
Unconsolidated Joint Venture includes the Company's investment in the Arch Street unconsolidated joint venture formed to acquire and own real estate properties.
Unencumbered Asset Ratio equals unencumbered Gross Real Estate Investments divided by Gross Real Estate Investments. Management believes that Unencumbered Asset Ratio is a useful supplemental measure of our overall liquidity and leverage.
Unencumbered Gross Real Estate Investments equals Gross Real Estate Investments, excluding Gross Real Estate Investments related to properties serving as collateral for the Company's CMBS Loan and the Company's pro rata share of properties owned by the Unconsolidated Joint Venture that are pledged as collateral under mortgage debt. Unencumbered Gross Real Estate Investments includes otherwise unencumbered properties that are part of the unencumbered property pool under our credit facility and therefore not available to serve as collateral under other borrowings.
Weighted Average Remaining Lease Term is the number of years remaining on each respective lease as of the applicable date, weighted based on Annualized Base Rent and includes the years remaining on each of the respective leases of the Unconsolidated Joint Venture, weighted based on the Company's pro rata share of Annualized Base Rent related to the Unconsolidated Joint Venture.
Forward-Looking Statements
Information set forth in this press release contains “forward-looking statements” which reflect the Company's expectations and projections regarding future events and plans, the Company's future financial condition, results of operations, liquidity and business, including leasing and occupancy, acquisitions, dispositions, rent receipts, the payment of future dividends, the Company’s future growth and the impact of the coronavirus (COVID-19) on the Company's business. Generally, the words "anticipates," "assumes," "believes," "continues," "could," "estimates," "expects," "goals," "intends," "may," "plans," "projects," "seeks," "should," "targets," "will," “guidance,” variations of such words and similar expressions identify forward-looking statements. These forward-looking statements are based on information currently available to the Company and involve a number of known and unknown assumptions and risks, uncertainties and other factors, which may be difficult to predict and beyond the Company's control, that could cause actual events and plans or could cause the Company's business, financial condition, liquidity and results of operations to differ materially from those expressed or implied in the forward-looking statements. Further, information regarding historical rent collections should not serve as an indication of future rent collections.
The following factors, among others, could cause actual results to differ materially from those set forth in the forward-looking statements:
•the risk of rising interest rates, including that our borrowing costs may increase and we may be unable to refinance our debt obligations on favorable terms or at all;
•the risk of inflation, including that our operating costs, such as insurance premiums, utilities, real estate taxes, capital expenditures and repair and maintenance costs, may rise;
•conditions associated with the global market, including an oversupply of office space, tenant credit risk and general economic conditions;
•the extent to which the ongoing COVID-19 pandemic or any future pandemic or outbreak of a highly infectious or contagious disease or fear of such pandemics or outbreaks impacts our business, operating results, financial condition and prospects, which is highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the COVID-19 pandemic and its impact on the U.S. economy and potential changes in tenant behavior that could adversely affect the use of and demand for office space;
•our ability to acquire new properties and sell non-core assets on favorable terms and in a timely manner, or at all;
•our ability to comply with the terms of our credit agreements or to meet the debt obligations on certain of our properties;
•our ability to access the capital markets to raise additional equity or refinance maturing debt on favorable terms or at all;
•changes in the real estate industry and in performance of the financial markets and interest rates and our ability to effectively hedge against interest rate changes;
•the risk of tenants defaulting on their lease obligations, which is heightened due to our focus on single tenant properties;
•our ability to renew leases with existing tenants or re-let vacant space to new tenants on favorable terms or at all;
•the cost of rent concessions, tenant improvement allowances and leasing commissions;
•the potential for termination of existing leases pursuant to tenant termination rights;
•the amount, growth and relative inelasticity of our expenses;
•risks associated with the ownership and development of real property;
•risks associated with our joint venture with an affiliate of Arch Street Capital Partners and any potential future equity investments;
•our ability to close pending real estate transactions, which may be subject to conditions that are outside of our control;
•risks associated with acquisitions, including the integration of the office portfolios of Realty Income and VEREIT into Orion;
•Realty Income’s inability or failure to perform under the various transaction agreements effecting the Separation and the Distribution;
•risks associated with the fact that we have a limited operating history and our future performance is difficult to predict;
•our properties may be subject to impairment charges;
•risks resulting from losses in excess or insured limits or uninsured losses; and
•risks associated with the potential volatility of our common stock.
Additional factors that may affect future results are contained in the Company's filings with the SEC, which are available at the SEC’s website at www.sec.gov. The Company disclaims any obligation to publicly update or revise any forward-looking statements, whether as a result of changes in underlying assumptions or factors, new information, future events or otherwise, except as required by law.
ORION OFFICE REIT INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except for share and per share data) (Unaudited)
| June 30, 2022 | December 31, 2021 | |||
|---|---|---|---|---|
| Assets | ||||
| Real estate investments, at cost: | ||||
| Land | $ | 250,724 | $ | 250,194 |
| Buildings, fixtures and improvements | 1,208,475 | 1,231,551 | ||
| Total real estate investments, at cost | 1,459,199 | 1,481,745 | ||
| Less: accumulated depreciation and amortization | 138,642 | 128,109 | ||
| Total real estate investments, net | 1,320,557 | 1,353,636 | ||
| Accounts receivable, net | 25,731 | 17,916 | ||
| Intangible lease assets, net | 247,722 | 298,107 | ||
| Cash and cash equivalents | 19,300 | 29,318 | ||
| Real estate assets held for sale, net | 9,402 | — | ||
| Other assets, net | 91,208 | 60,501 | ||
| Total assets | $ | 1,713,920 | $ | 1,759,478 |
| Liabilities and Equity | ||||
| Bridge facility, net | $ | — | $ | 354,357 |
| Mortgages payable, net | 351,820 | — | ||
| Credit facility term loan, net | 173,133 | 172,490 | ||
| Credit facility revolver | 71,000 | 90,000 | ||
| Accounts payable and accrued expenses | 16,855 | 17,379 | ||
| Below-market lease liabilities, net | 17,381 | 20,609 | ||
| Distributions payable | 5,663 | — | ||
| Other liabilities, net | 20,341 | 16,355 | ||
| Total liabilities | 656,193 | 671,190 | ||
| Common stock | 57 | 57 | ||
| Additional paid-in capital | 1,145,987 | 1,145,278 | ||
| Accumulated other comprehensive income (loss) | 5,851 | 299 | ||
| Accumulated deficit (Total) | (95,562) | (58,715) | ||
| Total stockholders' equity | 1,056,333 | 1,086,919 | ||
| Non-controlling interests | 1,394 | 1,369 | ||
| Total equity | 1,057,727 | 1,088,288 | ||
| Total liabilities and equity | $ | 1,713,920 | $ | 1,759,478 |
ORION OFFICE REIT INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except for share and per share data) (Unaudited)
| Three Months Ended | Six Months Ended | |||
|---|---|---|---|---|
| June 30, 2022 | June 30, 2022 | |||
| Revenues: | ||||
| Rental | $ | 52,659 | $ | 105,676 |
| Fee income from unconsolidated joint venture | 190 | 379 | ||
| Total revenues | 52,849 | 106,055 | ||
| Operating expenses: | ||||
| Property operating | 15,156 | 30,470 | ||
| General and administrative | 3,291 | 6,808 | ||
| Depreciation and amortization | 33,828 | 68,181 | ||
| Impairments | 7,758 | 9,360 | ||
| Acquisition-related | 141 | 204 | ||
| Transaction costs | 208 | 964 | ||
| Total operating expenses | 60,382 | 115,987 | ||
| Other (expense) income: | ||||
| Interest expense, net | (7,867) | (14,714) | ||
| Loss on extinguishment and forgiveness of debt, net | — | (468) | ||
| Other income, net | 48 | 87 | ||
| Equity in income of unconsolidated joint venture | (54) | (95) | ||
| Total other (expenses) income, net | (7,873) | (15,190) | ||
| Loss before taxes | (15,406) | (25,122) | ||
| Provision for income taxes | (164) | (330) | ||
| Net loss | (15,570) | (25,452) | ||
| Net income attributable to non-controlling interest | (1) | (25) | ||
| Net loss attributable to common stockholders | $ | (15,571) | $ | (25,477) |
| Weighted-average shares outstanding - basic and diluted | 56,629 | 56,628 | ||
| Basic and diluted net (loss) income per share attributable to common stockholders | $ | (0.27) | $ | (0.45) |
ORION OFFICE REIT INC.
FFO, CORE FFO and FAD
(In thousands, except for share and per share data) (Unaudited)
| Three Months Ended | Six Months Ended | |||
|---|---|---|---|---|
| June 30, 2022 | June 30, 2022 | |||
| Net loss | $ | (15,571) | $ | (25,477) |
| Depreciation and amortization of real estate assets | 33,811 | 68,148 | ||
| Impairment of real estate | 7,758 | 9,360 | ||
| Proportionate share of Unconsolidated Joint Venture adjustments for items above, as applicable (1) | 461 | 922 | ||
| FFO attributable to common stockholders | $ | 26,459 | $ | 52,953 |
| Adjustments: | ||||
| Acquisition-related expenses | 141 | 204 | ||
| Transaction costs | 208 | 964 | ||
| Loss on extinguishment of debt, net | — | 468 | ||
| Core funds from operations attributable to common stockholders | $ | 26,808 | $ | 54,589 |
| Adjustments: | ||||
| Amortization of deferred financing costs | 1,057 | 2,228 | ||
| Amortization of above and below market leases and deferred lease incentives, net | (315) | (635) | ||
| Straight-line rental revenue | (547) | (1,443) | ||
| Equity-Based Compensation | 439 | 709 | ||
| Equity in income of Unconsolidated Joint Venture | 54 | 95 | ||
| Capital expenditures and leasing costs | (2,381) | (4,782) | ||
| Other adjustments, net | 63 | 126 | ||
| Proportionate share of Unconsolidated Joint Venture adjustments for the items above, as applicable | (5) | 4 | ||
| Funds available for distribution | $ | 25,173 | $ | 50,891 |
| Weighted-average shares outstanding - basic and diluted | 56,629 | 56,628 | ||
| FFO attributable to common stockholders per share | $ | 0.47 | $ | 0.94 |
| Core FFO attributable to common stockholders per share | $ | 0.47 | $ | 0.96 |
| FAD per share | $ | 0.44 | $ | 0.90 |
_______________________________________________
(1)During the three months ended June 30, 2022, the Company identified an inadvertent error in its calculation of the line item “Proportionate share of Unconsolidated Joint Venture adjustments for items above, as applicable” resulting in a $219,000 overstatement of the amount previously reported in this line item for the three months ended March 31, 2022 and a $117,000 overstatement of the amount previously reported in this line item for the year ended December 31, 2021. These errors have been corrected, and the applicable amounts reported herein for the six months ended June 30, 2022 reflect such correction. The applicable amounts reported in future filings will also reflect such correction.
ORION OFFICE REIT INC.
EBITDA, EBITDAre AND ADJUSTED EBITDA
(In thousands) (Unaudited)
| Three Months Ended | Six Months Ended | |||
|---|---|---|---|---|
| June 30, 2022 | June 30, 2022 | |||
| Net loss | $ | (15,571) | $ | (25,477) |
| Adjustments: | ||||
| Interest expense | 7,867 | 14,714 | ||
| Depreciation and amortization | 33,828 | 68,181 | ||
| Provision for income taxes | 164 | 330 | ||
| Proportionate share of Unconsolidated Joint Venture adjustments for items above, as applicable (1) | 672 | 1,315 | ||
| EBITDA | $ | 26,960 | $ | 59,063 |
| Impairment of real estate | 7,758 | 9,360 | ||
| EBITDAre | $ | 34,718 | $ | 68,423 |
| Acquisition-related expenses | 141 | 204 | ||
| Transaction costs | 208 | 964 | ||
| Amortization of above and below market leases and deferred lease incentives, net | (315) | (635) | ||
| Loss on extinguishment and forgiveness of debt, net | — | 468 | ||
| Proportionate share of Unconsolidated Joint Venture adjustments for items above, as applicable | (8) | (15) | ||
| Adjusted EBITDA | $ | 34,744 | $ | 69,409 |
_______________________________________________
(1)During the three months ended June 30, 2022, the Company identified an inadvertent error in its calculation of the line item “Proportionate share of Unconsolidated Joint Venture adjustments for items above, as applicable” resulting in a $219,000 overstatement of the amount previously reported in this line item for the three months ended March 31, 2022 and a $117,000 overstatement of the amount previously reported in this line item for the year ended December 31, 2021. These errors have been corrected, and the applicable amounts reported herein for the six months ended June 30, 2022 reflect such correction. The applicable amounts reported in future filings will also reflect such correction.
ORION OFFICE REIT INC.
FINANCIAL AND OPERATIONS STATISTICS AND RATIOS
(Dollars in thousands) (Unaudited)
| Three Months Ended | Six Months Ended | |||
|---|---|---|---|---|
| June 30, 2022 | June 30, 2022 | |||
| Interest expense - as reported | $ | 7,867 | $ | 14,714 |
| Adjustments: | ||||
| Amortization of deferred financing costs and other non-cash charges | (1,057) | (2,228) | ||
| Proportionate share of Unconsolidated Joint Venture Interest Expense, excluding non-cash amortization | 155 | 271 | ||
| Interest Expense, excluding non-cash amortization | $ | 6,965 | $ | 12,757 |
| Interest Coverage Ratio | June 30, 2022 | March 31, 2022 | ||
| --- | --- | --- | --- | --- |
| Interest Expense, excluding non-cash amortization (1) | $ | 6,965 | $ | 5,791 |
| Adjusted EBITDA (2) | 34,744 | 34,665 | ||
| Interest Coverage Ratio | 4.99x | 5.99x | ||
| Fixed Charge Coverage Ratio | ||||
| Interest Expense, excluding non-cash amortization (1) | $ | 6,965 | $ | 5,791 |
| Secured debt principal amortization | — | — | ||
| Total fixed charges | 6,965 | 5,791 | ||
| Adjusted EBITDA (2) | 34,744 | 34,665 | ||
| Fixed Charge Coverage Ratio | 4.99x | 5.99x |
_______________________________________________
(1)Refer to the Statement of Operations for interest expense calculated in accordance with GAAP and to the table above for the required reconciliation to the most directly comparable GAAP financial measure.
(2)Refer to the Statement of Operations for net income calculated in accordance with GAAP and to the EBITDAre and Adjusted EBITDA tables above for the required reconciliation to the most directly comparable GAAP financial measure.
| Net Debt | June 30, 2022 | March 31, 2022 | ||||
|---|---|---|---|---|---|---|
| Mortgages payable, net | $ | 351,820 | $ | 351,648 | ||
| Credit facility term loan, net | 173,133 | 172,793 | ||||
| Credit facility revolver | 71,000 | 91,000 | ||||
| Total debt - as reported | 595,953 | 615,441 | ||||
| Deferred financing costs, net | 5,047 | 5,559 | ||||
| Principal Outstanding | 601,000 | 621,000 | ||||
| Proportionate share of Unconsolidated Joint Venture Principal Outstanding | 27,332 | 27,332 | ||||
| Adjusted Principal Outstanding | $ | 628,332 | $ | 648,332 | ||
| Cash and cash equivalents | (19,300) | (18,585) | ||||
| Proportionate share of Unconsolidated Joint Venture cash and cash equivalents | (623) | (652) | ||||
| Net Debt | $ | 608,409 | $ | 629,095 | ||
| June 30, 2022 | March 31, 2022 | |||||
| --- | --- | --- | --- | --- | ||
| Total real estate investments, at cost - as reported | $ | 1,459,199 | $ | 1,486,255 | ||
| Adjustments: | ||||||
| Gross intangible lease assets | 371,110 | 370,981 | ||||
| Gross intangible lease liabilities | (35,068) | (35,068) | ||||
| Gross assets held for sale | 9,402 | — | ||||
| Proportionate share of Unconsolidated Joint Venture Gross Real Estate Investments | 45,425 | 45,413 | ||||
| Gross Real Estate Investments | $ | 1,850,068 | $ | 1,867,581 | ||
| June 30, 2022 | March 31, 2022 | |||||
| --- | --- | --- | --- | --- | --- | --- |
| Net Debt Ratios | ||||||
| Net Debt (1) | $ | 608,409 | $ | 629,095 | ||
| Gross Real Estate Investments (1) | 1,850,068 | 1,867,581 | ||||
| Net Debt Leverage Ratio | 32.9 | % | 33.7 | % | ||
| Unencumbered Assets/Real Estate Assets | ||||||
| Unencumbered Gross Real Estate Investments (1) | $ | 1,249,379 | $ | 1,267,128 | ||
| Gross Real Estate Investments (1) | 1,850,068 | 1,867,581 | ||||
| Unencumbered Asset Ratio | 67.5 | % | 67.8 | % |
_______________________________________________
(1)Refer to the Balance Sheet for total debt and real estate investments, at cost calculated in accordance with GAAP and to the table above for the required reconciliation to the most directly comparable GAAP financial measure.
ORION OFFICE REIT INC.
CORE FUNDS FROM OPERATIONS PER DILUTED SHARE - UPDATED 2022 GUIDANCE
(Unaudited)
The Company expects its 2022 Core FFO per diluted share to be in a range between $1.74 and $1.78. This guidance assumes:
• General & Administrative Expenses: $16 million to $16.5 million
• Net Debt to Adjusted EBITDA: 4.7x to 5.0x
The estimated net income per diluted share is not a projection and is provided solely to satisfy the disclosure requirements of the U.S. Securities and Exchange Commission.
The Company does not provide a reconciliation of Net Debt to Adjusted EBITDA guidance to the most directly comparable GAAP measure, due to the inherent difficulty and uncertainty in quantifying certain adjustments principally related to the Company’s investment in the unconsolidated joint venture.
| Low | High | |||
|---|---|---|---|---|
| Diluted net income per share attributable to common stockholders | $ | (0.74) | $ | (0.70) |
| Depreciation and amortization of real estate assets | 2.39 | 2.39 | ||
| Proportionate share of adjustments for unconsolidated joint venture | 0.06 | 0.06 | ||
| FFO attributable to common stockholders per diluted share | 1.71 | 1.75 | ||
| Adjustments (1) | 0.03 | 0.03 | ||
| Core FFO attributable to common stockholders per diluted share | $ | 1.74 | $ | 1.78 |
_______________________________________________
(1)Includes non-routine items such as transaction and acquisition-related expenses.
15
Document
Exhibit 99.2
| Q2 2022 SUPPLEMENTAL INFORMATION | |
|---|---|
| Orion Supplemental Information | |
| --- | |
| June 30, 2022 | |
| Section | Page |
| --- | --- |
| Company Overview | 6 |
| Balance Sheet | 8 |
| Statements of Operations | 9 |
| Funds From Operations (FFO), Core Funds From Operations (Core FFO) and Funds Available for Distribution (FAD) | 10 |
| EBITDA, EBITDAre and Adjusted EBITDA | 11 |
| Capital Structure | 12 |
| Debt Detail | 13 |
| Ratio Analysis | 14 |
| Credit Facility Covenants | 15 |
| Net Operating Income | 16 |
| Diversification Statistics | 17 |
| Top 10 Concentrations | 18 |
| Tenants Comprising Over 1% of Annualized Base Rent | 19 |
| Tenant Industry Diversification | 20 |
| Property Geographic Diversification | 21 |
| Lease Expirations | 22 |
| Lease Summary | 23 |
| Full Portfolio | 24 |
| Unconsolidated Joint Venture Investment Summary | 26 |
| Definitions | 27 |
Orion Office REIT Inc. | WWW.ONLREIT.COM | 2
| Q2 2022 SUPPLEMENTAL INFORMATION |
|---|
| About the Data |
| --- |
This data and other information described herein are as of and for the three months ended June 30, 2022, unless otherwise indicated. Future performance may not be consistent with past performance and is subject to change and inherent risks and uncertainties. This information should be read in conjunction with the financial statements and the Management's Discussion and Analysis of Financial Condition and Results of Operations sections contained in Orion Office REIT Inc.'s (the "Company," "Orion," "us," "our" and "we") Quarterly Report on Form 10-Q for the quarter ended June 30, 2022 and Annual Report on Form 10-K for the year ended December 31, 2021.
Orion Office REIT Inc. | WWW.ONLREIT.COM | 3
| Q2 2022 SUPPLEMENTAL INFORMATION |
|---|
| Forward-Looking Statements |
| --- |
Information set forth herein contains “forward-looking statements” which reflect the Company's expectations and projections regarding future events and plans, the Company's future financial condition, results of operations, liquidity and business, including leasing and occupancy, acquisitions, dispositions, rent receipts, the payment of future dividends, the Company’s future growth and the impact of the coronavirus (COVID-19) on the Company's business. Generally, the words "anticipates," "assumes," "believes," "continues," "could," "estimates," "expects," "goals," "intends," "may," "plans," "projects," "seeks," "should," "targets," "will," "guidance", variations of such words and similar expressions identify forward-looking statements. These forward-looking statements are based on information currently available to the Company and involve a number of known and unknown assumptions and risks, uncertainties and other factors, which may be difficult to predict and beyond the Company's control, that could cause actual events and plans or could cause the Company's business, financial condition, liquidity and results of operations to differ materially from those expressed or implied in the forward-looking statements. Further, information regarding historical rent collections should not serve as an indication of future rent collections.
The following factors, among others, could cause actual results to differ materially from those set forth in the forward-looking statements:
•the risk of rising interest rates, including that our borrowing costs may increase and we may be unable to refinance our debt obligations on favorable terms or at all;
•the risk of inflation, including that our operating costs, such as insurance premiums, utilities, real estate taxes, capital expenditures and repair and maintenance costs, may rise;
•conditions associated with the global market, including an oversupply of office space, tenant credit risk and general economic conditions;
•the extent to which the ongoing COVID-19 pandemic or any future pandemic or outbreak of a highly infectious or contagious disease or fear of such pandemics or outbreaks impacts our business, operating results, financial condition and prospects, which is highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the COVID-19 pandemic and its impact on the U.S. economy and potential changes in tenant behavior that could adversely affect the use of and demand for office space;
•our ability to acquire new properties and sell non-core assets on favorable terms and in a timely manner, or at all;
•our ability to comply with the terms of our credit agreements or to meet the debt obligations on certain of our properties;
•our ability to access the capital markets to raise additional equity or refinance maturing debt on favorable terms or at all;
•changes in the real estate industry and in performance of the financial markets and interest rates and our ability to effectively hedge against interest rate changes;
•the risk of tenants defaulting on their lease obligations, which is heightened due to our focus on single tenant properties;
•our ability to renew leases with existing tenants or re-let vacant space to new tenants on favorable terms or at all;
•the cost of rent concessions, tenant improvement allowances and leasing commissions;
•the potential for termination of existing leases pursuant to tenant termination rights;
•the amount, growth and relative inelasticity of our expenses;
•risks associated with the ownership and development of real property;
•risks associated with our joint venture with an affiliate of Arch Street Capital Partners and any potential future equity investments;
•our ability to close pending real estate transactions, which may be subject to conditions that are outside of our control;
•risks associated with acquisitions, including the integration of the office portfolios of Realty Income Corporation (“Realty Income”) and VEREIT Inc. into Orion;
•Realty Income’s inability or failure to perform under the various transaction agreements effecting the Separation and the Distribution;
•risks associated with the fact that we have a limited operating history and our future performance is difficult to predict;
•our properties may be subject to impairment charges;
Orion Office REIT Inc. | WWW.ONLREIT.COM | 4
| Q2 2022 SUPPLEMENTAL INFORMATION |
|---|
•risks resulting from losses in excess or insured limits or uninsured losses; and
•risks associated with the potential volatility of our common stock.
Additional factors that may affect future results are contained in the Company's filings with the SEC, which are available at the SEC’s website at www.sec.gov. The Company disclaims any obligation to publicly update or revise any forward-looking statements, whether as a result of changes in underlying assumptions or factors, new information, future events or otherwise, except as required by law.
Orion Office REIT Inc. | WWW.ONLREIT.COM | 5
| Q2 2022 SUPPLEMENTAL INFORMATION |
|---|
| Company Overview<br><br>(unaudited) |
| --- |
Orion is a real estate company incorporated in the state of Maryland on July 1, 2021, which intends to qualify and elect to be taxed as a real estate investment trust ("REIT") for U.S. federal income tax purposes, commencing with our initial taxable year ended December 31, 2021.
Orion is a full-service real estate operating company which owns and operates a portfolio of 91 office properties totaling approximately 10.4 million leasable square feet located within 29 states and Puerto Rico. In addition, the Company owns a 20% equity interest in one unconsolidated joint venture with an affiliate of Arch Street Capital Partners, which owns a portfolio consisting of six office properties totaling approximately 1.0 million leasable square feet located within six states. As of June 30, 2022, approximately 67.3% of the Company's Annualized Base Rent was from Investment Grade Tenants, the Company's Occupancy Rate was 86.7% and the Weighted Average Remaining Lease Term was 4.1 years.
The Company's Annualized Base Rent as of June 30, 2022 was approximately $169.0 million. See "Top Ten Concentrations" and "Tenants Comprising Over 1% of Annualized Base Rent" below.
Tenants, Trademarks and Logos
Orion is not affiliated or associated with, is not endorsed by, does not endorse, and is not sponsored by or a sponsor of the tenants or of their products or services pictured or mentioned. The names, logos and all related product and service names, design marks and slogans are the trademarks or service marks of their respective companies.
See the Definitions section for a description of the Company's non-GAAP and operating metrics.
Orion Office REIT Inc. | WWW.ONLREIT.COM | 6
| Q2 2022 SUPPLEMENTAL INFORMATION | |||
|---|---|---|---|
| Company Overview (cont.) | |||
| --- | Senior Management | Board of Directors | |
| --- | --- | ||
| Paul H. McDowell, Chief Executive Officer, President | Reginald H. Gilyard, Non-Executive Chairman | ||
| Gavin B. Brandon, Executive Vice President, Chief Financial Officer and Treasurer | Kathleen R. Allen, Ph.D., Independent Director | ||
| Paul C. Hughes, General Counsel and Secretary | Richard J. Lieb, Independent Director | ||
| Christopher H. Day, Executive Vice President, Chief Operating Officer | Gregory J. Whyte, Independent Director | ||
| Gary E. Landriau, Executive Vice President, Chief Investment Officer | Paul H. McDowell, Chief Executive Officer and Director | ||
| Revea L. Schmidt, Senior Vice President, Chief Accounting Officer |
Corporate Offices and Contact Information
| 2325 E. Camelback Road, Suite 850 | 19 West 44th Street, Suite 1401 |
|---|---|
| Phoenix, AZ 85016 | New York, NY 10036 |
| 602-698-1002 | |
| www.ONLREIT.com |
Trading Symbol: ONL
Stock Exchange Listing: New York Stock Exchange
Transfer Agent
Computershare Trust Company, N.A.
462 South 4th Street, Suite 1600
Louisville, KY 40202
855-866- 0787
Orion Office REIT Inc. | WWW.ONLREIT.COM | 7
| Q2 2022 SUPPLEMENTAL INFORMATION | ||||
|---|---|---|---|---|
| Balance Sheet<br><br>(unaudited, in thousands) | ||||
| --- | ||||
| June 30, 2022 | December 31, 2021 | |||
| --- | --- | --- | --- | --- |
| Assets | ||||
| Real estate investments, at cost: | ||||
| Land | $ | 250,724 | $ | 250,194 |
| Buildings, fixtures and improvements | 1,208,475 | 1,231,551 | ||
| Total real estate investments, at cost | 1,459,199 | 1,481,745 | ||
| Less: accumulated depreciation and amortization | 138,642 | 128,109 | ||
| Total real estate investments, net | 1,320,557 | 1,353,636 | ||
| Accounts receivable, net | 25,731 | 17,916 | ||
| Intangible lease assets, net | 247,722 | 298,107 | ||
| Cash and cash equivalents | 19,300 | 29,318 | ||
| Real estate assets held for sale, net | 9,402 | — | ||
| Other assets, net | 91,208 | 60,501 | ||
| Total assets | $ | 1,713,920 | $ | 1,759,478 |
| Liabilities and Equity | ||||
| Bridge facility, net | $ | — | $ | 354,357 |
| Mortgages payable, net | 351,820 | — | ||
| Credit facility term loan, net | 173,133 | 172,490 | ||
| Credit facility revolver | 71,000 | 90,000 | ||
| Accounts payable and accrued expenses | 16,855 | 17,379 | ||
| Below-market lease liabilities, net | 17,381 | 20,609 | ||
| Distributions payable | 5,663 | — | ||
| Other liabilities, net | 20,341 | 16,355 | ||
| Total liabilities | 656,193 | 671,190 | ||
| Common stock | 57 | 57 | ||
| Additional paid-in capital | 1,145,987 | 1,145,278 | ||
| Accumulated other comprehensive income (loss) | 5,851 | 299 | ||
| Accumulated deficit | (95,562) | (58,715) | ||
| Total stockholders' equity | 1,056,333 | 1,086,919 | ||
| Non-controlling interests | 1,394 | 1,369 | ||
| Total equity | 1,057,727 | 1,088,288 | ||
| Total liabilities and equity | $ | 1,713,920 | $ | 1,759,478 |
Orion Office REIT Inc. | WWW.ONLREIT.COM | 8
| Q2 2022 SUPPLEMENTAL INFORMATION | ||||||
|---|---|---|---|---|---|---|
| Statements of Operations<br><br>(unaudited, in thousands, except per share data) | ||||||
| --- | Three Months Ended | |||||
| --- | --- | --- | --- | --- | ||
| June 30, 2022 | March 31, 2022 | |||||
| Revenues: | ||||||
| Rental | $ | 52,659 | $ | 53,017 | ||
| Fee income from unconsolidated joint venture | 190 | 189 | ||||
| Total revenues | 52,849 | 53,206 | ||||
| Operating expenses: | ||||||
| Property operating | 15,156 | 15,314 | ||||
| General and administrative | 3,291 | 3,517 | ||||
| Depreciation and amortization | 33,828 | 34,353 | ||||
| Impairments | 7,758 | 1,602 | ||||
| Acquisition-related | 141 | 63 | ||||
| Transaction costs | 208 | 756 | ||||
| Total operating expenses | 60,382 | 55,605 | ||||
| Other (expense) income: | ||||||
| Interest expense, net | (7,867) | (6,847) | ||||
| (Loss) gain on extinguishment and forgiveness of debt, net | — | (468) | ||||
| Other income, net | 48 | 39 | ||||
| Equity in income of unconsolidated joint venture | (54) | (41) | ||||
| Total other (expenses) income, net | (7,873) | (7,317) | ||||
| (Loss) income before taxes | (15,406) | (9,716) | ||||
| Provision for income taxes | (164) | (166) | ||||
| Net (loss) income | (15,570) | (9,882) | ||||
| Net (income) loss attributable to non-controlling interest | (1) | (24) | ||||
| Net (loss) income attributable to common stockholders | $ | (15,571) | $ | (9,906) | ||
| Weighted-average shares outstanding - basic and diluted | 56,629 | 56,626 | ||||
| Basic and diluted net (loss) income per share attributable to common stockholders | $ | (0.27) | $ | (0.17) |
Orion Office REIT Inc. | WWW.ONLREIT.COM | 9
| Q2 2022 SUPPLEMENTAL INFORMATION | ||||||
|---|---|---|---|---|---|---|
| Funds From Operations (FFO), Core Funds From Operations (Core FFO) and Funds Available for Distribution (FAD)<br><br>(unaudited, in thousands, except share and per share data) | ||||||
| --- | Three Months Ended | |||||
| --- | --- | --- | --- | --- | ||
| June 30, 2022 | March 31, 2022 | |||||
| Net (loss) income | $ | (15,571) | $ | (9,906) | ||
| Depreciation and amortization of real estate assets | 33,811 | 34,337 | ||||
| Impairment of real estate | 7,758 | 1,602 | ||||
| Proportionate share of Unconsolidated Joint Venture adjustments for items above, as applicable (1) | 461 | 461 | ||||
| FFO attributable to common stockholders | $ | 26,459 | $ | 26,494 | ||
| Adjustments: | ||||||
| Acquisition-related expenses | 141 | 63 | ||||
| Transaction costs | 208 | 756 | ||||
| Loss on extinguishment of debt, net | — | 468 | ||||
| Core funds from operations attributable to common stockholders (1) | $ | 26,808 | $ | 27,781 | ||
| Adjustments: | ||||||
| Amortization of deferred financing costs | 1,057 | 1,171 | ||||
| Amortization of above and below market leases and deferred lease incentives, net of amortization of below-market lease liabilities | (315) | (320) | ||||
| Straight-line rental revenue | (547) | (896) | ||||
| Equity-Based Compensation | 439 | 270 | ||||
| Equity in income of Unconsolidated Joint Venture | 54 | 41 | ||||
| Capital expenditures and leasing costs | (2,381) | (2,401) | ||||
| Other adjustments, net | 63 | 63 | ||||
| Proportionate share of Unconsolidated Joint Venture adjustments for the items above, as applicable | (5) | 9 | ||||
| Funds available for distribution (1) | $ | 25,173 | $ | 25,718 | ||
| Weighted-average shares outstanding - basic and diluted | 56,629 | 56,626 | ||||
| FFO attributable to common stockholders per share | $ | 0.47 | $ | 0.47 | ||
| Core FFO attributable to common stockholders per share | $ | 0.47 | $ | 0.49 | ||
| FAD per share | $ | 0.44 | $ | 0.45 |
___________________________________
(1) During the three months ended June 30, 2022, the Company identified an inadvertent error in its calculation of the line item “Proportionate share of Unconsolidated Joint Venture
adjustments for items above, as applicable” resulting in a $219,000 overstatement of the amount previously reported in this line item for the three months ended March 31, 2022 and
a $117,000 overstatement of the amount previously reported in this line item for the year ended December 31, 2021. These errors have been corrected, and the applicable amounts
reported herein for the three months ended March 31, 2022 reflect such correction. The applicable amounts reported in future Supplemental Information Packages will also reflect
such correction.
See the Definitions section for a description of the Company's non-GAAP and operating metrics.
Orion Office REIT Inc. | WWW.ONLREIT.COM | 10
| Q2 2022 SUPPLEMENTAL INFORMATION | ||||||
|---|---|---|---|---|---|---|
| EBITDA, EBITDAre and Adjusted EBITDA<br><br>(unaudited, in thousands) | ||||||
| --- | Three Months Ended | |||||
| --- | --- | --- | --- | --- | ||
| June 30, 2022 | March 31, 2022 | |||||
| Net (loss) income | $ | (15,571) | $ | (9,906) | ||
| Adjustments: | ||||||
| Interest expense | 7,867 | 6,847 | ||||
| Depreciation and amortization | 33,828 | 34,353 | ||||
| Provision for income taxes | 164 | 166 | ||||
| Proportionate share of Unconsolidated Joint Venture adjustments for items above, as applicable (1) | 672 | 643 | ||||
| EBITDA (1) | $ | 26,960 | $ | 32,103 | ||
| Gain on disposition of real estate assets, net | — | — | ||||
| Impairment of real estate | 7,758 | 1,602 | ||||
| Proportionate share of Unconsolidated Joint Venture | — | — | ||||
| EBITDAre (1) | $ | 34,718 | $ | 33,705 | ||
| Acquisition related | 141 | 63 | ||||
| Transaction costs | 208 | 756 | ||||
| Amortization of above-market lease assets and deferred lease incentives, net of amortization of below-market lease liabilities | (315) | (320) | ||||
| Loss on extinguishment and forgiveness of debt, net | — | 468 | ||||
| Proportionate share of Unconsolidated Joint Venture adjustments for items above, as applicable | (8) | (7) | ||||
| Adjusted EBITDA (1) | $ | 34,744 | $ | 34,665 |
___________________________________
(1) During the three months ended June 30, 2022, the Company identified an inadvertent error in its calculation of the line item “Proportionate share of Unconsolidated Joint Venture
adjustments for items above, as applicable” resulting in a $219,000 overstatement of the amount previously reported in this line item for the three months ended March 31, 2022 and
a $117,000 overstatement of the amount previously reported in this line item for the year ended December 31, 2021. These errors have been corrected, and the applicable amounts
reported herein for the three months ended March 31, 2022 reflect such correction. The applicable amounts reported in future Supplemental Information Packages will also reflect
such correction.
See the Definitions section for a description of the Company's non-GAAP and operating metrics.
Orion Office REIT Inc. | WWW.ONLREIT.COM | 11
| Q2 2022 SUPPLEMENTAL INFORMATION |
|---|
| Capital Structure<br><br>(unaudited, dollars and shares in thousands, except per share amounts) |
| --- |
| Common equity | 49.7% |
|---|---|
| Mortgages payable, net | 28.4% |
| Credit facility term loan | 14.0% |
| Credit facility revolver | 5.7% |
| Proportionate share of Unconsolidated Joint Venture Debt | 2.2% |
Fixed vs. Variable Rate Debt
| Fixed and Swapped to Fixed | 84.4 | % | ||||
|---|---|---|---|---|---|---|
| Variable | 15.6 | % | ||||
| Orion Capitalization Table | ||||||
| --- | --- | --- | --- | --- | --- | --- |
| June 30, 2022 | ||||||
| Common shares outstanding | 56,635 | |||||
| Stock price | $ | 10.96 | ||||
| Implied Equity Market Capitalization | $ | 620,720 | ||||
| Wtd. Avg. Maturity<br>(Years) | Interest Rate (1) | June 30, 2022 | ||||
| Proportionate share of Unconsolidated JV Debt | 2.4 | 3.05 | % | $ | 27,332 | |
| Mortgages payable, net | 4.6 | 4.97 | % | 355,000 | ||
| Total secured debt | 4.5 | 4.83 | % | $ | 382,332 | |
| Credit facility term loan (2) (3) | 1.4 | 3.19 | % | 175,000 | ||
| Credit facility revolver (3) | 2.4 | 4.05 | % | 71,000 | ||
| Total unsecured debt | 1.7 | 3.44 | % | 246,000 | ||
| Total Principal Outstanding | 3.4 | 4.29 | % | $ | 628,332 | |
| Total Capitalization | $ | 1,249,052 | ||||
| Cash and cash equivalents | 19,300 | |||||
| Proportionate share of Unconsolidated Joint Ventures' cash and cash equivalents | 623 | |||||
| Enterprise Value | $ | 1,229,129 | ||||
| Net Debt/Enterprise Value | 49.5 | % | ||||
| Net Debt/Gross Real Estate Investments | 32.9 | % | ||||
| Fixed Charge Coverage Ratio | 4.99x | |||||
| Liquidity (4) | $ | 373,923 | ||||
| Net Debt/Annualized Adjusted EBITDA | 4.38x |
___________________________________
(1)Weighted average interest rate for variable rate debt represents the interest rate in effect as of June 30, 2022.
(2)The term loan is a floating rate facility, however, the Company has entered into an interest rate swap transaction which effectively fixes the interest rate on the term loan indebtedness at 3.19% per annum.
(3)Under the related loan agreements, these borrowings which are secured only by a pledge of equity interests are treated as unsecured indebtedness. Certain otherwise unencumbered properties that are part of the unencumbered property pool under the related loan agreements are therefore not available to serve as collateral under other borrowings.
(4)Liquidity represents cash and cash equivalents of $19.9 million and approximately $354.0 million available capacity on our $425.0 million revolving credit facility as of June 30, 2022.
See the Definitions section for a description of the Company's non-GAAP and operating metrics.
Orion Office REIT Inc. | WWW.ONLREIT.COM | 12
| Q2 2022 SUPPLEMENTAL INFORMATION | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Debt Detail<br><br>(unaudited, dollars in thousands) | ||||||||||||
| --- | Principal Payments Due | Total | 2022 | 2023 | 2024 | Thereafter | ||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | ||
| Credit facility revolver | $ | 71,000 | $ | — | $ | — | $ | 71,000 | $ | — | ||
| Credit facility term loan | 175,000 | — | 175,000 | — | — | |||||||
| Mortgages payable | 355,000 | — | — | — | 355,000 | |||||||
| Proportionate share of Unconsolidated Joint Venture debt | 27,332 | — | — | 27,332 | — | |||||||
| Total Principal Outstanding | $ | 628,332 | $ | — | $ | 175,000 | $ | 98,332 | $ | 355,000 | ||
| Debt Type | Percentage of Principal Outstanding | Interest Rate | Weighted-Average Years to Maturity | |||||||||
| --- | --- | --- | --- | --- | --- | |||||||
| Credit facility revolver | 11.3 | % | 4.05 | % | 2.4 | |||||||
| Credit facility term loan | 27.9 | % | 3.19 | % | 1.4 | |||||||
| Mortgages payable | 56.5 | % | 4.97 | % | 4.6 | |||||||
| Proportionate share of Unconsolidated Joint Venture debt | 4.3 | % | 3.05 | % | 2.4 | |||||||
| Total | 100.0 | % | 4.29 | % | 3.4 | |||||||
| Debt Type | Percentage of Principal Outstanding | Weighted-Average Interest Rate | Weighted-Average Years to Maturity | |||||||||
| --- | --- | --- | --- | --- | --- | |||||||
| Total unsecured debt | 39.2 | % | 3.44 | % | 1.7 | |||||||
| Total secured debt | 60.8 | % | 4.83 | % | 4.5 | |||||||
| Total | 100.0 | % | 4.29 | % | 3.4 | |||||||
| Total fixed-rate and swapped to fixed-rate debt | 84.4 | % | 4.38 | % | 3.6 | |||||||
| Total variable-rate debt | 15.6 | % | 3.77 | % | 2.4 | |||||||
| Total | 100.0 | % | 4.29 | % | 3.4 |
___________________________________
See the Definitions section for a description of the Company's non-GAAP and operating metrics.
Orion Office REIT Inc. | WWW.ONLREIT.COM | 13
| Q2 2022 SUPPLEMENTAL INFORMATION | ||||||||
|---|---|---|---|---|---|---|---|---|
| Ratio Analysis<br><br>(unaudited, dollars in thousands) | ||||||||
| --- | Interest Coverage Ratio | June 30, 2022 | March 31, 2022 | |||||
| --- | --- | --- | --- | --- | --- | --- | ||
| Interest Expense, excluding non-cash amortization (1) | $ | 6,965 | $ | 5,791 | ||||
| Adjusted EBITDA (2) | 34,744 | 34,665 | ||||||
| Interest Coverage Ratio | 4.99x | 5.99x | ||||||
| Fixed Charge Coverage Ratio | ||||||||
| Interest Expense, excluding non-cash amortization (1) | $ | 6,965 | $ | 5,791 | ||||
| Secured debt principal amortization | — | — | ||||||
| Total fixed charges | 6,965 | 5,791 | ||||||
| Adjusted EBITDA (2) | 34,744 | 34,665 | ||||||
| Fixed Charge Coverage Ratio | 4.99x | 5.99x | ||||||
| June 30, 2022 | March 31, 2022 | |||||||
| Net Debt Ratios | ||||||||
| Net Debt (3) | $ | 608,409 | $ | 629,095 | ||||
| Adjusted EBITDA annualized | 138,976 | 138,660 | ||||||
| Net Debt to Adjusted EBITDA annualized ratio | 4.38x | 4.54x | ||||||
| Net Debt (3) | $ | 608,409 | $ | 629,095 | ||||
| Gross Real Estate Investments (3) | 1,850,068 | 1,867,581 | ||||||
| Net Debt Leverage Ratio | 32.9 | % | 33.7 | % | ||||
| Unencumbered Assets/Real Estate Assets | ||||||||
| Unencumbered Gross Real Estate Investments (3) | $ | 1,249,379 | $ | 1,267,128 | ||||
| Gross Real Estate Investments (3) | 1,850,068 | 1,867,581 | ||||||
| Unencumbered Asset Ratio | 67.5 | % | 67.8 | % |
___________________________________
(1)Refer to the Statements of Operations section for interest expense calculated in accordance with GAAP and to the Definitions section for the required reconciliation to the most directly comparable GAAP financial measure.
(2)Refer to the Statements of Operations section for net income calculated in accordance with GAAP and to the EBITDAre and Adjusted EBITDA section for the required reconciliation to the most directly comparable GAAP financial measure.
(3)Refer to the Balance Sheet section for total debt and real estate investments, at cost calculated in accordance with GAAP and to the Definitions section for the required reconciliation to the most directly comparable GAAP financial measure.
See the Definitions section for a description of the Company's non-GAAP and operating metrics.
Orion Office REIT Inc. | WWW.ONLREIT.COM | 14
| Q2 2022 SUPPLEMENTAL INFORMATION |
|---|
| Credit Facility Covenants<br><br>(unaudited) |
| --- |
The following is a summary of key financial covenants for the Company's term loan and revolving credit facility as defined and calculated per the terms of the facility's credit agreement. These calculations, which are not based on GAAP measurements, are presented to investors to show the Company's compliance with the financial covenants and are not measures of our liquidity or performance. As of June 30, 2022, the Company believes it is in compliance with these covenants based on the covenant limits and calculations in place at that time.
| Credit Facility Key Covenants | Required | June 30, 2022 |
|---|---|---|
| Ratio of total indebtedness to total asset value | ≤ 60% | 32.5% |
| Ratio of adjusted EBITDA to fixed charges | ≥ 1.5x | 4.89x |
| Ratio of secured indebtedness to total asset value | ≤ 45% | 19.7% |
| Ratio of unsecured indebtedness to unencumbered asset value | ≤ 60% | 18.1% |
| Ratio of unencumbered adjusted NOI to unsecured interest expense | ≥ 2.00x | 11.36x |
See the Definitions section for a description of the Company's non-GAAP and operating metrics.
Orion Office REIT Inc. | WWW.ONLREIT.COM | 15
| Q2 2022 SUPPLEMENTAL INFORMATION |
|---|
| Net Operating Income<br><br>(unaudited, dollars in thousands) |
| --- |
NOI and Cash NOI
| Three Months Ended | ||||
|---|---|---|---|---|
| June 30, 2022 | March 31, 2022 | |||
| Rental revenue | $ | 52,659 | $ | 53,017 |
| Property operating expense | (15,156) | (15,314) | ||
| NOI | 37,503 | 37,703 | ||
| Adjustments: | ||||
| Straight-line rent | (547) | (896) | ||
| Amortization of above-market lease assets and deferred lease incentives, net of amortization of below-market lease liabilities | (315) | (320) | ||
| Other non-cash adjustments | 48 | 51 | ||
| Proportionate share of Unconsolidated Joint Venture NOI | 850 | 849 | ||
| Cash NOI | $ | 37,539 | $ | 37,387 |
___________________________________
See the Definitions section for a description of the Company's non-GAAP and operating metrics.
Orion Office REIT Inc. | WWW.ONLREIT.COM | 16
| Q2 2022 SUPPLEMENTAL INFORMATION | | --- || Diversification Statistics: Real Estate Portfolio<br><br>(unaudited, percentages based on portfolio Annualized Base Rent as of June 30, 2022, other than occupancy rate which is based on square footage as of June 30, 2022) | | --- |
___________________________________________________
___________________________________________________
___________________________________________________
___________________________________________________
| Statistics<br><br>(square feet in thousands) | ||
|---|---|---|
| Operating Properties | 91 | |
| Unconsolidated Joint Venture Properties | 6 | |
| Rentable Square Feet | 10,541 | |
| Occupancy Rate | 86.7 | % |
| Weighted Average Remaining Lease Term | 4.1 | |
| Investment-Grade Tenants | 67.3 | % |
| NN leases | 62.7 | % |
| NNN leases | 16.8 | % |
See the Definitions section for a description of the Company's non-GAAP and operating metrics.
Orion Office REIT Inc. | WWW.ONLREIT.COM | 17
| Q2 2022 SUPPLEMENTAL INFORMATION | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Top 10 Concentrations: Real Estate Portfolio<br><br>(unaudited, square feet and dollars in thousands as of June 30, 2022) | |||||||||||
| --- | Tenant Concentration | Number of Leases | Leased Square Feet | Square Feet as a % of Total Portfolio | Annualized Base Rent | Annualized Base Rent as a % of Total Portfolio | Credit Rating | ||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | ||
| General Services Administration | 18 | 845 | 8.0 | % | $ | 20,963 | 12.4 | % | AA+ | ||
| Merrill Lynch | 1 | 482 | 4.6 | % | 11,983 | 7.1 | % | A- | |||
| Highmark Western & Northeastern NY | 1 | 430 | 4.1 | % | 8,208 | 4.9 | % | NR | |||
| RSA Security | 2 | 328 | 3.1 | % | 7,221 | 4.3 | % | BBB | |||
| Cigna/Express Scripts | 3 | 365 | 3.5 | % | 6,659 | 3.9 | % | A- | |||
| Walgreens | 6 | 574 | 5.4 | % | 6,201 | 3.7 | % | BBB | |||
| Coterra Energy | 1 | 309 | 2.9 | % | 5,658 | 3.3 | % | BBB | |||
| T-Mobile | 5 | 294 | 2.8 | % | 5,431 | 3.2 | % | BB+ | |||
| Teva Pharmaceuticals | 1 | 188 | 1.8 | % | 5,348 | 3.2 | % | BB- | |||
| Novartis | 1 | 176 | 1.7 | % | 4,995 | 3.0 | % | AA- | |||
| Total | 39 | 3,991 | 37.9 | % | $ | 82,667 | 49.0 | % | |||
| Tenant Industry Concentration | Number of Leases | Leased Square Feet | Square Feet as a % of Total Portfolio | Annualized Base Rent | Annualized Base Rent as a % of Total Portfolio | ||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | |||
| Health Care Equipment & Services | 13 | 1,132 | 10.7 | % | $ | 21,567 | 12.8 | % | |||
| Government & Public Services | 20 | 889 | 8.4 | % | 21,511 | 12.7 | % | ||||
| Insurance | 6 | 795 | 7.5 | % | 16,479 | 9.8 | % | ||||
| Financial Institutions | 4 | 696 | 6.6 | % | 16,251 | 9.6 | % | ||||
| Software & Services | 6 | 713 | 6.8 | % | 12,826 | 7.6 | % | ||||
| Capital Goods | 9 | 693 | 6.6 | % | 10,667 | 6.3 | % | ||||
| Pharmaceuticals, Biotechnology & Life Sciences | 2 | 364 | 3.5 | % | 10,343 | 6.1 | % | ||||
| Consumer Durables & Apparel | 3 | 375 | 3.6 | % | 8,362 | 4.9 | % | ||||
| Telecommunication Services | 6 | 497 | 4.7 | % | 8,251 | 4.9 | % | ||||
| Energy | 2 | 461 | 4.4 | % | 7,273 | 4.3 | % | ||||
| Total | 71 | 6,615 | 62.8 | % | $ | 133,530 | 79.0 | % | |||
| Geographic Concentration | Number of Properties | Rentable Square Feet | Square Feet as a % of Total Portfolio | Annualized Base Rent | Annualized Base Rent as a % of Total Portfolio | ||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | |||
| Texas | 15 | 1,353 | 12.8 | % | $ | 24,115 | 14.3 | % | |||
| New Jersey | 3 | 724 | 6.9 | % | 18,958 | 11.2 | % | ||||
| New York | 5 | 787 | 7.5 | % | 13,406 | 7.9 | % | ||||
| Illinois | 12 | 1,322 | 12.5 | % | 11,504 | 6.8 | % | ||||
| Kentucky | 2 | 458 | 4.3 | % | 9,950 | 5.9 | % | ||||
| Oklahoma | 3 | 585 | 5.5 | % | 9,514 | 5.6 | % | ||||
| Massachusetts | 2 | 378 | 3.6 | % | 7,920 | 4.7 | % | ||||
| Pennsylvania | 4 | 336 | 3.2 | % | 7,827 | 4.6 | % | ||||
| Colorado | 4 | 570 | 5.4 | % | 7,735 | 4.6 | % | ||||
| Ohio | 5 | 650 | 6.2 | % | 6,188 | 3.7 | % | ||||
| Total | 55 | 7,163 | 67.9 | % | $ | 117,117 | 69.3 | % |
See the Definitions section for a description of the Company's non-GAAP and operating metrics.
Orion Office REIT Inc. | WWW.ONLREIT.COM | 18
| Q2 2022 SUPPLEMENTAL INFORMATION | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Tenants Comprising Over 1% of Annualized Base Rent<br><br>(unaudited, square feet and dollars in thousands as of June 30, 2022) | |||||||||||
| --- | Tenant | Number of Leases | Leased Square Feet | Square Feet as a % of Total Portfolio | Annualized Base Rent | Annualized Base Rent as a % of Total Portfolio | Credit Rating | ||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | ||
| General Services Administration | 18 | 845 | 8.0 | % | $ | 20,963 | 12.4 | % | AA+ | ||
| Merrill Lynch | 1 | 482 | 4.6 | % | 11,983 | 7.1 | % | A- | |||
| Highmark Western & Northeastern NY | 1 | 430 | 4.1 | % | 8,208 | 4.9 | % | NR | |||
| RSA Security | 2 | 328 | 3.1 | % | 7,221 | 4.3 | % | BBB | |||
| Cigna/Express Scripts | 3 | 365 | 3.5 | % | 6,659 | 3.9 | % | A- | |||
| Walgreens | 6 | 574 | 5.4 | % | 6,201 | 3.7 | % | BBB | |||
| Coterra Energy | 1 | 309 | 2.9 | % | 5,658 | 3.3 | % | BBB | |||
| T-Mobile | 5 | 294 | 2.8 | % | 5,431 | 3.2 | % | BB+ | |||
| Teva Pharmaceuticals | 1 | 188 | 1.8 | % | 5,348 | 3.2 | % | BB- | |||
| Novartis | 1 | 176 | 1.7 | % | 4,995 | 3.0 | % | AA- | |||
| FedEx | 2 | 352 | 3.3 | % | 4,469 | 2.6 | % | BBB | |||
| MDC Holdings Inc. | 1 | 144 | 1.4 | % | 4,215 | 2.5 | % | BBB- | |||
| Charter Communications | 2 | 264 | 2.5 | % | 3,689 | 2.2 | % | BB+ | |||
| Inform Diagnostics | 1 | 172 | 1.6 | % | 3,481 | 2.1 | % | NR | |||
| Banner Life Insurance | 1 | 116 | 1.1 | % | 3,408 | 2.0 | % | A | |||
| Encompass Health | 1 | 65 | 0.6 | % | 3,369 | 2.0 | % | BB- | |||
| Collins Aerospace | 1 | 207 | 2.0 | % | 3,300 | 2.0 | % | A- | |||
| Home Depot/HD Supply | 3 | 153 | 1.5 | % | 3,059 | 1.8 | % | A | |||
| Experian | 1 | 178 | 1.7 | % | 2,915 | 1.7 | % | A- | |||
| AAA | 1 | 147 | 1.4 | % | 2,847 | 1.7 | % | NR | |||
| AT&T | 1 | 203 | 1.9 | % | 2,820 | 1.7 | % | BBB | |||
| Linde | 1 | 161 | 1.5 | % | 2,540 | 1.5 | % | A | |||
| Citigroup | 1 | 64 | 0.6 | % | 2,273 | 1.3 | % | BBB+ | |||
| Hasbro | 1 | 136 | 1.3 | % | 2,242 | 1.3 | % | BBB | |||
| NTT Data | 1 | 150 | 1.4 | % | 2,237 | 1.3 | % | NR | |||
| Ingram Micro | 1 | 200 | 1.9 | % | 2,197 | 1.3 | % | BB- | |||
| CVS/Aetna | 1 | 127 | 1.2 | % | 2,193 | 1.3 | % | BBB | |||
| Novus International | 1 | 96 | 0.9 | % | 2,022 | 1.2 | % | NR | |||
| Elementis | 1 | 66 | 0.6 | % | 1,980 | 1.2 | % | NR | |||
| Maximus | 2 | 196 | 1.9 | % | 1,971 | 1.2 | % | BB+ | |||
| NetJets | 1 | 140 | 1.3 | % | 1,966 | 1.2 | % | NR | |||
| Pulte Mortgage | 1 | 95 | 0.9 | % | 1,905 | 1.1 | % | BBB- | |||
| Baker Hughes | 1 | 152 | 1.4 | % | 1,615 | 1.0 | % | A- | |||
| Abbott Laboratories | 1 | 131 | 1.2 | % | 1,609 | 1.0 | % | AA- | |||
| AGCO | 1 | 126 | 1.2 | % | 1,606 | 1.0 | % | BBB- | |||
| Total | 69 | 7,832 | 74.2 | % | 148,595 | 88.2 | % |
__________________________________
See the Definitions section for a description of the Company's non-GAAP and operating metrics.
Orion Office REIT Inc. | WWW.ONLREIT.COM | 19
| Q2 2022 SUPPLEMENTAL INFORMATION | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Diversification: Tenant Industry<br><br>(unaudited, square feet and dollars in thousands as of June 30, 2022) | ||||||||||
| --- | Industry | Number of Leases | Leased Square Feet | Leased Square Feet as a % of Total Portfolio | Annualized Base Rent | Annualized Base Rent as a % of Total Portfolio | ||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | ||
| Health Care Equipment & Services | 13 | 1,132 | 10.7 | % | $ | 21,567 | 12.8 | % | ||
| Government & Public Services | 20 | 889 | 8.4 | % | 21,511 | 12.7 | % | |||
| Insurance | 6 | 795 | 7.5 | % | 16,479 | 9.8 | % | |||
| Financial Institutions | 4 | 696 | 6.6 | % | 16,251 | 9.6 | % | |||
| Software & Services | 6 | 713 | 6.8 | % | 12,826 | 7.6 | % | |||
| Capital Goods | 9 | 693 | 6.6 | % | 10,667 | 6.3 | % | |||
| Pharmaceuticals, Biotechnology & Life Sciences | 2 | 364 | 3.5 | % | 10,343 | 6.1 | % | |||
| Consumer Durables & Apparel | 3 | 375 | 3.6 | % | 8,362 | 4.9 | % | |||
| Telecommunication Services | 6 | 497 | 4.7 | % | 8,251 | 4.9 | % | |||
| Energy | 2 | 461 | 4.4 | % | 7,273 | 4.3 | % | |||
| Transportation | 5 | 541 | 5.1 | % | 7,176 | 4.2 | % | |||
| Commercial & Professional Services | 10 | 505 | 4.8 | % | 7,058 | 4.2 | % | |||
| Food & Staples Retailing | 6 | 574 | 5.4 | % | 6,201 | 3.7 | % | |||
| Materials | 4 | 352 | 3.4 | % | 5,656 | 3.3 | % | |||
| Media & Entertainment | 2 | 264 | 2.5 | % | 3,689 | 2.2 | % | |||
| Retailing | 4 | 157 | 1.5 | % | 3,131 | 1.9 | % | |||
| Food, Beverage & Tobacco | 1 | 96 | 0.9 | % | 2,022 | 1.2 | % | |||
| Utilities | 1 | 25 | 0.2 | % | 394 | 0.2 | % | |||
| Real Estate | 1 | 4 | — | % | 86 | 0.1 | % | |||
| Consumer Services | 2 | 5 | 0.1 | % | 54 | — | % | |||
| Total | 107 | 9,138 | 86.7 | % | $ | 168,997 | 100.0 | % |
See the Definitions section for a description of the Company's non-GAAP and operating metrics.
Orion Office REIT Inc. | WWW.ONLREIT.COM | 20
| Q2 2022 SUPPLEMENTAL INFORMATION | | --- || Diversification: Property Geographic<br><br>(unaudited, square feet and dollars in thousands as of June 30, 2022) | | --- | | Location | Number of Properties | Rentable Square Feet | Square Feet as a % of Total Portfolio | | Annualized Base Rent | | Annualized Base Rent as a % of Total Portfolio | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | United States | | | | | | | | | | Arizona | 3 | 239 | 2.3 | % | $ | 2,151 | 1.3 | % | | California | 4 | 262 | 2.5 | % | 5,275 | | 3.1 | % | | Colorado | 4 | 570 | 5.4 | % | 7,735 | | 4.6 | % | | Florida | 2 | 53 | 0.5 | % | 225 | | 0.1 | % | | Georgia | 3 | 284 | 2.7 | % | 4,493 | | 2.7 | % | | Idaho | 2 | 45 | 0.4 | % | 1,027 | | 0.6 | % | | Illinois | 12 | 1,322 | 12.5 | % | 11,504 | | 6.8 | % | | Indiana | 1 | 83 | 0.8 | % | 549 | | 0.3 | % | | Iowa | 3 | 137 | 1.3 | % | 2,673 | | 1.6 | % | | Kansas | 2 | 196 | 1.9 | % | 1,971 | | 1.2 | % | | Kentucky | 2 | 458 | 4.3 | % | 9,950 | | 5.9 | % | | Maryland | 2 | 236 | 2.2 | % | 4,452 | | 2.6 | % | | Massachusetts | 2 | 378 | 3.6 | % | 7,920 | | 4.7 | % | | Minnesota | 1 | 39 | 0.4 | % | 493 | | 0.3 | % | | Missouri | 4 | 529 | 5.0 | % | 4,868 | | 2.9 | % | | Nebraska | 2 | 180 | 1.7 | % | 2,739 | | 1.6 | % | | New Jersey | 3 | 724 | 6.9 | % | 18,958 | | 11.2 | % | | New York | 5 | 787 | 7.5 | % | 13,406 | | 7.9 | % | | Ohio | 5 | 650 | 6.2 | % | 6,188 | | 3.7 | % | | Oklahoma | 3 | 585 | 5.5 | % | 9,514 | | 5.6 | % | | Oregon | 1 | 69 | 0.7 | % | 1,120 | | 0.7 | % | | Pennsylvania | 4 | 336 | 3.2 | % | 7,827 | | 4.6 | % | | Rhode Island | 2 | 206 | 2.0 | % | 3,016 | | 1.8 | % | | South Carolina | 1 | 64 | 0.6 | % | 2,273 | | 1.3 | % | | Tennessee | 4 | 240 | 2.3 | % | 4,490 | | 2.7 | % | | Texas | 15 | 1,353 | 12.8 | % | 24,115 | | 14.3 | % | | Virginia | 2 | 240 | 2.3 | % | 4,426 | | 2.6 | % | | West Virginia | 1 | 64 | 0.6 | % | 1,114 | | 0.7 | % | | Wisconsin | 1 | 155 | 1.5 | % | 2,243 | | 1.3 | % | | Territories | | | | | | | | | | Puerto Rico | 1 | 57 | 0.5 | % | 2,282 | | 1.4 | % | | Total | 97 | 10,541 | 100.0 | % | $ | 168,997 | 100.0 | % |
See the Definitions section for a description of the Company's non-GAAP and operating metrics.
Orion Office REIT Inc. | WWW.ONLREIT.COM | 21
| Q2 2022 SUPPLEMENTAL INFORMATION | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Lease Expirations<br><br>(unaudited, square feet and dollars in thousands as of June 30, 2022) | ||||||||||
| --- | Year of Expiration (1) | Number of Leases<br>Expiring (2) | Leased<br>Square Feet | Leased Square Feet as a % of Total Portfolio | Annualized Base Rent | Annualized Base Rent as a % of Total Portfolio | ||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | ||
| 2022 | 5 | 369 | 3.5 | % | $ | 8,521 | 5.0 | % | ||
| 2023 | 21 | 2,025 | 19.2 | % | 31,113 | 18.4 | % | |||
| 2024 | 17 | 1,971 | 18.7 | % | 39,492 | 23.4 | % | |||
| 2025 | 12 | 1,049 | 10.0 | % | 18,497 | 10.9 | % | |||
| 2026 | 13 | 757 | 7.2 | % | 16,846 | 10.0 | % | |||
| 2027 | 13 | 967 | 9.2 | % | 15,375 | 9.1 | % | |||
| 2028 | 9 | 423 | 4.0 | % | 8,130 | 4.8 | % | |||
| 2029 | 3 | 392 | 3.7 | % | 5,775 | 3.4 | % | |||
| 2030 | 2 | 98 | 0.9 | % | 4,495 | 2.7 | % | |||
| 2031 | 1 | 11 | 0.1 | % | 399 | 0.2 | % | |||
| Thereafter | 9 | 1,019 | 9.7 | % | 20,068 | 11.9 | % | |||
| Total | 105 | 9,081 | 86.1 | % | $ | 168,711 | 99.8 | % |
__________________________________
(1) Includes the Company's pro rata share of properties owned by the Unconsolidated Joint Venture.
(2) The Company has certain properties that are subject to multiple leases.
See the Definitions section for a description of the Company's non-GAAP and operating metrics.
Orion Office REIT Inc. | WWW.ONLREIT.COM | 22
| Q2 2022 SUPPLEMENTAL INFORMATION |
|---|
| Lease Summary<br><br>(unaudited) |
| --- |
Rent Escalations
(square feet and dollars in thousands as of June 30, 2022)
| Number of Leases | Leased <br>Square Feet | Leased Square Feet as a % of Total Portfolio | Annualized Base Rent | Annualized Base Rent as a % of Total Portfolio | ||||
|---|---|---|---|---|---|---|---|---|
| Fixed dollar or percent increase | 85 | 7,677 | 72.8 | % | $ | 142,330 | 84.2 | % |
| Flat | 18 | 1,189 | 11.3 | % | 21,757 | 12.9 | % | |
| CPI | 4 | 272 | 2.6 | % | 4,910 | 2.9 | % | |
| Total | 107 | 9,138 | 86.7 | % | $ | 168,997 | 100.0 | % |
Tenant Expense Obligation
(square feet and dollars in thousands as of June 30, 2022)
| Number of Leases | Leased <br>Square Feet | Leased Square Feet as a % of Total Portfolio | Annualized Base Rent | Annualized Base Rent as a % of Total Portfolio | ||||
|---|---|---|---|---|---|---|---|---|
| NN | 60 | 5,832 | 55.3 | % | $ | 105,994 | 62.7 | % |
| Modified Gross | 22 | 1,263 | 12.0 | % | 34,516 | 20.4 | % | |
| NNN | 22 | 2,035 | 19.3 | % | 28,392 | 16.8 | % | |
| Gross | 3 | 8 | 0.1 | % | 95 | 0.1 | % | |
| Total | 107 | 9,138 | 86.7 | % | $ | 168,997 | 100.0 | % |
See the Definitions section for a description of the Company's non-GAAP and operating metrics.
Orion Office REIT Inc. | WWW.ONLREIT.COM | 23
| Q2 2022 SUPPLEMENTAL INFORMATION | |||||
|---|---|---|---|---|---|
| Full Portfolio (1) | |||||
| --- | Industry | Address | City | State | |
| --- | --- | --- | --- | ||
| Vacant | 1625 W. Main Street | El Centro | CA | ||
| Vacant | 6000 Perimeter Drive | Dublin | OH | ||
| Food, Beverage & Tobacco | 20 Missouri Research Park Drive | St. Charles | MO | ||
| Telecommunication Services | 4335 Paredes Line Road | Brownsville | TX | ||
| Telecommunication Services | 3750 Wheeler Road | Augusta | GA | ||
| Telecommunication Services | 4080 27th Court SE | Salem | OR | ||
| Insurance | 1100 Technology Parkway | Cedar Falls | IA | ||
| Financial Institutions | 11 Ewall Street | Mount Pleasant | SC | ||
| Health Care Equipment & Services | 8455 University Place Drive | St. Louis | MO | ||
| Transportation | 1475 Boettler Road | Uniontown | OH | ||
| Financial Institutions | 483 Main Street | Harleysville | PA | ||
| Government & Public Services | 2305 Hudson Boulevard | Brownsville | TX | ||
| Government & Public Services | 257 Bosley Industrial Park | Parkersburg | WV | ||
| Government & Public Services | 2805 Pine Mill Road | Paris | TX | ||
| Government & Public Services | 4521 Thomas Jefferson Street | Caldwell | ID | ||
| Government & Public Services | 3381 U.S. Highway 277 | Eagle Pass | TX | ||
| Vacant | 354 S Hwy 92 | Sierra Vista | AZ | ||
| Government & Public Services | 2475 Cliff Creek Crossing Drive | Dallas | TX | ||
| Government & Public Services | 3644 Avtech Parkway | Redding | CA | ||
| Government & Public Services | 5100 W 36th Street | Minneapolis | MN | ||
| Government & Public Services | 4551 State Route 11 (E) | Malone | NY | ||
| Government & Public Services | 2600 Voyager Avenue | Sioux City | IA | ||
| Government & Public Services | 135 Circle Lane | Knoxville | TN | ||
| Government & Public Services | 9912 & 9934 Little Road | New Port Richey | FL | ||
| Health Care Equipment & Services | 2304 State Highway 121 | Bedford | TX | ||
| Vacant | 5411 E. Williams Boulevard | Tucson | AZ | ||
| Government & Public Services | 3369 U.S. Highway 277 | Eagle Pass | TX | ||
| Transportation | 942 S. Shady Grove Road | Memphis | TN | ||
| Transportation | 4151 Bridgeway Avenue | Columbus | OH | ||
| Food & Staples Retailing | 1411 Lake Cook Road | Deerfield | IL | ||
| Food & Staples Retailing | 1415 Lake Cook Road | Deerfield | IL | ||
| Food & Staples Retailing | 1417 Lake Cook Road | Deerfield | IL | ||
| Food & Staples Retailing | 1419 Lake Cook Road | Deerfield | IL | ||
| Food & Staples Retailing | 1425 Lake Cook Road | Deerfield | IL | ||
| Food & Staples Retailing | 1435 Lake Cook Road | Deerfield | IL | ||
| Capital Goods | 601 Third Street SE | Cedar Rapids | IA | ||
| Consumer Durables & Apparel | 15 LaSalle Square | Providence | RI | ||
| Vacant | 887 Deerfield Parkway | Buffalo Grove | IL | ||
| Materials | 100 Sci Park Boulevard | East Windsor | NJ | ||
| Media & Entertainment | 6005 Fair Lakes Road | East Syracuse | NY | ||
| Government & Public Services | 310 Canaveral Groves Boulevard | Cocoa | FL | ||
| Vacant | 8640 Evans Avenue | Berkeley | MO | ||
| Government & Public Services | 103 & 104 Airport Road | Grangeville | ID | ||
| Government & Public Services | 2901 Alta Mesa Boulevard | Fort Worth | TX | ||
| Government & Public Services | 59 Dunning Way | Plattsburgh | NY | ||
| Financial Institutions | 480 Jefferson Boulevard | Warwick | RI | ||
| Energy | 1800 Nelson Road | Longmont | CO | ||
| Health Care Equipment & Services | 1850 Norman Drive North | Waukegan | IL |
See the Definitions section for a description of the Company's non-GAAP and operating metrics.
Orion Office REIT Inc. | WWW.ONLREIT.COM | 24
| Q2 2022 SUPPLEMENTAL INFORMATION | |||
|---|---|---|---|
| Industry | Address | City | State |
| --- | --- | --- | --- |
| Health Care Equipment & Services | 1333 - 1385 East Shaw Avenue | Fresno | CA |
| Telecommunication Services | 2270 Lakeside Boulevard | Richardson | TX |
| Health Care Equipment & Services | 5859 Farinon Drive | San Antonio | TX |
| Energy | 202 S. Cheyenne | Tulsa | OK |
| Vacant | 7475 S. Joliet Street | Englewood | CO |
| Vacant | 8 and 10 Morton Avenue | Ridley Park | PA |
| Government & Public Services | Lot37, Santiago De Los Caballeros | Ponce | PR |
| Consumer Durables & Apparel | 4340 & 4350 South Monaco Street | Denver | CO |
| Vacant | 2250 Lakeside Boulevard | Richardson | TX |
| Commercial & Professional Services | 3833 Greenway Drive | Lawrence | KS |
| Commercial & Professional Services | 2201 Noria Road | Lawrence | KS |
| Materials | 1585 Sawdust Road | The Woodlands | TX |
| Consumer Durables & Apparel | 7390 S. Iola Street | Englewood | CO |
| Pharmaceuticals, Biotechnology & Life Sciences | 41 Moores Road | Malvern | PA |
| Media & Entertainment | 1320 N. Dr. MLK Jr. Drive | Milwaukee | WI |
| Telecommunication Services | 695 Grassmere Park | Nashville | TN |
| Commercial & Professional Services | 1575 Sawdust Road | The Woodlands | TX |
| Retailing | 101 Riverview Parkway | Santee | CA |
| Materials | 6752 Baymeadow Drive | Glen Burnie | MD |
| Health Care Equipment & Services | 6655 North MacArthur Boulevard | Irving | TX |
| Capital Goods | 2087 East 71st Street | Tulsa | OK |
| Government & Public Services | 333 Scott Street | Covington | KY |
| Software & Services | 1759 Wehrle Dr | Amherst | NY |
| Commercial & Professional Services | 6377 Emerald Drive | Dublin | OH |
| Capital Goods | 22640 Davis Drive | Sterling | VA |
| Capital Goods | 1100 Atwater Drive, Lot 11A | Malvern | PA |
| Vacant | 930 National Parkway | Schaumburg | IL |
| Health Care Equipment & Services | 7353 Company Drive | Indianapolis | IN |
| Health Care Equipment & Services | 1640 Dallas Parkway | Plano | TX |
| Capital Goods | 1705 Kellie Drive | Blair | NE |
| Commercial & Professional Services | 955 American Lane Unit 1 | Schaumburg | IL |
| Insurance | 3100 Quail Springs Parkway | Oklahoma City | OK |
| Software & Services | 777 Research Road | Lincoln | NE |
| Insurance | 249-257 West Genesee Street | Buffalo | NY |
| Insurance | 3275 Bennett Creek Avenue | Urbana | MD |
| Health Care Equipment & Services | 100 Airpark Center Drive East | Nashville | TN |
| Retailing | 3074 Chastain Meadows Parkway NW | Kennesaw | GA |
| Vacant | 2211 Sanders Road | Northbrook | IL |
| Capital Goods | 4205 River Green Parkway | Duluth | GA |
| Pharmaceuticals, Biotechnology & Life Sciences | 8 Sylvan way | Parsippany | NJ |
| Software & Services | 174 & 176 Middlesex Turnpike | Bedford | MA |
| Financial Institutions | 1500-1600 Merrill Lynch Drive | Hopewell | NJ |
| Health Care Equipment & Services | 3003 N. 3rd Street | Phoenix | AZ |
| Capital Goods | 70 Mechanic Street | Foxboro | MA |
| Health Care Equipment & Services | 577 Aptakisic Road | Lincolnshire | IL |
| Transportation | 360 Westar Boulevard | Westerville | OH |
| Software & Services | 12975 Worldgate Drive | Herndon | VA |
| Transportation | 580 Atlas Air Way | Erlanger | KY |
| Utilities | 700 Market Street | St. Louis | MO |
__________________________________
(1)Includes the properties owned by the Company's unconsolidated joint venture.
See the Definitions section for a description of the Company's non-GAAP and operating metrics.
Orion Office REIT Inc. | WWW.ONLREIT.COM | 25
| Q2 2022 SUPPLEMENTAL INFORMATION |
|---|
| Unconsolidated Joint Venture Investment Summary<br><br>(unaudited, square feet and dollars in thousands) |
| --- |
The following table summarizes the Company's investments in the Arch Street Unconsolidated Joint Venture as of June 30, 2022.
| Legal Ownership Percentage (1) | Property Type | Pro Rata Share of Gross Real Estate Investments | Pro Rata Share of Rentable Square Feet | Pro Rata Share of Annualized Base Rent | Pro Rata Share of Principal Outstanding | ||||
|---|---|---|---|---|---|---|---|---|---|
| Schneider Electric - Foxboro, MA | 20% | Office | $ | 8,336 | 50 | $ | 699 | $ | 5,090 |
| Sysmex - Lincolnshire, IL | 20% | Office | 9,239 | 33 | 779 | 5,448 | |||
| DHL - Westerville, OH | 20% | Office | 6,676 | 29 | 430 | 3,972 | |||
| Peraton - Herndon, VA | 20% | Office | 9,686 | 33 | 1,126 | 6,000 | |||
| Atlas Air - Erlanger, KY | 20% | Office | 5,330 | 20 | 311 | 3,162 | |||
| Spire Energy - St. Louis, MO | 20% | Office | 6,159 | 26 | 394 | 3,660 | |||
| $ | 45,426 | 191 | $ | 3,739 | $ | 27,332 |
__________________________________
(1)Legal ownership percentage may, at times, not equal the Company's economic interest because of various provisions in the joint venture agreement regarding capital contributions, distributions of cash flow based on capital account balances and allocations of profits and losses.
See the Definitions section for a description of the Company's non-GAAP and operating metrics.
Orion Office REIT Inc. | WWW.ONLREIT.COM | 26
| Q2 2022 SUPPLEMENTAL INFORMATION | | --- || Definitions<br><br>(unaudited, in thousands, except share and per share data) | | --- |
Annualized Base Rent is the monthly aggregate cash amount charged to tenants under our leases (including monthly base rent receivables and certain contractually obligated reimbursements by our tenants), as of the final date of the applicable period, multiplied by 12, including the Company's pro rata share of such amounts related to the Unconsolidated Joint Venture. Annualized Base Rent is not indicative of future performance.
CPI refers to a lease in which base rent is adjusted based on changes in a consumer price index.
Double Net Lease ("NN") is a lease under which the tenant agrees to pay all operating expenses associated with the property (e.g., real estate taxes, insurance, maintenance), but excludes some or all major repairs (e.g., roof, structure, parking lot, in each case, as further defined in the applicable lease).
Earnings Before Interest, Taxes, Depreciation and Amortization for Real Estate ("EBITDAre") and Adjusted EBITDA
Due to certain unique operating characteristics of real estate companies, as discussed below, the National Association of Real Estate Investment Trusts, Inc. ("Nareit"), an industry trade group, has promulgated a supplemental performance measure known as Earnings Before Interest, Taxes, Depreciation and Amortization for Real Estate. Nareit defines EBITDAre as net income or loss computed in accordance with GAAP, adjusted for interest expense, income tax expense (benefit), depreciation and amortization, impairment write-downs on real estate, gains or losses from disposition of property and our pro rata share of EBITDAre adjustments related to the Unconsolidated Joint Venture. We calculated EBITDAre in accordance with Nareit's definition described above.
In addition to EBITDAre, we use Adjusted EBITDA as a non-GAAP supplemental performance measure to evaluate the operating performance of the Company. Adjusted EBITDA, as defined by the Company, represents EBITDAre, modified to exclude non-routine items such as acquisition-related expenses and transaction costs. We also exclude certain non-cash items such as impairments of intangible and right of use assets, gains or losses on derivatives, gains or losses on the extinguishment or forgiveness of debt, amortization of intangibles, above-market lease assets and deferred lease incentives, net of amortization of below-market lease liabilities and our pro rata share of Adjusted EBITDA adjustments related to the Unconsolidated Joint Venture. Management believes that excluding these costs from EBITDAre provides investors with supplemental performance information that is consistent with the performance models and analysis used by management, and provides investors a view of the performance of our portfolio over time. Therefore, EBITDAre and Adjusted EBITDA should not be considered as an alternative to net income, as computed in accordance with GAAP. The Company uses Adjusted EBITDA as one measure of its operating performance when formulating corporate goals and evaluating the effectiveness of the Company's strategies. EBITDAre and Adjusted EBITDA may not be comparable to similarly titled measures of other companies.
Occupancy Rate equals the sum of Leased Square Feet divided by Rentable Square Feet and includes the Company's pro rata share of such amounts related to the Unconsolidated Joint Venture, in each case, as of an applicable date.
Enterprise Value equals the sum of the Implied Equity Market Capitalization and Net Debt, in each case, as of an applicable date.
Fixed Charge Coverage Ratio is (a) the sum of (i) Interest Expense, excluding non-cash amortization and (ii) secured debt principal amortization on Adjusted Principal Outstanding, divided by (b) Adjusted EBITDA. Management believes that Fixed Charge Coverage Ratio is a useful supplemental measure of our ability to satisfy fixed financing obligations.
Fixed Dollar or Percent Increase refers to a lease that requires contractual rent increases during the initial term of the lease agreement. A Fixed Dollar or Percent Increase lease may include a period of free rent at the beginning or end of the lease.
Flat refers to a lease that requires equal rent payments, with no contractual increases, throughout the initial term of the lease agreement. A Flat Lease may include a period of free rent at the beginning or end of the lease.
Orion Office REIT Inc. | WWW.ONLREIT.COM | 27
| Q2 2022 SUPPLEMENTAL INFORMATION | | --- || Definitions (cont.)<br><br>(unaudited, in thousands, except share and per share data) | | --- |
Funds Available for Distribution ("FAD")
Funds available for distribution, as defined by the Company, represents Core FFO, as defined below, modified to exclude capital expenditures, as well as certain non-cash items such as amortization of deferred financing costs, amortization of above market leases and deferred lease incentives, net of amortization of below market lease liabilities, straight-line rental revenue, equity-based compensation, equity in income or losses of the Unconsolidated Joint Venture and our pro rata share of FAD adjustments related to the Unconsolidated Joint Venture. Management believes that adjusting these items from Core FFO provides investors with supplemental performance information that is consistent with the performance models and analysis used by management and provides useful information regarding the Company's ability to fund its dividend.
However, not all REITs calculate FAD and those that do may not calculate FAD the same way, so comparisons with other REITs may not be meaningful. FAD should not be considered as an alternative to net income (loss) or cash flow provided by operating activities as determined under GAAP.
Nareit Funds from Operations ("Nareit FFO" or "FFO") and Core Funds from Operations ("Core FFO")
Due to certain unique operating characteristics of real estate companies, as discussed below, Nareit has promulgated a supplemental performance measure known as FFO, which we believe to be an appropriate supplemental performance measure to reflect the operating performance of a REIT. FFO is not equivalent to our net income or loss as determined under GAAP.
Nareit defines FFO as net income or loss computed in accordance with GAAP adjusted for gains or losses from disposition of real estate assets, depreciation and amortization of real estate assets, impairment write-downs on real estate, and our pro rata share of FFO adjustments related to the Unconsolidated Joint Venture. We calculate FFO in accordance with Nareit's definition described above.
In addition to FFO, we use Core FFO as a non-GAAP supplemental financial performance measure to evaluate the operating performance of the Company. Core FFO, as defined by the Company, excludes from FFO items that we believe do not reflect the ongoing operating performance of our business such as acquisition-related expenses, transaction costs and gains or losses on extinguishment of swaps and/or debt. Core FFO allows for a comparison of the performance of our operations with other publicly-traded REITs, as Core FFO, or an equivalent measure, is routinely reported by publicly-traded REITs, and we believe often used by analysts and investors for comparison purposes.
For all of these reasons, we believe FFO and Core FFO, in addition to net income (loss), as defined by GAAP, are helpful supplemental performance measures and useful in understanding the various ways in which our management evaluates the performance of the Company over time. However, not all REITs calculate FFO and Core FFO the same way, so comparisons with other REITs may not be meaningful. FFO and Core FFO should not be considered as alternatives to net income (loss) and are not intended to be used as a liquidity measure indicative of cash flow available to fund our cash needs. Neither the SEC, Nareit, nor any other regulatory body has evaluated the acceptability of the exclusions used to adjust FFO in order to calculate Core FFO and its use as a non-GAAP financial performance measure.
GAAP is an abbreviation for generally accepted accounting principles in the United States.
Gross Lease is a lease under which the landlord is responsible for all expenses associated with the property (e.g., real estate taxes, insurance, maintenance and repairs).
Gross Real Estate Investments represent total gross real estate and related assets of Operating Properties and the Company's pro rata share of such amounts related to properties owned by the Unconsolidated Joint Venture, net of gross intangible lease liabilities. Gross Real Estate Investments should not be considered as an alternative to the Company's real estate investments balance as determined in accordance with GAAP or any other GAAP financial measures and should only be considered together with, and as a supplement to, the Company's financial information prepared in accordance with GAAP.
The following table shows a reconciliation of Gross Real Estate Investments to the amounts presented in accordance with GAAP on the balance sheet for the periods presented (dollar amounts in thousands):
Orion Office REIT Inc. | WWW.ONLREIT.COM | 28
| Q2 2022 SUPPLEMENTAL INFORMATION | | --- || Definitions (cont.)<br><br>(unaudited, in thousands, except share and per share data) | | --- | | | June 30, 2022 | | March 31, 2022 | | | --- | --- | --- | --- | --- | | Total real estate investments, at cost - as reported | $ | 1,459,199 | $ | 1,486,255 | | Adjustments: | | | | | | Gross intangible lease assets | 371,110 | | 370,981 | | | Gross intangible lease liabilities | (35,068) | | (35,068) | | | Gross assets held for sale | 9,402 | | — | | | Proportionate share of Unconsolidated Joint Venture Gross Real Estate Investments | 45,425 | | 45,413 | | | Gross Real Estate Investments | $ | 1,850,068 | $ | 1,867,581 |
Implied Equity Market Capitalization equals shares of common stock outstanding as of an applicable date, multiplied by the closing sale price of the Company's stock as reported on the New York Stock Exchange on such date.
Industry is derived from the Global Industry Classification Standard ("GICS") Methodology that was developed by Morgan Stanley Capital International ("MSCI") in collaboration with S&P Dow Jones Indices to establish a global, accurate, complete and widely accepted approach to defining industries and classifying securities by industry.
Interest Coverage Ratio equals Adjusted EBITDA divided by Interest Expense, excluding non-cash amortization. Management believes that Interest Coverage Ratio is a useful supplemental measure of our ability to service our debt obligations.
Interest Expense, excluding non-cash amortization is a non-GAAP measure that represents interest expense incurred on the outstanding principal balance of our debt and the Company's pro rata share of the Unconsolidated Joint Venture's interest expense incurred on its outstanding principal balance. This measure excludes the amortization of deferred financing costs, premiums and discounts, which is included in interest expense in accordance with GAAP. Interest Expense, excluding non-cash amortization should not be considered as an alternative to the Company's interest expense as determined in accordance with GAAP or any other GAAP financial measures and should only be considered together with and as a supplement to the Company's financial information prepared in accordance with GAAP.
The following table shows a reconciliation of Interest Expense, excluding non-cash amortization to interest expense presented in accordance with GAAP on the statements of operations for the periods presented (dollar amounts in thousands):
| Three Months Ended | ||||
|---|---|---|---|---|
| June 30, 2022 | March 31, 2022 | |||
| Interest expense, net - as reported | $ | 7,867 | $ | 6,847 |
| Adjustments: | ||||
| Amortization of deferred financing costs and other non-cash charges | (1,057) | (1,171) | ||
| Proportionate share of Unconsolidated Joint Venture Interest Expense, excluding non-cash amortization | 155 | 115 | ||
| Interest Expense, excluding non-cash amortization | $ | 6,965 | $ | 5,791 |
Investment-Grade Tenants are those with a Standard & Poor’s credit rating of BBB- or higher or a Moody’s credit rating of Baa3 or higher. The ratings may reflect those assigned by Standard & Poor’s or Moody’s to the lease guarantor or the parent company, as applicable. Where we refer to the “Credit Rating” of a tenant, we refer to the Standard & Poor’s or Moody’s credit rating and such rating also may reflect the rating assigned by Standard & Poor’s or Moody’s to the lease guarantor or the parent company, as applicable.
Leased Square Feet is Rentable Square Feet leased and includes such amounts related to the Unconsolidated Joint Venture.
Modified Gross Lease is a lease under which the landlord is responsible for most expenses associated with the property (e.g., real estate taxes, insurance, maintenance and repairs), but passes through some operating expenses to the tenant.
Net Debt, Principal Outstanding and Adjusted Principal Outstanding
Orion Office REIT Inc. | WWW.ONLREIT.COM | 29
| Q2 2022 SUPPLEMENTAL INFORMATION | | --- || Definitions (cont.)<br><br>(unaudited, in thousands, except share and per share data) | | --- |
Principal Outstanding is a non-GAAP measure that represents the Company's outstanding principal debt balance, excluding certain GAAP adjustments, such as premiums and discounts, financing and issuance costs, and related accumulated amortization. Adjusted Principal Outstanding includes the Company's pro rata share of the Unconsolidated Joint Venture's outstanding principal debt balance. We believe that the presentation of Principal Outstanding and Adjusted Principal Outstanding, which show our contractual debt obligations, provides useful information to investors to assess our overall financial flexibility, capital structure and leverage. Principal Outstanding and Adjusted Principal Outstanding should not be considered as alternatives to the Company's consolidated debt balance as determined in accordance with GAAP or any other GAAP financial measures and should only be considered together with, and as a supplement to, the Company's financial information prepared in accordance with GAAP.
Net Debt is a non-GAAP measure used to show the Company's Adjusted Principal Outstanding, less all cash and cash equivalents and the Company's pro rata share of the Unconsolidated Joint Venture's cash and cash equivalents. We believe that the presentation of Net Debt provides useful information to investors because our management reviews Net Debt as part of its management of our overall liquidity, financial flexibility, capital structure and leverage.
The following table shows a reconciliation of Net Debt, Principal Outstanding and Adjusted Principal Outstanding to the amounts presented in accordance with GAAP on the balance sheet for the periods presented (dollar amounts in thousands):
| June 30,<br>2022 | March 31, 2022 | |||
|---|---|---|---|---|
| Mortgages payable, net | 351,820 | 351,648 | ||
| Credit facility term loan, net | 173,133 | 172,793 | ||
| Credit facility revolver | 71,000 | 91,000 | ||
| Total debt - as reported | 595,953 | 615,441 | ||
| Deferred financing costs, net | 5,047 | 5,559 | ||
| Principal Outstanding | 601,000 | 621,000 | ||
| Proportionate share of Unconsolidated Joint Venture Principal Outstanding | 27,332 | 27,332 | ||
| Adjusted Principal Outstanding | $ | 628,332 | $ | 648,332 |
| Cash and cash equivalents | (19,300) | (18,585) | ||
| Proportionate share of Unconsolidated Joint Venture cash and cash equivalents | (623) | (652) | ||
| Net Debt | $ | 608,409 | $ | 629,095 |
Net Debt Leverage Ratio equals Net Debt divided by Gross Real Estate Investments.
Net Operating Income ("NOI") and Cash NOI
NOI is a non-GAAP performance measure used to evaluate the operating performance of a real estate company. NOI represents total revenues less property operating expenses and excludes fee revenue earned for services to the Unconsolidated Joint Venture, impairment, depreciation and amortization, general and administrative expenses, acquisition-related expenses and transaction costs. Cash NOI excludes the impact of certain GAAP adjustments included in rental revenue, such as straight-line rent adjustments and amortization of above-market intangible lease assets and below-market lease intangible liabilities. Cash NOI includes the pro rata share of such amounts from properties owned by the Unconsolidated Joint Venture. It is management's view that NOI and Cash NOI provide investors relevant and useful information because it reflects only income and operating expense items that are incurred at the property level and presents them on an unleveraged basis. NOI and Cash NOI should not be considered as an alternative to operating income in accordance with GAAP. Further, NOI and Cash NOI may not be comparable to similarly titled measures of other companies.
Orion Office REIT Inc. | WWW.ONLREIT.COM | 30
| Q2 2022 SUPPLEMENTAL INFORMATION | | --- || Definitions (cont.)<br><br>(unaudited, in thousands, except share and per share data) | | --- |
The following table shows the calculation of NOI and Cash NOI for the periods presented (dollar amounts in thousands):
| Three Months Ended | ||||
|---|---|---|---|---|
| June 30, 2022 | March 31, 2022 | |||
| Total revenues | $ | 52,849 | $ | 53,206 |
| Less total operating expenses | (60,382) | (55,605) | ||
| Fee income from unconsolidated joint venture | (190) | (189) | ||
| Acquisition related | 141 | 63 | ||
| Transaction costs | 208 | 756 | ||
| General and administrative | 3,291 | 3,517 | ||
| Depreciation and amortization | 33,828 | 34,353 | ||
| Impairment of real estate | 7,758 | 1,602 | ||
| NOI | 37,503 | 37,703 | ||
| Straight-line rent | (547) | (896) | ||
| Amortization of above-market lease assets and deferred lease incentives, net of amortization of below-market lease liabilities | (315) | (320) | ||
| Other non-cash adjustments | 48 | 51 | ||
| Proportionate share of Unconsolidated Joint Venture Cash NOI | 850 | 849 | ||
| Cash NOI | $ | 37,539 | $ | 37,387 |
Operating Properties refers to all properties owned and consolidated by the Company as of the applicable date.
Property Operating Expense includes reimbursable and non-reimbursable costs to operate a property, including real estate taxes, utilities, insurance, repairs, maintenance, legal, property management fees, etc.
Rentable Square Feet is leasable square feet of Operating Properties and the Company's pro rata share of leasable square feet of properties owned by the Unconsolidated Joint Venture.
Triple Net Lease ("NNN") is a lease under which the tenant agrees to pay all expenses associated with the property (e.g., real estate taxes, insurance, maintenance and repairs in accordance with the lease terms).
Unconsolidated Joint Venture includes the Company's investment in the Arch Street unconsolidated joint venture formed to acquire and own real estate properties.
Unencumbered Asset Ratio equals Unencumbered Gross Real Estate Investments divided by Gross Real Estate Investments. Management believes that Unencumbered Asset Ratio is a useful supplemental measure of our overall liquidity and leverage.
Unencumbered Gross Real Estate Investments equals Gross Real Estate Investments, excluding Gross Real Estate Investments related to properties serving as collateral for the Company's CMBS Loan and the Company's pro rata share of properties owned by the Unconsolidated Joint Venture that are pledged as collateral under mortgage debt. Unencumbered Gross Real Estate Investments includes otherwise unencumbered properties that are part of the unencumbered property pool under our credit facility and therefore not available to serve as collateral under other borrowings.
Weighted Average Remaining Lease Term is the number of years remaining on each respective lease as of the applicable date, weighted based on Annualized Base Rent and includes the years remaining on each of the respective leases of the Unconsolidated Joint Venture, weighted based on the Company's pro rata share of Annualized Base Rent related to the Unconsolidated Joint Venture.
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