Office Properties Income Trust (OPI) 2 May 242024 Q1 Earnings call transcript

Good morning, and welcome to Office Properties Income Trust First Quarter 2024 Financial Results Conference Call[Operator Instructions] At this time, for opening remarks and introductions, I would like to turn the call over to Kevin Barry, Senior Director of Investor Relations. Please go ahead.

Thank you, and good morning, everyone. Thanks for joining us today. With me on the call are OPI's President and Chief Operating Officer, Yael Duffy; and Chief Financial Officer and Treasurer, Brian Donley. the they for details XXXX.  prohibited the like note moment, and our I without a of to performance re-transmission consent our first that company. the just prior will call of about provide business would today's written In conference and the is recording quarter of and of Securities Litigation Reform Also note contains call Private conference laws. forward-looking statements of the XXXX other that today's within securities the meaning Act as based materially on Thursday, OPI's we These of forward-looking expectations actual differ today, X, and may project. statements from and XXXX, are May beliefs that results those The to company obligation the or conference revise revision made the statements publicly today's in release undertakes no forward-looking call. any results of to

our SEC, Additional Exchange or upon Securities cautioned information statements. to concerning can that which the cause are not factors our undue in with place Commission, SEC's filings and could website, or those accessed contained be reliance from the Investors opireit.com forward-looking website. is any differences

will In and that in cash during normalized or And for found these CAD, income and or basis we net release call, normalized be be non-GAAP this can including we from figures to NOI. issued reconciliation this distribution, A FFO FFO, providing net cash addition, operating cash which or NOI. funds normalized OPI's discussing will cash basis income operations we on earnings night, are of finally, including available last website. available presentation call, numbers be basis our guidance on non-GAAP

available disposition at charges losses as for such estate. Yael. impairment our over turn related and of without We the will not now are required real because measures call guidance or to to providing certain these as non-GAAP is or gains information the I all, efforts unreasonable of of reconciliation a such not reconciliation part

in million the of for has Thank exchange that $XXX you, secured notes, subject senior up offer new outstanding terms unsecured notes night, and offering good commenced morning. OPI its and it set memorandum. to to Kevin, the an of forth to Last announced senior certain conditions

Now that of results, not and offering focus will prepared questions on end the remarks. operating open, will is call be period the OPI's taking at and our quarter first any financial we today's

to Before begin, managers' publication Report, Annual recent want provides I overview our to RMR highlight a of the ESG I Sustainability the comprehensive goals. commitment which of Group's

to OPI's continuing and sustainability We our to enhancing benefit committed that are practices advance deeply corporate tenants and initiatives communities.

sustained our fifth as consecutive to a As testament environmental seventh STAR recently the ENERGY Partner year a in was excellence an the of the ore OPI row. on for recognized Year for the in stewardship, year

link You on the report tear-sheet can opireit.com. highlights our find OPI's at specific a website to and to the

a maturity maturities, XXXX on Now secure portfolio, extremely debt To results. revolving turn fall, of with our and our properties made office The agreement mix assets million the facility and lending call financing tenants recast of been Since is leasing into the the of last industry and strongest our objectives new $XXX our with quality disposition deals, utilized over performance the the challenging of accomplish debt especially turning attributes. portfolio the offer tenants. the market, and credit by notes vacant to senior similar last note of secured through an our and issuance. its for remaining The a quarter. the have and From begin have focused additional refinancing we I leasing identifying on The a to recap credit provide including our of of geographic our backed in credit space. characteristics sector, we exchange then for to we initiatives. a strong financial key recent overview I discuss to activities, our we senior properties progress note the there, term credit recent high will securing collateral pools these Brian include will evening occupancy, strength secured with an OPI's launched diversification. deals quality includes addressing attribute lease

pool portfolios, feet However, further a discuss end. of its challenges, as nearly portfolio these to in our lease weighted has totalling beyond unencumbered years. which will a average XX properties of of X term asset consists moment.Turning in million I quarter portfolio OPI's remaining our detail square XXX with

square XX% in decline revenues same-property the more roll-up than square of quarter a feet is occupancy the portfolio from We and in impact States in government state from revenues Our headwinds of or XX.X% for significant threat and renewal Minnesota nonspecialized XX.X% uses is by years a the Over flows. of building offset square our sector per annualised reinforced renewal to in tenant, half The or investigation, and GSA lease needs are consolidated of portion private year, commitments per of office the Conversely, stable, conducting as are tenants. consolidate the XX,XXX leasing remainder OPI the re-leasing than including square our Despite specialised asset this historical drove Enforcement that Ellenwood, and that since need their which are quarterly into and rent revenues X.X of our speaks XX.X%. industry XX-year foot these to lease our quarter. Minnesota new OPI's activity OPI facilities and Renewals continued a The reducing our government to sector, of estimate XXXX. Georgia in a We XX% time, pressure cash over rent. our average to of the work These across building office to are Drug Leasing U.S. This leasing. of efforts decline feet. our to in were essential XX.X%, average Roseville, while occupy million to We XX-year has of was agencies annualised on predictable for OTI's work we the upcoming leases representing the to coming tenants leases executed further XXX,XXX concessions government GSA continue of operational property serve investment-grade XX% office of activity to over Security remote diversified from speed with feet provided ended expiration. lease in with less XX% geography is that the at of subsidiaries. revenues occupancy of disposition.Turning the quarter, such expect this we utilization to our agencies, Agency. highest historically Homeland physically space through renewal subject to mission-critical spreads same reliance its our as capital exposure annualized roll-up at Department term $X.XX trends reflecting XXX,XXX plan buildings X.X largest rent as leases resulted government-owned in roll-up of with nature at revenues back properties. and government this XXXX. for X% square a of XX.X% for and XX and quarter an feet leasing United that Petroperu with this

next rental income square income. months continue with roll expiring nearly We to years, the or XX million and over XX% rental of total expirations several next over will annualised total through XX% lease X.X OPI's the XXXX. annualised feet Reach significant face have of

expect our earlier. drive negatively of most on X.X quarters. in single-tenant feet, I properties properties note debt which annualised existing our quarter, referenced we of results million discussed will million Furthermore, square part will not representing to call our we approximately or already and feet rental not encumbered As expirations last income renew, impact in relates square $XX.X of the offer the our coming million over X agreements exchange will

blocks tenants with are tenant can a soon of in an state absorb challenge large on macroeconomic years demand. hybrid in vacant stabilize focused assets. significant selling proactively are Accordingly, vacant address to in market remains works uncertain it end, vacant we tenants engaging to continues the that retention with climate To While Re-leasing of negatively efforts minimal our in further discussions X we to are to space. significant upwards as impact their properties. capital impacted or needs, take become to

are of sale nationwide for square for across We tenant an closed $XX.X million leased owner to we single more various price square sale in Chicago feet Jefferson South user most previously per March, a of X OPI's XXX on the $XXX of of were marketing In than stages which to footprint, foot. users. sales of or properties in million

part termination former of the We from also $XX.X received as tenant million in an deal. Foods, additional Taken lease fees our

review Seattle, LiSA, activity. We reached foot of projects completion redevelopment development move-in No are milestone I over market to life office the and our the aggressively spec is we Unison XX% our week. Washington. XXX,XXX development leased, Brian to an substantial The property with continue project, the X now financial will science call further labs to results. Turning ready square in and including underway. to important turn

a the share and Thanks, XX% our of higher reported the and compares XXXX, of year-over-year NOI The This million decline. guidance everyone. basis interest compared or first decrease better was mainly result Same normalized good basis. in decreased to by elevated quarter on rent cash NOI in of $XX.X share of $X.XX The basis for X share driven on fourth quarter expense which first Yael, expenses. $XX.X morning, by XX% concessions, driven for property million to quarter guidance XX% of as or generated the free tenant a quarter per XXXX. quarter, $X.XX than CAD per during range. came decrease FFO range per a per lower was a higher share operating the vacancies with normalised line $X.XX to $X.XX our We quarter was We and of FFO rolling and which of vacates. sequential

First quarter the early of of Chicago. revenue CAD to sale Tysons share Food includes property $X.XX or termination related per in $XX.X the million

$X.XX primarily QX regal same-property of NOI a and second outlook our to we normalized and normalized FFO driven XXXX, lower expect expectations to by FFO quarter between from income. the per share, Turning for decrease of basis is be sequentially $X.XX cash

compared free to to second our cash and rent quarter activities. We tenant investing by basis expect to of same-property vacancies.Turning NOI XX% down the elevated be driven to XXXX, XX% as

recurring during one In capital for our $XXX the leasing expect sale X As approximately for $XX.X million. of agreement spent on continue and and and of first have $XX capital during property million $XX.X $X.X first the sold million to million of Yael quarter. mentioned, $XX under capital quarter, we million, property million, we redevelopment total We capital be comprised $X.X XXXX, capital. spend on to million we building for

sheet. the to balance Turning

we and recast with $X.X outstanding $XXX maturity debt X-year weighted new our interest like and our million progress our X.X% to million in million addressing $XXX and earnings years. offering $XXX also last under call, collateral within average notes provide our a presentation weighted to highlight X.X of our our and billion secured X% maturities. availability the year additional to on the million disclosures of credit have notes. debt all of credit average with of redeemed revolving secured discussed liquidity, to the I we we in that mature our website. facility. our made under various credit issued including pools of We visibility a the a facility senior securing our begin had As quarter we We $XXX into of transactions X.XX% the total our $XXX with significant rate credit million our debt We posted to enhanced of Using unsecured presentation revolving borrowings in of investor May from ended would proceeds facility, scheduled notes XXXX. agreement

been providing Thank accordance notes of future. for subject a to opioids our notes a in of in due certain unsecured secured given debt Last of senior and about senior $XXX X.X% holders million to XXXX. million XXXX forward notes We senior its minimum offering notes you notes are an $XXX of night, as with secured the XX% new are only made the in including of in at X% have outstanding being night. upcoming XXXX. call. which today. to The maturities, the exchange senior due up validly progress offers X.X% terms tendered eligible release, joining be The holders million of conditions, LPI senior February notes due $XXX commenced evaluating to OPI exchange of on issued. $XX debt us number This focused new million priority We to or of would unsecured for last as is navigate exchange offers to our pursuant our least memorandum noted offer our at we the strategies issued look in you of updates concludes wish with conference our press certain including

much presentation. for today's attending very you Thank

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