Office Properties Income Trust (OPI) 31 Oct 242024 Q3 Earnings call transcript

Good morning, and welcome to the Office Properties Income Trust Third Quarter 2024 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference call over to Kevin Barry, Senior Director of Investor Relations. Please go ahead.

Thank you, and good morning, everyone. today. us joining for Thanks With me Operating and President Chief are Brian the Yael Duffy; call Officer, Officer OPI's and Donley. and on Chief Treasurer, Financial and provide In XXXX, of a sell-side about they a with by for will session just our third moment, followed business analysts. our question-and-answer quarter performance the details

project. XXXX forward-looking call Securities Act and the like other the Reform Thursday, contains forward-looking those prior actual without Litigation These to recording within of differ we company. statements as based I conference of prohibited October note beliefs statements and that would today's and OPI's may retransmission securities and of consent of XXXX, from meaning is the results note of on laws. Also that today's XX, the today, are conference the written materially expectations call Private that

or no any in undertakes to revision obligation the company today's forward-looking to of The release made statements revise the results call. conference publicly

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

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

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

over turn to the will Yael. call now I

good Thank morning. you, Kevin, and

would the to our on quarter, billion the nearly last total $XXX I In we to strategic year, like begin, senior have half and secured in for outstanding provide to $XXX have million senior we reduce OPI's $X.X update reduced first allowed the approximately progress Before notes notes shares. million. we secured new of million $XXX maturities. common navigate debt unsecured $XX.X our and by made to of we $XXX debt financings an actions maturity over upcoming debt our Since from million exchanged These million. us by XXXX completed

X for Additionally, the we capacity are sold properties focused earlier this in the $XXX $XX remaining third credit We quarter million and under on liquidity. drew month. of enhancing our our facility million

debt holders. a group We have of exchange negotiating been our with potential a XXXX transaction note

with and debt say on to XXXX able February the certainty X, date. maturity we to the whether refinancing satisfy cannot we execute will However, transaction a be prior

From weighted Now an turning over of review to of results this XX.X% consists property of turn with our portfolio will Brian total lease leasing with dispositions. than quarter the We X XXX portfolio OPI's properties on of results. million providing more an before update same-property review feet ended will I and portfolio, our to third square average years. financial our a totaling and occupancy of occupancy approximately XX term remaining XX.X%. lease quarter. expirations, start upcoming there, call overview to the with I quarter

diversified revenue both nearly by Our with and generates subsidiaries. from tenants investment-grade $XXX geography revenues of our million and of rated or is industry portfolio annualized XX% coming

as existing feet for totaling million XX our properties debt our collateral portfolio nearly total of of of $XXX square today, agreements. XX that or revenue million serve annualized As account XX% revenue under

disproportionately Accordingly, portfolio, utilization, vacates are and are in negative these shifts impact footprint. properties. concentrated. tenants and consolidating had our work estate XXXX to due such challenges face as our their portfolio, known a XXXX OPI's where our real remote the of we to majority at continues on on office Within focused tenants in OPI space challenges unencumbered increased have retaining

XX weighted years. totaling Renewals leases with average X% leasing, XXX,XXX with feet we During of the at of majority America XX.X a including XXX,XXX term with square square lease third drove XX% of or a Bank foot quarter, lease executed our million the notes properties a forecasted roll-up XX% to XXXX single-tenant in in occur. that XXX,XXX and due to foot were Both AT&T serve rent. $XXX a square and as were lease senior rent, an secured roll-up for lease collateral previously at our

to through X.X square million vacates or is Known million annualized total during XXXX. of of account As feet this OPI's revenue. period $XX.X revenue expire XX.X% we telegraphed, December annualized long of scheduled have for

be would are conditions re-lease large outcome which market face single-tenant vacate. many vacancies, properties, desired our While to tenants as these challenging

are common multi-tenant all the experiencing we quarter, carry further completed. which X costs properties, multi-tenant downtime, Additionally, market executed and rents XX% leasing properties of tenant through of our OPI's especially pipeline improvement tenant and put dispositions. greater on portfolio burden to properties. at where significant third associated liquidity. and mitigate and property represent recently the upgrades multi-tenant of packages occupancy amenity properties decreasing and OPI's been increased In is the concession impact to plan XX% would were within have our We demand, leases new area new

well properties focused Turning to our We our selling vacant carrying with on liquidity as that activity. reduce the increase associated as will properties. remain disposition costs

valuations and to sales available sector the financing market as not is However, challenging remain in readily office remain depressed buyers. within this

or of vacant or buyers value-add Additionally, for the pool properties limited generally vacant soon-to-be is buyers opportunistic potential to developers.

sales in X we additional XX the sell to square an sold under aggregate million, agreement $XXX for of million properties to totaling feet for price X.X an quarter we've addition are In the $XX million. properties third

at at experience, certain these prices However, based our currently projected sell own on or the we be that properties all. will cannot

strategies over to Brian? like and while evaluating the our on navigate financial our to discuss maturities I reiterate operating I leasing equally upcoming to to turn are we debt OPI's Before properties. Brian focused results, that call simultaneously would

good and Yael, you, morning. Thank

to For end range guidance reported we $X.XX FFO quarter, by for below in a or $X.XX million reserve normalized on as $X.XX XXXX. $X.XX a related FFO our of in an million of $X.XX miss income share normalized share $XX.X per of for miss and the rents operating the a $XX.X to result rental per higher second This of or of for the quarter, increase third low compared expenses. quarter the uncollectible

NOI. certain due being sale quarter properties of XXXX, held XX. for of expectations basis quarter basis beating driven on a higher cash of X% interest and as the Same-property The as was was expense $XX.X third NOI for lower million, decrease our classified decline representing a to sequential compared to September the quarter by

Turning expectations and to same-property cash quarter fourth our XXXX. outlook basis NOI for of the normalized FFO for

to $X.XX from The and FFO normalized interest QX We driven by primarily increased between $X.XX share. expect decrease and per is expense. lower be sequentially NOI

$XX interest run interest of consisting $XX approximately costs. of of of million quarterly expense and estimated is expense $X million million, rate current Our cash noncash amortization financing

same-property expect expenses. not down basis of changes as tenant X% fourth to operating to NOI to partially portfolio. does any the free by NOI quarter compared be X% potential lower same-store XXXX, We offset rent, This to cash guidance by vacancies, include elevated our driven

properties $XX of We full capital capital. be CapEx and with activities. these of investing million had XX of We million a impairment our value quarter $XX.X classified took expected and during of to end, to is year and value carrying additional At of recurring guidance $XX held we million, spent XXXX spend of our approximately to a million the as building a leasing million carrying of comprised X the for property. million quarter Turning down on capital $XXX properties $XXX $XX sale. charge write X

of for of sale. properties have for $XXX sale as held XX As for today, agreement properties we including classified million, XX the under

these close XXXX. QX by of expect to We transactions end the

Turning to under balance million remaining we sheet. down drew our preserve credit flexibility. to In the our financial capacity the facility revolving $XXX of October,

total $XXX and the have of new $XX.X of notes senior outstanding due million XXXX XXXX million X% exchanged second $XX.X senior Our for due today notes million X.X our is million shares. quarter, common unsecured we cash. secured of liquidity Since

our the exchange debt under that senior of rate maturity weighted weighted X.X% a interest this remaining a quarter was and senior for notes from outstanding ended with X% available notes with billion debt We average new secured The XXXX average June $X.X capacity OPI due of September of represented years. issuance exchange. X.X

obligations. We leasing-related also committed $XXX million currently of have

this noted, We focused As notes of on remaining we Yael be cannot can satisfy maturity. the execute million XXXX. we debt $XXX addressing refinancing X, to are on transaction that February on a sure maturing

and third-party is on concern. transactions. exchange the At a time, note to continue with a a of a we to work with & doubt debt substantial going adviser, as certain to ability capital our XXXX there holders Moelis explore result, our other continue about same Company, management possible our As

provide are updates with as circumstances we'll conversations ongoing, Our investors these warrant. and

for the Operator, our prepared concludes That call questions. up we're to remarks. ready open

[Operator Instructions] The B. first Bryan from Maher Riley Securities. is question with

basically Yael to and sold a kind a I Page look the to for and of XX-Q, little look I Am XX% of safe charges, that about bit of is value? between say at impairment XX% you're to rough right? math you've and When Brian, specifically assets me it sold, of at at that XX, just selling thinking sold what being and the the be they're today. that these at and I assets couple the kind I do carrying

are or soon selling Brian, these generally properties we're be vacant. that to vacant

there's that in considering no irrelevant really is value place. leases carrying the So

So carrying less again, it's X/X -- probably value. I the even the than value, say, would of carrying

I they say selling unencumbered what $X really I of what are to they're you when of remaining at okay share be unencumbered to kind if billion. using vacant? to get these look is sure, just I'm common. to Or at you're percentage trying think, exchange. to discuss how there, are, I helpful color get trying to debt get assets, properties in gross by whatever of if the I you you're don't value available I'm assets, -- pool, would XX-something investors are north really book your be that and it what that of pound. to would the want But soon kind your the vacant? I'm Any that them or Okay, know assets, worth. currently

Yes.

QX be XX of the or in will of -- or the And early of agreement, there's of that under another vacant XX properties end vacant So the vacant be them to 'XX. soon will by are then one year. be

And or have occupancy. -- so XX% low WALT. are less I I would short mean, and the a remaining say,

guess, say within not are those those our portfolio. assets the are So performing I -- would I

to assets we does portfolio When would of the I in that property challenged in the to all the discussed. which in just versus assets challenged draw of bulk, that debt correlation think the that vast for Isn't up at value, tranches I'm more value trying Mass between pools their Sonesta you've Kind on up and period? the Right. make rent collateral portfolio coming and their Ave. not being the some D.C. agree, of free stop fairly the a XX moving the soon?

'XX. of In January

Okay. are when little bit. are? can buyers ability you on how in to close there, buy a are unencumbered, bit And coming You know your then they I to prepared to What that a what of assets buyers little they comments, thinking? it and talked are redevelopments? close about the the out their give your who teardowns, color But fast? And table the are is

the really mix on it So property. a depending is

other just have have and properties under garnering redevelopment value and likely those are based premium. the really that are -- buyers agreement We will down land owner a torn that a redeveloped. some then And be are users, properties and we on

the can to prices from $XXX square square $XX a range foot anywhere sales foot. So really, a

pipeline and I in And give activity and this, impressed, bit little a maybe for the on We your on that nearly optimism me. leasing on square the the know were had like more X the Can last leasing close what that you outlook million color pipeline? leasing some to third on you feet. ability quarter, us Okay. looks

and my aren't stages. seen, activity would really just say prepared So of activity stages the we where deals. we properties. as don't tour in it under have is just or single-tenant most We multi-tenant million the in early increased square the the remarks, XX tenants [ leaving, at at less the our is advanced least, activity. said buildings -- than pipeline X in -- XX% existing at over are proposals ] have is I I And seeing tenants feet, about

so Do that noteholders. commentary Okay. -- me. that, remaining and something maybe or along a and guys one you one they want negotiations you negotiating guess, XXXX get that are pulled had that Well, the your saw the for in happen good information. to But moved you with went whatever of In I noteholder the last deck to out, noteholders out these it and like feel XXXX? was, one faith X going sense that do along the with disclose for that I ago week make

have been conversations The very Yes. constructive.

I So that's can say. really all

The next Stanley. from question is with Morgan Ronald Kamdem

me. one both equity? done for quickly walk me the the with a and quick debt notes you Could thinking of Just XXXX in sort through behind quarter in the due exchange just just

trying We've to Sure. the at the At -- our investors. of chip been toolbox in utilize the certain talking as same maturities. XXXX tools away we're the we time, to mentioned, with

small that under away closed had helping the overly exchange the have some $XXX which further left, on million. size capacity we So maturity we material been October. is June but also exchanges, now equity issue the deal, we from in in bit is chip We've to every for notes of and left utilized down at debt some did that doing to we one-off amount, not which

question-and-answer would conference our to closing for turn concludes any session. the remarks. back I like Officer, to Chief Duffy, and This President Operating Yael over

for you joining good Have day. Thank a us.