Orion Office REIT Inc.
−Removed: is an internally managed REIT engaged in the ownership, acquisition, and management of a diversified portfolio of mission-critical regional and corporate headquarters office buildings located in high-quality suburban markets across the U.S.
+Added: is an internally managed real estate investment trust (“REIT”) engaged in the ownership, acquisition, and management of a diversified portfolio of 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.
−Removed: Orion Office REIT Inc.
−Removed: was incorporated in the State of Maryland on July 1, 2021 and has been operating in a manner so as to qualify and has elected to be taxed as a REIT for U.S.
−Removed: federal income tax purposes, commencing with our initial taxable year ended December 31, 2021.
−Removed: As of December 31, 2022, the Company owned and operated 81 office properties with an aggregate of 9.5 million square feet, with an occupancy rate of 88.8% and a weighted-average remaining lease term of 4.0 years.
−Removed: Including the Company’s pro rata share of square feet and annualized base rent from the Arch Street Joint Venture, the Company’s unconsolidated joint venture with an affiliate of Arch Street Capital Partners, LLC (“Arch Street Capital Partners”), we owned an aggregate of 9.7 million square feet, with an occupancy rate of 89.0% and a weighted-average remaining lease term of 4.1 years as of December 31, 2022.
−Removed: Our properties are located in a total of 29 different states throughout the U.S.
+Added: Our portfolio is comprised of traditional office buildings, as well as governmental office, medical office, office/laboratory, office/research and office/flex properties.
+Added: The Company was initially formed as a wholly-owned subsidiary of Realty Income Corporation (“Realty Income”).
+Added: Following completion of the merger transaction involving Realty Income and VEREIT, Inc.
+Added: (“VEREIT”) on November 1, 2021, Realty Income contributed the combined business comprising certain office real properties and related assets previously owned by subsidiaries of Realty Income, and certain office real properties and related assets previously owned by subsidiaries of VEREIT (the “Separation”), to the Company and its operating partnership, Orion Office REIT LP (“Orion OP”), and on November 12, 2021, effected a special distribution to its stockholders of all the outstanding shares of common stock of the Company (the “Distribution”).
+Added: Following the Distribution, the Company has been operating as an independent publicly traded company, and the Company has elected to be taxed as a REIT for U.S.
+Added: federal income tax purposes, commencing with its initial taxable year ended December 31, 2021.
+Added: As of December 31, 2023, we owned and operated 75 office properties with an aggregate of 8.7 million leasable square feet located in 29 states with an occupancy rate of 80.0% and a weighted-average remaining lease term of 3.9 years.
+Added: Including our pro rata share of leasable square feet and annualized base rent from the Arch Street Joint Venture, we owned an aggregate of 8.9 million leasable square feet with an occupancy rate of 80.4%, or 87.2% adjusted for properties that are currently under agreement to be sold, and a weighted-average remaining lease term of 4.0 years as of December 31, 2023.
As of December 31, 2023, one tenant exceeded 10% of our annualized base rent:
the General Services Administration at 13.5%.
−Removed: As of December 31, 2022, the Company had a total of 17 leases with the General Services Administration and the weighted average remaining lease term of these leases was 2.8 years.
+Added: As of December 31, 2023, we had a total of 15 leases with the General Services Administration and the weighted average remaining lease term of these leases was 3.0 years.
As of December 31, 2023, properties located in the following states accounted for over 10% of our annualized base rent:
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New Jersey 10.2%
+Added: New York 10.2%
As of December 31, 2023, tenants in the following industries accounted for over 10% of our annualized base rent:
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Government & Public Services 13.9%
+Added: Financial Institutions 11.1%
Investment Strategy
−Removed: We employ a proven, cycle-tested investment evaluation framework which serves as the lens through which we make capital allocation decisions for both our current portfolio and future acquisitions.
+Added: We employ a proven, cycle-tested investment evaluation framework which serves as the lens through which we make capital allocation decisions.
This framework prescribes that investments are evaluated along the following parameters:
+Added: Asset Management.
+Added: We employ active asset management strategies and work to leverage our tenant relationships to attract and retain high-quality creditworthy tenants, drive re-leasing and renewal activity and maximize our tenant retention rates.
+Added: As part of our asset management efforts, we assess each property in our portfolio, including with respect to its existing leases, property type and tenant utilization, future leasing opportunities, geographic market, and marketability for sale, as well as how each property contributes to the portfolio as a whole, to determine the appropriate strategy, including potential disposition opportunities.
+Added: Additionally, we may seek to address any lease roll or vacancy in our portfolio by converting the space to multi-tenant office or other use in the event that our management team considers conversion to be the value-maximizing alternative for the subject property.
+Added: Capital Recycling .
+Added: We expect to continue to selectively dispose of properties in our current portfolio if we determine that they do not fit our investment strategies.
+Added: Proceeds from dispositions are expected to be redeployed to fund capital investment into our existing portfolio to further enhance the quality of our portfolio and stability of our cash flows, selective acquisitions and other general corporate purposes.
+Added: As part of our capital recycling efforts, we are seeking opportunities to invest in properties featuring, among other uses, government, medical, laboratory, research and development, and flex operations.
+Added: Our experience is that these properties have greater tenant utilization and higher renewal probability, given their generally specialized uses.
+Added: We expect to be more cautious with investment in generic office properties if we believe that remote and hybrid work arrangements will continue to be viable alternatives and in-office head counts remain below pre-pandemic levels.
Suburban Market Features.
−Removed: We focus on suburban markets with strong fundamentals and demographic tailwinds accelerated in the post-COVID environment.
−Removed: We look for markets with population growth, limited new supply, and highly educated workforces that are well positioned to capitalize on de-urbanization trends amplified by the migration of millennials to the suburbs.
−Removed: The suburbs within Sun Belt states in particular are markets which are now benefiting from an increasing number of corporate relocations from urban coastal markets to inland secondary markets, as companies and employees alike seek a lower cost of living, business-friendly tax and regulatory environments, less density, and better weather.
−Removed: Additionally, we believe there are a variety of markets outside the Sun Belt which possess similar attractive characteristics and are benefiting from similar trends.
−Removed: We will look to opportunistically emphasize both Sun Belt and other similar high-quality markets as we grow our portfolio.
+Added: We primarily own commercial real properties located in suburban markets and seek to capitalize on de-urbanization trends amplified by the migration of millennials to the suburbs in the post-COVID environment.
+Added: 36.0% of our annualized base rent as of December 31, 2023 was from Sun Belt markets.
+Added: We believe these markets will continue to benefit from an increasing number of corporate relocations from urban coastal markets to inland secondary markets, as companies and employees alike seek a lower cost of living, business-friendly tax and regulatory environments, less density, and better weather.
+Added: Additionally, we believe there are a variety of markets outside the Sun Belt which possess similar attractive characteristics and will benefit from similar trends.
+Added: We will look to opportunistically emphasize both Sun Belt and other similar high-quality markets to the extent we are able to grow our portfolio.
Net Lease Investment Characteristics.
−Removed: We seek stable cash flow from primarily long-term leases with high credit quality tenants and inflation protection from embedded rent growth.
+Added: We seek to invest in stable cash flow from primarily long-term leases with high credit quality tenants and inflation protection from embedded rent growth.
Net leases can enhance stability of cash flows by shifting some or all operating expense burden to the tenant.
Tenant Credit Underwriting.
−Removed: We will pursue both investment grade rated tenants and creditworthy non-investment grade rated tenants.
−Removed: We will utilize our credit underwriting and real estate expertise to underwrite creditworthy non-investment grade tenants that we believe will offer enhanced yield and attractive risk-adjusted returns.
+Added: We primarily own commercial real properties leased to investment-grade rated tenants and creditworthy non-investment-grade rated or unrated tenants.
+Added: To the extent we are able to grow our portfolio, we intend to utilize our credit underwriting and real estate expertise to underwrite creditworthy investment-grade and non-investment-grade tenants that we believe will offer enhanced yield and attractive risk-adjusted returns.
Real Estate Attributes.
−Removed: We intend to invest primarily in mission-critical regional and corporate headquarters office locations that are well-located with easy access to commuting routes and on-site amenities that enhance the tenant’s propensity to renew.
−Removed: When possible, we will look to acquire properties with modern floor plans configured to optimize collaboration and enhance employee productivity.
−Removed: We will also seek to acquire properties that further the environmental, social and governance initiatives that are part of our strategy.
−Removed: We seek to utilize our investment evaluation framework to drive external growth through acquisitions, generate internal growth via asset management, and optimize our portfolio through capital recycling.
−Removed: To accomplish this objective, we intend to execute along three fundamental drivers of our business:
−Removed: External Growth, Asset Management, and Capital Recycling.
+Added: Our portfolio includes regional and corporate headquarters office locations and other properties that are well-located with easy access to commuting routes and on-site amenities that enhance the tenant’s propensity to renew.
+Added: As part of our asset management efforts, we expect to increase the quality and desirability of our portfolio by continuing to make capital investments in our properties to add amenities and to create more modern floor plans configured to optimize collaboration and enhance employee productivity.
External Growth.
−Removed: We intend to grow our portfolio by acquiring properties, both directly and through our Arch Street Joint Venture, that fit the characteristics defined in our investment evaluation framework through multiple sourcing channels, leveraging our management team’s extensive relationship network with an average of over 25 years of experience transacting in the single-tenant net lease suburban office market.
−Removed: We expect to pursue both individual assets as well as portfolio opportunities sourced from a wide range of marketed and off-market transactions.
+Added: When possible, we intend to grow our portfolio by acquiring properties that fit the characteristics defined in our investment evaluation framework through multiple sourcing channels, leveraging our management team’s extensive relationship network with an average of over 25 years of experience transacting in the single-tenant net lease suburban office market.
+Added: We intend to pursue both individual assets as well as portfolio opportunities sourced from a wide range of marketed and off-market transactions.
As described in more detail in the section in this report entitled “Risk Factors”, our acquisition strategy is subject to risks, including that we may not be in a position or have the opportunity in the future, to make suitable property acquisitions on advantageous terms and/or that such acquisitions will fail to perform as expected.
−Removed: Asset Management.
−Removed: We employ active asset management strategies and work to leverage our tenant relationships to attract and retain high-quality creditworthy tenants, drive re-leasing and renewal activity and maximize our tenant retention rates.
−Removed: Our active asset management strategy utilizes a disciplined and adaptive investment evaluation framework to assess each property in our portfolio, including with respect to its existing leases, future leasing opportunities, geographic market, and marketability for sale, as well as how each property contributes to the portfolio as a whole, to determine the appropriate strategy for managing that property within the context of our portfolio, including potential disposition opportunities.
−Removed: We also apply this evaluation framework to the properties in our portfolio as part of the process by which we identify opportunities to sell, re-lease, or reposition existing assets.
−Removed: Additionally, we may seek to address any lease roll or vacancy in our portfolio by converting the space to multi-tenant office use in the event that our management team considers conversion to be the value-maximizing alternative for the subject property.
−Removed: Capital Recycling.
−Removed: We expect to continue to selectively dispose of properties in our current portfolio if we determine that they do not fit our investment strategies.
−Removed: Proceeds from dispositions are expected to be redeployed to fund new acquisitions as well as capital investment into our existing portfolio to further enhance the quality of our portfolio and stability of our cash flows.
−Removed: We intend, when appropriate, to employ prudent amounts of leverage and to use debt as a means of providing additional funds for the acquisition of assets, and to refinance existing debt or for asset management and general corporate purposes.
+Added: We employ prudent amounts of leverage and use debt as a means of providing additional funds for asset management and other general corporate purposes.
We expect to use leverage conservatively, assessing the appropriateness of new equity or debt capital based on market conditions, including prudent assumptions regarding future cash flow, the creditworthiness of tenants and future rental rates.
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Pursuant to the ATM Program, we may from time to time offer and sell shares of our common stock, having an aggregate offering price of up to $100.0 million.
−Removed: Such offers or sales of shares of our common stock may be made in privately negotiated
−Removed: transactions, including block trades, brokers’ transactions that are deemed to be “at the market” offerings as defined in Rule 415 under the Securities Act, including sales made directly on the New York Stock Exchange, or through forward transactions under separate master forward sale confirmations and related supplemental confirmations for the sale of shares of our common stock on a forward basis.
+Added: Such offers or sales of shares of our common stock may be made in privately negotiated transactions, including block trades, brokers’ transactions that are deemed to be “at the market” offerings as defined in Rule 415 under the Securities Act, including sales made directly on the New York Stock Exchange, or through forward transactions under separate master forward sale confirmations and related supplemental confirmations for the sale of shares of our common stock on a forward basis.
As of December 31, 2023, we had not sold any shares of common stock pursuant to the ATM Program.
−Removed: As of December 31, 2022, we had $530.0 million of total consolidated debt outstanding, consisting of a $355.0 million fixed rate mortgage loan collateralized by 19 properties (the “CMBS Loan”), and $175.0 million borrowed under our senior term loan facility (the “Term Loan Facility”).
−Removed: As of December 31, 2022, we did not have any amounts outstanding under our $425.0 million senior revolving credit facility (the “Revolving Facility” and together with the Term Loan Facility, the “Revolver/Term Loan Facilities”).
−Removed: In addition, the Company’s pro rata share of mortgage notes of the unconsolidated joint venture was $27.3 million as of December 31, 2022.
−Removed: We believe our conservative leverage and strong liquidity will enable us to opportunistically take advantage of high-quality acquisition opportunities.
−Removed: However, there can be no assurance that we will be able to obtain the financing necessary to fund our acquisition of new properties or expansion or redevelopment of existing properties on terms favorable to us or at all.
+Added: As of December 31, 2023, we had $471.0 million of total consolidated debt outstanding, consisting of a $355.0 million fixed rate mortgage loan collateralized by 19 properties (the “CMBS Loan”), and $116.0 million borrowed under our $425.0 million senior revolving credit facility (the “Revolving Facility”).
+Added: In June 2023, we repaid and retired our $175.0 million senior term loan facility with borrowings under the Revolving Facility.
+Added: Additionally, the Company’s pro rata share of mortgage notes of the Arch Street Joint Venture was $27.3 million as of December 31, 2023.
+Added: We believe our conservative leverage and liquidity will enable us to continue to make the capital investments needed to enhance the quality of our existing portfolio and stability of our cash flows, as well as opportunistically take advantage of high-quality acquisition opportunities as market conditions permit.
Competitive Strengths
−Removed: Our portfolio consists of high-quality, diversified properties with favorable exposure to investment grade credit.
−Removed: Our acquisition strategy is focused on suburban office assets and primarily net leases with long-term leases of approximately 10 years on average, with the ability to opportunistically acquire multi-tenant office properties.
−Removed: Our ability to efficiently deploy capital is a direct result of our management team’s wide-ranging network of industry relationships, which we believe allows us to source a robust pipeline of attractive marketed, off-market, sale-leased back and build-to-suit investment opportunities.
−Removed: We believe our relationship-based sourcing strategy will generate a sustainable pipeline of opportunities to drive growth and enhance scale over time.
−Removed: We also believe that our senior management team’s experience, as well as deep and long-standing relationships within the single-tenant suburban office sector, competitively position us, provide us with unique market insights, allow us to discern market trends, help us to access off-market acquisition opportunities and facilitate our ability to execute our growth plan.
−Removed: Our platform is vertically integrated across functions, including investment, finance, property management and leasing.
+Added: Our portfolio consists of high-quality, diversified properties with favorable exposure to investment-grade credit and is located in attractive suburban markets across the U.S.
+Added: and leased primarily on a single-tenant net lease basis.
+Added: We have a strong management team with a wide-ranging network of industry relationships and an average of over 25 years of experience transacting in the single-tenant net lease suburban office market.
+Added: Our platform is vertically integrated across functions, including investment, finance, property management, leasing and legal.
Our integrated structure enables us to identify value creation opportunities and realize significant operating efficiencies.
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We electronically file Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and all amendments to those reports, and proxy statements, with the SEC.
−Removed: You may access any materials we file with the SEC through the EDGAR database at the SEC’s website at http://www.sec.gov.
+Added: You may access any materials we file with the SEC through the EDGAR database at the SEC’s website at www.sec.gov.
In addition, copies of our filings with the SEC may be obtained free of charge from our website at www.onlreit.com.
−Removed: We are providing our website address solely for the
−Removed: information of investors.
+Added: We are providing our website address solely for the information of investors.
We do not intend for the information contained on our website to be incorporated into this Annual Report on Form 10-K or other filings with the SEC.
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• If global market and economic conditions deteriorate, our business, financial condition and results of operations could be materially adversely affected.
−Removed: • The COVID-19 pandemic has had, and may continue to have, significant impacts on workplace practices, or other office space utilization trends, which could materially adversely impact our business, operating results, financial condition and prospects.
+Added: • Changes in workplace practices and office space utilization, including remote and hybrid work arrangements, have reduced the demand for office space at our properties and may continue to do so.
• We could experience difficulties or delays renewing leases or re-leasing space, which will increase our costs to operate and maintain such properties without receiving income.
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• We have a significant amount of indebtedness and may need to incur more in the future.
−Removed: • We have existing debt and refinancing risks that could have a material adverse effect on our business, financial condition and results of operations, including the risk that interest rates may rise.
+Added: • We have existing debt and refinancing risks that could have a material adverse effect on our business, financial condition and results of operations, including the risk that we will be unable to extend or refinance some or all of our debt, including uncertainty with regard to our ability to extend and continue to comply with or otherwise refinance our Revolving Facility which is scheduled to mature on November 12, 2024.
• Financial covenants could materially adversely affect our ability to conduct our business.
−Removed: • We depend on external sources of capital that are outside of our control, which may affect our ability to pursue strategic opportunities, refinance or repay our indebtedness and make distributions to our stockholders.
+Added: • We depend on external sources of capital that are outside of our control, which may affect our ability to achieve our business strategies.
• Our expenses may remain constant or increase, even if our revenues decrease, which may have a material adverse effect on our business, financial condition and results of operations.
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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.