What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2025-03-05 compared with 2024-02-27 · 419 added, 687 removed, 857 unchanged (56% of the section changed)

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2025 Annual Bonus Program

On February 26, 2024, the Compensation Committee (the “Compensation Committee”) of the Board of Directors (the “Board”) of the Company, approved a new annual incentive program for the Company’s 2024 fiscal year (the “2024 Bonus Program”).

Under the 2024 Bonus Program, each of the Company’s named executive officers, namely, Paul McDowell, Gavin Brandon, and Gary Landriau (the “executives”), are eligible to earn an annual incentive bonus based on the applicable executive’s individual performance and the Company’s achievement of performance goals relating to (1) Core FFO per share, (2) total general and administrative expenses (“G&A expenses”), and (3) Net Debt to Adjusted EBITDA.

On March 3, 2025, the Compensation Committee (the “Compensation Committee”) of the Board of Directors (the “Board”) of the Company, approved a new annual incentive program for the Company’s 2025 fiscal year (the “2025 Bonus Program”).

Under the 2025 Bonus Program, each of the Company’s named executive officers, namely, Paul McDowell, Gavin Brandon, and Chris Day (the “executives”), are eligible to earn an annual incentive bonus based on the applicable executive’s individual performance and the Company’s achievement of performance goals relating to (1) Core FFO per share, (2) total general and administrative expenses (“G&A expenses”), and (3) Net Debt to Adjusted EBITDA.

The weighting of each component of the 2025 Bonus Program is as follows:

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Schedule III – Real Estate and Accumulated Depreciation is included herein beginning on page F- 34 .

All other schedules have been omitted as the required information is either presented in the consolidated and combined financial statements or is not applicable.

All other schedules have been omitted as the required information is either presented in the consolidated financial statements or is not applicable.

The following exhibits are included, or incorporated by reference, in this Annual Report on Form 10-K for the period ended December 31, 2024 (and are numbered in accordance with Item 601 of Regulation S-K):

2.1 Separation and Distribution Agreement, by and among Realty Income Corporation, Orion Office REIT Inc., and Orion Office REIT LP (filed as Exhibit 2.1 to the Company's Current Report on Form 8-K, filed on November 15, 2021 and incorporated herein by reference).

2.2 Transition Services Agreement by and among Realty Income Corporation and Orion Office REIT Inc.

(filed as Exhibit 2.2 to the Company's Current Report on Form 8-K, filed on November 15, 2021 and incorporated herein by reference).

2.3 Tax Matters Agreement by and among Realty Income Corporation and Orion Office REIT Inc.

(filed as Exhibit 2.3 to the Company's Current Report on Form 8-K, filed on November 15, 2021 and incorporated herein by reference).

2.4 Employee Matters Agreement by and among Realty Income Corporation, VEREIT, Inc., Orion Office REIT Inc.

and Orion Office REIT LP (filed as Exhibit 2.4 to the Company's Current Report on Form 8-K, filed on November 15, 2021 and incorporated herein by reference).

3.1 Articles of Amendment and Restatement of Orion Office REIT Inc.

(filed as Exhibit 3.1 to the Company's Current Report on Form 8-K, filed on November 15, 2021 and incorporated herein by reference).

3.2 Articles of Amendment to Articles of Amendment and Restatement, as amended through March 5, 2025 (filed as Exhibit 3.1 to the Company's Current Report on Form 8-K, filed on March 5, 2025 and incorporated herein by reference).

3.3 Second Amended and Restated Bylaws of Orion Office REIT Inc.

(filed as Exhibit 3.1 to the Company's Current Report on Form 8-K, filed on September 8, 2023 and incorporated herein by reference).

3.4 First Amendment to Second Amended and Restated Bylaws (filed as Exhibit 3.2 to the Company's Current Report on Form 8-K, filed on March 5, 2025 and incorporated herein by reference).

4.1 Form of Warrant (filed as Exhibit 4.1 to the Company's Registration Statement on Form S-3 (File No.

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10.1 Agreement of Limited Partnership of Orion Office REIT LP (filed as Exhibit 2.2 to the Company’s Registration Statement on Form 10, filed on October 4, 2021 and incorporated herein by reference).

10.2 First Amendment to Agreement of Limited Partnership (filed as Exhibit 10.1 to the Company's Current Report on Form 8-K, filed on March 5, 2025 and incorporated herein by reference).

10.3 Credit Agreement, dated November 12, 2021, by and among Orion Office REIT Inc., Orion Office REIT LP, the financial institutions party thereto, and Wells Fargo Bank, National Association, as administrative agent (filed as Exhibit 10.1 to the Company's Current Report on Form 8-K, filed on November 15, 2021 and incorporated herein by reference).

10.4 First Amendment to Credit Agreement, dated as of December 1, 2022, among Orion Office REIT LP, as Borrower, Orion Office REIT Inc., as Parent, Wells Fargo Bank, National Association, as Administrative Agent, and the Lenders party thereto (filed as Exhibit 10.1 to the Company's Current Report on Form 8-K, filed on December 5, 2022 and incorporated herein by reference).

10.5 Second Amendment to Credit Agreement, dated as of June 29, 2023, among Orion Office REIT LP, as Borrower, Orion Office REIT Inc., as Parent, Wells Fargo Bank, National Association, as Administrative Agent, and the Lenders party thereto (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed on June 29, 2023 and incorporated herein by reference).

10.6 Third Amendment to the Credit Agreement, dated as of May 3, 2024, among Orion Office REIT LP, as Borrower, Orion Office REIT, Inc., as Parent, Wells Fargo Bank, National Association, as Administrative Agent, and the Lenders party thereto (filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q, filed May 8, 2024 and incorporated herein by reference).

10.7 Guaranty, dated November 12, 2021, by and among Orion Office REIT Inc.

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10.18† Form of Performance-Based Restricted Stock Unit Agreement pursuant to the Orion Office REIT Inc.

2021 Equity Incentive Plan (March 2023 Awards) (filed as Exhibit 10.1 4 to the Company ’ s Form 10-K filed on March 8, 2023 and incorpor ated herein by reference)

2021 Equity Incentive Plan (March 2023 Awards) (filed as Exhibit 10.14 to the Company’s Form 10-K filed on March 8, 2023 and incorporated herein by reference).

10.19† Form of Performance-Based Restricted Stock Unit Agreement pursuant to the Orion Office REIT Inc.

2021 Equity Incentive Plan (March 2024 Awards)

10.16 First Amendment to Credit Agreement, dated as of December 1, 2022, among Orion Office REIT LP, as Borrower, Orion Office REIT Inc., as Parent, Wells Fargo Bank, National Association, as Administrative Agent, and the Lenders party thereto (filed as Exhibit 10.1 to the Company's Current Report on Form 8-K, filed on December 5, 2022 and incorporated herein by reference).

10.17 Second Amendment to Credit Agreement, dated as of June 29, 2023, among Orion Office REIT LP, as Borrower, Orion Office REIT Inc., as Parent, Wells Fargo Bank, National Association, as Administrative Agent, and the Lenders party thereto (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed on June 29, 2023 and incorporated herein by reference).

2021 Equity Incentive Plan (March 2024 Awards) (filed as exhibit 10.15 to the Company’s Form 10-K filed on February 27, 2024 and incorporated herein by reference).

10.20†* R etirement and Consultanc y Agreement by and between Gary E.

Landriau and Orion Properties Inc.

dated March 5, 202 5.

19.1* The Company's Insider Trading Compliance Policy

21.1* Subsidiaries of the Company

23.1* Consent of KPMG LLP

23.2* Consent of Deloitte & Touche LLP

31.1* Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

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1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

97.1* Orion Office REIT Inc.

Policy for Recoupment of Incentive Compensation

97.1 Policy for Recoupment of Incentive Compensation (filed as Exhibit 97.1 to the Company’s Form 10-K filed on February 27, 2024 and incorporated herein by reference).

101.SCH* Inline XBRL Taxonomy Extension Schema Document.

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* Filed herewith

** In accordance with Item 601(b)(32) of Regulation S-K, this Exhibit is not deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities of that section.

Such certifications will not be deemed incorporated by reference into any filing under the federal securities laws, Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference.

† Management contract or compensatory plan or arrangement.

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Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned thereunto duly authorized.

Orion Office REIT Inc.

Orion Properties Inc.

Chief Financial Officer, Executive Vice President and Treasurer

February 27, 2024

March 5, 2025

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Form 10-K has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Name Capacity Date

McDowell Chief Executive Officer, President and Director February 27, 2024

McDowell Chief Executive Officer, President and Director March 5, 2025

McDowell (Principal Executive Officer)

Brandon Executive Vice President, Chief Financial Officer and Treasurer February 27, 2024

Brandon Executive Vice President, Chief Financial Officer and Treasurer March 5, 2025

Brandon (Principal Financial Officer)

Schmidt Senior Vice President and Chief Accounting Officer February 27, 2024

Schmidt Chief Accounting Officer March 5, 2025

Schmidt (Principal Accounting Officer)

/s/ Reginald H.

Gilyard Director, Non-Executive Chairman February 27, 2024

Gilyard Director, Non-Executive Chairman March 5, 2025

/s/ Kathleen R.

Allen Director February 27, 2024

Allen Director March 5, 2025

/s/ Richard J.

Lieb Director February 27, 2024

Lieb Director March 5, 2025

/s/ Gregory J.

Whyte Director February 27, 2024

INDEX TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

Whyte Director March 5, 2025

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Financial Statements

Report of Independent Registered Public Accounting Firm ( KPMG LLP , San Diego, CA , Firm ID 185 )

Orion Office REIT Inc.

O rion Properties Inc.

Consolidated Balance Sheets as of December 31, 202 4 and 202 3

Orion Office REIT Inc.

Consolidated and Combined Statements of Operations for the Years Ended December 31, 2023, 2022, and 2021

Orion Office REIT Inc.

Consolidated and Combined Statements of Comprehensive Income (Loss) for the Years Ended December 31, 2023, 2022, and 2021

Orion Office REIT Inc.

Consolidated and Combined Statements of Equity for the Years Ended December 31, 2023, 2022, and 2021

Orion Office REIT Inc.

Consolidated and Combined Statements of Cash Flows for the Years Ended December 31, 2023, 2022, and 2021

Notes to Orion Office REIT Inc.

Consolidated and Combined Financial Statements

O rion Properties Inc.

Consolidated Statements of Operations for the Years Ended December 31, 202 4 , 202 3 and 202 2

O rion Properties Inc.

Consolidated Statements of Comprehensive Income (Loss) for the Years Ended December 31, 202 4 , 202 3 and 202 2

O rion Properties Inc.

Consolidated Statements of Equity for the Years Ended December 31, 202 4 , 202 3 and 202 2

O rion Properties Inc.

Consolidated Statements of Cash Flows for the Years Ended December 31, 202 4 , 202 3 and 202 2

Notes to Orion Properties Inc.

Consolidated Financial Statements

Schedule III – Real Estate and Accumulated Depreciation

Report of Independent Registered Public Accounting Firm ( Deloitte & Touche LLP , Tempe, AZ , Firm ID 34 )

VEREIT Office Assets Combined and Consolidated Statement of Operations for the Ten Months Ended October 31, 2021

VEREIT Office Assets Combined and Consolidated Statement of Equity for the Ten Months Ended October 31, 2021

VEREIT Office Assets Combined and Consolidated Statement of Cash Flows for the Ten Months Ended October 31, 2021

Notes to VEREIT Office Assets Combined and Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors

Orion Office REIT Inc.:

Opinion on the Consolidated and Combined Financial Statements

We have audited the accompanying consolidated balance sheets of Orion Office REIT Inc.

and subsidiaries (the Company) as of December 31, 2023 and 2022, the related consolidated and combined statements of operations, comprehensive income (loss), equity, and cash flows for each of the years in the three-year period ended December 31, 2023, and the related notes and financial statement schedule III (collectively, the consolidated and combined financial statements).

In our opinion, the consolidated and combined financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2023, in conformity with U.S.

Orion Properties Inc.:

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Orion Properties Inc.

and subsidiaries (the Company) as of December 31, 2024 and 2023, the related consolidated statements of operations, comprehensive income (loss), equity, and cash flows for each of the years in the three-year period ended December 31, 2024, and the related notes and financial statement schedule III (collectively, the consolidated financial statements).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2024, in conformity with U.S.

generally accepted accounting principles.

Basis for Opinion

These consolidated and combined financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on these consolidated and combined financial statements based on our audits.

These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

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We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated and combined financial statements are free of material misstatement, whether due to error or fraud.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

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Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated and combined financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated and combined financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated and combined financial statements.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

We believe that our audits provide a reasonable basis for our opinion.

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San Diego, California

February 27, 2024

ORION OFFICE REIT INC.

March 5, 2025

ORION PROPERTIES INC.

CONSOLIDATED BALANCE SHEETS

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Mortgages payable, net $ 371,222 $ 352,856

Credit facility term loan, net — 173,815

Credit facility revolver 119,000 116,000

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Additional paid-in capital 1,148,223 1,144,636

Accumulated other comprehensive (loss) income ( 264 ) 6,308

Accumulated other comprehensive loss ( 15 ) ( 264 )

Accumulated deficit ( 384,348 ) ( 258,805 )

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The accompanying notes are an integral part of these statements.

ORION OFFICE REIT INC.

CONSOLIDATED AND COMBINED STATEMENTS OF OPERATIONS

ORION PROPERTIES INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except for per share data)

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Net loss ( 102,976 ) ( 57,311 ) ( 97,474 )

Net loss (income) attributable to non-controlling interest 9 ( 20 ) ( 17 )

Net (income) loss attributable to non-controlling interest ( 36 ) 9 ( 20 )

Net loss attributable to common stockholders $ ( 103,012 ) $ ( 57,302 ) $ ( 97,494 )

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The accompanying notes are an integral part of these statements.

ORION OFFICE REIT INC.

CONSOLIDATED AND COMBINED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

ORION PROPERTIES INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands)

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Unrealized gain on interest rate derivatives 249 127 7,802

Reclassification of previous unrealized (gain) loss on interest rate derivatives into net loss ( 6,699 ) ( 1,793 ) 90

Total other comprehensive (loss) income ( 6,572 ) 6,009 299

Reclassification of previous unrealized gain on interest rate derivatives into net loss — ( 6,699 ) ( 1,793 )

Total other comprehensive income (loss) 249 ( 6,572 ) 6,009

Total comprehensive loss ( 102,727 ) ( 63,883 ) ( 91,465 )

Comprehensive loss (income) attributable to non-controlling interest 9 ( 20 ) ( 17 )

Comprehensive (income) loss attributable to non-controlling interest ( 36 ) 9 ( 20 )

Total comprehensive loss attributable to common stockholders $ ( 102,763 ) $ ( 63,874 ) $ ( 91,485 )

The accompanying notes are an integral part of these statements.

ORION OFFICE REIT INC.

CONSOLIDATED AND COMBINED STATEMENTS OF EQUITY

ORION PROPERTIES INC.

CONSOLIDATED STATEMENTS OF EQUITY

(In thousands, except for share data)

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Value Additional Paid-In Capital Accumulated Other Comprehensive Income (Loss) Accumulated

Deficit Net Parent Investment Total Stockholders’ and Parent Company Equity Non-Controlling Interest Total Equity

Deficit Total Stockholders’ Equity Non-Controlling Interest Total Equity

Balance, January 1, 2022 56,625,650 $ 57 $ 1,145,278 $ 299 $ ( 58,715 ) $ 1,086,919 $ 1,369 $ 1,088,288

Net (loss) income — — — — ( 97,494 ) ( 97,494 ) 20 ( 97,474 )

Contributions from parent company, net — — — — — 633,650 633,650 1,352 635,002

Issuance of common stock, net 56,625,650 57 1,141,945 — — ( 1,142,002 ) — — —

Grant of stock warrants — — 3,269 — — — 3,269 — 3,269

Equity-based compensation, net — — 64 — — — 64 — 64

Other comprehensive income — — — 299 — — 299 — 299

Balance, December 31, 2021 56,625,650 57 1,145,278 299 ( 58,715 ) — 1,086,919 1,369 1,088,288

Net (loss) income — — — — ( 97,494 ) — ( 97,494 ) 20 ( 97,474 )

Distributions — — — — ( 22,701 ) ( 22,701 ) — ( 22,701 )

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Balance, December 31, 2023 55,783,548 56 1,144,636 ( 264 ) ( 258,805 ) 885,623 1,380 887,003

Net (loss) income — — — — ( 103,012 ) ( 103,012 ) 36 ( 102,976 )

Distributions — — — — ( 22,531 ) ( 22,531 ) ( 76 ) ( 22,607 )

Repurchases of common stock to settle tax obligations ( 48,700 ) — ( 170 ) — — ( 170 ) — ( 170 )

Equity-based compensation, net 217,028 — 3,757 — — 3,757 — 3,757

Other comprehensive income, net — — — 249 — 249 — 249

Balance, December 31, 2024 55,951,876 $ 56 $ 1,148,223 $ ( 15 ) $ ( 384,348 ) $ 763,916 $ 1,340 $ 765,256

The accompanying notes are an integral part of these statements.

ORION OFFICE REIT INC.

CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS

ORION PROPERTIES INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

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Non-cash revenue adjustments, net 180 ( 5,977 ) 171

Amortization of net premiums on mortgages payable — — ( 60 )

Impairments 47,552 33,112 66,359

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Cash flows from investing activities:

Investment in real estate assets ( 34,734 ) — —

Capital expenditures and leasing costs ( 22,576 ) ( 18,442 ) ( 11,624 )

Proceeds from disposition of real estate, net 5,069 21,032 31,854

Investment in unconsolidated joint venture — — ( 2,478 )

Return of investment from unconsolidated joint venture 987 1,840 2,247

Origination of member loan to unconsolidated joint venture ( 1,400 ) — —

Principal repayments received on notes receivable 1,200 — —

Deposits for real estate assets ( 1,350 ) ( 2,340 ) —

Refunds of deposits for real estate assets 2,340 — —

Uses and refunds of deposits for real estate assets 1,350 2,340 —

Proceeds from the settlement of property-related insurance claims 191 859 —

Net cash provided by (used in) investing activities 5,289 22,477 ( 12,261 )

Net cash (used in) provided by investing activities ( 51,263 ) 5,289 22,477

Cash flows from financing activities:

Proceeds from bridge facility — — 355,000

Repayment of bridge facility, including debt extinguishment costs — — ( 355,026 )

Proceeds from mortgages payable 18,000 — 355,000

Payments on mortgages payable — — ( 36,476 )

Proceeds from credit facility term loan — — 175,000

Repayment of credit facility term loan — ( 175,000 ) —

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Distributions paid ( 22,355 ) ( 22,578 ) ( 16,991 )

Distributions to parent company, net — — ( 587,156 )

Other financing activities ( 198 ) ( 101 ) ( 48 )

Payments upon extinguishment of mortgages payable — — ( 4,298 )

Net cash used in financing activities ( 3,025 ) ( 92,490 ) ( 110,716 )

Net change in cash and cash equivalents and restricted cash ( 28 ) 1,887 25,993

ORION OFFICE REIT INC.

CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS (CONTINUED)

(In thousands)

Cash and cash equivalents and restricted cash, beginning of year 57,198 55,311 29,318

Cash and cash equivalents and restricted cash, end of year $ 57,170 $ 57,198 $ 55,311

ORION PROPERTIES INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

(In thousands)

Reconciliation of Cash and Cash Equivalents and Restricted Cash

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The accompanying notes are an integral part of these statements.

ORION OFFICE REIT INC.

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

ORION PROPERTIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2024

Note 1 – Organization

Orion Office REIT Inc.

(the “Company”, “Orion”, “we” or “us”) 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.

Our portfolio is comprised of traditional office buildings, as well as governmental office, medical office, office/laboratory, office/research and office/flex properties.

Orion Properties Inc.

(the “Company”, “Orion”, “we” or “us”) is an internally managed real estate investment trust (“REIT”) engaged in the ownership, acquisition, and management of a diversified portfolio of office properties located in high-quality suburban markets across the United States and leased primarily on a single-tenant net lease basis to creditworthy tenants.

The Company’s portfolio is comprised of traditional office properties, as well as governmental, medical office, flex/laboratory and R&D and flex/industrial properties.

On March 5, 2025, the Company changed its name from Orion Office REIT Inc.

to Orion Properties Inc.

to better describe its broader investment strategy to shift its portfolio concentration over time away from traditional office properties, towards more dedicated use assets that have an office component.

The Company defines dedicated use assets as those that include a substantial specialized use component such as government, medical, laboratory and research and development, and flex operations, and would therefore not be considered traditional office properties.

The Company was initially formed as a wholly-owned subsidiary of Realty Income Corporation (“Realty Income”).

Following completion of the merger transaction involving Realty Income and VEREIT, Inc.

(“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”).

Following the Distribution, the Company became independent and publicly traded and its common stock, par value $ 0.001 per share, trades on the New York Stock Exchange (the “NYSE”) under the symbol “ONL” and has elected to be taxed as a REIT for U.S.

(“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 Properties 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”).

Following the Distribution, the Company became an independent and publicly traded company, and its common stock, par value $ 0.001 per share, trades on the New York Stock Exchange (the “NYSE”) under the symbol “ONL.” The Company has elected to be taxed as a REIT for U.S.

federal income tax purposes, commencing with its initial taxable year ended December 31, 2021.

As of December 31, 2023, the Company owned and operated 75 office properties with an aggregate of 8.7 million leasable square feet located in 29 states.

As of December 31, 2024, the Company owned and operated 69 operating properties with an aggregate of 7.9 million leasable square feet located in 29 states.

During the year ended December 31, 2024, the Company split the properties located in Amherst, New York and Denver, Colorado, each containing two buildings, into four separate properties for reporting purposes.

Also during the year ended December 31, 2024, the Company commenced classifying certain of its properties which are being repositioned, redeveloped, developed or held for sale as non-operating properties rather than operating properties, resulting in seven properties being removed from the presentation of the Company’s portfolio of operating properties as of December 31, 2024.

In addition, the Company owns an equity interest in OAP/VER Venture, LLC (the “Arch Street Joint Venture”), an unconsolidated joint venture with an affiliate of Arch Street Capital Partners, LLC (“Arch Street Capital Partners”).

As of December 31, 2023, the Arch Street Joint Venture owned a portfolio consisting of six office properties totaling approximately 1.0 million leasable square feet located within six states.

As of December 31, 2024, the Arch Street Joint Venture owned a portfolio consisting of six properties totaling approximately 1.0 million leasable square feet located within six states.

Note 2 – Summary of Significant Accounting Policies

Basis of Presentation

The consolidated and combined statements of the Company presented herein include the accounts of the Company and its consolidated subsidiaries.

Basis of Presentation and Principles of Consolidation

The consolidated financial statements of the Company presented herein include the accounts of the Company and its consolidated subsidiaries, including Orion OP, and a consolidated joint venture and are prepared on the accrual basis of accounting in accordance with generally accepted accounting principles in the United States (“U.S.

All intercompany transactions have been eliminated upon consolidation.

The financial statements are prepared on the accrual basis of accounting in accordance with generally accepted accounting principles in the United States (“U.S.

GAAP”) assuming the Company will continue as a going concern.

The going concern assumption contemplates continuity of operations, the realization of assets and the satisfaction of liabilities and commitments in the normal course of business.

Principles of Consolidation and Combination

The consolidated and combined statements of the Company include the accounts of Realty Income Office Assets presented on a combined basis for the period from January 1, 2021 to October 31, 2021, as the ownership interests were under common control and ownership of Realty Income during this period.

From and after November 1, 2021, the consolidated and combined financial statements include the accounts of the Company and its consolidated subsidiaries and a consolidated joint venture, which accounts include the Realty Income Office Assets and the VEREIT Office Assets.

The portion of the consolidated joint venture not owned by the Company is presented as non-controlling interest in the Company’s consolidated balance sheets and consolidated and combined statements of operations, statements of comprehensive income (loss) and statements of equity.

For periods presented prior to the date of the Distribution, the historical consolidated and combined results for the Company reflect charges for certain legal, accounting and other costs related to the Distribution, which were incurred and paid by Realty Income on the Company’s behalf and are reflected as capital contributions.

The portion of the consolidated joint venture not owned by the Company is presented as non-controlling interest in the accompanying consolidated balance sheets, statements of operations, statements of comprehensive income (loss) and statements of equity.

For legal entities being evaluated for consolidation, the Company must first determine whether the interests that it holds and fees it receives qualify as variable interests in the entity.

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If the Company determines that it holds a variable interest in an entity, it evaluates whether that entity is a variable interest entity (“VIE”).

VIEs are entities where investors lack sufficient equity at risk for the entity to finance

ORION OFFICE REIT INC.

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

VIEs are entities where investors lack sufficient equity at risk for the entity to finance its activities without additional subordinated financial support or where equity investors, as a group, lack one or more of the following characteristics:

(a) the power to direct the activities that most significantly impact the entity’s economic performance,

ORION PROPERTIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2024

its activities without additional subordinated financial support or where equity investors, as a group, lack one or more of the following characteristics:

(a) the power to direct the activities that most significantly impact the entity’s economic performance, (b) the obligation to absorb the expected losses of the entity;

(b) the obligation to absorb the expected losses of the entity;

or (c) the right to receive the expected returns of the entity.

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Actual results could differ from those estimates.

Management makes significant estimates regarding real estate investment impairments.

Management makes significant estimates regarding real estate impairments and purchase price allocations.

Spin related expenses are expensed as incurred.

Such expenses are primarily comprised of the legal and professional fees associated with the formation and organization of the Company, the Mergers and the Distribution.

Such expenses are primarily comprised of the legal and professional fees associated with the formation and organization of the Company, the merger transactions involving Realty Income and VEREIT and the Distribution.

Such costs also include expenses related to the fair value of the warrants issued to the Arch Street Partner and one of its affiliates during the year ended December 31, 2021.

7 unchanged sentences

Lease classification tests and measurement procedures are performed at the lease commencement date.

When the terms of a lease effectively transfer control of the underlying asset, the lease is classified as finance lease, otherwise it is classified as an operating lease.

When the terms of a lease effectively transfer control of the underlying asset, the lease is classified as a finance lease, otherwise it is classified as an operating lease.

The lease liability is initially measured as the present value of the lease payments over the lease term, discounted using the interest rate implicit in the lease, if that rate is readily determinable;

4 unchanged sentences

The lease liability is remeasured when the contract is modified, upon the resolution of a contingency such that variable payments become fixed or if the assessment of exercising an extension, termination or purchase option changes.

ORION OFFICE REIT INC.

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

ORION PROPERTIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2024

The right-of-use (“ROU”) asset balance is initially measured as the lease liability amount, adjusted for any lease payments made prior to the commencement date, initial direct costs, estimated costs to dismantle, remove, or restore the underlying asset and incentives received.

The right-of-use asset balance is initially measured as the lease liability amount, adjusted for any lease payments made prior to the commencement date, initial direct costs, estimated costs to dismantle, remove, or restore the underlying asset and incentives received.

Revenue Recognition

4 unchanged sentences

Such reimbursements are included in rental revenue on a gross basis.

Property operating expenses paid directly by tenants are recorded on a net basis (i.e., treated as fully offset by an identical amount of assumed reimbursement revenue) and, therefore, are not included in the Company’s consolidated and combined financial statements.

The Company continually reviews receivables related to rent, straight-line rent and property operating expense reimbursements and determines collectability by taking into consideration the tenant’s payment history, the financial condition of the tenant, business conditions in the industry in which the tenant operates and economic conditions in the area in which the property is located.

3 unchanged sentences

The Company recognizes all changes in the collectability assessment for an operating lease as an adjustment to rental revenue.

During the years ended December 31, 2023 and 2022, the Company recorded a reduction to rental revenue of less than $ 0.1 million and $ 1.5 million, respectively, for income not probable of collection.

During the year ended December 31, 2021, the Company did not record any reductions to rental revenue for amounts not probable of collection.

Rental revenue also includes lease termination income collected from tenants to allow for the tenants to settle their lease obligations and/or to vacate their space prior to their scheduled termination dates, as well as amortization of above and below-market leases and lease incentives.

During the years ended December 31, 2023, 2022 and 2021, the Company recognized $ 4.3 million, $ 1.4 million and $ 0.3 million of lease termination income, respectively.

During the years ended December 31, 2024 and 2023, the Company recorded a reduction to rental revenue of less than $ 0.1 million for income not probable of collection and $ 1.5 million during the year ended December 31, 2022.

Periodically the Company receives reimbursements from previous tenants for certain end of lease obligations that are recognized in rental revenue on a cash basis or when the amounts are definitively agreed upon.

During the year ended December 31, 2024, the Company recognized $ 3.3 million of such reimbursements.

No such amounts were recognized during the years ended December 31, 2023 and 2022.

The Company recognized lease termination income of $ 2.0 million, $ 4.3 million and $ 1.4 million during the years ended December 31, 2024, 2023 and 2022, respectively.

Amortization of above and below-market leases and lease incentives is also included in rental revenue and is discussed further in Note 3 – Real Estate Investments and Related Intangibles.

Fee Income from Unconsolidated Joint Venture

The Company provides various services to the Arch Street Joint Venture in exchange for market-based fees.

Total asset and property management fees earned in connection with this entity was $ 0.8 million for the years ended December 31, 2023 and 2022 and $ 0.3 million for the year ended December 31, 2021.

Total asset and property management fees earned in connection with this entity was $ 0.8 million for the years ended December 31, 2024, 2023 and 2022, respectively.

Real Estate Investments

1 unchanged sentence

The Company considers the period of future benefit of the asset to determine the appropriate useful lives.

Depreciation is computed using a straight-line method over the estimated useful life of 35 years for buildings, five to 20 years for building fixtures and improvements and the remaining lease term for intangible lease assets.

ORION OFFICE REIT INC.

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

ORION PROPERTIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2024

Allocation of Purchase Price of Real Estate Acquisitions

For acquisitions that qualify as asset acquisitions, the Company allocates the purchase price of acquired properties to tangible and identifiable intangible assets and liabilities acquired based on their relative fair values.

Tangible assets include land, buildings, fixtures and improvements on an as-if vacant basis.

Allocation of Purchase Price of Real Estate Assets

For acquisitions that qualify as asset acquisitions, the Company allocates the purchase price or total consideration exchanged, inclusive of acquisition costs of acquired properties to tangible and intangible assets and liabilities based on their relative estimated fair values.

Tangible assets consist of land, buildings, fixtures and improvements on an as-if-vacant basis.

The Company utilizes various estimates, processes and information to determine the as-if vacant property value.

Identifiable intangible assets and liabilities include amounts allocated to acquired leases for above-market and below-market lease rates and the value of in-place leases.

In estimating fair values for purposes of allocating purchase price, the Company utilizes a number of sources, including independent appraisals that may be obtained in connection with the acquisition or financing of the respective property and other market data.

Identifiable intangible assets and liabilities consist of any above-market and below-market leases, acquired in-place leases and other identified intangible assets and assumed liabilities (including ground leases, if applicable).

The Company’s purchase price allocations are developed utilizing third-party appraisal reports, industry standards and management experience.

The Company also considers information obtained about each property as a result of its pre-acquisition due diligence, as well as subsequent marketing and leasing activities, in estimating the fair value of the tangible and intangible assets acquired and intangible liabilities assumed.

2 unchanged sentences

In estimating carrying costs, the Company includes real estate taxes, insurance and other operating expenses and estimates of lost rentals at market rates during the expected lease-up period.

The Company also estimates costs to execute similar leases, including leasing commissions, legal and other related expenses.

The Company also estimates costs to execute similar leases, including leasing commissions and tenant improvement allowances.

The value of in-place leases is amortized over the remaining non-cancelable term of the respective leases at acquisition.

1 unchanged sentence

Above-market and below-market in-place lease values for owned properties are recorded based on the present value (using an interest rate which reflects the risks associated with the leases acquired) of the difference between the contractual amounts to be paid pursuant to the in-place leases and management’s estimate of fair market lease rates for the corresponding in-place leases, measured over a period equal to the remaining non-cancelable term of the lease, including any bargain renewal periods.

A bargain renewal period is provision in a lease which allows a lessee, at its option, to renew a lease at a rate that is sufficiently lower than fair market lease rates at the date such option is exercisable such that exercise of the option appears, at the inception of the lease, to be reasonably certain.

A bargain renewal period is a provision in a lease which allows a lessee, at its option, to renew a lease at a rate that is sufficiently lower than fair market lease rates at the date such option is exercisable such that exercise of the option appears, at the inception of the lease, to be reasonably certain.

Above-market leases are amortized as a reduction to rental revenue over the remaining terms of the respective leases.

13 unchanged sentences

The Company records

ORION OFFICE REIT INC.

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

ORION PROPERTIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2024

its proportionate share of net income (loss) from the Arch Street Joint Venture in equity in loss of unconsolidated joint venture, net in the consolidated and combined statements of operations.

its proportionate share of net income (loss) from the Arch Street Joint Venture in equity in loss of unconsolidated joint venture, net in the consolidated statements of operations.

See Note 3 – Real Estate Investments and Related Intangibles for further discussion on the Company’s investment in the Arch Street Joint Venture.

6 unchanged sentences

No impairments of the Arch Street Joint Venture were identified during the years ended December 31, 2024, 2023 or 2022.

Prior to the Distribution, the Company did not own any investments in an unconsolidated joint venture.

Real Estate Assets

7 unchanged sentences

Right-of-Use Assets

The Company’s impairment assessment for ROU assets is consistent with the impairment analysis for the Company’s other long-lived assets.

No impairments of ROU assets were identified during the years ended December 31, 2023, 2022, or 2021.

The Company’s impairment assessment for right-of-use assets is consistent with the impairment analysis for the Company’s other long-lived assets.

No impairments of right-of-use assets were identified during the years ended December 31, 2024, 2023 or 2022.

See Note 5 – Fair Value Measures for further discussion.

6 unchanged sentences

Restricted Cash

The Company had $ 34.7 million in restricted cash as of December 31, 2023 and 2022, primarily comprised of reserves held by the lender under the CMBS Loan (as defined in Note 6 – Debt, Net) for future rent concessions and tenant improvement allowances.

The Company did not have any balances in restricted cash as of December 31, 2021.

Restricted cash is included in other assets, net on the Company’s consolidated balance sheets.

The Company had $ 41.6 million in restricted cash as of December 31, 2024 and $ 34.7 million for the years ended December 31, 2023 and 2022, primarily comprised of reserves held by the lender under the CMBS Loan (as defined in Note 6 – Debt, Net) for future rent concessions and tenant improvement allowances.

Restricted cash is included in other assets, net in the accompanying consolidated balance sheets.

Deferred Financing Costs

Deferred financing costs represent commitment fees, legal fees and other costs associated with obtaining commitments for financing.

D eferred financing costs, other than those associated with the Revolving Facility (as defined in Note 6 – Debt, Net ), are presented on the consolidated balance sheets as a direct deduction from the carrying value of the related debt liability rather

ORION OFFICE REIT INC.

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

D eferred financing costs, other than those associated with the Revolving Facility (as defined in Note 6 – Debt, Net ), are presented in the accompanying consolidated balance sheets as a direct deduction from the carrying value of the related debt

ORION PROPERTIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2024

than as an asset .

liability rather than as an asset .

Deferred financing costs related to the Revolving Facility are included in other assets, net in the accompanying consolidated balance sheets.

10 unchanged sentences

The Company does not anticipate that any of the counterparties will fail to meet their obligations.

The Company records all derivatives on the consolidated balance sheets at fair value.

The Company records all derivatives in the accompanying consolidated balance sheets at fair value.

The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether the Company has elected to designate a derivative in a hedging relationship and apply hedge accounting and whether the hedging relationship has satisfied the criteria necessary under U.S.

3 unchanged sentences

The accounting for subsequent changes in the fair value of these derivatives depends on whether each has been designated and qualifies for hedge accounting treatment.

If the Company elects not to apply hedge accounting treatment, any changes in the fair value of these derivative instruments is recognized immediately in other income, net in the consolidated and combined statements of operations and consolidated and combined statements of comprehensive income (loss).

If the Company elects not to apply hedge accounting treatment, any changes in the fair value of these derivative instruments is recognized immediately in other income, net in the accompanying consolidated statements of operations and consolidated statements of comprehensive income (loss).

If the derivative is designated and qualifies for cash flow hedge accounting treatment, the change in fair value of the derivative is recorded in other comprehensive income (loss).

1 unchanged sentence

Loss Contingencies

The Company records a liability in the consolidated and combined financial statements for loss contingencies when a loss is known or considered probable and the amount is reasonably estimable.

The Company records a liability in the consolidated financial statements for loss contingencies when a loss is known or considered probable and the amount is reasonably estimable.

If the reasonable estimate of a known or probable loss is a range, and no amount within the range is a better estimate than any other, the minimum amount of the range is accrued.

9 unchanged sentences

The accounting estimates used to compute the provision for or benefit from income taxes may change as new events occur, additional information is obtained or the tax environment changes.

ORION OFFICE REIT INC.

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

ORION PROPERTIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2024

During the year ended December 31, 2023, the Company recognized state and local income and franchise tax expense of $ 0.5 million.

During both the years ended December 31, 2022 and 2021, the Company recognized state and local income and franchise tax expense of $ 0.2 million.

State and local income and franchise tax expense is included in provision for income taxes in the accompanying consolidated and combined statements of operations.

During the years ended December 31, 2024, 2023 and 2022, the Company recognized state and local income and franchise tax expense of $ 0.2 million, $ 0.5 million and $ 0.2 million, respectively.

State and local income and franchise tax expense is included in provision for income taxes in the accompanying consolidated statements of operations.

The Company regularly analyzes its income tax positions in the jurisdictions in which it operates and only recognizes the income tax effect in the financial statements when certain criteria regarding uncertain tax positions have been met.

The Company believes that its material income tax positions would more likely than not be sustained upon examination by the relevant taxing authorities.

Therefore, no provisions related to material uncertain income tax positions have been recognized in the accompanying consolidated and combined financial statements during the years ended December 31, 2023, 2022, and 2021.

Any interest and penalties related to unrecognized tax benefits would be recognized in provision for income taxes in the accompanying consolidated and combined statements of operations.

For periods presented prior to November 1, 2021, Realty Income Office Assets was owned by Realty Income, which had elected to be taxed as a REIT, under the Code.

Under the REIT operating structure, Realty Income was permitted to deduct dividends paid to its stockholders in determining its taxable income.

Assuming Realty Income’s dividends equaled or exceeded its taxable net income, it was generally not required to pay federal corporate income taxes on such income.

Accordingly, no provision was made for federal income taxes in the accompanying consolidated and combined financial statements of the Company for such prior periods.

The properties in the consolidated and combined financial statements which comprised Realty Income Office Assets were previously owned directly or indirectly by limited partnerships or limited liability companies of Realty Income and, as a result, the allocated share of income for periods presented prior to November 1, 2021 are included in the consolidated income tax return of Realty Income.

Therefore, no provisions related to material uncertain income tax positions have been recognized in the accompanying consolidated financial statements during the years ended December 31, 2024, 2023 and 2022.

Any interest and penalties related to unrecognized tax benefits would be recognized in provision for income taxes in the accompanying consolidated statements of operations.

Segment Reporting

The Company operates in one business segment:

direct ownership and operation of commercial real estate.

commercial real estate.

This segment is characterized as owning, managing and leasing commercial real estate assets under long-term agreements.

The chief operating decision maker (“CODM”) of the Company is the chief executive officer.

The CODM reviews net income (loss) attributable to common stockholders, included in the accompanying consolidated statements of operations, when assessing performance and making operating decisions, including the allocation of resources.

The CODM uses net income (loss) attributable to common stockholders as it informs comparative period trends for the forecasting process and is the baseline measurement for any additional measures of profit or loss of the Company’s consolidated financial results.

Additionally, the CODM reviews the following significant expenses when measuring segment performance:

property operating expenses for properties that were fully vacant or became fully vacant during the reporting period (“Vacant Property Operating Expenses”) and general and administrative expenses.

Segment revenues, profit or loss and general and administrative expenses are all disclosed in the accompanying consolidated statements of operations for the years ended December 31, 2024, 2023 and 2022.

Vacant Property Operating Expenses of $ 16.3 million, $ 9.1 million and $ 7.4 million are included in property operating expenses in the accompanying consolidated statements of operations for the years ended December 31, 2024, 2023 and 2022.

Asset information for the segment is not used by the CODM to measure performance but is disclosed in the accompanying consolidated balance sheets as of December 31, 2024 and 2023.

The Company does not have intra-entity sales or transfers, and its revenues have been generated in and all long-lived assets are located within the United States.

Recent Accounting Pronouncements

In November 2023, the FASB issued ASU 2023-07, Improvements to Reportable Segment Disclosures (Topic 280, Segment Reporting).

ASU 2023-07 serves to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses on both an annual and interim basis.

The guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted.

The Company is currently evaluating the impact of the adoption of ASU 2023-07 on its consolidated and combined financial statements.

In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures (Topic 740, Income Taxes).

ASU 2023-09 serves to enhance transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and information on income taxes paid.

The update also includes certain other amendments to improve the effectiveness of income tax disclosures.

The guidance is effective for annual periods beginning after December 15, 2024, with early adoption permitted.

The Company is currently evaluating the impact of the adoption of ASU 2023-09 on its consolidated and combined financial statements.

In November 2024, the FASB issued ASU 2024-03, Disaggregation of Income Statement Expenses (Subtopic 220-40, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures).

ASU 2024-03 serves to improve disclosures about a public business entity’s expenses and provide detailed information about expense categories commonly presented in cost of sales, research and development and selling, general, and administrative expenses, including but not limited to purchases of inventory, employee compensation, depreciation, amortization and depletion.

The guidance is effective for annual reporting periods beginning after December 15, 2026 and interim reporting periods with annual reporting periods beginning after December 15, 2027, with early adoption permitted.

The Company is currently evaluating the impact of the adoption of ASU 2024-03 on its consolidated financial statements.

Note 3 – Real Estate Investments and Related Intangibles

Property Acquisitions

During the year ended December 31, 2022, the Company acquired for no consideration the fee interest in one parcel of land in connection with the maturity of the tax advantaged bond and ground lease structure.

As a result of the transaction, $ 4.7 million that was previously classified as a finance lease right-of-use asset with respect to such land parcel previously subject to the ground lease was reclassified from other assets, net to real estate investments in the Company’s consolidated balance sheet as of December 31, 2022.

The Company did not have any other acquisitions during the year ended December 31, 2022, and during the years ended December 31, 2023 and 2021, the Company had no acquisitions.

ORION OFFICE REIT INC.

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

During each of the years ended December 31, 2024 and 2022, the Company acquired, for no consideration, the fee simple interest in one parcel of land in connection with the maturity of the tax advantaged bond and ground lease structure on each of the parcels.

As a result of the transactions, $ 3.5 million and $ 4.7 million that were previously classified as a finance lease right-of-use assets with respect to such land parcels previously subject to the ground leases were reclassified from other assets, net to land in the accompanying consolidated balance sheets as of December 31, 2024 and 2022.

Also during the year ended December 31, 2024, the Company acquired fee simple, controlling financial interest in one real property and the improvements thereon including a 97 ,000 square foot flex/laboratory and R&D facility located in San Ramon, California for a gross purchase price of $ 34.6 million and external acquisition-related expenses of $ 0.1 million that were capitalized.

The property is fully leased to a single tenant with a remaining lease term of 15.0 years as of the acquisition date.

ORION PROPERTIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2024

The following table presents the allocation of the purchase consideration and capitalized external acquisition-related expenses to the assets acquired and liabilities assumed based on their relative fair values during the year ended December 31, 2024 (in thousands):

Real estate investment, at cost:

Land $ 12,250

Building, fixtures and improvements 25,269

Total real estate investment, at cost 37,519

Acquired intangible assets:

Intangible lease asset 13,847

Assumed intangible liabilities:

Below-market lease liability ( 16,632 )

Net assets acquired $ 34,734

During the year ended December 31, 2023, the Company had no acquisitions and did not have any other acquisitions during the year ended December 31, 2022.

Property Dispositions and Real Estate Assets Held for Sale

The following table summarizes the Company’s property dispositions for the years ended December 31, 2023, 2022 and 2021 (dollars in thousands) :

The following table summarizes the Company’s property dispositions for the periods indicated below (dollars in thousands) :

Year Ended December 31,

6 unchanged sentences

Property count 2 3 6

As of December 31, 2023, the Company had no properties classified as held for sale.

During the years ended December 31, 2023 and 2022, the Company recorded losses of $ 4.4 million and $ 6.0 million, respectively, related to properties that were classified as held for sale and subsequently disposed, which are included in impairments in the accompanying consolidated and combined statements of operations.

As of December 31, 2024, the Company had one property classified as held for sale with a carrying value of $ 9.7 million, primarily comprised of land of $ 1.2 million and building, fixtures and improvements, net, of $ 8.5 million, included in real estate assets held for sale, net in the accompanying consolidated balance sheets, which it expects to be sold in the next 12 months as part of its portfolio management strategy.

During the years ended December 31, 2024, 2023 and 2022, the Company recorded losses of $ 8.6 million, $ 4.4 million and $ 6.0 million, respectively, related to properties that were classified as held for sale, which are included as part of impairments in the accompanying consolidated statements of operations.

ORION PROPERTIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2024

Intangible Lease Assets and Liabilities

14 unchanged sentences

14.9 $ 20,596 $ 8,074

The aggregate amount of amortization of above-market and below-market leases included as a net increase to rental revenue was $ 1.2 million, $ 1.2 million and $ 1.0 million for the years ended December 31, 2023, 2022 and 2021, respectively.

The aggregate amount of amortization of deferred lease incentives included as a net decrease to rental revenue was $ 0.3 million and $ 0.1 million for the years ended December 31, 2023 and 2022, respectively, as compared to no impact to rental revenue for the year ended December 31, 2021.

The aggregate amount of in-place leases, leasing commissions and other lease intangibles amortized and included in depreciation and amortization expense was $ 75.0 million, $ 95.4 million and $ 23.1 million for the years ended December 31, 2023, 2022 and 2021, respectively.

ORION OFFICE REIT INC.

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

December 31, 2023

The aggregate amount of amortization of above-market and below-market leases included as a net increase to rental revenue in the accompanying statements of operations was $ 1.1 million for the year ended December 31, 2024 and $ 1.2 million for each of the years ended December 31, 2023 and 2022.

The aggregate amount of amortization of deferred lease incentives included as a net decrease to rental revenue was $ 0.5 million, $ 0.3 million and $ 0.1 million for the years ended December 31, 2024, 2023 and 2022, respectively.

The aggregate amount of in-place leases, leasing commissions and other lease intangibles amortized and included in depreciation and amortization expense in the accompanying statements of operations was $ 51.4 million, $ 75.0 million and $ 95.4 million for the years ended December 31, 2024, 2023 and 2022, respectively.

The following table provides the projected amortization expense and adjustments to rental revenue related to the intangible lease assets and liabilities for the next five years as of December 31, 2024 (in thousands) :

16 unchanged sentences

The Company and the joint venture partner are subject to the provisions of the joint venture agreement, which includes provisions for when additional contributions may be required to fund certain cash shortfalls.

ORION PROPERTIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2024

Investment in Unconsolidated Joint Venture

3 unchanged sentences

Investment Equity in Loss, Net

Year Ended (2)

Investment December 31, 2024 December 31, 2024 December 31, 2023 December 31, 2024 December 31, 2023 December 31, 2022

5 unchanged sentences

As a result, the Company’s actual economic interest (as distinct from its legal ownership interest) in certain of the properties could fluctuate from time to time and may not wholly align with its legal ownership interest.

(2) The interest in the Arch Street Joint Venture was acquired by Realty Income as part of the merger transaction with VEREIT and was transferred to the Company upon the consummation of the Distribution.

Therefore, the Company’s equity in loss, net reflects operations following November 1, 2021.

(3) During the years ended December 31, 2023 and 2022, the Arch Street Joint Venture did not acquire any properties.

During the year ended December 31, 2021, the Arch Street Joint Venture acquired one property from a third party for a purchase price of $ 30.5 million.

(4) The total carrying value of the Company’s investment in the Arch Street Joint Venture was greater than the underlying equity in net assets by $ 0.4 million and $ 0.9 million as of December 31, 2023 and 2022, respectively.

This difference is related to a step up in the fair value of the investment in the Arch Street Joint Venture in connection with the Separation and the Distribution.

The step up in fair value was allocated based on the underlying assets and liabilities of the Arch Street Joint Venture and is being amortized over the estimated useful lives of the respective assets and liabilities in accordance with the Company’s accounting policies.

ORION OFFICE REIT INC.

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

December 31, 2023

(2) The total carrying value of the Company’s investment in the Arch Street Joint Venture was less than the underlying equity in net assets by less than $ 0.1 million as of December 31, 2024, and greater than the underlying equity in net assets by $ 0.4 million as of December 31, 2023.

This difference is related to the recognition of the fair value of the investment in the Arch Street Joint Venture in connection with the Separation and the Distribution.

The difference in fair value and carrying value of the investment was allocated based on the underlying assets and liabilities of the Arch Street Joint Venture and is being amortized over the estimated useful lives of the respective assets and liabilities in accordance with the Company’s accounting policies.

The non-recourse mortgage notes associated with the Arch Street Joint Venture were scheduled to mature on November 27, 2024, with two successive one-year options to extend the maturity until November 27, 2026.

On November 22, 2024, the Arch Street Joint Venture repaid $ 3.4 million of principal on the mortgage notes to satisfy the 60 % maximum loan-to-value extension condition and effected the first loan extension option, which extended the maturity date of the mortgage notes 12 months to November 27, 2025.

As of December 31, 2024, there was $ 131.6 million outstanding under the mortgage notes and the Company’s proportionate share was $ 26.3 million.

The mortgage notes have a variable interest rate and during the 12 -month extension term the spread on a SOFR (the secured overnight financing rate as administered by the Federal Reserve Bank of New York) loan is 2.60 % per annum (increased from 1.60 % per annum), and in the case of a base rate loan, the spread is unchanged at 0.50 % per annum.

The Arch Street Joint Venture has entered into an interest rate cap agreement that caps the SOFR rate at 5.50 % per annum during the 12 -month extension term.

The Company provided a member loan to the Arch Street Joint Venture of $ 1.4 million in connection with the partial repayment of the Arch Street Joint Venture mortgage notes to satisfy the maximum 60 % loan-to-value extension condition.

During February 2025, the Company made an additional member loan of $ 8.3 million to fund leasing costs related to a lease extension that was completed for one of the properties in the Arch Street Joint Venture portfolio.

As part of the terms of the recent extension of the Arch Street Joint Venture mortgage notes, the mortgage lender is expected to re-appraise the property where the lease was extended in February 2025, and the Company is also committed to make an additional member loan as and if needed to repay principal on the mortgage notes to continue to satisfy the 60 % loan-to-value extension condition.

The Company’s member loan to the Arch Street Joint Venture, which had $ 9.2 million receivable as of March 5, 2025, earns interest at 15 % per annum and is non-recourse and unsecured, and structurally subordinate to the Arch Street Joint Venture mortgage notes.

Interest and principal are payable monthly solely out of the excess cash from the joint venture after payment of property operating expenses, interest and principal on the Arch Street mortgage notes and other joint venture expenses and excess proceeds from the sale of any of the joint venture properties.

Note 4 – Receivables and Other Assets

Accounts receivable, net consisted of the following as of December 31, 2023 and 2022 (in thousands):

Accounts receivable, net consisted of the following as of the periods indicated below (in thousands):

December 31, 2024 December 31, 2023

2 unchanged sentences

Total $ 22,833 $ 24,663

Other assets, net consisted of the following as of December 31, 2023 and 2022 (in thousands):

ORION PROPERTIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2024

Other assets, net consisted of the following as of the periods indicated below (in thousands):

December 31, 2024 December 31, 2023

6 unchanged sentences

Prepaid expenses 2,133 1,318

Derivative assets — 6,308

Other assets, net 1,591 1,247

1 unchanged sentence

____________________________________

(1) Amortization expense for below market right-of-use asset was $ 0.2 million, $ 0.2 million and less than $ 0.1 million for the years ended December 31, 2023, 2022 and 2021.

(1) Includes right-of-use finance leases of $ 5.6 million, right-of-use operating leases of $ 10.2 million and a below-market right-of-use asset, net of $ 6.4 million as of December 31, 2024.

Includes right-of-use finance leases of $ 9.0 million, right-of-use operating leases of $ 10.9 million and a below-market right-of-use asset, net of $ 6.6 million as of December 31, 2023.

(2) Amortization expense for deferred costs related to the Revolving Facility totaled $ 2.6 million, $ 2.2 million and $ 0.3 million for the years ended December 31, 2023, 2022 and 2021, respectively.

Accumulated amortization for deferred costs related to the Revolving Facility was $ 5.1 million and $ 2.5 million as of December 31, 2023 and 2022, respectively.

Additional deferred costs related to the Revolving Facility of $ 5.6 million were capitalized during the year ended December 31, 2023 in connection with the second amendment to the Credit Agreement, as defined below and discussed in Note 6 – Debt, Net.

Deferred costs, net also includes outstanding deferred equity offering costs of $ 0.6 million and $ 0.5 million, which will be offset against additional paid in capital for future issuances of shares of the Company’s common stock, as of December 31, 2023 and 2022, respectively.

(3) Notes receivable includes two seller financed promissory notes for two properties sold during the year ended December 31, 2023.

These loans have been structured as first mortgage loans on the properties sold with an unsecured recourse guaranty from the buyer principal(s).

Amortization expense for below market right-of-use asset was $ 0.2 million for each of the years ended December 31, 2024, 2023 and 2022.

(2) Includes accumulated amortization for deferred costs related to the Revolving Facility of $ 7.0 million and $ 5.1 million as of December 31, 2024 and 2023, respectively.

Amortization expense for deferred costs related to the Revolving Facility was $ 3.0 million, $ 2.6 million and $ 2.2 million for the years ended December 31, 2024, 2023 and 2022, respectively.

During the year ended December 31, 2024, the Company capitalized additional deferred costs of $ 1.0 million in connection with the third amendment to the Credit Agreement, as defined below and discussed in Note 6 – Debt, Net.

Also in connection with the third amendment to the Credit Agreement and resulting reduction in borrowing capacity, net deferred costs of $ 1.1 million were written off and recognized in loss on extinguishment of debt, net in the accompanying consolidated statements of operations during the year ended December 31, 2024.

Deferred costs, net as of December 31, 2024 and 2023 also includes outstanding deferred equity offering costs of $ 0.6 million, which will be offset against additional paid in capital for future issuances of shares of the Company’s common stock.

(3) Notes receivable as of December 31, 2024 includes a $ 1.4 million member loan to the Arch Street Joint Venture funded in connection with the partial repayment of the Arch Street Joint Venture mortgage notes discussed in Note 3 – Real Estate Investments and Related Intangibles – Investment in Unconsolidated Joint Venture.

Notes receivable as of December 31, 2024 also includes one $ 2.5 million long-term seller financed promissory note for one property sold during the year ended December 31, 2023.

Notes receivable as of December 31, 2023 includes one long-term seller financed promissory note and one short-term seller financed promissory note for two properties sold during the year ended December 31, 2023.

These loans were structured as first mortgage loans on the properties sold with an unsecured recourse guaranty from the buyer principal(s).

The short-term seller financed promissory note was repaid in full during the year ended December 31, 2024.

Note 5 – Fair Value Measures

Items Measured at Fair Value on a Recurring Basis

The following tables present information about the Company’s assets and liabilities measured at fair value on a recurring basis as of December 31, 2023 and 2022, aggregated by the level in the fair value hierarchy within which those instruments fall (in thousands):

The following tables present information about the Company’s assets and liabilities measured at fair value on a recurring basis as of the periods indicated below, aggregated by the level in the fair value hierarchy within which those instruments fall (in thousands):

Level 1 Level 2 Level 3 Balance as of December 31, 2024

Derivative assets $ — $ — $ — $ —

Derivative liabilities — 15 — 15

Level 1 Level 2 Level 3 Balance as of December 31, 2023

Derivative assets $ — $ 6,308 $ — $ 6,308

Derivative liabilities — 264 — 264

ORION OFFICE REIT INC.

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

December 31, 2023

Derivative Assets and Liabilities – The Company’s derivative financial instruments comprise interest rate collar agreements and interest rate swap agreements entered into in order to hedge interest rate volatility with respect to the Company’s borrowings with an aggregate notional amount of $ 60.0 million and $ 175.0 million as of December 31, 2023 and 2022, respectively (as described in Note 6 – Debt, Net).

Derivative Liabilities – The Company’s derivative financial instruments comprise interest rate collar agreements entered into in order to hedge interest rate volatility with respect to the Company’s borrowings with an aggregate notional amount of $ 60.0 million as of December 31, 2024 and 2023 (as described in Note 6 – Debt, Net).

The valuation of derivative instruments is determined using a discounted cash flow analysis on the expected cash flows of each derivative.

1 unchanged sentence

In addition, credit valuation adjustments are incorporated into the fair values to account for the Company’s potential nonperformance risk and the performance risk of the counterparties.

ORION PROPERTIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2024

Although the Company determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with those derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by the Company and its counterparties.

4 unchanged sentences

Real Estate and Other Investments – The Company performs quarterly impairment review procedures for real estate investments, right-of-use assets and its investment in the Arch Street Joint Venture, primarily through continuous monitoring of events and changes in circumstances that could indicate the carrying value of such assets may not be recoverable.

As part of the Company’s impairment review procedures, net real estate assets representing eight , 18 and 10 properties were deemed to be impaired during the years ended December 31, 2023, 2022 and 2021, respectively, resulting in impairment charges of $ 33.1 million, $ 66.4 million and $ 49.9 million during the years ended December 31, 2023, 2022 and 2021, respectively.

The impairment charges were incurred primarily with respect to real estate assets that were sold or expected to be sold and reflect changes in the Company’s future cash flow assumptions for agreed-upon or estimated sales proceeds, as well as changes to assumptions with regard to management’s intent to sell or lease the real estate assets.

The following table summarizes our provisions for impairment during the periods indicated below (dollars in thousands).

The impairment charges reflect changes in the Company’s future cash flow assumptions for agreed-upon or estimated sales proceeds with respect to real estate assets that were expected to be sold as well as changes to assumptions with regard to management’s intent to sell or lease the real estate assets.

Year Ended December 31,

10 unchanged sentences

(4) property operating expenses;

and (5) re-leasing assumptions including number of months to re-lease, market rental revenue and required tenant improvements.

and (5) re-leasing assumptions including the number of months to re-lease, market rental revenue and required tenant improvements.

There are inherent uncertainties in making these estimates such as market conditions and performance and sustainability of the Company’s tenants.

For the Company’s impairment tests for the real estate assets during the year ended December 31, 2023, the fair value measurement for seven properties was determined based on sales prices under definitive agreements and the remaining one impaired property was determined by a discount rate of 9.0 % and capitalization rate of 8.5 %.

For the Company’s impairment tests for the real estate assets during the year ended December 31, 2024, the fair value measurements for nine properties were determined based on sales prices under definitive agreements, two properties were determined by a weighted average discount rate of 9.3 % and weighted average capitalization rate of 8.8 %, and one was determined based on an estimated sales price based on market data.

During the year ended December 31, 2024, impairment charges of $ 33.0 million were recorded for held and used properties, $ 8.6 million for held for sale properties and $ 6.0 million for disposed properties.

For the Company’s impairment tests for the real estate assets during the year ended December 31, 2023, the fair value measurements for seven properties were determined based on sales prices under definitive agreements and one property was determined by a discount rate of 9.0 % and capitalization rate of 8.5 %.

During the year ended December 31, 2023, impairment charges of $ 5.9 million were recorded for held and used properties and $ 27.2 million for disposed properties.

ORION OFFICE REIT INC.

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

For the Company’s impairment tests for the real estate assets during the year ended December 31, 2022, the fair value measurements for 17 properties were determined by applying an estimated sales price based on market data and one property was determined by applying a discount rate of 8.5 % and capitalization rate of 8.0 %.

During the year ended December 31, 2022, impairment charges of $ 39.5 million were recorded for held and used properties, $ 0.2 million for held for sale properties and $ 26.7 million for disposed properties.

ORION PROPERTIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2024

For the Company’s impairment tests for the real estate assets during the year ended December 31, 2022, the fair value measurement for 17 impaired properties was determined by applying an estimated sales price based on market data and the remaining one impaired property by applying a discount rate of 8.5 % and capitalization rate of 8.0 %.

During the year ended December 31, 2022, impairment charges of $ 39.5 million were recorded for held and used properties, $ 0.2 million impairment charges were recorded for held for sale properties and $ 26.7 million for disposed properties.

For the Company’s impairment tests for the real estate assets during the year ended December 31, 2021, the fair value measurement for all 10 impaired properties was determined by applying an estimated sales price based on market data.

During the year ended December 31, 2021, impairment charges of $ 49.9 million were recorded for held and used properties, and no impairment charges were recorded for held for sale properties or disposed properties.

The following tables present certain of the Company’s assets measured at fair value on a non-recurring basis as of December 31, 2023 and 2022, aggregated by the level in the fair value hierarchy within which those assets fall (in thousands):

The following tables present certain of the Company’s assets measured at fair value on a non-recurring basis as of the periods indicated below, aggregated by the level in the fair value hierarchy within which those assets fall (in thousands):

Level 1 Level 2 (1)

1 unchanged sentence

Assets of properties held and used $ — $ — $ 22,903 $ 22,903

Assets of properties held for sale — 9,671 — 9,671

$ — $ 9,671 $ 22,903 $ 32,574

Level 1 Level 2 (1)

1 unchanged sentence

Assets of properties held and used $ — $ — $ 5,402 $ 5,402

Assets of properties held for sale — 2,502 — 2,502

____________________________________

(1) The fair value of the level 2 category was derived using negotiated sales prices with third parties and the fair value of the level 3 category was derived using discounted cash flow analysis and management estimates of selling prices.

6 unchanged sentences

Fair Value at December 31, 2023

Derivative assets 2 $ — $ — $ 6,308 $ 6,308

Notes receivable 3 $ 3,900 $ 3,900 $ 2,500 $ 2,500

Total $ 2,500 $ 2,500 $ 6,308 $ 6,308

Liabilities (1) :

Mortgages payable 2 $ 373,000 $ 352,476 $ 355,000 $ 334,897

Credit facility term loan 2 — — 175,000 175,000

Credit facility revolver 2 119,000 119,000 116,000 116,000

3 unchanged sentences

(1) Current and prior period liabilities’ carrying and fair values exclude net deferred financing costs.

Notes Receivable – The fair value of the Company’s long-term promissory note receivable was determined to be at fair value at inception based on management’s estimates of credit spreads and observable market interest rates, representing level 2 on the fair value hierarchy.

Notes Receivable – The fair value of the Company’s long-term promissory notes receivable were determined to be at fair value based on management’s estimates of credit spreads and observable market interest rates, representing level 3 on the fair value hierarchy.

Debt – The fair value is estimated by an independent third party using a discounted cash flow analysis, based on management’s estimates of credit spreads and observable market interest rates, representing level 2 on the fair value hierarchy.

ORION OFFICE REIT INC.

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

ORION PROPERTIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2024

1 unchanged sentence

As of December 31, 2024, the Company had $ 490.2 million of debt outstanding, including net deferred financing costs, with a weighted-average years to maturity of 2.1 years and a weighted-average effective interest rate for the year ended December 31, 2024 of 5.85 %.

The following table summarizes the carrying value of debt as of December 31, 2023 and 2022, and the debt activity for the year ended December 31, 2023 (in thousands):

The following table summarizes the carrying value of debt as of and the debt activity for the periods indicated below (in thousands):

Year Ended December 31, 2024

5 unchanged sentences

Mortgages payable, net 352,856 17,668 — 698 371,222

Credit facility term loan:

Outstanding balance 175,000 — ( 175,000 ) — —

Deferred costs ( 1,185 ) — 504 681 —

Credit facility term loan, net 173,815 — ( 174,496 ) 681 —

Credit facility revolver 116,000 36,000 ( 33,000 ) — 119,000

1 unchanged sentence

The following table summarizes the scheduled aggregate principal repayments due on the Company’s debt outstanding as of December 31, 2024 (in thousands):

Thereafter 18,000

Total $ 492,000

____________________________________

(1) As described below, the Company’s Revolving Facility is scheduled to mature on November 12, 2024 and Orion OP has an option to extend the maturity date to May 12, 2026 if customary conditions are satisfied.

This table assumes exercise of the extension option, however, as described below, the Company cannot provide any assurance it will be able to satisfy the extension conditions.

Credit Agreement

2 unchanged sentences

In June 2023, as further described below, the Term Loan Facility was repaid and retired with borrowings under the Revolving Facility and, as of December 31, 2024, $ 119.0 million of principal amount was outstanding under the Revolving Facility with $ 231.0 million available for future borrowings thereunder, including the $ 25.0 million letter of credit sub-facility.

ORION OFFICE REIT INC.

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

December 31, 2023

The Company and Orion OP have entered into two amendments to the Credit Agreement.

The purpose of the first amendment entered into in December 2022 was to change the benchmark rate for borrowings under the Credit Agreement from LIBOR to SOFR (the secured overnight financing rate as administered by the Federal Reserve Bank of New York).

The Company and Orion OP have entered into three amendments to the Credit Agreement.

The purpose of the first amendment entered into in December 2022 was to change the benchmark rate for borrowings under the Credit Agreement from LIBOR (the London interbank offered rate as administered by the ICE Benchmark Administration) to SOFR (the secured overnight financing rate as administered by the Federal Reserve Bank of New York).

The purpose of the second amendment entered into in June 2023 was to repay and retire $ 175.0 million of outstanding borrowings under the Term Loan Facility with borrowings from the Revolving Facility which was undrawn at the time of the second amendment, provide Orion OP with the option to extend the maturity of the Revolving Facility for an additional 18 months to May 12, 2026 from November 12, 2024 and to effect certain other modifications.

The extension option is subject to customary conditions including there being no default or event of default, such as the failure to satisfy a financial or other covenant, and the payment of an extension fee.

The Company’s ability to satisfy these conditions and continue to comply with the terms of the Revolving Facility is partially dependent upon the Company having a sufficient level of unencumbered asset value as defined in the Credit Agreement.

The level of unencumbered asset value is partially dependent upon future leasing activity at the underlying properties and/or the Company acquiring additional properties to add to the unencumbered asset pool, and there is uncertainty about the Company’s ability to renew or re-lease properties and/or acquire additional properties at a sufficient level to meet the requirements to extend and continue to comply with the Revolving Facility.

Accordingly, the extension option may not be available to the Company.

Additionally, the Company does not expect to have generated sufficient cash from operations to repay the principal outstanding under the Revolving Facility, which was $ 116.0 million as of December 31, 2023, on its scheduled maturity date.

Management has had preliminary discussions with the administrative agent of the Revolving Facility to potentially amend the Credit Agreement terms in a manner that would result in an extension of the facility and a reduction in the amount of unencumbered asset value required under the financial covenants of the Revolving Facility.

However, there is no assurance that the Company will be able to reach an agreement with the lenders of the Revolving Facility on favorable terms and in a timely manner, or at all.

If an agreement is not reached with the lenders, management’s plans include acquiring additional properties to add to the unencumbered asset pool to meet the conditions to exercise the extension option of the Revolving Facility.

As of the date of these consolidated and combined financial statements, management believes it is probable that an agreement will be reached with the lenders, or the Company will be able to satisfy the conditions necessary to exercise the extension option of the Revolving Facility through its leasing efforts and its plan to acquire additional unencumbered properties.

Management will continue to monitor and assess the effectiveness of its plans in subsequent financial reporting periods.

Giving effect to the amendments described above, the interest rate applicable to the loans under the Revolving Facility may be determined, at the election of Orion OP, on the basis of Daily Simple SOFR, Term SOFR or a base rate, in the case of a SOFR loan, plus a SOFR adjustment of 0.10 % per annum, and in the case of a SOFR loan or a base rate loan, plus an applicable margin of 3.25 % for SOFR loans and 2.25 % for base rate loans.

On May 3, 2024, the Company entered into a third amendment to the Credit

ORION PROPERTIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2024

Agreement which resulted in a permanent $ 75.0 million reduction in the capacity of the Revolving Facility to $ 350.0 million from $ 425.0 million, while making a proportional reduction in the minimum value of the unencumbered asset pool required under the Credit Agreement to $ 500.0 million from $ 600.0 million and certain other modifications to financial covenants.

On May 16, 2024, the Company elected its option to extend the maturity of the Revolving Facility to May 12, 2026.

The interest rate applicable to the loans under the Revolving Facility may be determined, at the election of Orion OP, on the basis of Daily Simple SOFR, Term SOFR or a base rate, in the case of a SOFR loan, plus a SOFR adjustment of 0.10 % per annum, and in the case of a SOFR loan or a base rate loan, plus an applicable margin of 3.25 % for SOFR loans and 2.25 % for base rate loans.

Loans under the Revolving Facility may be prepaid and reborrowed, and unused commitments under the Revolving Facility may be reduced, at any time, in whole or in part, by Orion OP, without premium or penalty (except for SOFR breakage costs).

In December 2022, the Company entered into interest rate swap agreements with an aggregate notional amount of $ 175.0 million, which effectively fixed the interest rate on $ 175.0 million of principal under the Revolving Facility at 3.92 % per annum until November 12, 2023.

Upon the scheduled expiration of the interest rate swap agreements, the Company entered into interest rate collar agreements on a total notional amount of $ 60.0 million to hedge against interest rate volatility on the Revolving Facility.

4 unchanged sentences

The Revolving Facility is secured by, among other things, first priority pledges of the equity interests in the Subsidiary Guarantors.

ORION OFFICE REIT INC.

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

December 31, 2023

The Revolving Facility requires that Orion OP comply with various covenants, including covenants restricting, subject to certain exceptions, liens, investments, mergers, asset sales and the payment of certain dividends.

9 unchanged sentences

As of December 31, 2024, Orion OP was in compliance with the Revolving Facility financial covenants.

ORION PROPERTIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2024

The Revolving Facility includes customary representations and warranties of the Company and Orion OP, which must be true and correct in all material respects as a condition to future extensions of credit under the Revolving Facility.

The Revolving Facility also includes customary events of default, the occurrence of which, following any applicable grace period, would permit the lenders to, among other things, declare the principal, accrued interest and other obligations of Orion OP under the Revolving Facility to be immediately due and payable and foreclose on the collateral securing the Revolving Facility.

On February 10, 2022, certain indirect subsidiaries of the Company (the “Mortgage Borrowers”) obtained a $ 355.0 million fixed rate mortgage loan (the “CMBS Loan”) from Wells Fargo Bank, National Association (together with its successor, the “Lender”), which is secured by the Mortgage Borrowers’ fee simple or ground lease interests in 19 properties owned indirectly by the Company (collectively, the “Mortgaged Properties”).

On February 10, 2022, certain indirect subsidiaries of the Company (the “Mortgage Borrowers”) obtained a $ 355.0 million fixed rate mortgage note (the “CMBS Loan”) from Wells Fargo Bank, National Association (together with its successor, the “Lender”), which is secured by the Mortgage Borrowers’ fee simple or ground lease interests in 19 properties owned indirectly by the Company (collectively, the “Mortgaged Properties”).

During March 2022, Wells Fargo effected a securitization of the CMBS Loan.

4 unchanged sentences

These amounts, as well as the transaction expenses incurred in connection with the CMBS Loan, were funded with cash on hand and borrowings under the Company’s Revolving Facility.

During the year ended December 31, 2024, the Mortgage Borrowers funded an additional $ 9.4 million of loan reserves for future rent concessions and tenant improvement allowances agreed to as part of the extension of one of the leases in the CMBS collateral pool.

The CMBS Loan is secured by, among other things, first priority mortgages and deeds of trust granted by the Mortgage Borrowers and encumbering the Mortgaged Properties.

The CMBS Loan is generally not freely prepayable by the Mortgage Borrowers without payment of certain prepayment premiums and costs.

The CMBS Loan may be prepaid in whole, but not in part, except as provided in the loan agreement governing the CMBS Loan (the “CMBS Loan Agreement”), at any time following the Prepayment Lockout Release Date (as defined in the CMBS Loan Agreement) (generally in March 2024, two years after the CMBS Loan has been fully securitized), subject to the payment of a yield maintenance premium and the satisfaction of other terms and conditions set forth in the CMBS Loan Agreement.

Further, releases of individual properties are permitted in connection with an arms’ length third party sale upon repayment of the Release Price (as defined in the CMBS Loan Agreement) for the applicable individual property and subject to payment of the applicable yield maintenance premium and the satisfaction of other terms and conditions set forth in the CMBS Loan Agreement.

ORION OFFICE REIT INC.

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

December 31, 2023

The CMBS Loan Agreement also contains customary cash management provisions, including certain trigger events (such as failure of the Mortgage Borrowers to satisfy a minimum debt yield) which allow the Lender to retain any excess cash flow as additional collateral for the Loan, until such trigger event is cured.

The CMBS Loan may be prepaid in whole, but not in part, except as provided in the loan agreement governing the CMBS Loan (the “CMBS Loan Agreement”), at any time, subject to the payment of a yield maintenance premium and the satisfaction of other terms and conditions set forth in the CMBS Loan Agreement.

Further, releases of individual properties are permitted in connection with an arm’s length third party sale upon repayment of the Release Price (as defined in the CMBS Loan Agreement) for the applicable individual property and subject to payment of the applicable yield maintenance premium and the satisfaction of other terms and conditions set forth in the CMBS Loan Agreement.

The CMBS Loan may be prepaid in full without premium or penalty beginning in May 2026 (nine months prior to maturity).

The CMBS Loan Agreement also contains customary cash management provisions, including certain trigger events (such as failure of the Mortgage Borrowers to satisfy a minimum debt yield of 8.0 %) which allow the Lender to retain any excess cash flow as additional collateral for the Loan, until such trigger event is cured.

In connection with the CMBS Loan Agreement, the Company (as the guarantor) delivered a customary non-recourse carveout guaranty to the Lender (the “Guaranty”), under which the Company guaranteed the obligations and liabilities of the Mortgage Borrowers to the Lender with respect to certain non-recourse carveout events and the circumstances under which the CMBS Loan will be fully recourse to the Mortgage Borrowers, and which includes requirements for the Company to maintain a net worth of no less than $ 355.0 million and liquid assets of no less than $ 10.0 million, in each case, exclusive of the values of the collateral for the CMBS Loan.

3 unchanged sentences

The CMBS Loan Agreement also includes customary events of default, the occurrence of which, following any applicable grace period, would permit the Lender to, among other things, declare the principal, accrued interest and other obligations of the Mortgage Borrowers to be immediately due and payable and foreclose on the Mortgaged Properties.

San Ramon Loan

On November 7, 2024, an indirect subsidiary of the Company (the “San Ramon Borrower”) obtained an $ 18.0 million fixed rate mortgage note (the “San Ramon Loan”) from RGA Americas Investments LLC (the “San Ramon Lender”) secured

ORION PROPERTIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2024

by the fee simple interest in the San Ramon, California property acquired in September 2024 (the “San Ramon Property”).

The San Ramon Loan bears interest at a fixed rate of 5.90 % per annum and matures on December 1, 2031.

The San Ramon Loan requires monthly payments of interest only and all principal is due at maturity and is generally not freely prepayable by the San Ramon Borrower until December 2026, and thereafter without payment of certain prepayment premiums and costs.

In connection with the San Ramon Loan, the Company (as guarantor) delivered a customary non-recourse carveout guaranty, under which the Company guaranteed the obligations and liabilities of the San Ramon Borrower under the San Ramon Loan with respect to certain non-recourse carveout events and the circumstances under which the San Ramon Loan will be fully recourse to the San Ramon Borrower.

The San Ramon Borrower and the Company also provided a customary environmental indemnity agreement, pursuant to which the San Ramon Borrower and the Company agreed to protect, defend, indemnify and hold harmless the San Ramon Lender from and against certain environmental liabilities related to the San Ramon Property.

The loan agreement governing the San Ramon Loan (the “San Ramon Loan Agreement”) includes customary representations, warranties and covenants of the San Ramon Borrower and the Company.

The San Ramon Loan Agreement also includes customary events of default, the occurrence of which, following any applicable grace period, would permit the Lender to, among other things, declare the principal, accrued interest and other obligations of the San Ramon Borrower to be immediately due and payable and foreclose on the San Ramon Property.

The Company’s mortgages payable consisted of the following as of December 31, 2024 (dollars in thousands):

5 unchanged sentences

(1) Net carrying value is real estate assets, including right-of-use assets, net of real estate liabilities.

The table above does not include mortgage notes associated with the Arch Street Joint Venture of $ 136.7 million as of December 31, 2023.

The table above does not include non-recourse mortgage notes associated with the Arch Street Joint Venture of $ 131.6 million, of which the Company’s proportionate share was $ 26.3 million, as of December 31, 2024.

Note 7 – Derivatives and Hedging Activities

Cash Flow Hedges of Interest Rate Risk

As of December 31, 2023 and 2022, the Company had outstanding derivative agreements with aggregate notional amounts of $ 60.0 million and $ 175.0 million, respectively, which were designated as cash flow hedges under U.S.

The interest rate derivative agreements were entered into in order to hedge interest rate volatility.

The initial interest rate swap agreements were effective on December 1, 2021 and were scheduled to terminate on November 12, 2023.

During the year ended December 31, 2022, in connection with the transition of the benchmark rate for borrowings under the Credit Agreement from LIBOR to SOFR, the Company terminated the initial interest rate swap agreements and entered into new interest rate swap agreements with an aggregate notional amount of $ 175.0 million, effective on December 1, 2022 and terminating on November 12, 2023.

Upon the scheduled expiration of the interest rate swap agreements, the Company entered into interest rate collar agreements on a total notional amount of $ 60.0 million.

As of December 31, 2024 and 2023, the Company had outstanding derivative agreements with aggregate notional amounts of $ 60.0 million, which were designated as cash flow hedges under U.S.

The interest rate derivative agreements comprise interest rate collar agreements entered into in order to hedge interest rate volatility with respect to the Company’s borrowings under the Revolving Facility.

Under the agreements, the benchmark rate for the Revolving Facility will float between 5.50 % per annum and 4.20 % per annum on $ 25.0 million, and 5.50 % per annum and 4.035 % per annum on $ 35.0 million, effective from November 13, 2023 until May 12, 2025.

The table below presents the fair value of the Company’s derivative financial instruments designated as a cash flow hedges as well as its classification in the Company’s consolidated balance sheets as of December 31, 2023 and 2022 (in thousands):

The Company was previously party to derivative agreements with an aggregate notional amount of $ 175.0 million, which were also designated as cash flow hedges under U.S.

The interest rate derivative agreements, which expired on November 12, 2023, comprised interest rate swap agreements which effectively fixed the interest rate on the Company’s borrowings under the Revolving Facility (or, until June 29, 2023, the Term Loan Facility) until November 12, 2023.

The table below presents the fair value of the Company’s derivative financial instruments designated as a cash flow hedges as well as its classification in the accompanying consolidated balance sheets as of the periods indicated below (in thousands):

Derivatives Designated as Hedging Instruments Balance Sheet Location December 31, 2024 December 31, 2023

Interest rate swaps Other assets, net $ — $ 6,308

Interest rate collars Other liabilities, net $ ( 15 ) $ ( 264 )

ORION OFFICE REIT INC.

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

During the years ended December 31, 2024, 2023 and 2022, the Company recorded net unrealized gains of $ 0.2 million, $ 0.1 million and $ 7.8 million, respectively, for changes in the fair value of its cash flow hedges in accumulated other comprehensive income (loss).

ORION PROPERTIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2024

During the years ended December 31, 2023, 2022 and 2021, the Company recorded net unrealized gains of $ 0.1 million, $ 7.8 million and $ 0.2 million, respectively, for changes in the fair value of its cash flow hedges in accumulated other comprehensive (loss) income.

During the years ended December 31, 2023, 2022 and 2021, the Company reclassified previous net gains of $ 6.7 million and $ 1.8 million, and previous losses of $ 0.1 million respectively, from accumulated other comprehensive (loss) income into interest expense as a result of the hedged transactions impacting earnings.

During the next twelve months, the Company estimates that less than $ 0.1 million will be reclassified from other comprehensive income as an increase to interest expense.

During the years ended December 31, 2023 and 2022, the Company reclassified previous net gains of $ 6.7 million and $ 1.8 million, respectively, from accumulated other comprehensive (loss) income into interest expense as a result of the hedged transactions impacting earnings.

No such amounts were reclassified from accumulated other comprehensive loss into interest expense during the year ended December 31, 2024.

During the next twelve months, the Company estimates that $ 0.1 million will be reclassified from other comprehensive income as an increase to interest expense.

Derivatives Not Designated as Hedging Instruments

1 unchanged sentence

Tabular Disclosure of Offsetting Derivatives

The table below details a gross presentation, the effects of offsetting and a net presentation of the Company’s derivatives as of December 31, 2023 and 2022 (in thousands).

The table below details a gross presentation, the effects of offsetting and a net presentation of the Company’s derivatives as of the periods indicated below (in thousands).

The net amounts of derivative assets or liabilities can be reconciled to the tabular disclosure of fair value.

10 unchanged sentences

$ 28,955 $ 25,283 $ 25,108

Cash paid for income taxes

$ 463 $ 634 $ 98

Cash paid for income taxes, net of refunds $ 207 $ 463 $ 634

Non-cash investing and financing activities:

1 unchanged sentence

Accrued deferred financing costs

Non-cash assets and liabilities contributed by parent company $ — $ — $ 1,142,002

Establishment of right-of-use assets and lease liabilities

4 unchanged sentences

Origination of seller financed notes receivable $ — $ 3,700 $ —

ORION OFFICE REIT INC.

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

ORION PROPERTIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2024

Note 9 – Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses consisted of the following as of December 31, 2023 and 2022 (in thousands):

Accounts payable and accrued expenses consisted of the following as of the periods indicated below (in thousands):

December 31, 2024 December 31, 2023

4 unchanged sentences

Accounts payable 1,159 1,606

$ 30,479 $ 26,161

Total $ 31,585 $ 30,479

Note 10 – Commitments and Contingencies

1 unchanged sentence

These rent concession and leasing cost commitments could be significant and are expected to vary due to factors such as competitive market conditions for leasing of commercial office space and the volume of square footage subject to re-leasing by the Company.

As of December 31, 2023, the Company had total commitments of $ 42.3 million outstanding for tenant improvement allowances and $ 0.3 million for leasing commissions.

As of December 31, 2024, the Company had the following estimated total outstanding leasing costs commitments (in thousands):

Tenant improvement allowances $ 64,274

Reimbursable landlord work (2)

Non-reimbursable landlord work (2)

Leasing commissions 323

Total $ 78,652

____________________________________

(1) Outstanding commitments do not include rent concessions as such amounts are recorded as a component of straight-line rent receivable, net, in accordance with U.S.

(2) Landlord work represents specific improvements agreed to within the lease agreement to be performed by the Company, as landlord, as a new and non-recurring obligation and in order to induce the tenant to enter into a new lease or lease renewal or extension.

Outstanding commitments for reimbursable and non-reimbursable landlord work include estimates and are subject to change.

The actual amount the Company pays for tenant improvement allowances may be lower than the amount agreed upon in the applicable lease and will depend upon the tenant’s use of the capital on the agreed upon timeline.

The timing of the Company’s cash outlay for tenant improvement allowances is significantly uncertain and will depend upon the applicable tenant’s schedule for the improvements and corresponding use of capital, if any.

For assets financed on the CMBS Loan, the Company has funded reserves with the lender for tenant improvement allowances and rent concession commitments.

The restricted cash included in the reserve totaled $ 34.7 million as of December 31, 2023, including $ 23.6 million for tenant improvement allowances and $ 11.1 million for rent concession commitments, and is included in other assets, net in the Company’s consolidated balance sheets.

For assets financed on the CMBS Loan, the Company has funded reserves with the lender for tenant improvement allowances and rent concessions.

As of December 31, 2024, total restricted cash of $ 41.5 million was reserved for outstanding leasing costs, including $ 30.1 million for tenant improvement allowances and $ 11.4 million for rent concession commitments, and is included in other assets, net in the accompanying consolidated balance sheets.

From time to time, the Company may be party to various legal proceedings which it believes are routine in nature and incidental to the operation of its business.

The Company does not believe that any such legal proceedings will have a material adverse effect upon its consolidated and combined position or results of operations.

The Company does not believe that any such legal proceedings will have a material adverse effect upon its consolidated position or results of operations.

ORION PROPERTIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2024

Environmental Matters

In connection with the ownership and operation of real estate, the Company may potentially be liable for costs and damages related to environmental matters.

The Company has not been notified by any governmental authority of any non-compliance, liability or other claim, and is not aware of any other environmental condition, in each case, that it believes will have a material adverse effect upon its consolidated and combined position or results of operations.

Note 11 – Leases

2 unchanged sentences

Lease agreements may also contain rent increases that are based on an index or rate (e.g., the consumer price index).

ORION OFFICE REIT INC.

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

December 31, 2023

The components of rental revenue from the Company’s operating leases during the periods indicated below were as follows (in thousands):

Year Ended December 31,

2024 2023 2022

Cash rental revenue $ 117,953 $ 141,471 $ 156,505

Straight-line rental revenue ( 210 ) 5,649 ( 769 )

Lease intangible amortization 637 894 1,091

Fixed property operating cost reimbursements 5,881 5,956 5,566

Other fixed rental revenue 1,128 865 5,271

Total fixed 125,389 154,835 167,664

Variable property operating cost reimbursements 35,897 36,010 36,624

Other variable rental revenue 2,769 3,396 3,065

Total variable 38,666 39,406 39,689

Total rental revenue $ 164,055 $ 194,241 $ 207,353

The following table presents future minimum base rent payments due to the Company under the terms of its operating lease agreements, excluding expense reimbursements, over the next five years and thereafter as of December 31, 2024 (in thousands).

3 unchanged sentences

Total $ 585,477

ORION PROPERTIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2024

The Company is the lessee under ground lease arrangements and corporate office leases, which meet the criteria under U.S.

3 unchanged sentences

The weighted-average discount rate used to measure the lease liability for the Company’s operating leases was 3.72 % as of December 31, 2024.

As the Company’s leases do not provide an implicit rate, the Company used an estimated incremental borrowing rate based on the information available at the lease commencement date, lease guidance adoption date or the Merger Effective Time, as applicable, in determining the present value of lease payments.

As the Company’s leases do not provide an implicit rate, the Company used an estimated incremental borrowing rate based on the information available at the lease commencement date or the lease guidance adoption date, as applicable, in determining the present value of lease payments.

Operating lease costs were $ 1.2 million, $ 1.3 million and $ 1.0 million for the years ended December 31, 2024, 2023 and 2022, respectively.

No cash paid for operating lease liabilities was capitalized.

No cash paid for operating lease liabilities was capitalized during the years ended December 31, 2024, 2023 and 2022.

The following table reflects the maturity analysis of payments due from the Company over the next five years and thereafter for ground and corporate office lease obligations as of December 31, 2024 (in thousands).

7 unchanged sentences

On November 12, 2021, Realty Income effected the Distribution.

ORION OFFICE REIT INC.

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

December 31, 2023

Distributions

During the years ended December 31, 2024, 2023 and 2022, the Company’s Board of Directors declared quarterly cash dividends on shares of the Company’s common stock as follows:

Declaration Date Record Date Paid Date Distributions Per Share

February 27, 2024 March 29, 2024 April 15, 2024 $ 0.10

May 7, 2024 June 28, 2024 July 15, 2024 $ 0.10

August 7, 2024 September 30, 2024 October 15, 2024 $ 0.10

November 6, 2024 December 31, 2024 January 15, 2025 $ 0.10

ORION PROPERTIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2024

Declaration Date Record Date Paid Date Distributions Per Share

March 7, 2023 March 31, 2023 April 17, 2023 $ 0.10

7 unchanged sentences

November 1, 2022 December 30, 2022 January 17, 2023 $ 0.10

On February 27, 2024, the Company’s Board of Directors declared a quarterly cash dividend of $ 0.10 per share for the first quarter of 2024, payable on April 15, 2024, to stockholders of record as of March 29, 2024.

The following table sets forth the federal income tax characterization of dividends paid on a percentage basis on the Company’s common stock for the years ended December 31, 2023 and 2022:

On March 4, 2025, the Company’s Board of Directors declared a quarterly cash dividend of $ 0.02 per share for the first quarter of 2025, payable on April 15, 2025 to stockholders of record as of March 31, 2025.

The following table sets forth the federal income tax characterization of dividends paid on a percentage basis on the Company’s common stock for the periods indicated below:

Year Ended December 31,

2024 2023 2022

Ordinary dividends — % — % — %

8 unchanged sentences

The Arch Street Warrants expire on the earlier of (a) ten years after issuance and (b) if the Arch Street Joint Venture is terminated, the later of the termination of the Arch Street Joint Venture and seven years after issuance.

ORION OFFICE REIT INC.

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

December 31, 2023

Share Repurchase Program

4 unchanged sentences

Shares of common stock repurchased by the Company under the Share Repurchase Program, if any, will be returned to the status of authorized but unissued shares of common stock.

During the year ended December 31, 2023, the Company repurchased approximately 0.9 million shares of common stock in multiple open market transactions, at a weighted average share price of $ 5.46 for an aggregate purchase price of $ 5.0 million as part of the Share Repurchase Program, which are currently deemed to be authorized but unissued shares of common stock.

ORION PROPERTIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2024

The Company did not repurchase any shares under the Share Repurchase Program during the years ended December 31, 2024 and 2022.

As of December 31, 2024, the approximate dollar value of shares that remain available for repurchase under the Share Repurchase Program was $ 45.0 million.

Note 13 – Equity-Based Compensation

5 unchanged sentences

The Company also granted Time-Based RSUs to its non-employee directors which are scheduled to vest on the earlier of the one-year anniversary of the grant date and the next annual meeting, subject to the recipient’s continued service with the Company.

During the year ended December 31, 2021, the Company granted Time-Based RSUs to non-employee directors and officers of the Company.

Failure to satisfy the performance conditions for the Metrics-Based RSUs will result in the forfeiture of the units and, in the case of awards where the performance conditions were previously determined to be likely of achieving, a reversal of any previously recognized equity-based compensation expense.

Failure to satisfy the market conditions for the TSR-Based RSUs will result in the forfeiture of the units but does not result in a reversal of previously recognized equity-based compensation expense, provided that the requisite service has been rendered.

Forfeiture of Time-Based RSUs or Performance-Based awards due to the failure to meet the service requirements results in the reversal of previously recognized equity-based compensation expense.

The Company adjusts for forfeitures of Time-Based RSUs and Performance-Based RSUs as they occur.

During the years ended December 31, 2024, 2023 and 2022, the Company granted Time-Based RSUs and/or Performance-Based RSUs to non-employee directors and officers and other employees of the Company.

5 unchanged sentences

Equity-based compensation expense related to Time-Based RSUs and Performance-Based RSUs for the years ended December 31, 2024, 2023 and 2022 was $ 3.7 million, $ 2.5 million and $ 1.4 million, respectively.

As of December 31, 2023 and 2022, total unrecognized compensation expense related to Time-Based RSUs and Performance-Based RSUs was approximately $ 3.7 million and $ 2.7 million, respectively, with an aggregate weighted-average remaining term of 1.7 years and 2.0 years, respectively.

ORION OFFICE REIT INC.

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

As of December 31, 2024, total unrecognized compensation expense related to Time-Based RSUs and Performance-Based RSUs was approximately $ 4.1 million with an aggregate weighted-average remaining term of 1.7 years.

ORION PROPERTIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2024

The following table details the activity of the Time-Based RSUs during the year ended December 31, 2023:

Time-Based RSUs Weighted-Average Grant Date Fair Value

The following table details the activity of the Time-Based RSUs for the periods indicated below:

Time-Based RSUs Weighted-Average Grant Date Fair Value per Share

Unvested units, December 31, 2022

5 unchanged sentences

445,136 $ 9.09

The following table details the activity of the Performance-Based RSUs during the year ended December 31, 2023:

Performance-Based RSUs Weighted-Average Grant Date Fair Value

Granted 771,870 $ 3.37

Vested ( 217,028 ) $ 8.94

Forfeited ( 23,015 ) $ 4.89

Unvested units, December 31, 2024

976,963 $ 4.71

The following table details the activity of the Performance-Based RSUs for the periods indicated below:

Performance-Based RSUs Weighted-Average Grant Date Fair Value per Share

Unvested units, December 31, 2022

212,154 $ 13.65

Granted 509,273 $ 5.83

2 unchanged sentences

721,427 $ 8.13

The Company is also required under U.S.

GAAP to recognize equity-based compensation expense for awards to its former employees of Realty Income time-based restricted stock units and stock options granted in connection with the Separation and Distribution.

Equity-based compensation expense for the years ended December 31, 2023 2022 and 2021, related to such Realty Income equity-based compensation awards, was $ 0.2 million, $ 0.4 million and $ 0.1 million.

As of December 31, 2023 and 2022, total unrecognized compensation expense related to Realty Income time-based restricted stock units and stock options was less than $ 0.1 million and $ 0.2 million, respectively, with an aggregate weighted-average remaining term of 0.1 years and 1.0 year, respectively.

Note 14 - Net Income (Loss) Per Share

The computation of basic and diluted earnings per share is as follows for the years ended December 31, 2023, 2022 and 2021 (in thousands, except share and per share data):

Granted 1,613,592 $ 2.41

Vested ( 31,080 ) $ 17.77

Forfeited ( 201,625 ) $ 16.33

Unvested units, December 31, 2024

2,102,314 $ 2.81

The Company was also required under U.S.

GAAP to recognize equity-based compensation expense for awards to its employees who received grants of Realty Income time-based restricted stock units and stock options in connection with the Separation and the Distribution.

Equity-based compensation expense related to such Realty Income equity-based compensation awards was less than $ 0.1 million for the year ended December 31, 2024, and was $ 0.2 million and $ 0.4 million for the years ended December 31, 2023 and 2022, respectively.

As of December 31, 2024, there was no remaining unrecognized compensation expense related to Realty Income time-based restricted stock units and stock options.

ORION PROPERTIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2024

Note 14 – Net Loss Per Share

The computation of basic and diluted earnings per share is as follows for the periods indicated below (in thousands, except per share data):

Year Ended December 31,

1 unchanged sentence

Net loss $ ( 102,976 ) $ ( 57,311 ) $ ( 97,474 )

Income attributable to non-controlling interest 9 ( 20 ) ( 17 )

Net loss available to common stockholders used in basic and diluted net income per share ( 57,302 ) ( 97,494 ) ( 47,481 )

Net (income) loss attributable to non-controlling interest ( 36 ) 9 ( 20 )

Net loss attributable to common stockholders and used in basic and diluted net loss per share ( 103,012 ) ( 57,302 ) ( 97,494 )

Weighted average shares of common stock outstanding - basic 55,903 56,410 56,632

3 unchanged sentences

____________________________________

(1) There were no adjustments to the weighted average common shares outstanding used in the diluted calculation given there were no potentially dilutive shares for the years ended December 31, 2023, 2022 and 2021.

The following were excluded from diluted net loss per share attributable to common stockholders, as the effect would have been antidilutive:

(1) There were no adjustments to the weighted average common shares outstanding used in the diluted calculation given that all potentially dilutive shares were antidilutive for the year ended December 31, 2024 and there were no potentially dilutive shares for the years ended December 31, 2023 and 2022.

The following were excluded from diluted net loss per share attributable to common stockholders during the periods indicated below, as the effect would have been antidilutive (in thousands):

Year Ended December 31,

2024 2023 2022

Weighted average unvested Time-Based RSUs and Performance-Based RSUs (1)

Weighted average stock warrants 1,120 1,120 1,120

ORION OFFICE REIT INC.

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

December 31, 2023

____________________________________

(1) Net of assumed purchases in accordance with the treasury stock method and exclude Performance-Based RSUs for which the performance thresholds have not been met by the end of the applicable reporting period.

Note 15 – Subsequent Events

Distributions

Leasing Activity

During January 2024, the Company entered into a 17.0 -year lease renewal, which includes a 2.0 -year period of the stated lease term during which the tenant has the right to vacate their space, or “non-firm term”, for 9,000 square feet at one of its properties in Eagle Pass, Texas and a new 15.0 -year lease, which includes an 8.0 -year non-firm term, for 86,000 square feet at one of its properties in Lincoln, Nebraska.

ORION OFFICE REIT INC.

Arch Street Joint Venture Member Loan

ORION PROPERTIES INC.

SCHEDULE III – REAL ESTATE AND ACCUMULATED DEPRECIATION

8 unchanged sentences

Land Buildings, Fixtures and Improvements Date Acquired Date of Construction

Food, Beverage & Tobacco - St.

Charles, MO $ — $ 3,675 $ 13,828 $ ( 12,101 ) $ 5,402 $ — 4/1/2011 1993

Commercial & Professional Services - Brownsville, TX $ — $ 1,740 $ 11,571 $ 956 $ 14,267 $ ( 5,765 ) 4/1/2011 2007

19 unchanged sentences

Vacant - Deerfield, IL (6)

— 4,093 11,511 ( 13,564 ) 2,040 — 8/27/2013 1984

Vacant - Deerfield, IL (6)

— 4,262 11,988 ( 14,125 ) 2,125 — 8/27/2013 1984

Vacant - Deerfield, IL (6)

— 4,082 11,484 ( 13,531 ) 2,035 — 8/27/2013 1984

Vacant - Deerfield, IL (6)

— 4,089 11,503 ( 13,553 ) 2,039 — 8/27/2013 1984

Vacant - Deerfield, IL (6)

— 2,586 7,275 ( 8,572 ) 1,289 — 8/27/2013 1976

Vacant - Deerfield, IL (6)

— 3,181 8,947 ( 10,543 ) 1,585 — 8/27/2013 1976

Capital Goods - Cedar Rapids, IA 7,000 1,000 12,981 — 13,981 ( 4,157 ) 10/10/2013 2013

6 unchanged sentences

Government & Public Services - Plattsburgh, NY — 1,136 2,486 148 3,770 ( 274 ) 11/1/2021 2008

Financial Institutions - Warwick, RI — 1,358 3,982 ( 567 ) 4,773 ( 29 ) 11/1/2021 1995

ORION OFFICE REIT INC.

Vacant - Warwick, RI — 1,358 3,982 ( 423 ) 4,917 ( 144 ) 11/1/2021 1995

Capital Goods - Longmont, CO — 2,106 12,543 463 15,112 ( 1,228 ) 11/1/2021 1993

ORION PROPERTIES INC.

SCHEDULE III – REAL ESTATE AND ACCUMULATED DEPRECIATION

7 unchanged sentences

Land Buildings, Fixtures and Improvements Date Acquired Date of Construction

Capital Goods - Longmont, CO $ — $ 2,106 $ 12,543 $ 396 $ 15,045 $ ( 820 ) 11/1/2021 1993

Health Care Equipment & Services - Waukegan, IL $ — $ 636 $ 4,136 $ 1,681 $ 6,453 $ ( 478 ) 11/1/2021 1980

2 unchanged sentences

Health Care Equipment & Services - San Antonio, TX — 2,125 15,425 462 18,012 ( 1,515 ) 11/1/2021 2008

Energy - Tulsa, OK — 6,865 34,716 60 41,641 ( 2,152 ) 11/1/2021 1995

Restaurant - Tulsa, OK — 6,865 34,716 60 41,641 ( 3,147 ) 11/1/2021 1995

Vacant - Englewood, CO — 2,291 2,989 ( 1,280 ) 4,000 — 11/1/2021 2011

Consumer Durables & Apparel - Denver, CO (7)

— 3,386 19,727 1,604 24,717 ( 1,943 ) 11/1/2021 2001

Vacant - Richardson, TX — 2,047 12,733 7 14,787 ( 1,298 ) 11/1/2021 2008

6 unchanged sentences

Telecommunication Services - Nashville, TN 9,291 2,588 9,587 1,241 13,416 ( 1,015 ) 11/1/2021 2002

Commercial & Professional Services - The Woodlands, TX — 2,550 17,481 826 20,857 ( 1,165 ) 11/1/2021 2014

Retailing - The Woodlands, TX — 2,550 17,481 1,429 21,460 ( 1,734 ) 11/1/2021 2014

Retailing - Santee, CA — — 9,859 1,150 11,009 ( 1,033 ) 11/1/2021 2003

Materials - Glen Burnie, MD — 3,095 11,466 1,401 15,962 ( 1,283 ) 11/1/2021 1984

Health Care Equipment & Services - Irving, TX — 9,267 19,853 196 29,316 ( 1,270 ) 11/1/2021 1997

Vacant - Irving, TX — 9,267 19,853 385 29,505 ( 1,886 ) 11/1/2021 1997

Capital Goods - Tulsa, OK — 1,904 1,238 — 3,142 ( 142 ) 11/1/2021 1982

Government & Public Services - Covington, KY — 4,087 56,991 3,974 65,052 ( 3,635 ) 11/1/2021 2002

Vacant - Covington, KY — 4,087 56,991 6,737 67,815 ( 5,590 ) 11/1/2021 2002

Software & Services - Amherst, NY (8)

Commercial & Professional Services - Dublin, OH — 1,287 4,688 18 5,993 ( 314 ) 11/1/2021 1997

— 2,997 2,701 — 5,698 ( 378 ) 11/1/2021 1986

Capital Goods - Sterling, VA 29,094 10,515 25,393 — 35,908 ( 2,446 ) 11/1/2021 2011

5 unchanged sentences

Software & Services - Lincoln, NE — — 6,587 1,326 7,913 ( 784 ) 11/1/2021 2009

Insurance - Buffalo, NY — 4,710 36,740 — 41,450 ( 2,326 ) 11/1/2021 2007

Vacant - Buffalo, NY — 4,710 36,740 28 41,478 ( 3,400 ) 11/1/2021 2007

Insurance - Urbana, MD 23,165 4,028 19,888 — 23,916 ( 1,924 ) 11/1/2021 2011

2 unchanged sentences

Capital Goods - Duluth, GA 14,669 3,684 14,786 — 18,470 ( 1,425 ) 11/1/2021 1999

ORION OFFICE REIT INC.

Commercial & Professional Services - Parsippany, NJ — 9,537 9,174 358 19,069 ( 1,050 ) 11/1/2021 2009

Vacant - Bedford, MA — 22,381 26,029 4 48,414 ( 2,760 ) 11/1/2021 2001

Financial Institutions - Hopewell, NJ 92,663 19,325 57,846 3,291 80,462 ( 5,556 ) 11/1/2021 2001

ORION PROPERTIES INC.

SCHEDULE III – REAL ESTATE AND ACCUMULATED DEPRECIATION

7 unchanged sentences

Land Buildings, Fixtures and Improvements Date Acquired Date of Construction

Vacant - Parsippany, NJ $ — $ 9,537 $ 9,174 $ — $ 18,711 $ ( 719 ) 11/1/2021 2009

Software & Services - Bedford, MA — 22,381 26,029 4 48,414 ( 1,889 ) 11/1/2021 2001

Financial Institutions - Hopewell, NJ 92,663 19,325 57,846 1,897 79,068 ( 3,726 ) 11/1/2021 2001

Health Care Equipment & Services - Phoenix, AZ 26,099 4,786 21,346 844 26,976 ( 1,490 ) 11/1/2021 2012

Vacant - Phoenix, AZ $ 26,099 $ 4,786 $ 21,346 $ 844 $ 26,976 $ ( 2,204 ) 11/1/2021 2012

Vacant - Amherst, NY (8)

— 564 486 — 1,050 ( 69 ) 11/1/2021 1988

Materials - San Ramon, CA 18,000 12,250 25,269 — 37,519 ( 219 ) 9/11/2024 1984

$ 373,000 $ 241,361 $ 1,111,592 $ ( 70,501 ) $ 1,282,452 $ ( 177,906 )

____________________________________

(1) Initial costs exclude subsequent impairment charges.

3 unchanged sentences

(5) Depreciation is computed using the straight-line method over the estimated useful lives of up to 35 years for buildings and five to 20 years for building fixtures and improvements.

ORION OFFICE REIT INC.

(6) The buildings and associated accumulated depreciation of the six-property campus in Deerfield, Illinois were written-off during the year ended December 31, 2024.

(7) This property was split during the year ended December 31, 2024 as a result of a pending parcel split and sale agreement on a portion of the land and improvements thereon.

The vacant property under the sale agreement is included in real estate assets held for sale, net in the accompanying balance sheets as of December 31, 2024.

(8) These properties were split during the year ended December 31, 2024 due to a completed parcel split for the land and improvements thereon.

ORION PROPERTIES INC.

SCHEDULE III – REAL ESTATE AND ACCUMULATED DEPRECIATION

December 31, 2024 (in thousands)

The following is a reconciliation of the gross real estate activity for the years ended December 31, 2023, 2022 and 2021 (in thousands):

The following is a reconciliation of the gross real estate activity for the periods indicated below (in thousands):

Year Ended December 31,

4 unchanged sentences

Sold or disposed of (1)

( 20,955 ) ( 7,173 ) ( 18,548 )

Impairments ( 61,723 ) ( 41,467 ) ( 87,834 )

Reclassified to real estate assets held for sale, net ( 9,671 ) ( 15,065 ) ( 21,941 )

Other — — ( 982 )

Balance, end of year $ 1,282,452 $ 1,320,396 $ 1,366,625

The following is a reconciliation of the accumulated depreciation for the years ended December 31, 2023, 2022 and 2021 (in thousands):

The following is a reconciliation of the accumulated depreciation for the periods indicated below (in thousands):

Year Ended December 31,

4 unchanged sentences

Sold or disposed of (1)

( 15,887 ) — ( 169 )

Impairments ( 14,252 ) ( 8,625 ) ( 21,757 )

Reclassified to real estate assets held for sale, net — — ( 8,659 )

Other — — ( 235 )

Balance, end of year $ 177,906 $ 158,791 $ 133,379

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the stockholders and the Board of Directors of Orion Office REIT Inc.

Opinion on the Financial Statements

We have audited the accompanying combined and consolidated statements of operations, equity and cash flows, for the ten months ended October 31, 2021, and the related notes, of VEREIT Office Assets (the "Company"), as described in Note 1 to the combined and consolidated financial statements (collectively referred to as the "financial statements").

In our opinion, the financial statements present fairly, in all material respects, the results of the Company’s operations and cash flows for the ten months ended October 31, 2021, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company's management.

Our responsibility is to express an opinion on the Company's financial statements based on our audit.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB and in accordance with auditing standards generally accepted in the United States of America.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audit, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audit provides a reasonable basis for our opinion.

/s/ DELOITTE & TOUCHE LLP

Tempe, Arizona

March 24, 2022

We have served as the Company’s auditor since 2021.

VEREIT OFFICE ASSETS

COMBINED AND CONSOLIDATED STATEMENT OF OPERATIONS

(In thousands)

Ten Months Ended

October 31, 2021

Rental revenue (including reimbursable) $ 134,740

Fee income from unconsolidated joint venture 654

Total revenues 135,394

Operating expenses:

Property operating (including reimbursable) 36,173

General and administrative 5,602

Depreciation and amortization 48,938

Impairments 28,064

Total operating expenses 118,777

Other (expenses) income:

Other income, net 152

Interest expense ( 5,961 )

Loss on extinguishment of debt, net ( 5,294 )

Equity in income of unconsolidated joint venture 697

Total other expenses, net ( 10,406 )

Income before taxes 6,211

Provision for income taxes ( 520 )

Net income 5,691

Net loss attributable to non-controlling interest 62

Net income attributable to VEREIT Office Assets $ 5,753

The accompanying notes are an integral part of this statement.

VEREIT OFFICE ASSETS

COMBINED AND CONSOLIDATED STATEMENT OF EQUITY

(In thousands)

Balance, December 31, 2020 $ 1,161,434

Contributions, net 145,169

Net income 5,691

Balance, October 31, 2021 $ 1,312,294

The accompanying notes are an integral part of this statement.

VEREIT OFFICE ASSETS

COMBINED AND CONSOLIDATED STATEMENT OF CASH FLOWS

(In thousands)

Ten Months Ended

October 31, 2021

Cash flows from operating activities:

Net income $ 5,691

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization 48,894

Impairments 28,064

Loss on extinguishment of debt, net 5,294

Equity in income of unconsolidated joint venture ( 697 )

Distributions from unconsolidated joint venture 697

Changes in assets and liabilities:

Rents and tenant receivables, operating lease right-of-use and other assets, net 803

Accounts payable and accrued expenses ( 4,860 )

Deferred rent, operating lease and other liabilities ( 156 )

Net cash provided by operating activities 83,730

Cash flows from investing activities:

Capital expenditures and leasing costs ( 8,019 )

Real estate developments ( 259 )

Investments in unconsolidated joint venture ( 2,180 )

Return of investment from unconsolidated joint venture 1,147

Proceeds from the settlement of property-related insurance claims 70

Net cash (used in) provided by investing activities ( 9,241 )

Cash flows from financing activities:

Payments on mortgage notes payable ( 223,064 )

Net contributions from (distributions to) parent 145,169

Net cash used in financing activities ( 77,895 )

Net change in cash and cash equivalents and restricted cash ( 3,406 )

Cash and cash equivalents and restricted cash, beginning of period 3,414

Cash and cash equivalents and restricted cash, end of period $ 8

Reconciliation of Cash and Cash Equivalents and Restricted Cash

Cash and cash equivalents at the beginning of period $ 400

Restricted cash at the beginning of the period 3,014

Cash and cash equivalents and restricted cash at the beginning of the period $ 3,414

Cash and cash equivalents at the end of the period $ —

Restricted cash at the end of the period 8

Cash and cash equivalents and restricted cash at the end of the period $ 8

Supplemental disclosures:

Cash paid for interest $ 6,521

Non-cash investing and financing activities:

Accrued capital expenditures and real estate developments $ ( 2,033 )

The accompanying notes are an integral part of this statement.

VEREIT OFFICE ASSETS

NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS

October 31, 2021

Note 1 - Organization and Summary of Significant Accounting Policies

On April 29, 2021, Realty Income Corporation (“Realty Income”) entered into an Agreement and Plan of Merger (as amended, the “Merger Agreement”) with VEREIT, Inc.

(“VEREIT”), its operating partnership, VEREIT Operating Partnership, L.P.

(“VEREIT OP”), Rams MD Subsidiary I, Inc., a wholly owned subsidiary of Realty Income (“Merger Sub 1”), and Rams Acquisition Sub II, LLC, a wholly owned subsidiary of Realty Income (“Merger Sub 2”).

On November 1, 2021, pursuant to the Merger Agreement, Merger Sub 2 merged with and into VEREIT OP, with VEREIT OP continuing as the surviving partnership, and immediately thereafter, VEREIT merged with and into Merger Sub 1, with Merger Sub 1 continuing as the surviving corporation (together, the “Mergers”, and such effective time of the Mergers, the “Merger Effective Time”).

Upon the Merger Effective Time, as part of the Mergers, Realty Income acquired certain office real properties and related assets previously owned by subsidiaries of VEREIT (collectively, “VEREIT Office Assets”).

Following the Merger Effective Time, in accordance with the Merger Agreement, Realty Income contributed the portion of the combined business which comprised certain office real properties and related assets previously owned by subsidiaries of Realty Income (collectively, “Realty Income Office Assets”) and the VEREIT Office Assets (the “Separation”) to Orion Office REIT Inc.

(the “Company”) and its operating partnership, Orion Office REIT LP (“Orion OP”).

On November 12, 2021, following the Separation, in accordance with the Merger Agreement and that certain Separation and Distribution Agreement dated as of November 11, 2021, by and among Realty Income, the Company and Orion OP, Realty Income effected a special distribution to its stockholders (including the former holders of VEREIT common stock and certain former VEREIT OP common unitholders prior to the Mergers) of all of the outstanding shares of common stock of the Company (the “Distribution”).

VEREIT Office Assets included the combined accounts related to certain of the office properties of VEREIT, historically operated through subsidiaries of VEREIT, and contained certain corporate costs.

As of October 31, 2021, VEREIT Office Assets had one reportable segment which owned 52 properties, which included one property owned by a consolidated joint venture, totaling approximately 7.6 million leasable square feet located in 25 states in the United States and Puerto Rico, and an investment in one unconsolidated joint venture that owned five office properties totaling approximately 0.8 million leasable square feet located within five states.

As of October 31, 2021, VEREIT Office Assets had not conducted any business as a separate legal entity and had no other material assets or liabilities.

Summary of Significant Accounting Policies

Principles of Combination and Basis of Accounting and Presentation

The accompanying combined and consolidated financial statements were prepared in accordance with generally accepted accounting principles in the United States (“U.S.

GAAP”) and include the accounts of VEREIT Office Assets on a combined and consolidated basis as the ownership interests were under common control and ownership of VEREIT, including a consolidated joint venture.

Any applicable intercompany accounts and transactions have been eliminated in consolidation and combination.

The portion of the consolidated joint venture not previously owned by VEREIT, is presented as non-controlling interest in VEREIT Office Assets’ combined and consolidated statement of operations.

The results of operations for the ten months ended October 31, 2021 are not necessarily indicative of the results for the entire year.

For legal entities being evaluated for consolidation, VEREIT Office Assets must have first determined whether the interests that it held and fees it received qualified as variable interests in the entity.

A variable interest is an investment or other interest that would absorb portions of an entity’s expected losses or receive portions of the entity’s expected residual returns.

VEREIT Office Assets’ evaluation included consideration of fees paid to VEREIT Office Assets where VEREIT’s management, on behalf of VEREIT Office Assets, acted as a decision maker or service provider to the entity being evaluated.

If VEREIT Office Assets determined that it held a variable interest in an entity, it evaluated whether that entity is a variable interest entity (“VIE”).

(a) the power to direct the activities that most significantly impact the entity’s economic performance, (b) the obligation to absorb the expected losses of the entity, or (c) the right to receive the expected returns of the entity.

VEREIT Office Assets consolidated entities that are not VIEs if it had a majority voting interest or other rights that resulted in effectively controlling the entity.

VEREIT Office Assets then qualitatively assessed whether it is (or is not) the primary beneficiary of a VIE, which is generally defined as the party who has a controlling financial interest in the VIE.

Consideration of various factors included, but were not limited to, VEREIT Office Assets’ ability to direct the activities that most significantly impacted the entity’s economic performance and its obligation to absorb losses from or right to receive benefits of the VIE that could potentially be significant

VEREIT OFFICE ASSETS

NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS

October 31, 2021

VEREIT Office Assets consolidated any VIEs when the Company is determined to be the primary beneficiary of the VIE and the difference between consolidating the VIE and accounting for it using the equity method could be material to VEREIT Office Assets’ combined and consolidated financial statements.

VEREIT Office Assets continually evaluated the need to consolidate these VIEs based on standards set forth in U.S.

These combined and consolidated financial statements were derived from the books and records of VEREIT and were carved out from VEREIT at a carrying value reflective of historical cost in such VEREIT records.

VEREIT Office Assets’ historical financial results reflect charges for certain corporate costs and we believe such charges are reasonable.

Costs of the services that were charged to VEREIT Office Assets were based on either actual costs incurred or a proportion of costs estimated to be applicable to this entity, based on VEREIT Office Assets’ pro rata share of VEREIT’s annualized rental income.

Annualized rental income is rental revenue on a straight-line basis, which includes the effect of rent escalations and any tenant concessions, such as free rent, and excludes any adjustments to rental income due to changes in the collectability assessment, contingent rent, such as percentage rent, and operating expense reimbursements.

The historical combined and consolidated financial information presented may therefore not be indicative of the results of operations or cash flows that would have been obtained if there had been an independent, stand-alone public company during the periods presented or of the Company’s future performance as an independent, stand-alone company.

Use of Estimates

The preparation of financial statements in conformity with U.S.

GAAP requires management to make estimates and assumptions that affect the reported amounts of revenues and expenses during the reporting period.

Actual results could differ from those estimates.

Real Estate Investments

Real estate and related assets acquired were recorded at cost and accumulated depreciation and amortization were assessed based on the period of future benefit of the asset.

Depreciation and amortization were computed using a straight-line method over the estimated useful life of 40 years for buildings and building improvements, 15 years for land improvements and the remaining lease term for tenant improvements and intangible lease assets.

VEREIT management performed quarterly impairment review procedures, primarily through continuous monitoring of events and changes in circumstances that could have indicated the carrying value of its real estate assets may not be recoverable.

Impairment indicators that VEREIT management considered included, but were not limited to, decrease in operating income, bankruptcy or other credit concerns of a property’s major tenant or tenants or a significant decrease in a property’s revenues due to lease terminations, vacancies or reduced lease rates.

When impairment indicators were identified or if a property was considered to have a more likely than not probability of being disposed of within the next 12 to 24 months, VEREIT management assessed the recoverability of the assets by determining whether the carrying value of the assets would be recovered through the undiscounted future cash flows expected from the use of the assets and their eventual disposition.

GAAP required VEREIT Office Assets to utilize the expected holding period of its properties when assessing recoverability.

In the event that such expected undiscounted future cash flows did not exceed the carrying value, the real estate assets were adjusted to their respective fair values and an impairment loss was recognized.

There were inherent uncertainties in making estimates of expected future cash flows such as market conditions and performance and sustainability of the tenants.

Investment in Unconsolidated Joint Venture

During the ten months ended October 31, 2021, VEREIT Office Assets owned a 20 % ownership interest in an unconsolidated joint venture, the Arch Street Joint Venture, that owned five properties.

VEREIT Office Assets accounted for its investment in the Arch Street Joint Venture using the equity method of accounting as VEREIT Office Assets had the ability to exercise significant influence, but not control, over operating and financing policies of the joint venture.

VEREIT Office Assets recorded its proportionate share of net income (loss) from the Arch Street Joint Venture in equity in income of unconsolidated joint venture in the combined and consolidated statement of operations.

VEREIT Office Assets was required to determine whether an event or change in circumstances had occurred that may have had a significant adverse effect on the fair value of its investment in the Arch Street Joint Venture.

If an event or change in circumstance had occurred, VEREIT Office Assets’ management was required to evaluate its investment in the Arch Street Joint Venture for potential impairment and determine if the carrying value of its investment exceeded its fair value.

VEREIT OFFICE ASSETS

NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS

October 31, 2021

impairment charge was recorded when an impairment was deemed to be other-than-temporary.

To determine whether an impairment was other-than-temporary, VEREIT Office Assets’ management considered whether it had the ability and intent to hold the investment until the carrying value was fully recovered.

The evaluation of an investment in an unconsolidated joint venture for potential impairment required VEREIT Office Assets’ management to exercise significant judgment and to make certain assumptions.

The use of different judgments and assumptions could have resulted in different conclusions.

No impairments of the investment in the Arch Street Joint Venture were identified during the ten months ended October 31, 2021.

Goodwill Impairment

VEREIT evaluated goodwill for impairment annually or more frequently when an event occurred or circumstances changed that indicated the carrying value may not be recoverable.

To determine whether it was necessary to perform a quantitative goodwill impairment test, VEREIT first assessed qualitative factors, including macro-economic conditions such as deterioration in the entity’s operating environment or industry or market considerations;

entity-specific events such as increasing costs, declining financial performance, or loss of key personnel;

or other events such as an expectation that a reporting unit would be sold or sustained decrease in VEREIT’s stock price on either an absolute basis or relative to peers.

If VEREIT believed, as a result of its qualitative assessment, that it was more-likely-than-not (i.e., greater than 50% chance) that the fair value of a reporting unit was less than its carrying value, the quantitative impairment test was required.

Otherwise, no quantitative testing was required.

If VEREIT determined, as a result of the qualitative assessment, that it was more-likely-than-not that the fair value was less than the carrying value, the provisions of guidance required that the fair value be compared to the carrying value.

Goodwill was considered impaired if the carrying value exceeds the fair value.

No impairments of VEREIT’s goodwill were recorded during the ten months ended October 31, 2021.

The results of the VEREIT impairment tests carried over to VEREIT Office Assets, therefore no impairments were recorded in the accompanying combined and consolidated statement of operations.

Cash and Cash Equivalents

VEREIT Office Assets considered all highly liquid instruments with maturities when purchased of three months or less to be cash equivalents.

VEREIT Office Assets considered investments in highly liquid money market accounts to be cash equivalents.

Restricted Cash

As of October 31, 2021, restricted cash included $ 8,000 in lender reserves.

Deferred Financing Costs

Deferred financing costs represented commitment fees, legal fees and other costs associated with obtaining commitments for financing.

These costs were amortized to interest expense over the terms of the respective financing agreements and used the straight-line method, which approximated the effective interest method.

Unamortized deferred financing costs were written off when the associated debt was refinanced or repaid before maturity.

Costs incurred in connection with potential financing transactions that were not completed were expensed in the period in which it is determined the financing would not be completed.

Leases - Lessor

At the inception of a new lease arrangement, including new leases that arise from amendments, the terms and conditions were assessed to determine the proper lease classification.

When the terms of a lease effectively transferred control of the underlying asset, the lease was classified as a sales-type lease.

When a lease did not effectively transfer control of the underlying asset to the lessee, but a guarantee was obtained for the value of the asset from a third party, the lease was classified as a direct financing lease.

All other leases were classified as operating leases.

As of October 31, 2021, VEREIT Office Assets did not classify any leases as sales-type or direct financing leases.

For operating leases with minimum scheduled rent increases, rental revenue was recognized on a straight-line basis, including the effect of any free rent periods, over the lease term when collectability of lease payments was probable.

Variable lease payments were recognized as rental revenue in the period when the changes in facts and circumstances on which the variable lease payments were based occur.

VEREIT Office Assets adopted Accounting Standards Codification Topic 842, Leases effective as of January 1, 2019.

Two separate lease components were identified as follows:

(i) land lease component and (ii) single property lease component

VEREIT OFFICE ASSETS

NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS

October 31, 2021

comprised of building, land improvements and tenant improvements.

The leases also contained provisions for tenants to reimburse VEREIT Office Assets for real estate taxes and insurance, which are considered noncomponents of the lease, and maintenance and other property operating expenses, which were considered to be non-lease components.

VEREIT Office Assets elected the practical expedient to combine lease and non-lease components and the non-lease components were included with the single property lease component as the predominant component.

VEREIT Office Assets continually reviewed receivables related to rent, straight-line rent and property operating expense reimbursements and determined collectability by taking into consideration the tenant’s payment history, the financial condition of the tenant, business conditions in the industry in which the tenant operates and economic conditions in the area in which the property was located.

The review included a binary assessment of whether or not substantially all of the amounts due under a tenant’s lease agreement were probable of collection.

For leases that were deemed probable of collection, revenue continued to be recorded on a straight-line basis over the lease term.

For leases that were deemed not probable of collection, revenue was recorded as cash was received.

All changes in the collectability assessment for an operating lease were recognized as an adjustment to rental income.

During the year ended December 31, 2020, there was a global outbreak of a new strain of coronavirus, COVID-19.

The global and domestic response to the COVID-19 outbreak continued to evolve during the ten months ended October 31, 2021.

Federal, state, and local authorities responded in a variety of ways, including temporary closure of or imposed limitations on the operations of certain non-essential businesses.

Since the COVID-19 outbreak began, each of VEREIT Office Assets’ tenants almost entirely continued to meet its payment obligations under its respective lease.

In consideration of each tenant’s payment history, among other factors, there were no changes in the collectability assessment for any of VEREIT Office Assets’ operating leases.

Though the COVID-19 outbreak did not have a material impact on VEREIT Office Assets’ results of operations, cash flows or financial condition for the ten months ended October 31, 2021, it could negatively impact tenant operations at VEREIT Office Assets’ properties in the future, which could result in a material impact to VEREIT Office Assets’ future results of operations, cash flows and financial condition.

Leases - Lessee

To account for leases for which VEREIT Office Assets is the lessee, contracts must have been analyzed upon inception to determine if the arrangement was, or contained, a lease.

A lease conveyed the right to control the use of an identified asset for a period of time in exchange for consideration.

Lease classification tests and measurement procedures were performed at the lease commencement date.

The lease liability was initially measured as the present value of the lease payments over the lease term, discounted using the interest rate implicit in the lease, if that rate was readily determinable;

otherwise, the lessee’s incremental borrowing rate was used.

The incremental borrowing rate was determined based on the estimated rate of interest that the lessee would pay to borrow on a collateralized basis over a similar term at an amount equal to the lease payments in a similar economic environment.

The lease term was the noncancelable period of the lease and included any renewal and termination options VEREIT Office Assets was reasonably certain to exercise.

The lease liability balance was amortized using the effective interest method.

The lease liability was remeasured when the contract was modified, upon the resolution of a contingency such that variable payments became fixed or if the assessment of exercising an extension, termination or purchase option changed.

The operating lease right-of-use (“ROU”) asset balance was initially measured as the lease liability amount, adjusted for any lease payments made prior to the commencement date, initial direct costs, estimated costs to dismantle, remove, or restore the underlying asset and incentives received.

As of October 31, 2021, VEREIT Office Assets was owned by VEREIT, which had elected to be taxed as a REIT for U.S.

federal income tax purposes under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended, commencing with the taxable year ended December 31, 2011.

VEREIT believed it was organized and operating in such a manner as to qualify to be taxed as a REIT for the taxable year ended December 31, 2021.

As a REIT, VEREIT was generally not subject to federal income tax on taxable income that it distributed to its stockholders so long as it had distributed annually at least 90% of its REIT taxable income (computed without regard to the deduction for dividends paid and excluding net capital gains).

Accordingly, no provision was made for federal income taxes in the accompanying combined and consolidated financial statements of VEREIT Office Assets.

VEREIT OFFICE ASSETS

NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS

October 31, 2021

During the ten months ended October 31, 2021, VEREIT Office Assets recognized state and local income and franchise tax expense of approximately $ 0.5 million.

Amounts were included in provision for income taxes in the accompanying combined and consolidated statement of operations.

VEREIT Office Assets had no unrecognized tax benefits as of or during the ten months ended October 31, 2021.

Any interest and penalties related to unrecognized tax benefits were recognized in provision for income taxes in the accompanying combined and consolidated statement of operations.

As of October 31, 2021, VEREIT Office Assets had no material uncertain income tax positions.

Note 2 – Real Estate Investments and Related Intangibles

Property Dispositions

There were no properties disposed by VEREIT Office Assets during the ten months ended October 31, 2021.

Intangible Lease Assets and Liabilities

The aggregate amount of amortization of above-market and below-market leases and deferred lease incentives included as a net decrease to rental revenue was $ 29,000 for the ten months ended October 31, 2021.

The aggregate amount of in-place leases, leasing commissions and other lease intangibles amortized and included in depreciation and amortization expense was $ 13.0 million for the ten months ended October 31, 2021.

Remainder of 2021 2022 2023 2024 2025

In-place leases:

Total projected to be included in amortization expense $ 2,191 $ 10,475 $ 9,142 $ 5,512 $ 1,156

Leasing commissions:

Total projected to be included in amortization expense $ 288 $ 1,692 $ 1,290 $ 1,201 $ 1,020

Above-market lease assets and deferred lease incentives:

Total projected to be deducted from rental revenue $ 373 $ 2,223 $ 2,186 $ 1,104 $ 354

Below-market lease liabilities:

Total projected to be included in rental revenue $ 345 $ 2,003 $ 1,878 $ 854 $ 208

Consolidated Joint Venture

VEREIT Office Assets had an interest in one consolidated joint venture that owned one property as of October 31, 2021.

The property was secured by a mortgage note payable, which was non-recourse to VEREIT Office Assets.

During the ten months ended October 31, 2021, VEREIT, on behalf of VEREIT Office Assets, repaid the balance of the mortgage note in full and there were no amounts outstanding as of October 31, 2021.

The joint venture partner was the managing member of the joint venture.

However, in accordance with the joint venture agreement, VEREIT Office Assets had the ability to control operating and financing policies of the consolidated joint venture and the joint venture partner was required to obtain VEREIT Office Assets’ approval for any major transactions.

VEREIT Office Assets and the joint venture partner were subject to the provisions of the joint venture agreement, which included provisions for when additional contributions may be required to fund certain cash shortfalls.

VEREIT management performed quarterly impairment review procedures for real estate investments, leasehold improvements and property and equipment and right of use assets, primarily through continuous monitoring of events and changes in circumstances that could indicate the carrying value of its real estate assets may not be recoverable.

As part of VEREIT management’s quarterly impairment review procedures, net real estate assets representing four properties of VEREIT Office Assets were deemed to be impaired resulting in impairment charges of $ 28.1 million during the ten months ended October 31, 2021.

The impairment charges related to properties that VEREIT management identified for potential sale or were determined, based on discussions with the current tenants, would not be re-leased by the tenant and

VEREIT OFFICE ASSETS

NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS

October 31, 2021

VEREIT management believed the properties would not be leased to another tenant at a rental rate that supported the book value.

VEREIT estimated fair values using Level 3 inputs and used a combined income and market approach, specifically using discounted cash flow analysis and recent comparable sales transactions.

The evaluation of real estate assets for potential impairment required VEREIT’s management to exercise significant judgment and make certain key assumptions, which included the following:

(1) capitalization rate;

(2) discount rates;

(3) number of years the property will be held;

(4) property operating expenses;

and (5) re-leasing assumptions, including number of months to re-lease, market rental revenue and required tenant improvements.

There were inherent uncertainties in making these estimates such as market conditions and performance and sustainability of VEREIT Office Assets’ tenants.

For VEREIT’s impairment tests for the real estate assets during the ten months ended October 31, 2021, VEREIT used a weighted-average discount rate of 9.0 % and a weighted-average capitalization rate of 8.5 %.

Note 3 – Commitments and Contingencies

VEREIT Office Assets was party to various legal proceedings which it believed are routine in nature and incidental to the operation of its business.

VEREIT Office Assets did not believe that any of these outstanding claims against it were expected to have a material adverse effect upon its consolidated results of operations.

Environmental Matters

In connection with the ownership and operation of real estate, VEREIT Office Assets may have potentially been liable for costs and damages related to environmental matters.

VEREIT Office Assets was not notified by any governmental authority of any non-compliance, liability or other claim, and was not aware of any other environmental condition, in each case, that it believed would have a material adverse effect upon its results of operations.

Note 4 – Leases

As of October 31, 2021, VEREIT Office Assets was the lessor for its 52 office properties.

VEREIT Office Assets’ operating leases have non-cancelable lease terms ranging from 0.17 years to 11.59 years as of October 31, 2021.

Certain leases with tenants included tenant options to extend or terminate the lease agreements or to purchase the underlying assets.

Lease agreements may have also contained rent increases that were based on an index or rate (e.g., the consumer price index).

VEREIT Office Assets believed the residual value risk was not a primary risk because of the long-lived nature of the assets.

The components of rental revenue from VEREIT Office Assets’ operating leases were as follows (in thousands):

Ten Months Ended October 31,

Cash rent $ 109,582

Straight-line rent ( 4,889 )

Lease intangible amortization

Property operating cost reimbursements

Total rental revenue $ 134,740

____________________________________

(1) Includes costs reimbursed related to property operating expenses, common area maintenance and percentage rent.

VEREIT OFFICE ASSETS

NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS

October 31, 2021

The following table presents future minimum operating lease payments due to VEREIT Office Assets over the next five years and thereafter as of October 31, 2021 (in thousands).

Future Minimum

Operating Lease Payments

November 1, 2021 - December 31, 2021 $ 15,683

Thereafter 34,357

Total $ 397,334

VEREIT Office Assets was the lessee under one ground lease arrangement, which met the criteria of an operating lease.

As of October 31, 2021, VEREIT Office Assets’ lease had a remaining lease term of 35.8 years, which included options to extend.

Under the ground lease arrangement, VEREIT Office Assets paid variable costs, which included property operating expenses and common area maintenance.

The discount rate for VEREIT Office Assets’ operating lease was 5.17 % as of October 31, 2021.

As VEREIT Office Assets’ lease did not provide an implicit rate, VEREIT Office Assets used an estimated incremental borrowing rate based on the information available at the adoption date in determining the present value of lease payments.

Operating lease costs for the ten months ended October 31, 2021 were $ 0.2 million.

No cash paid for operating lease liabilities was capitalized.

The following table reflects the maturity analysis of payments due from VEREIT Office Assets over the next five years and thereafter for ground lease obligations as of October 31, 2021 (in thousands).

Future Minimum Lease Payments

November 1, 2021 - December 31, 2021 $ 55

Thereafter 10,062

imputed interest 6,403

Total $ 5,359

Note 5 – Subsequent Events

VEREIT Office Assets evaluated subsequent events and no items have come to the attention of management that require recognition or disclosure, except as set forth below.

On November 1, 2021, the Mergers were completed.

Following the Merger Effective Time, the Separation was completed.

On November 12, 2021, following the Separation, the Distribution was completed.

(1) Includes the full write-off of the buildings and associated accumulated depreciation of the six-property campus in Deerfield, Illinois during the year ended December 31, 2024.

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.

What changed 10-K

Item 9A. Controls and Procedures