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What changed in Orion Properties Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Orion Properties Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+438 added−355 removedSource: 10-K (2025-03-05) vs 10-K (2024-02-27)

Top changes in Orion Properties Inc.'s 2024 10-K

438 paragraphs added · 355 removed · 252 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

32 edited+9 added−3 removed16 unchanged
Biggest changeRisk Factors ” contained in this Annual Report on Form 10-K. • If global market and economic conditions deteriorate, our business, financial condition and results of operations could be materially adversely affected. • Changes in workplace practices and office space utilization, including remote and hybrid work arrangements, have reduced the demand for office space at our properties and may continue to do so. • We could experience difficulties or delays renewing leases or re-leasing space, which will increase our costs to operate and maintain such properties without receiving income. • Most of our properties depend upon a single tenant for all or a majority of their rental income; therefore, our financial condition, including our ability to make distributions to stockholders, may be adversely affected by the bankruptcy or insolvency, a downturn in the business, or a lease termination of such a single tenant. • Government budgetary pressures and priorities and trends in government employment and office leasing may adversely impact our business. • We are invested in the Arch Street Joint Venture and have co-invested and may in the future co-invest in joint ventures with third parties.
Biggest changeRisk Factors ” contained in this Annual Report on Form 10-K. • If global market and economic conditions deteriorate, our business, financial condition and results of operations could be materially adversely affected. • Changes in workplace practices and office space utilization, including remote and hybrid work arrangements, have reduced the demand for office space at our properties and may continue to do so. • Leases representing approximately 13.5% of our annualized base rent are scheduled to expire in 2025, and we could experience difficulties or delays renewing leases or re-leasing vacant space, which will increase our costs to operate and maintain such properties without receiving income. • Most of our properties depend upon a single tenant for all or a majority of their rental income; therefore, our financial condition, including our ability to make distributions to stockholders, may be adversely affected by the bankruptcy or insolvency, a downturn in the business, or a lease termination of such a single tenant. • We expect to continue to convert certain vacant properties to multi-tenant use, and cannot provide any assurance that the investments we make of time and capital to do so will increase the value of the subject properties. • Government budgetary pressures and priorities, and trends in government employment and office leasing may adversely impact our business. • Our partner in the Arch Street Joint Venture has not had access to sufficient liquidity to contribute its share of the capital requirements that have recently arisen, thereby exposing us to liabilities in excess of our share of the joint venture and other risks. • We may be unable to successfully execute on our strategy to shift our portfolio concentration over time away from traditional office properties, towards more dedicated use assets. • Competition for acquisitions may reduce the number of acquisition opportunities available to us and increase the costs of those acquisitions. • We may suffer adverse effects from acquisitions of commercial real estate properties. 7 Table of Contents • We face considerable competition in the leasing market and may be unable to renew existing leases or re-let space on terms similar to our existing leases, or we may expend significant capital in our efforts to re-lease space, which may adversely affect our business, financial condition and results of operations. • Tenant payment defaults may have a material adverse effect on our business, financial condition and results of operations. • Some of our leases provide tenants with the right to terminate their leases early, which may have a material adverse effect on our business, financial condition and results of operations. • We have a significant amount of indebtedness and may need to incur more in the future. • We have existing debt and refinancing risks that could have a material adverse effect on our business, financial condition and results of operations, including the risk that we will be unable to extend or refinance some or all of our debt. • Financial covenants could materially adversely affect our ability to conduct our business. • We depend on external sources of capital that are outside of our control, which may affect our ability to achieve our business strategies. • Our expenses may remain constant or increase, even if our revenues decrease, which may have a material adverse effect on our business, financial condition and results of operations. • Real estate property investments are illiquid.
(“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”).
(“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 the Company’s stockholders of all the outstanding shares of common stock of the Company (the “Distribution”).
We primarily own commercial real properties leased to investment-grade rated tenants and creditworthy non-investment-grade rated or unrated tenants. To the extent we are able to grow our portfolio, we intend to utilize our credit underwriting and real estate expertise to underwrite creditworthy investment-grade and non-investment-grade tenants that we believe will offer enhanced yield and attractive risk-adjusted returns. Real Estate Attributes.
We primarily own commercial real properties leased to investment-grade rated tenants and creditworthy non-investment-grade rated or unrated tenants. To the extent we are able to continue to grow our portfolio, we intend to utilize our credit underwriting and real estate expertise to underwrite creditworthy investment-grade and non-investment-grade tenants that we believe will offer enhanced yield and attractive risk-adjusted returns.
We believe our conservative leverage and liquidity will enable us to continue to make the capital investments needed to enhance the quality of our existing portfolio and stability of our cash flows, as well as opportunistically take advantage of high-quality acquisition opportunities as market conditions permit.
We believe our prudent leverage and liquidity will enable us to continue to make the capital investments needed to enhance the quality of our existing portfolio and stability of our cash flows, as well as opportunistically take advantage of high-quality acquisition opportunities as market conditions permit.
Financing We employ prudent amounts of leverage and use debt as a means of providing additional funds for asset management and other general corporate purposes. We expect to use leverage conservatively, assessing the appropriateness of new equity or debt capital based on market conditions, including prudent assumptions regarding future cash flow, the creditworthiness of tenants and future rental rates.
Financing We employ prudent amounts of leverage and use debt as a means of providing additional funds for asset management and other general corporate purposes. We expect to use leverage prudently, assessing the appropriateness of new equity or debt capital based on market conditions, including reasonable assumptions regarding future cash flow, the creditworthiness of tenants and future rental rates.
We believe proactive, in-house property management and leasing allows us to exercise greater control of operating and capital expenditures while improving propensity to renew and maximizing re-leasing spreads. Regulations Compliance with various governmental regulations has an impact on our business, including our capital expenditures, earnings and competitive position, which can be material.
We believe proactive, in-house property management and leasing allows us to exercise greater control of operating and capital expenditures while improving propensity to renew and maximizing re-leasing spreads. 6 Table of Contents Regulations Compliance with various governmental regulations has an impact on our business, including our capital expenditures, earnings and competitive position, which can be material.
Such offers or sales of shares of our common stock may be made in privately negotiated transactions, including block trades, brokers’ transactions that are deemed to be “at the market” offerings as defined in Rule 415 under the Securities Act, including sales made directly on the New York Stock Exchange, or through forward transactions under separate master forward sale confirmations and related supplemental confirmations for the sale of shares of our common stock on a forward basis.
Such offers or sales of shares of our common stock may be made in privately negotiated transactions, including block trades, brokers’ transactions that are deemed to be “at the market” offerings as defined in Rule 415 under the Securities Act, including sales made directly on the NYSE, or through forward transactions under separate master forward sale confirmations and related supplemental confirmations for the sale of shares of our common stock on a forward basis.
Our portfolio includes regional and corporate headquarters office locations and other properties that are well-located with easy access to commuting routes and on-site amenities that enhance the tenant’s propensity to renew.
Real Estate Attributes. Our portfolio includes regional and corporate headquarters office locations and other properties that are well-located with easy access to commuting routes and on-site amenities that enhance the tenant’s propensity to renew.
Competitive Strengths Our portfolio consists of high-quality, diversified properties with favorable exposure to investment-grade credit and is located in attractive suburban markets across the U.S. and leased primarily on a single-tenant net lease basis.
Competitive Strengths Our portfolio consists of high-quality, diversified properties with favorable exposure to investment-grade credit and is located in attractive suburban markets across the United States and leased primarily on a single-tenant net lease basis.
Item 1. Business. Overview Orion Office REIT Inc. 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.
Item 1. Business. Overview Orion Properties Inc. 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.
Proceeds from dispositions are expected to be redeployed to fund capital investment into our existing portfolio to further enhance the quality of our portfolio and stability of our cash flows, selective acquisitions and other general corporate purposes.
Proceeds from the sale of real estate assets are expected to be redeployed to fund capital investment into our existing portfolio to further enhance the quality of our portfolio and stability of our cash flows, selective acquisitions and other general corporate purposes.
Additionally, we may seek to address any lease roll or vacancy in our portfolio by converting the space to multi-tenant office or other use in the event that our management team considers conversion to be the value-maximizing alternative for the subject property. 4 Table of Contents Capital Recycling .
Additionally, we may seek to address any lease roll or vacancy in our portfolio by converting the space to multi-tenant office or other use if our management team considers conversion to be the value-maximizing alternative for the subject property. Capital Recycling .
We primarily own commercial real properties located in suburban markets and seek to capitalize on de-urbanization trends amplified by the migration of millennials to the suburbs in the post-COVID environment. 36.0% of our annualized base rent as of December 31, 2023 was from Sun Belt markets.
Suburban Market Features. We primarily own commercial real properties located in suburban markets and seek to capitalize on de-urbanization trends amplified by the migration of millennials to the suburbs in the post-COVID environment. 39.2% of our annualized base rent as of December 31, 2024 was from Sun Belt markets.
Human Capital As of December 31, 2023, we had 38 employees. We value our employees and their individual and collective contributions to the Company in the furtherance of our corporate, operational, social, environmental and governance initiatives.
Human Capital As of December 31, 2024, we had 40 employees. We value our employees and their individual and collective contributions to Orion in the furtherance of our corporate, operational, social, environmental and governance initiatives.
Our board of directors may authorize us to issue a number of shares up to the amount of our authorized capital in any manner and on such terms and for such consideration as it deems appropriate.
Our Board of Directors may authorize us to issue a number of shares up to the amount of our authorized capital in any manner and on such terms and for such consideration as it deems appropriate. Such securities may be senior to the outstanding class of common stock.
When possible, we intend to grow our portfolio by acquiring properties that fit the characteristics defined in our investment evaluation framework through multiple sourcing channels, leveraging our management team’s extensive relationship network with an average of over 25 years of experience transacting in the single-tenant net lease suburban office market.
We intend to grow our portfolio by acquiring properties that fit the characteristics defined in our investment evaluation framework, including dedicated use assets that have an office component, through multiple sourcing channels, leveraging our management team’s extensive relationship network with an average of over 25 years of experience 5 Table of Contents transacting in the single-tenant net lease market.
As of December 31, 2023, properties located in the following states accounted for over 10% of our annualized base rent: Geographic Concentration Annualized Base Rent as a % of Total Portfolio Texas 17.2% New Jersey 10.2% New York 10.2% As of December 31, 2023, tenants in the following industries accounted for over 10% of our annualized base rent: Tenant Industry Concentration Annualized Base Rent as a % of Total Portfolio Health Care Equipment & Services 15.3% Government & Public Services 13.9% Financial Institutions 11.1% Investment Strategy We employ a proven, cycle-tested investment evaluation framework which serves as the lens through which we make capital allocation decisions.
As of December 31, 2024, properties located in the following states accounted for over 10% of our annualized base rent: Geographic Concentration % of Total Annualized Base Rent Texas 16.5% New Jersey 12.5% As of December 31, 2024, tenants in the following industries accounted for over 10% of our annualized base rent: Tenant Industry Concentration % of Total Annualized Base Rent Government & Public Services 16.8% Health Care Equipment & Services 13.4% Financial Institutions 11.4% Capital Goods 11.0% 4 Table of Contents Investment Strategy We employ a proven, cycle-tested investment evaluation framework which serves as the lens through which we make capital allocation decisions.
We have a strong management team with a wide-ranging network of industry relationships and an average of over 25 years of experience transacting in the single-tenant net lease suburban office market. Our platform is vertically integrated across functions, including investment, finance, property management, leasing and legal.
We have a strong management team with a wide-ranging network of industry relationships and an average of over 25 years of experience transacting in the single-tenant net lease market. Our platform is vertically integrated across functions, including investment, finance, property management, leasing and legal. Our integrated structure enables us to identify value creation opportunities and realize significant operating efficiencies.
As of December 31, 2023, one tenant exceeded 10% of our annualized base rent: the General Services Administration at 13.5%. As of December 31, 2023, we had a total of 15 leases with the General Services Administration and the weighted average remaining lease term of these leases was 3.0 years.
As of December 31, 2024, one tenant exceeded 10% of our annualized base rent: the General Services Administration at 16.3%. As of December 31, 2024, we had a total of 15 leases with the General Services Administration with a weighted average remaining lease term of 4.7 years.
As of December 31, 2023, we owned and operated 75 office properties with an aggregate of 8.7 million leasable square feet located in 29 states with an occupancy rate of 80.0% and a weighted-average remaining lease term of 3.9 years.
As of December 31, 2024, we owned and operated 69 operating properties with an aggregate of 7.9 million leasable square feet located in 29 states with an occupancy rate of 73.0% and a weighted-average remaining lease term of 5.2 years.
Including our pro rata share of leasable square feet and annualized base rent from the Arch Street Joint Venture, we owned an aggregate of 8.9 million leasable square feet with an occupancy rate of 80.4%, or 87.2% adjusted for properties that are currently under agreement to be sold, and a weighted-average remaining lease term of 4.0 years as of December 31, 2023.
Including our proportionate share of leasable square feet and annualized base rent from the Arch Street Joint Venture, we owned an aggregate of 8.1 million leasable square feet with an occupancy rate of 73.7%, or 73.1% adjusted for two operating properties that are currently under agreements to be sold, and a weighted-average remaining lease term of 5.2 years as of December 31, 2024.
We may not be able to dispose of properties when desired or on favorable terms. • Competition for acquisitions may reduce the number of acquisition opportunities available to us and increase the costs of those acquisitions. • Our assets may be subject to impairment charges. • Uninsured and underinsured losses may adversely affect our operations. • We have a limited operating history as a REIT and an independent public company, and the obligations and requirements to which we are subject as a public company are extensive and have resulted in increased cost and time commitments which we anticipate will continue. • Our failure to maintain our qualification as a REIT for U.S. federal income tax purposes could have a material adverse effect on us. 7 Table of Contents
We may not be able to dispose of properties when desired or on favorable terms. • Our assets may be subject to impairment charges. • Uninsured and underinsured losses may adversely affect our operations. • The obligations and requirements to which we are subject as a public company are extensive and will increase when we no longer qualify as an “emerging growth company.” • Our failure to maintain our qualification as a REIT for U.S. federal income tax purposes could have a material adverse effect on us.
As part of our capital recycling efforts, we are seeking opportunities to invest in properties featuring, among other uses, government, medical, laboratory, research and development, and flex operations. Our experience is that these properties have greater tenant utilization and higher renewal probability, given their generally specialized uses.
As part of our capital recycling efforts, we are seeking opportunities to invest in properties featuring, among other uses, government, medical, laboratory and research and development, and flex operations.
In addition, copies of our filings with the SEC may be obtained free of charge from our website at www.onlreit.com. We are providing our website address solely for the information of investors.
In addition, copies of our filings with the SEC may be obtained free of charge from our website at www.onlreit.com. We are providing our website address solely for the information of investors. We do not intend for the information contained on our website to be incorporated into this Annual Report on Form 10-K or other filings with the SEC.
As of December 31, 2023, we had $471.0 million of total consolidated debt outstanding, consisting of a $355.0 million fixed rate mortgage loan collateralized by 19 properties (the “CMBS Loan”), and $116.0 million borrowed under our $425.0 million senior revolving credit facility (the “Revolving Facility”).
As of December 31, 2024, we had $492.0 million of total consolidated debt outstanding, consisting of a $355.0 million fixed rate securitized mortgage note collateralized by 19 properties (the “CMBS Loan”), $119.0 million borrowed under our $350.0 million senior revolving credit facility (the “Revolving Facility”) and an $18.0 million fixed rate mortgage note on the San Ramon, California property we acquired in September 2024 (the “San Ramon Loan”).
We do not intend for the information contained on our website to be incorporated into this Annual Report on Form 10-K or other filings with the SEC. 6 Table of Contents Summary of Risk Factors The following section sets forth a summary of principal risk factors that we believe are material to our investors, and could adversely affect our business, financial condition, results of operations, our ability to pay distributions and the value of an investment in our common stock.
Summary of Risk Factors The following section sets forth a summary of principal risk factors that we believe are material to our investors, and could adversely affect our business, financial condition, results of operations, our ability to pay distributions and the value of an investment in our common stock.
Following the Distribution, the Company has been operating as an independent publicly traded company, and the Company has elected to be taxed as a REIT for U.S. federal income tax purposes, commencing with its initial taxable year ended December 31, 2021.
Following the Distribution, we became an independent and publicly traded company, and our 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.
Our integrated structure enables us to identify value creation opportunities and realize significant operating efficiencies. Our organization includes property managers and leasing professionals who maintain direct relationships and dialogue with our tenants and broker communities.
Our organization includes property managers and leasing professionals who maintain direct relationships and dialogue with our tenants and broker communities.
We expect to continue to selectively dispose of properties in our current portfolio if we determine that they do not fit our investment strategies.
We intend to shift our portfolio concentration over time away from traditional office properties, towards more dedicated use assets that have an office component. We expect to continue to selectively dispose of properties in our current portfolio if we determine that they do not fit our investment strategies.
Such securities may be senior to the outstanding class of common stock. 5 Table of Contents In November 2022, we established an “at the market” offering program for our common stock (the “ATM Program”).
In November 2022, we established an “at the market” offering program for our common stock (the “ATM Program”), although we have not utilized this program to sell any shares of our common stock to date.
In June 2023, we repaid and retired our $175.0 million senior term loan facility with borrowings under the Revolving Facility. Additionally, the Company’s pro rata share of mortgage notes of the Arch Street Joint Venture was $27.3 million as of December 31, 2023.
Additionally, our proportionate share of the non-recourse mortgage notes associated with the Arch Street Joint Venture was $26.3 million as of December 31, 2024.
Our portfolio is comprised of traditional office buildings, as well as governmental office, medical office, office/laboratory, office/research and office/flex 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.
We define 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. Orion was initially formed as a wholly-owned subsidiary of Realty Income Corporation (“Realty Income”).
Removed
We expect to be more cautious with investment in generic office properties if we believe that remote and hybrid work arrangements will continue to be viable alternatives and in-office head counts remain below pre-pandemic levels. Suburban Market Features.
Added
Our portfolio is comprised of traditional office properties, as well as governmental, medical office, flex/laboratory and R&D and flex/industrial properties.
Removed
As of December 31, 2023, we had not sold any shares of common stock pursuant to the ATM Program.
Added
On March 5, 2025, we changed our name from Orion Office REIT Inc. to Orion Properties Inc. to better describe our broader investment strategy to shift our portfolio concentration over time away from traditional office properties, towards more dedicated use assets that have an office component.
Removed
The Arch Street Joint Venture, including the limitations it places on our ability to acquire new properties, may adversely affect our ability to acquire wholly-owned properties and any joint venture investments could be adversely affected by the capital markets, lack of sole decision-making authority, reliance on joint venture partners’ financial condition and any disputes that may arise between us and our joint venture partners. • We may suffer adverse effects from acquisitions of commercial real estate properties. • We face considerable competition in the leasing market and may be unable to renew existing leases or re-let space on terms similar to our existing leases, or we may expend significant capital in our efforts to re-lease space, which may adversely affect our business, financial condition and results of operations. • Tenant defaults may have a material adverse effect on our business, financial condition and results of operations. • Some of our leases provide tenants with the right to terminate their leases early, which may have a material adverse effect on our business, financial condition and results of operations. • We have a significant amount of indebtedness and may need to incur more in the future. • We have existing debt and refinancing risks that could have a material adverse effect on our business, financial condition and results of operations, including the risk that we will be unable to extend or refinance some or all of our debt, including uncertainty with regard to our ability to extend and continue to comply with or otherwise refinance our Revolving Facility which is scheduled to mature on November 12, 2024. • Financial covenants could materially adversely affect our ability to conduct our business. • We depend on external sources of capital that are outside of our control, which may affect our ability to achieve our business strategies. • Our expenses may remain constant or increase, even if our revenues decrease, which may have a material adverse effect on our business, financial condition and results of operations. • Real estate property investments are illiquid.
Added
Following completion of the merger transaction involving Realty Income and VEREIT, Inc.
Added
We also owned a 20% equity interest in the Arch Street Joint Venture which, as of December 31, 2024, owned a portfolio of six properties with an aggregate of 1.0 million leasable square feet located in six states with an occupancy rate of 100% and a weighted-average remaining lease term of 5.2 years.
Added
Our experience is that these properties have greater tenant utilization and higher renewal probability, given their generally specialized uses and general inability for the tenant’s employees to conduct business at these sites on a remote or hybrid basis.
Added
Consistent with the foregoing capital recycling strategy, during the year ended December 31, 2024, we acquired an approximately 97,000 square foot flex/laboratory and R&D facility in San Ramon, California for a gross purchase price of $34.6 million. The property is fully leased to a high credit quality tenant through August 2039.
Added
As of December 31, 2024, approximately 31.8% of our annualized base rent was derived from properties we deemed dedicated use assets.
Added
We will continue to invest in the properties we own today when we believe those properties will produce attractive risk-adjusted yields on our investment plus any incremental capital we must invest and we will consider adding traditional office properties to the portfolio when we expect those properties to produce attractive, risk adjusted yields during our hold period through disposition but we intend to increase our focus on and exposure to dedicated use assets.
Added
In May 2024, in connection with the election of our option to extend the maturity of the Revolving Facility to May 12, 2026, we agreed to reduce the borrowing capacity of the Revolving Facility to $350.0 million from $425.0 million and to certain financial covenant changes.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

71 edited+44 added−21 removed181 unchanged
Biggest changeIf the Arch Street Joint Venture elects not to purchase a property offered pursuant to the ROFO Agreement, their rights to first review the opportunity may delay or otherwise interfere in our ability to competitively bid or acquire such property, which, in turn, adversely affect our ability to act on our investment strategies in accordance with our business plan. 9 Table of Contents We also may enter into future joint ventures pursuant to which we will not be able to exercise sole decision-making authority regarding the properties owned through such joint ventures or similar ownership structure.
Biggest changeWe also may enter into future joint ventures pursuant to which we will not be able to exercise sole decision-making authority regarding the properties owned through such joint ventures or similar ownership structure.
If our properties are not as attractive to existing or new tenants as properties owned by our competitors due to age of the buildings, physical condition, lack of amenities or other similar factors, we could lose tenants, it could take longer to re-lease our properties and we could suffer lower rental rates.
If our properties are not as attractive to existing or new tenants as properties owned by our competitors due to the age of the buildings, physical condition, lack of amenities or other similar factors, we could lose tenants, it could take longer to re-lease our properties and we could suffer lower rental rates.
If we are unable to repay, extend or refinance our indebtedness as it becomes due, we may need to sell assets or to seek protection from our creditors under applicable law, which may have a material adverse effect on our business, financial condition and results of operations. Financial covenants could materially adversely affect our ability to conduct our business.
If we are unable to extend, refinance or repay our indebtedness as it becomes due, we may need to sell assets or to seek protection from our creditors under applicable law, which may have a material adverse effect on our business, financial condition and results of operations. Financial covenants could materially adversely affect our ability to conduct our business.
These risks include: • changes in supply of or demand for office properties in our market or sub-markets; • competition for tenants in our market or sub-markets; • the ongoing need for capital improvements; • increased operating costs, which may not necessarily be offset by increased rents, including insurance premiums, utilities, real estate taxes, capital expenditures and repair and maintenance costs, due to inflation and other factors; • changes in tax, real estate and zoning laws; • changes in governmental rules and fiscal policies; • inability of tenants to pay rent; 10 Table of Contents • competition from the development of new office space in our market or sub-markets and the quality of competition, such as the attractiveness of our properties as compared to our competitors’ properties based on considerations such as convenience of location, rental rates, amenities and safety record; and • civil unrest, acts of war, terrorism, adverse political conditions, acts of God, including earthquakes, hurricanes and other natural disasters (which may result in uninsured losses) and other factors beyond our control.
These risks include: • changes in supply of or demand for office properties in our market or sub-markets; • competition for tenants in our market or sub-markets; • the ongoing need for capital improvements; • increased operating costs, which may not necessarily be offset by increased rents, including insurance premiums, utilities, real estate taxes, capital expenditures and repair and maintenance costs, due to inflation and other factors; • changes in tax, real estate and zoning laws; • changes in governmental rules and fiscal policies; • inability of tenants to pay rent; 12 Table of Contents • competition from the development of new space in our market or sub-markets and the quality of competition, such as the attractiveness of our properties as compared to our competitors’ properties based on considerations such as convenience of location, rental rates, amenities and safety record; and • civil unrest, acts of war, terrorism, adverse political conditions, acts of God, including earthquakes, hurricanes and other natural disasters (which may result in uninsured losses) and other factors beyond our control.
Tenant defaults may have a material adverse effect on our business, financial condition and results of operations. Nearly all of our revenues and income comes from rental income from real property. As such, our business, financial condition and results of operations could be adversely affected if our tenants default on their lease obligations.
Tenant payment defaults may have a material adverse effect on our business, financial condition and results of operations. Nearly all of our revenues and income comes from rental income from real property. As such, our business, financial condition and results of operations could be adversely affected if our tenants default on their lease payment obligations.
If a tenant becomes bankrupt, the federal bankruptcy code will apply and, in some instances, may restrict the amount and recoverability of our claims against the tenant. A tenant’s default on its obligations may have a material adverse effect on our business, financial condition and results of operations.
If a tenant becomes bankrupt, the federal bankruptcy code will apply and, in some instances, may restrict the amount and recoverability of our claims against the tenant. A tenant’s default on its payment obligations may have a material adverse effect on our business, financial condition and results of operations.
We do not expect our cash flows from operations to be sufficient to fund our future capital investments and, therefore, we will be dependent upon our ability to access third-party sources of capital, including the Revolving Facility and other sources of debt and equity capital.
We do not expect our cash flows from operations alone to be sufficient to fund our future capital investments and, therefore, we will be dependent upon our ability to access third-party sources of capital, including the Revolving Facility and other sources of debt and equity capital.
In addition, violations of these covenants could cause declarations of default under, and acceleration of, any related indebtedness, which would result in adverse consequences to our financial condition.
In addition, violations of these covenants could cause declarations of default under, and acceleration of, any related indebtedness, which would result in material adverse consequences to our financial condition.
The amount of such indebtedness could have material adverse consequences for us, including: 11 Table of Contents • hindering our ability to adjust to changing market, industry or economic conditions; • limiting our ability to access the capital markets to raise additional equity or refinance maturing debt on favorable terms to fund acquisitions, respond to competitive challenges or otherwise execute our business strategy; • limiting the amount of free cash flow available for future operations, reinvestment in our portfolio, acquisitions, dividends or other uses; • making us more vulnerable to economic or industry downturns, including interest rate increases; and • placing us at a competitive disadvantage compared to less leveraged competitors.
The amount of such indebtedness could have material adverse consequences for us, including: • hindering our ability to adjust to changing market, industry or economic conditions; • limiting our ability to access the capital markets to raise additional equity or refinance maturing debt on favorable terms to fund acquisitions, respond to competitive challenges or otherwise execute our business strategy; • limiting the amount of free cash flow available for future operations, reinvestment in our portfolio, acquisitions, dividends or other uses; • making us more vulnerable to economic or industry downturns, including interest rate increases; and • placing us at a competitive disadvantage compared to less leveraged competitors.
During the year ended December 31, 2023, most of our rental revenue was from our properties leased to single tenants. The value of our single tenant properties is materially dependent on the performance of those tenants under their respective leases. These tenants face competition within their industries and other factors that could reduce their ability to pay us rent.
During the year ended December 31, 2024, most of our rental revenue was from our properties leased to single tenants. The value of our single tenant properties is materially dependent on the performance of those tenants under their respective leases. These tenants face competition within their industries and other factors that could reduce their ability to pay us rent.
If we are unable to obtain a sufficient level of third-party financing to fund our capital needs, our ability to achieve our business strategies will be materially adversely effected. Our expenses may remain constant or increase, even if our revenues decrease, which may have a material adverse effect on our business, financial condition and results of operations.
If we are unable to obtain a sufficient level of third-party financing to fund our capital needs, our ability to achieve our business strategies will be materially adversely affected. Our expenses may remain constant or increase, even if our revenues decrease, which may have a material adverse effect on our business, financial condition and results of operations.
Investors, tenants, employees, and other stakeholders have begun to focus increasingly on ESG practices and to place increasing importance on the implications and social costs of their investments, business decisions and consumer choices. Many investors, particularly institutional investors, may use ESG practices and scores to benchmark companies against their peers and as a basis for making investment or voting decisions.
Investors, tenants, employees, and other stakeholders have begun to focus increasingly on sustainability practices and to place increasing importance on the implications and social costs of their investments, business decisions and consumer choices. Many investors, particularly institutional investors, may use sustainability practices and scores to benchmark companies against their peers and as a basis for making investment or voting decisions.
Given this increased focus and demand as well as the potential for future legal or regulatory requirements, public reporting regarding ESG practices is becoming more broadly expected. If our ESG practices and reporting do not meet investor, tenant, or employee expectations, which continue to evolve, our reputation and investor interest and tenant and employee retention may be negatively impacted.
Given this increased focus and demand as well as the potential for future legal or regulatory requirements, public reporting regarding sustainability practices is becoming more broadly expected. If our sustainability practices and reporting do not meet investor, tenant, or employee expectations, which continue to evolve, our reputation and investor interest and tenant and employee retention may be negatively impacted.
Under applicable Treasury Regulations, if Realty Income or VEREIT failed to qualify as a REIT during certain periods prior to the Distribution, unless Realty Income’s or VEREIT’s failure were subject to relief under U.S. federal income tax laws, we would be prevented from electing to qualify as a REIT prior to the fifth calendar year following the year in which Realty Income or VEREIT failed to qualify.
Under applicable Treasury Regulations, if Realty Income or VEREIT failed to qualify as a REIT during certain periods prior to the Distribution, unless Realty Income’s or VEREIT’s failure was subject to relief under U.S. federal income tax laws, we would be prevented from electing to qualify as a REIT prior to the fifth calendar year following the year in which Realty Income or VEREIT failed to qualify.
It is possible that investors and other stakeholders may not be satisfied with our ESG reporting, our ESG practices or the speed or comprehensiveness with which we adopt and implement them. In addition, the criteria by which we are benchmarked against our peers and scored may change.
It is possible that investors and other stakeholders may not be satisfied with our sustainability reporting, our sustainability practices or the speed or comprehensiveness with which we adopt and implement them. In addition, the criteria by which we are benchmarked against our peers and scored may change.
Although we do not intend to hold any properties that would be characterized as inventory held for sale to customers in the ordinary course of our business, such characterization is a factual determination and no guarantee can 20 Table of Contents be given that the IRS would agree with our characterization of our properties or that we will always be able to make use of the available safe harbors.
Although we do not intend to hold any properties that would be characterized as inventory held for sale to customers in the ordinary course of our business, such characterization is a factual determination and no guarantee can be given that the IRS would agree with our characterization of our properties or that we will always be able to make use of the available safe harbors.
The issuance of a substantial number of shares of 22 Table of Contents our common stock in the open market or the issuance of a substantial number of shares of our common stock upon the exercise of the warrants granted to affiliates of Arch Street Capital Partners in connection with the Distribution or the exchange of OP units or other securities exchangeable or convertible into shares of our common stock, or the perception that such issuances might occur, could adversely affect the per share trading price of our common stock.
The issuance of a substantial number of shares of our common stock in the open market or the issuance of a substantial number of shares of our common stock upon the exercise of the warrants granted to affiliates of Arch Street Capital Partners in connection with the Distribution or the exchange of OP units or other securities exchangeable or convertible into shares of our common stock, or the perception that such issuances might occur, could adversely affect the per share trading price of our common stock.
In addition, compliance with these requirements, including new requirements or stricter interpretation of existing requirements, may require us, or our tenants, to incur significant expenditures. We do not know whether existing requirements will change or whether future requirements, including any requirements that may emerge from pending or future climate change regulations or legislation, will develop.
In addition, 16 Table of Contents compliance with these requirements, including new requirements or stricter interpretation of existing requirements, may require us, or our tenants, to incur significant expenditures. We do not know whether existing requirements will change or whether future requirements, including any requirements that may emerge from pending or future climate change regulations or legislation, will develop.
McDowell or any of our other key personnel will remain employed by us. Our ability to retain such individuals, or to attract a suitable replacement should he leave, is dependent on the competitive nature of the employment market. The loss of 17 Table of Contents services of Mr.
McDowell or any of our other key personnel will remain employed by us. Our ability to retain such individuals, or to attract a suitable replacement should he leave, is dependent on the competitive nature of the employment market. The loss of services of Mr.
Even if our tenants renew their leases or we are able to re-let the space, the terms and other costs of renewal or re-letting, including the cost of required renovations, increased tenant improvement allowances, leasing commissions, declining rental rates, and rent or other potential concessions, may be less favorable than the terms of our current leases and could require significant capital expenditures.
Even if our tenants renew their leases or we can re-let the space, the terms and other costs of renewal or re-letting, including the cost of required renovations, increased tenant improvement allowances, leasing commissions, declining rental rates, and rent or other potential concessions, may be less favorable than the terms of our current leases and could require significant capital expenditures.
As a result, if revenues drop, 13 Table of Contents we may not be able to reduce our expenses accordingly, which may have a material adverse effect on our business, financial condition and results of operations. Property taxes may increase without notice.
As a result, if revenues drop, we may not be able to reduce our expenses accordingly, which may have a material adverse effect on our business, financial condition and results of operations. Property taxes may increase without notice.
In addition, any disputes that may arise between us and joint venture partners, including Arch Street Capital Partners, may result in litigation or arbitration that would increase our expenses. Any of the foregoing may have a material adverse effect on our business, financial condition and results of operations. The U.S. government’s “green lease” policies may adversely affect us.
In addition, any disputes that may arise between us and joint venture partners, including Arch Street Capital Partners, may result in litigation or arbitration that would increase our expenses. Any of the foregoing may have a material adverse effect on our business, financial condition and results of operations. The United States Government’s “green lease” policies may adversely affect us.
In recent years, the U.S. government has instituted “green lease” policies which allow a government tenant to require Leadership in Energy and Environmental Design for commercial interiors, or LEED ® -CI, designation in selecting new premises or renewing leases at existing premises, and these policies have and may continue to be expanded to cover additional enhanced requirements.
In recent years, the United States Government has instituted “green lease” policies which allow a government tenant to require Leadership in Energy and Environmental Design for commercial interiors, or LEED ® -CI, designation in selecting new premises or renewing leases at existing premises, and these policies have and may continue to be expanded to cover additional enhanced requirements.
The credit agreement governing the Revolving Facility and the CMBS Loan each contain various financial and other covenants, including, with respect to the Revolving Facility, covenants restricting, subject to certain exceptions, liens, investments, mergers, asset sales, and the payment of certain dividends and share repurchases, and with respect to the CMBS Loan, certain cash management requirements.
The credit agreement governing the Revolving Facility and the CMBS Loan each contain various financial and other covenants, including, with respect to the Revolving Facility, various financial covenants and other covenants restricting, subject to certain exceptions, liens, investments, mergers, asset sales, and the payment of certain dividends and share repurchases.
Failure to hedge effectively against such interest rate changes may have a material adverse effect on our business, financial condition and results of operations. We may amend our investment strategy and business policies without stockholder approval.
Failure to hedge effectively against such interest rate changes may have a material adverse effect on our business, financial condition and results of operations. 19 Table of Contents We may amend our investment strategy and business policies without stockholder approval.
If market interest rates remain elevated or continue to rise, prospective purchasers of our common stock may expect a higher dividend yield, and higher interest rates would likely increase our borrowing costs and potentially decrease funds available for distribution.
If market interest rates remain elevated or increase, prospective purchasers of our common stock may expect a higher dividend yield, and higher interest rates would likely increase our borrowing costs and potentially decrease funds available for distribution.
We have elected to be taxed as a REIT and believe we have been organized and have operated in a manner that has allowed us to qualify and to remain qualified as a REIT for U.S. federal income tax purposes commencing with our initial taxable year 18 Table of Contents ended December 31, 2021.
We have elected to be taxed as a REIT and believe we have been organized and have operated in a manner that has allowed us to qualify and to remain qualified as a REIT for U.S. federal income tax purposes commencing with our initial taxable year ended December 31, 2021.
In addition, the Energy Independence and Security Act of 2007 allows the General Services Administration to give preference to buildings for lease that have received an “Energy Star” label. Complying with enhanced requirements may be costly and time consuming, but our failure to do so may result in our competitive disadvantage in acquiring new or retaining existing government tenants.
In addition, the Energy Independence and Security Act of 2007 allows the United States Government to give preference to buildings for lease that have received an “Energy Star” label. Complying with enhanced requirements may be costly and time consuming, but our failure to do so may result in our competitive disadvantage in acquiring new or retaining existing government tenants.
Taxable REIT subsidiaries that we own or may form will pay federal, state and local income tax on their taxable income, and their after-tax net income will be available for distribution to us but will not be required to be distributed to us, unless necessary to maintain our REIT qualification.
Taxable REIT subsidiaries that we own or may form will pay federal, state and local income tax on their taxable income, and their after-tax net income will be available for distribution to us but will not be required to be distributed to us, unless 21 Table of Contents necessary to maintain our REIT qualification.
These ownership limitations in our charter are common in REIT governing documents and are intended to provide added assurance of compliance with the tax law requirements, and to 21 Table of Contents minimize administrative burdens.
These ownership limitations in our charter are common in REIT governing documents and are intended to provide added assurance of compliance with the tax law requirements, and to minimize administrative burdens.
However, efforts to manage space utilization rates may result in the government tenants exercising early termination rights under our leases, vacating our properties upon expiration of our leases in order to relocate, or renewing their leases for less space than they currently occupy.
Efforts to manage space utilization rates and reduce government spending may result in the government tenants exercising early termination rights under our leases, vacating our properties upon expiration of our leases in order to relocate, or renewing their leases for less space than they currently occupy.
If the Arch Street Joint Venture is unable to extend or refinance the mortgage notes, our investment in the Arch Street Joint Venture could be materially adversely affected. 12 Table of Contents As a result of the indebtedness we incur, we are, and expect to be, subject to the risks normally associated with debt financing including: • that we will be unable to extend or refinance some or all of our debt or increase the availability of overall debt on terms as favorable as those of our existing debt, or at all; • that interest rates may rise; • that our cash flow could be insufficient to make required payments of principal and interest; • that required payments on mortgages and on our other debt are not reduced if the economic performance of any property declines; • that debt service obligations will reduce funds available for distribution to our stockholders; • that any default on our debt, due to noncompliance with financial covenants or otherwise, could result in acceleration of those obligations; • that we may be unable to extend, refinance or repay the debt as it becomes due; and • that if our degree of leverage is viewed unfavorably by lenders or potential joint venture partners, it could affect our ability to obtain additional financing.
As a result of the indebtedness we incur, we are, and expect to be, subject to the risks normally associated with debt financing including: • that we will be unable to extend, refinance or repay our debt as it becomes due or increase the availability of overall debt on terms as favorable as those of our existing debt, or at all; 14 Table of Contents • that interest rates may rise; • that our cash flow could be insufficient to make required payments of principal and interest; • that required payments on mortgages and on our other debt are not reduced if the economic performance of any property declines; • that debt service obligations will reduce funds available for distribution to our stockholders; • that any default on our debt, due to noncompliance with financial covenants or otherwise, could result in acceleration of those obligations; • that we may be unable to extend, refinance or repay the debt as it becomes due; and • that if our degree of leverage is viewed unfavorably by lenders or potential joint venture partners, it could affect our ability to obtain additional financing.
There can be no assurance that we will be able to obtain the capital necessary to fund the investments we will be required to make in our existing portfolio or to acquire new properties on terms favorable to us or at all.
There can be no assurance that we will be able to obtain the capital necessary to fund the investments we will be required to make in our existing portfolio or to acquire new properties on terms 15 Table of Contents favorable to us or at all.
We could also incur additional costs and devote additional resources to monitoring, reporting and implementing various ESG practices.
We could also incur additional costs and devote additional resources to monitoring, reporting and implementing various sustainability practices.
Increased scrutiny and changing expectations from investors, tenants, employees, and others regarding our environmental, social, and governance (“ESG”) practices and reporting could cause us to incur additional costs, devote additional resources and expose us to additional risks. Companies across all industries are facing increasing scrutiny related to their ESG practices and reporting.
Increased scrutiny and changing expectations from investors, tenants, employees, and others regarding our sustainability, social, and governance practices (“sustainability”) and reporting could cause us to incur additional costs, devote additional resources and expose us to additional risks. Companies across all industries are facing increasing scrutiny related to their sustainability practices and reporting.
These restrictions, as well as any additional restrictions to which we may become subject in connection with additional financings or refinancings, could restrict our ability to pursue business initiatives, effect certain transactions or make other changes to our business that may otherwise be beneficial to us, which could adversely affect our business, financial condition and results of operations.
The financial and other covenants under our existing indebtedness, as well as any additional restrictions to which we may become subject in connection with additional financings or refinancings, could restrict our ability to pursue business initiatives, effect certain transactions or make other changes to our business that may otherwise be beneficial to us, which could adversely affect our business, financial condition and results of operations.
For example, the increased adoption of and familiarity with remote and hybrid work practices has resulted in decreased demand for and utilization of office space.
For example, the increased adoption of and 8 Table of Contents familiarity with remote and hybrid work practices has resulted in decreased demand for and utilization of office space.
In general, when we sell properties that are vacant or soon to be vacant, the valuation will be discounted to reflect that the new owner will bear carrying costs until the property has been leased up and take the risk that the property may not be leased up on a timely basis, favorable terms or at all.
In general, when we sell properties that are vacant or soon to be vacant, the valuation will be discounted if the new owner is required to make capital improvements and to reflect that the new owner will bear carrying costs until the property has been leased up and take the risk that the property may not be leased up on a timely basis, favorable terms or at all.
Our failure, or perceived failure, to meet any goals and objectives we may set in any ESG disclosure or the expectations of our various stakeholders could negatively impact our reputation, investor interest and tenant and employee retention, as well as our cost of or access to capital.
Our failure, or perceived failure, to meet any goals and objectives we may set in any sustainability disclosure or the expectations of our various 17 Table of Contents stakeholders could negatively impact our reputation, investor interest and tenant and employee retention, as well as our cost of or access to capital.
If we fail to maintain our qualification as a REIT or lose our REIT status, we will face significant tax consequences that would substantially reduce our cash available for distribution to our stockholders for each of the years involved because: • we would not be allowed a deduction for dividends paid to stockholders in computing our taxable income and would be subject to regular U.S. federal corporate income tax; • we could be subject to increased state and local taxes; and • unless we are entitled to relief under applicable statutory provisions, we could not elect to be taxed as a REIT for four taxable years following the year during which we were disqualified.
If we fail to maintain our qualification as a REIT or lose our REIT status, we will face significant tax consequences that would substantially reduce our cash available for distribution to our stockholders for each of the years involved because: • we would not be allowed a deduction for dividends paid to stockholders in computing our taxable income and would be subject to regular U.S. federal corporate income tax; • we could be subject to increased state and local taxes; and • unless we are entitled to relief under applicable statutory provisions, we could not elect to be taxed as a REIT for four taxable years following the year during which we were disqualified. 20 Table of Contents Any such corporate tax liability could be substantial and would reduce our cash available for, among other things, our operations and distributions to stockholders.
Any disclosure we make may include our policies and practices on a variety of ESG matters, including corporate governance, environmental compliance, employee health and safety 15 Table of Contents practices, human capital management and workforce inclusion and diversity.
Any disclosure we make may include our policies and practices on a variety of sustainability matters, including corporate governance, environmental compliance, employee health and safety practices, human capital management and workforce inclusion and diversity.
If our tenants elect to terminate their leases early, it may have a material adverse effect on our business, financial condition and results of operations. We have a significant amount of indebtedness and may need to incur more in the future. As of December 31, 2023, we have approximately $471.0 million of total outstanding indebtedness.
If our tenants elect to terminate their leases early, it may have a material adverse effect on our business, financial condition and results of operations. 13 Table of Contents We have a significant amount of indebtedness and may need to incur more in the future. As of December 31, 2024, we had approximately $492.0 million of total outstanding consolidated indebtedness.
The funding of our capital contributions to such joint ventures may be dependent on proceeds from asset sales, credit facility advances or sales of equity securities.
The funding of our capital contributions to such joint ventures may be dependent on proceeds from the sale of real estate assets, credit facility advances or sales of equity securities.
The authorization and issuance of a new class of capital stock could have the effect of delaying or preventing someone from taking control of us, even if a change in control were in our stockholders’ best interests, which could have a material adverse effect on our business, financial condition and results of operations.
The authorization and issuance of a new class of capital stock could have the effect of delaying or preventing someone from taking control of us, even if a change in control were in our stockholders’ best interests, which could have a material adverse effect on our business, financial condition and results of operations. 23 Table of Contents Maryland law may limit the ability of a third party to acquire control of us.
Our inability to respond rapidly to changes in the performance of our investments could adversely affect our financial condition and results of operations. We could be exposed to losses on loans we have made to buyers of the properties we have sold. As part of our asset disposition activity, we have provided seller financing to certain buyers.
Our inability to respond rapidly to changes in the performance of our investments could adversely affect our business, financial condition and results of operations. We could be exposed to losses on loans we have made to buyers of the properties we have sold.
Also, the failure of any subsidiary partnerships or limited liability company to qualify as a disregarded entity or partnership for applicable income tax purposes could cause it to become subject to federal and state corporate income tax, which would reduce significantly the amount of cash available for debt service and for distribution to its partners or members, including us. 19 Table of Contents Any taxable REIT subsidiaries owned by us are subject to corporate-level taxes and our dealings with our taxable REIT subsidiaries may be subject to 100% excise tax.
Also, the failure of any subsidiary partnerships or limited liability company to qualify as a disregarded entity or partnership for applicable income tax purposes could cause it to become subject to federal and state corporate income tax, which would reduce significantly the amount of cash available for debt service and for distribution to its partners or members, including us.
Maryland law may limit the ability of a third party to acquire control of us. The Maryland General Corporation Law (the “MGCL”) provides protection for Maryland corporations against unsolicited takeovers by limiting, among other things, the duties of the directors in unsolicited takeover situations.
The Maryland General Corporation Law (the “MGCL”) provides protection for Maryland corporations against unsolicited takeovers by limiting, among other things, the duties of the directors in unsolicited takeover situations.
If the Arch Street Joint Venture decides to acquire a property, our participation in the profitability and growth related to that property may be adversely impacted by our limited participation rights, and our ability to determine the strategy with respect to properties we own through the Arch Street Joint Venture is materially limited compared to acquisitions we make directly, including with respect to leasing, disposition and joint venture opportunities (including if such actions are necessary to maintain compliance with our debt commitments).
Our ability to determine the strategy with respect to properties we own through the Arch Street Joint Venture is materially limited compared to acquisitions we make directly, including with respect to leasing, disposition and joint venture opportunities (including if such actions are necessary to maintain compliance with our debt commitments).
We have existing debt and refinancing risks that could have a material adverse effect on our business, financial condition and results of operations, including the risk that we will be unable to extend or refinance some or all of our debt, including uncertainty with regard to our ability to extend and continue to comply with or otherwise refinance our Revolving Facility which is scheduled to mature on November 12, 2024.
We have existing debt and refinancing risks that could have a material adverse effect on our business, financial condition and results of operations, including the risk that we will be unable to extend or refinance some or all of our debt.
The Arch Street Joint Venture, including the limitations it places on our ability to acquire new properties, may adversely affect our ability to acquire wholly-owned properties and any joint venture investments could be adversely affected by the capital markets, lack of sole decision-making authority, reliance on joint venture partners’ financial condition and any disputes that may arise between us and our joint venture partners.
The Arch Street Joint Venture and any other joint venture investments we make could be adversely affected by the lack of sole decision-making authority, reliance on joint venture partners’ financial condition and any disputes that may arise between us and our joint venture partners.
Additionally, the COVID-19 pandemic and its aftermath have had negative impacts on government budgets and resources, and it is unclear what the effect of these impacts will be on government demand for leasing office space. We are invested in the Arch Street Joint Venture and have co-invested in and may in the future co-invest in joint ventures with third parties.
Additionally, the COVID-19 pandemic and its aftermath have had negative impacts on government budgets and resources, and it is unclear what the effect of these impacts will be on government demand for leasing office space.
We could experience difficulties or delays renewing leases or re-leasing space, which will increase our costs to operate and maintain such properties without receiving income.
Leases representing approximately 13.5% of our annualized base rent are scheduled to expire in 2025 and we could experience difficulties or delays renewing leases or re-leasing vacant space, which will increase our costs to operate and maintain such properties without receiving income.
As of December 31, 2023, our portfolio, including our pro rata share of properties owned by the Arch Street Joint Venture, had a weighted average lease term of 4.0 years, and had 12 vacant operating properties, with an aggregate 1.4 million square feet, including three properties, with an aggregate of 0.4 million square feet, that have remained vacant for over one year.
Leases representing approximately 13.5% of our annualized base rent are scheduled to expire in 2025, and as of December 31, 2024, our portfolio, including our proportionate share of properties owned by the Arch Street Joint Venture, had a weighted average lease term of 5.2 years, and had 11 vacant operating properties, with an aggregate 1.7 million square feet, including six properties, with an aggregate of 0.6 million square feet, that have remained vacant for over one year.
Further, as a public company, we are subject to the reporting requirements of the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”), the Sarbanes-Oxley Act and the Dodd-Frank Act and are required to prepare our financial statements in accordance with the rules and regulations promulgated by the SEC.
Securities Exchange Act of 1934, as amended (the “Exchange Act”), the Sarbanes-Oxley Act and the Dodd-Frank Act and are required to prepare our financial statements in accordance with the rules and regulations promulgated by the SEC. These and other public company obligations and requirements place significant demands on our management, administrative and operational resources, including accounting and information technology resources.
A corporation of which a taxable REIT subsidiary directly or indirectly owns more than 35% of the voting power or value of the stock will automatically be treated as a taxable REIT subsidiary. Overall, no more than 20% of the gross value of a REIT’s assets may consist of stock or securities of one or more taxable REIT subsidiaries.
Overall, no more than 20% of the gross value of a REIT’s assets may consist of stock or securities of one or more taxable REIT subsidiaries.
Future offerings of debt securities, which would be senior to our common stock upon liquidation, or preferred equity securities which may be senior to our common stock for purposes of dividends or upon liquidation, may materially adversely affect the per share trading price of our common stock.
Future issuances of shares of our common stock may be dilutive to existing stockholders, which may have a material adverse effect on our business, financial condition and results of operations. 24 Table of Contents Future offerings of debt securities, which would be senior to our common stock upon liquidation, or preferred equity securities which may be senior to our common stock for purposes of dividends or upon liquidation, may materially adversely affect the per share trading price of our common stock.
Risks Related to an Investment in Our Common Stock Limitations on the ownership of our common stock and other provisions of our charter may preclude the acquisition or change of control of our Company.
Also, the law relating to the tax treatment of other entities, or an investment in other entities, could change, making an investment in such other entities more attractive relative to an investment in a REIT. 22 Table of Contents Risks Related to an Investment in Our Common Stock Limitations on the ownership of our common stock and other provisions of our charter may preclude the acquisition or change of control of our Company.
If substantial office space reconfiguration is required, a tenant may explore other office space and find it more advantageous to relocate than to renew its lease and renovate the existing space. Less successful leasing efforts and increased leasing costs may cause our business, operating results, financial condition and prospects to be materially adversely impacted.
If substantial office space reconfiguration is required, a tenant may explore other office space and find it more advantageous to relocate than to renew its lease and renovate the existing space.
We may acquire properties if market conditions permit and we are presented with an attractive opportunity to do so.
Competition for acquisitions may reduce the number of acquisition opportunities available to us and increase the costs of those acquisitions. We may acquire properties if market conditions permit and we are presented with an attractive opportunity to do so.
We believe the Arch Street Joint Venture will be able to satisfy the extension conditions or otherwise extend the loan on terms mutually acceptable to the Arch Street Joint Venture and the existing lenders, but we cannot provide any assurance it will be able to do so.
The Arch Street Joint Venture may be unable to satisfy the extension conditions, and we cannot provide any assurance the Arch Street Joint Venture will be able to satisfy the extension conditions or otherwise extend or refinance the mortgage notes.
We have both fixed and variable rate indebtedness and may incur additional indebtedness in the future, including borrowings under our $425.0 million Revolving Facility. Our Revolving Facility is scheduled to mature in November 2024, and we have the option to extend the maturity an additional 18 months until May 12, 2026.
We have both fixed and variable rate indebtedness and may incur additional indebtedness in the future, including borrowings under our Revolving Facility. Our Revolving Facility under which we had $119.0 million borrowed as of December 31, 2024 is scheduled to mature in May 2026, and our $355.0 million CMBS Loan is scheduled to mature in February 2027.
To date, these loans have been structured as first mortgage loans with an unsecured recourse guaranty from the buyer principal(s).
As part of our asset disposition activity, we have provided seller financing to certain buyers and may continue to do so. To date, these loans have been structured as first mortgage loans with an unsecured recourse guaranty from the buyer principal(s).
A security breach involving our information technology networks 16 Table of Contents and related systems could disrupt our operations in numerous ways that may have a material adverse effect on our business, financial condition and results of operations.
A security breach involving our information technology networks and related systems could disrupt our operations in numerous ways that may have a material adverse effect on our business, financial condition and results of operations. 18 Table of Contents The obligations and requirements to which we are subject as a public company are extensive and will increase when we no longer qualify as an “emerging growth company.” As a public company, we are subject to the reporting requirements of the U.S.
Furthermore, over the past several years, government tenants have reduced their space utilization per employee and consolidated government tenants into existing government owned properties. Persistent remote and hybrid work practices have also reduced space utilization at many of our government properties. These factors have reduced the demand for government leased space, and may continue to do so.
Persistent remote and hybrid work practices have also reduced space utilization at many of our government properties. These factors have reduced the demand for government leased space, and may continue to do so. The Trump Administration’s initiative to dramatically cut government spending introduces additional uncertainty for our portfolio of properties leased to the United States Government.
Any such corporate tax liability could be substantial and would reduce our cash available for, among other things, our operations and distributions to stockholders. In addition, if we fail to maintain our qualification as a REIT, we will not be required to make distributions to our stockholders.
In addition, if we fail to maintain our qualification as a REIT, we will not be required to make distributions to our stockholders.
The mortgage notes associated with the Arch Street Joint Venture are also scheduled to mature in November 2024, and the Arch Street Joint Venture has two successive one-year options to extend the maturity until November 27, 2026. The extension options are subject to satisfaction of certain conditions, including satisfaction of certain financial and operating covenants.
Following the Arch Street Joint Venture’s exercise of the first extension option and satisfaction of the related conditions in November 2024, the non-recourse mortgage notes associated with the Arch Street Joint Venture of $131.6 million as of December 31, 2024 are scheduled to mature on November 27, 2025, and the Arch Street Joint Venture has one remaining one-year option to extend the maturity until November 27, 2026.
Accordingly, competition for acquisitions may limit our opportunities to grow our business, which may have a material adverse effect on our business, financial condition and results of operations. 14 Table of Contents We, our tenants and our properties are subject to various federal, state and local regulatory requirements, such as environmental laws, state and local fire and safety requirements, building codes and land use regulations.
To the extent we suffer such losses with respect to these loans, it could adversely affect our business, financial condition and results of operations. We, our tenants and our properties are subject to various federal, state and local regulatory requirements, such as environmental laws, state and local fire and safety requirements, building codes and land use regulations.
We may suffer adverse effects from acquisitions of commercial real estate properties. We may pursue acquisitions of additional commercial real estate properties as part of our business strategy.
Accordingly, competition for acquisitions may limit our opportunities to grow our business, which may have a material adverse effect on our business, financial condition and results of operations. We may suffer adverse effects from acquisitions of commercial real estate properties. We intend to pursue acquisitions of additional commercial real estate properties as part of our business strategy.
A REIT may own up to 100% of the stock of one or more taxable REIT subsidiaries. Both the subsidiary and the REIT must jointly elect to treat the subsidiary as a taxable REIT subsidiary.
Both the subsidiary and the REIT must jointly elect to treat the subsidiary as a taxable REIT subsidiary. A corporation of which a taxable REIT subsidiary directly or indirectly owns more than 35% of the voting power or value of the stock will automatically be treated as a taxable REIT subsidiary.
Government budgetary pressures and priorities and trends in government employment and office leasing may adversely impact our business. We believe that recent government budgetary and spending priorities and enhancements in technology have resulted in a decrease in government office use for employees.
We believe that recent government budgetary and spending priorities and enhancements in technology have resulted in a decrease in government office use for employees. Furthermore, over the past several years, government tenants have reduced their space utilization per employee and consolidated government tenants into existing government owned properties.
If our tenants decide not to renew their leases, terminate their leases early or default on their leases, we will seek to re-lease the space to new tenants. We may not, however, be able to re-lease the space to suitable replacement tenants on a timely basis, or at all.
If our tenants decide not to renew their leases, terminate their leases early or default on their leases, we will experience a loss in the associated rental revenue and will incur property operating costs that will no longer be reimbursed by the vacating tenant.
Removed
Even if we are able to renew leases with existing tenants or enter into new leases with replacement tenants, the terms of renewals or new leases, including the cost of required renovations or concessions to tenants, may be less favorable to us than current lease terms.
Added
Less successful leasing efforts, lower rents and increased leasing costs have caused our business, operating results, financial condition and prospects to be materially adversely impacted, and may continue to do so.
Removed
As a result, our net income and ability to pay dividends to stockholders could be materially adversely affected.
Added
When tenant leases expire, we confirm the condition of the premises and will seek to enforce the performance of any outstanding tenant obligations, such as repair and maintenance and lease surrender obligations. These efforts can lead to disputes with the tenants, and we cannot provide any assurance we will be successful in enforcing the tenant’s obligations.
Removed
Further, if any of our properties cannot be leased on terms and conditions favorable to us, we may seek to dispose of the property; however, such property may not be marketable at a suitable price without substantial capital improvements, alterations, or at all, which could inhibit our ability to 8 Table of Contents effectively dispose of those properties and could require us to expend capital to fund necessary capital improvements or alterations.
Added
Accordingly, we may incur enforcement and property operating and capital costs in connection with expired leases that may not be recoverable. Tenant lease expirations, delays in re-leasing vacant space and tenant defaults could have a material adverse effect on our financial condition, results of operations and ability to pay dividends to stockholders.
Removed
Our historical experience with respect to properties of the type we own that are majority leased to government tenants has been that government tenants frequently renew leases to avoid the costs and disruptions that may result from relocating their operations.
Added
We expect to continue to convert certain vacant properties to multi-tenant use, and cannot provide any assurance that the investments we make of time and capital to do so will increase the value of the subject properties.
Removed
In connection with Arch Street Capital Partners’ consent to the transfer of the equity interests in the Arch Street Joint Venture to us in the Separation, we entered into the ROFO Agreement with the Arch Street Joint Venture, whereby we will agree to not acquire any property within certain investing parameters without first offering the property for purchase to the Arch Street Joint Venture.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

15 edited+1 added−2 removed1 unchanged
Biggest changeCompany management, including members of the Risk Committee, provides regular updates to the board of directors regarding material matters with respect to the Company, including cyber matters. These updates include quarterly updates to the board with respect to material cyber events and an annual cybersecurity program overview covering cybersecurity strategy, assessment, risks, notable events and governance.
Biggest changeThese updates include quarterly updates to the board with respect to material cyber events and a twice per annum cybersecurity program review covering topics such as cybersecurity strategy, assessment, risks, notable events and governance. We also conduct an annual enterprise risk assessment through which it identifies and assesses material risks to the Company, including both cyber and non-cyber risks.
The IT department, the Risk Committee , and any necessary third parties, including managed security service providers, forensic investigators, and internal and external auditors, collaborate in the response and management with respect to cyber incidents.
The IT department, the Risk Committee , and any necessary third parties, including managed security service providers, forensic investigators, and internal auditors, collaborate in the response and management with respect to cyber incidents.
As part of its management of cybersecurity risks, the IT department conducts regular cybersecurity training of the Company’s employees, which includes an annual training given to all employees and internal contractors, targeted trainings for employees and internal contractors with specific roles within the Company and simulated cyber threats, including phishing exercises that spoof common and novel tactics used by threat actors.
As part of its management of cybersecurity risks, the IT department conducts regular cybersecurity training of our employees, which includes an annual training given to all employees and internal contractors, targeted trainings for employees and internal contractors with specific roles within the Company and simulated cyber threats, including phishing exercises that spoof common and novel tactics used by threat actors.
As described in greater detail below, the Risk Committee also assesses and makes the final determination as to whether a cybersecurity incident is material. The Risk Committee is comprised of members of the Company’s senior management, who have managed and overseen cybersecurity risk at numerous public companies.
As described in greater detail below, the Risk Committee also assesses and makes the final determination as to whether a cybersecurity incident is material. The Risk Committee is comprised of members of our senior management, who have managed and overseen cybersecurity risk at numerous public companies.
The Company’s executive officers and the Risk Committee provide guidance and approval of such items to ensure that such risks are mitigated and in line with the Company’s overall risk management systems and processes. If the Company’s IT department identifies a cybersecurity incident, the IT department assesses such incident and its materiality.
Our executive officers and the Risk Committee provide guidance and approval of such items to ensure that such risks are mitigated and in line with our overall risk management systems and processes. If our IT department identifies a cybersecurity incident, the IT department assesses such incident and its materiality.
The IT department, through the Company’s head of IT, provides regular updates and reports to the Company’s executive officers and the Risk Committee regarding cybersecurity threats, risks from such threats, strategies and recommendations to mitigate risk from such threats, cybersecurity incidents that have occurred, industry updates, and policy and process recommendations.
The IT department, through our head of IT, provides regular updates and reports to our executive officers and the Risk Committee regarding cybersecurity threats, risks from such threats, strategies and recommendations to mitigate risk from such threats, cybersecurity incidents that have occurred, industry updates, and policy and process recommendations.
However, if such a material cybersecurity incident is identified or were to occur, Company management would report it to the board of directors immediately. The Company’s IT department is responsible for day-to-day management of potential cybersecurity risks.
However, if such a material cybersecurity incident is identified or were to occur, Company management would report it to the Board of Directors immediately. Our IT department is responsible for day-to-day management of potential cybersecurity risks.
Item 1C. Cybersecurity. The Company’s board of directors is responsible for the Company’s cyber risk oversight.
Item 1C. Cybersecurity. Our Board of Directors is responsible for the Company’s cyber risk oversight.
Since completion of the Separation and Distribution, the Company has not had any risks of cybersecurity threats or cybersecurity incidents that have materially affected or, to the Company’s knowledge, are reasonably likely to materially affect the Company, including its business strategy, results of operations or financial condition.
Since completion of the Separation and the Distribution, we have not had any risks of cybersecurity threats or cybersecurity incidents that have materially affected or, to our knowledge, are reasonably likely to materially affect the Company, including its business strategy, results of operations or financial condition.
The Company utilizes an independent external firm that provides services to detect cybersecurity risks and makes recommendations to the Company regarding ways the Company can better protect itself from threats and improve internal processes based on cyber threats and risks that are impacting other companies.
We utilize an independent external firm that provides services to detect cybersecurity risks and makes recommendations to us regarding ways the Company can better protect itself from threats and improve internal processes based on cyber threats and risks that are impacting other companies.
The Company has established a risk committee (the “Risk Committee”) comprised of members of senior management whose responsibilities include 23 Table of Contents identifying, assessing, and managing enterprise-level and material risks to the Company, including strategic, financial, credit, market, liquidity, security, property, information technology (“IT”), cyber, legal, regulatory, and reputational risks.
We have established a risk committee (the “Risk Committee”) comprised of members of senior management whose responsibilities include identifying, assessing, and managing enterprise-level and material risks to the Company, including strategic, financial, credit, market, liquidity, security, property, information technology (“IT”), cyber, legal, regulatory, and reputational risks.
Additionally, as part of its processes for assessing, identifying and managing risks from cybersecurity threats, the Company intends to periodically conduct maturity and other external cybersecurity assessments to evaluate its cybersecurity maturity and enhance its cybersecurity capabilities. The Company’s auditors also perform annual inquiries and risk assessments into cybersecurity practices and potential incidents.
Additionally, as part of its processes for assessing, identifying and managing risks from cybersecurity threats, we intend to periodically conduct maturity and other external cybersecurity assessments to evaluate its cybersecurity maturity and enhance its cybersecurity capabilities. Our internal auditors also perform annual inquiries and risk assessments into cybersecurity practices and potential incidents.
The Company has developed policies and procedures with regard to cyber incident responses which policies and procedures are based on key components of the National Institute of Standards and Technology Cybersecurity Framework, together with other best practices.
This assessment is reviewed and discussed with the Board of Directors. We have developed policies and procedures with regard to cyber incident responses which policies and procedures are based on key components of the National Institute of Standards and Technology Cybersecurity Framework, together with other best practices.
The Company has processes to oversee and identify material risks from cybersecurity threats associated with its use of third-party service providers. Such processes include evaluating service providers to ensure coverage of key cybersecurity risks have appropriate mitigations.
We have processes to oversee and identify material risks from cybersecurity threats associated with its use of third-party service providers. Such processes include evaluating service providers to ensure coverage of key cybersecurity risks have appropriate mitigations. We also monitor for threats impacting key service providers and assesses identified threats for potential impacts to services, data, and systems.
The Company’s head of IT has overseen cybersecurity strategy, cybersecurity risk management, engineering of security technology, managed security service providers, processes and governance at other publicly traded companies and holds industry-standard certifications with respect to cybersecurity risk management.
He has served in this role since our inception in November 2021 and has more than 16 years of experience overseeing cybersecurity strategy, cybersecurity and technology risk management, engineering of security technology, overseeing managed security service providers and IT governance at other publicly traded companies and holds industry-standard certifications with respect to cybersecurity risk management. 25 Table of Contents Company management, including members of the Risk Committee, provides regular updates to the Board of Directors regarding material matters with respect to the Company, including cyber matters.
Removed
The Company also conducts an annual enterprise risk assessment through which it identifies and assesses material risks to the Company, including both cyber and non-cyber risks. This assessment is reviewed and discussed with the board of directors.
Added
Our Vice President and Head of IT leads our operational oversight of cybersecurity and IT strategy, policy, standards and processes.
Removed
The Company also monitors for threats impacting key service providers and assesses identified threats for potential impacts to services, data, and systems. 24 Table of Contents

Item 2. Properties

Properties — owned and leased real estate

5 edited+2 added−1 removed0 unchanged
Biggest changeTenant Industry Diversification The following table sets forth certain information regarding the tenant industry concentrations in our property portfolio, including our proportionate share of square feet and annualized base rent from properties owned by the Arch Street Joint Venture, as of December 31, 2023 (dollars and square feet in thousands): Industry Number of Leases (1) Leased Square Feet Leased Square Feet as a % of Total Portfolio Annualized Base Rent Annualized Base Rent as a % of Total Portfolio Health Care Equipment & Services 12 1,109 12.5 % $ 21,601 15.3 % Government & Public Services 17 769 8.7 % 19,657 13.9 % Financial Institutions 3 616 6.9 % 15,720 11.1 % Insurance 3 600 6.7 % 13,292 9.4 % Capital Goods 10 846 9.5 % 12,656 9.0 % Software & Services 6 609 6.9 % 12,390 8.8 % Consumer Durables & Apparel 3 375 4.2 % 8,632 6.1 % Telecommunication Services 5 419 4.7 % 6,892 4.9 % Materials 4 366 4.1 % 5,852 4.1 % Energy 1 309 3.5 % 5,762 4.1 % Top Ten Tenant Industries 64 6,018 67.7 % 122,454 86.7 % Remaining Tenant Industries: Commercial & Professional Services 10 293 3.3 % 4,746 3.4 % Transportation 4 279 3.1 % 4,496 3.2 % Media & Entertainment 2 264 3.0 % 3,745 2.6 % Retailing 3 157 1.8 % 3,247 2.3 % Food, Beverage & Tobacco 1 96 1.1 % 2,022 1.4 % Utilities 1 26 0.3 % 394 0.3 % Real Estate 1 4 — % 86 0.1 % Consumer Services 2 5 0.1 % 54 — % Retail/Restaurant 1 2 — % 49 — % Total 89 7,144 80.4 % $ 141,293 100.0 % ____________________________________ (1) The Company has certain properties that are subject to multiple leases. 25 Table of Contents Geographic Diversification The following table sets forth certain information regarding the geographic concentrations (by state) in our property portfolio, including our proportionate share of square feet and annualized base rent from properties owned by the Arch Street Joint Venture, as of December 31, 2023 (dollars and square feet in thousands): Location Number of Properties Rentable Square Feet Square Feet as a % of Total Portfolio Annualized Base Rent Annualized Base Rent as a % of Total Portfolio Texas 15 1,353 15.2 % $ 24,313 17.2 % New Jersey 3 724 8.2 % 14,445 10.2 % New York 5 781 8.8 % 14,407 10.2 % Kentucky 2 458 5.2 % 10,354 7.3 % Colorado 4 571 6.4 % 8,103 5.7 % Massachusetts 2 378 4.3 % 7,947 5.6 % Oklahoma 3 585 6.6 % 6,811 4.8 % California 3 244 2.8 % 5,532 3.9 % Missouri 3 303 3.4 % 4,917 3.5 % Maryland 2 236 2.7 % 4,646 3.3 % Top Ten States 42 5,633 63.6 % 101,475 71.7 % Remaining States: Tennessee 4 240 2.7 % 4,641 3.3 % Georgia 3 284 3.2 % 4,635 3.3 % Virginia 2 240 2.7 % 4,523 3.2 % Ohio 3 237 2.7 % 3,545 2.5 % Rhode Island 2 206 2.3 % 3,040 2.2 % South Carolina 1 64 0.7 % 2,459 1.8 % Wisconsin 1 155 1.7 % 2,299 1.6 % Arizona 1 91 1.0 % 2,282 1.6 % Illinois 8 738 8.3 % 2,191 1.6 % Iowa 2 92 1.0 % 1,955 1.4 % Nebraska 2 180 2.0 % 1,584 1.1 % Pennsylvania 2 233 2.6 % 1,316 0.9 % Oregon 1 69 0.8 % 1,142 0.8 % West Virginia 1 63 0.7 % 1,130 0.8 % Kansas 2 196 2.2 % 1,044 0.7 % Idaho 1 35 0.4 % 741 0.5 % Indiana 1 83 0.9 % 570 0.4 % Minnesota 1 39 0.4 % 493 0.4 % Florida 1 6 0.1 % 228 0.2 % Total 81 8,884 100.0 % $ 141,293 100.0 % 26 Table of Contents Tenant Diversification The following table sets forth certain information regarding tenants comprising over one percent of annualized base rent in our property portfolio, including our proportionate share of square feet and annualized base rent from properties owned by the Arch Street Joint Venture, as of December 31, 2023 (dollars and square feet in thousands): Tenant Number of Leases Leased Square Feet Square Feet as a % of Total Portfolio Annualized Base Rent Annualized Base Rent as a % of Total Portfolio General Services Administration 15 725 8.2 % $ 19,109 13.5 % Merrill Lynch 1 482 5.4 % 12,465 8.8 % Highmark Western & Northeastern NY 1 430 4.8 % 8,450 6.0 % RSA Security 2 328 3.7 % 7,221 5.1 % Cigna/Express Scripts 3 365 4.1 % 6,922 4.9 % Coterra Energy 1 309 3.5 % 5,762 4.1 % MDC Holdings Inc. 1 144 1.6 % 4,385 3.1 % T-Mobile 3 217 2.4 % 3,971 2.8 % Charter Communications 2 264 3.0 % 3,745 2.7 % Banner Life Insurance 1 116 1.4 % 3,581 2.5 % Top Ten Tenants 30 3,380 38.1 % 75,611 53.5 % Remaining Tenants: Inform Diagnostics 1 172 1.9 % 3,551 2.5 % Encompass Health 1 65 0.7 % 3,505 2.5 % Collins Aerospace 1 207 2.3 % 3,369 2.4 % Home Depot/HD Supply 2 153 1.8 % 3,173 2.2 % AT&T 1 203 2.3 % 2,921 2.1 % Ingram Micro 1 170 1.9 % 2,898 2.1 % Linde 1 175 2.0 % 2,714 1.9 % Maximus 2 168 1.9 % 2,549 1.8 % Citigroup 1 64 0.7 % 2,459 1.7 % CVS/Aetna 1 127 1.4 % 2,328 1.7 % Hasbro 1 136 1.5 % 2,243 1.6 % Novus International 1 96 1.1 % 2,022 1.4 % Pulte Mortgage 1 95 1.1 % 2,005 1.4 % NetJets 1 140 1.6 % 1,990 1.4 % Elementis 1 66 0.7 % 1,980 1.4 % FedEx 1 90 1.0 % 1,744 1.2 % General Electric 1 152 1.7 % 1,713 1.2 % AGCO 1 126 1.4 % 1,607 1.1 % Intermec 1 81 0.9 % 1,459 1.0 % Abbott Laboratories 1 131 1.5 % 1,379 1.0 % Becton Dickinson 1 72 0.8 % 1,370 1.0 % Total 53 6,069 68.3 % $ 124,590 88.1 % 27 Table of Contents Lease Expirations The following table sets forth certain information regarding scheduled lease expirations in our property portfolio, including our proportionate share of square feet and annualized base rent from properties owned by the Arch Street Joint Venture, as of December 31, 2023 (dollars and square feet in thousands): Year of Expiration Number of Leases Expiring (1) Leased Square Feet Leased Square Feet as a % of Total Portfolio Annualized Base Rent Annualized Base Rent as a % of Total Portfolio 2024 15 1,907 21.5 % $ 39,432 27.9 % 2025 12 919 10.3 % 16,858 11.9 % 2026 15 801 9.0 % 18,834 13.3 % 2027 14 1,004 11.3 % 16,621 11.8 % 2028 11 594 6.7 % 10,981 7.8 % 2029 4 396 4.5 % 5,966 4.2 % 2030 3 138 1.6 % 5,153 3.7 % 2031 1 11 0.1 % 429 0.3 % 2032 3 300 3.4 % 3,808 2.7 % 2033 3 358 4.0 % 6,187 4.4 % Thereafter 8 716 8.0 % 17,024 12.0 % Total 89 7,144 80.4 % $ 141,293 100.0 % ____________________________________ (1) The Company has certain properties that are subject to multiple leases.
Biggest changeTenant Industry Diversification The following table sets forth certain information regarding the tenant industry concentrations in our operating property portfolio, including our proportionate share of square feet and annualized base rent from properties owned by the Arch Street Joint Venture, as of December 31, 2024 (dollars and square feet in thousands): Industry Number of Leases (1) Occupied Square Feet % of Total Rentable Square Feet Annualized Base Rent % of Total Annualized Base Rent Government & Public Services 17 769 9.5 % $ 20,179 16.8 % Health Care Equipment & Services 10 846 10.4 % 16,158 13.4 % Financial Institutions 2 546 6.7 % 13,772 11.4 % Capital Goods 10 846 10.4 % 13,207 11.0 % Consumer Durables & Apparel 3 375 4.6 % 8,971 7.5 % Materials 5 462 5.7 % 8,378 7.0 % Telecommunication Services 5 420 5.2 % 7,202 6.0 % Energy 1 309 3.8 % 5,866 4.9 % Commercial & Professional Services 10 281 3.5 % 5,516 4.6 % Software & Services 3 263 3.3 % 5,056 4.2 % Top Ten Tenant Industries 66 5,117 63.1 % 104,305 86.8 % Remaining Tenant Industries: Transportation 4 279 3.5 % 4,536 3.8 % Media & Entertainment 2 264 3.3 % 3,803 3.2 % Insurance 1 116 1.4 % 3,671 3.0 % Retailing 3 157 1.9 % 3,368 2.8 % Utilities 1 25 0.3 % 394 0.3 % Restaurant 4 15 0.2 % 168 0.1 % Real Estate 1 2 — % 48 — % Total 82 5,975 73.7 % $ 120,293 100.0 % ____________________________________ (1) The Company has certain operating properties that are subject to multiple leases. 27 Table of Contents Geographic Diversification The following table sets forth certain information regarding the geographic concentrations (by state) in our operating property portfolio, including our proportionate share of square feet and annualized base rent from properties owned by the Arch Street Joint Venture, as of December 31, 2024 (dollars and square feet in thousands): Location Number of Properties Rentable Square Feet % of Total Rentable Square Feet Annualized Base Rent % of Total Annualized Base Rent Texas 15 1,352 16.7 % $ 19,910 16.5 % New Jersey 3 714 8.8 % 15,023 12.5 % Kentucky 2 458 5.6 % 10,470 8.7 % Colorado 4 452 5.6 % 8,581 7.1 % California 4 341 4.2 % 8,144 6.8 % Oklahoma 3 585 7.2 % 7,017 5.8 % New York 6 781 9.6 % 6,151 5.1 % Maryland 2 236 2.9 % 4,756 4.0 % Tennessee 4 240 3.0 % 4,708 3.9 % Georgia 3 284 3.5 % 4,669 3.9 % Top Ten States 46 5,443 67.1 % 89,429 74.3 % Remaining States: Virginia 2 240 3.0 % 4,623 3.8 % Missouri 2 207 2.5 % 2,981 2.5 % South Carolina 1 64 0.8 % 2,513 2.1 % Ohio 2 169 2.1 % 2,463 2.0 % Rhode Island 2 206 2.5 % 2,446 2.0 % Wisconsin 1 155 1.9 % 2,357 2.0 % Illinois 2 163 2.0 % 2,240 1.9 % Iowa 2 92 1.1 % 2,001 1.7 % West Virginia 1 63 0.8 % 1,457 1.2 % Nebraska 2 180 2.2 % 1,411 1.2 % Pennsylvania 2 233 2.9 % 1,345 1.1 % Oregon 1 69 0.9 % 1,165 1.0 % Kansas 2 196 2.4 % 1,075 0.9 % Massachusetts 2 378 4.7 % 742 0.6 % Idaho 1 35 0.4 % 741 0.6 % Indiana 1 83 1.0 % 581 0.5 % Minnesota 1 39 0.5 % 493 0.4 % Florida 1 6 0.1 % 230 0.2 % Arizona 1 91 1.1 % — — % Total 75 8,112 100.0 % $ 120,293 100.0 % 28 Table of Contents Tenant Diversification The following table sets forth certain information regarding tenants comprising over one percent of annualized base rent in our operating property portfolio, including our proportionate share of square feet and annualized base rent from properties owned by the Arch Street Joint Venture, as of December 31, 2024 (dollars and square feet in thousands): Tenant Number of Leases Occupied Square Feet % of Total Rentable Square Feet Annualized Base Rent % of Total Annualized Base Rent General Services Administration 15 725 8.9 % $ 19,631 16.3 % Bank of America 1 482 5.9 % 11,260 9.4 % Coterra Energy 1 309 3.8 % 5,866 4.9 % Cigna/Express Scripts 2 274 3.4 % 4,770 4.0 % MDC Holdings Inc. 1 144 1.8 % 4,473 3.7 % T-Mobile 3 217 2.7 % 4,065 3.4 % Charter Communications 2 264 3.3 % 3,803 3.2 % Banner Life Insurance 1 116 1.4 % 3,670 3.1 % Encompass Health 1 65 0.8 % 3,575 3.0 % Collins Aerospace 1 207 2.6 % 3,440 2.9 % Top Ten Tenants 28 2,803 34.6 % 64,553 53.9 % Remaining Tenants: Home Depot/HD Supply 2 153 1.9 % 3,292 2.7 % AT&T 1 203 2.5 % 3,137 2.6 % Ingram Micro 1 170 2.1 % 2,985 2.5 % Linde 1 175 2.2 % 2,800 2.3 % Maximus 2 168 2.1 % 2,610 2.2 % Citigroup 1 64 0.8 % 2,513 2.1 % Hasbro 1 136 1.7 % 2,446 2.0 % Valent U.S.A. 1 97 1.2 % 2,417 2.0 % CVS/Aetna 1 127 1.6 % 2,403 2.0 % GE Vernova 1 152 1.9 % 2,055 1.7 % Pulte Mortgage 1 95 1.2 % 2,053 1.7 % NetJets 1 140 1.7 % 2,015 1.7 % Elementis 1 66 0.8 % 1,980 1.6 % Day Pitney 1 56 0.7 % 1,783 1.5 % FedEx 1 90 1.1 % 1,744 1.4 % AGCO 1 126 1.6 % 1,607 1.3 % Intermec 1 81 1.0 % 1,503 1.2 % Abbott Laboratories 1 131 1.6 % 1,412 1.2 % Becton Dickinson 1 72 0.9 % 1,397 1.2 % Ifm Efector 1 45 0.6 % 1,345 1.1 % Peraton 1 33 0.4 % 1,184 1.0 % Total 51 5,183 64.2 % $ 109,234 90.9 % 29 Table of Contents Lease Expirations The following table sets forth certain information regarding scheduled lease expirations in our operating property portfolio, including our proportionate share of square feet and annualized base rent from properties owned by the Arch Street Joint Venture, as of December 31, 2024 (dollars and square feet in thousands): Year of Expiration Number of Leases Expiring (1) Occupied Square Feet % of Total Rentable Square Feet Annualized Base Rent % of Total Annualized Base Rent 2025 9 859 10.6 % $ 16,200 13.5 % 2026 15 688 8.5 % 15,572 12.9 % 2027 13 973 12.0 % 16,524 13.7 % 2028 12 992 12.2 % 21,091 17.5 % 2029 5 398 4.9 % 6,174 5.1 % 2030 6 214 2.7 % 7,094 5.9 % 2031 1 11 0.1 % 431 0.4 % 2032 3 300 3.7 % 3,875 3.2 % 2033 3 358 4.4 % 6,364 5.3 % 2034 4 172 2.1 % 2,532 2.1 % Thereafter 11 1,010 12.5 % 24,436 20.4 % Total 82 5,975 73.7 % $ 120,293 100.0 % ____________________________________ (1) The Company has certain operating properties that are subject to multiple leases.
Including the Company’s pro rata share of square feet and annualized base rent from the Arch Street Joint Venture, it owned an aggregate of 8.9 million square feet, with an occupancy rate of 80.4%, or 87.2% adjusted for properties that are currently under agreement to be sold, and a weighted-average remaining lease term of 4.0 years as of December 31, 2023.
Including the Company’s proportionate share of leasable square feet and annualized base rent from the Arch Street Joint Venture, it owned an aggregate of 8.1 million leasable square feet, with an occupancy rate of 73.7%, or 73.1% adjusted for two operating properties that are currently under agreements to be sold, and a weighted-average remaining lease term of 5.2 years as of December 31, 2024.
Item 3. Legal Proceedings. As of December 31, 2023, we are not a party to, and none of our properties are subject to, any material pending legal proceedings. Item 4. Mine Safety Disclosures. Not applicable. PART II
Legal Proceedings. As of December 31, 2024, we are not a party to, and none of our properties are subject to, any material pending legal proceedings.
As of December 31, 2023, the Company owned 75 office properties with an aggregate of 8.7 million square feet located in 29 states, with an occupancy rate of 80.0% and a weighted-average remaining lease term of 3.9 years as of December 31, 2023.
Item 2. Properties. The Company leases its corporate office space, including its corporate headquarters, which is located in Phoenix, Arizona. As of December 31, 2024, the Company owned 69 operating properties with an aggregate of 7.9 million leasable square feet located in 29 states, with an occupancy rate of 73.0% and a weighted-average remaining lease term of 5.2 years.
See Schedule III – Real Estate and Accumulated Depreciation for more information about the Company’s properties and see Note 6 – Debt, Net for more information about mortgages and other indebtedness related to the Company’s properties.
See Schedule III – Real Estate and Accumulated Depreciation for more information about the Company’s properties and see Note 6 – Debt, Net for more information about mortgages and other indebtedness related to the Company’s properties. 26 Table of Contents During the year ended December 31, 2024, we split the properties located in Amherst, New York and Denver, Colorado, each containing two buildings, into four separate properties for reporting purposes.
Removed
Item 2. Properties. The Company leases its corporate office space, including its corporate headquarters, which is located in Phoenix, Arizona.
Added
Also during the year ended December 31, 2024, we commenced classifying certain of our 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.
Added
Operating Property Type The following table sets forth certain information regarding property types in our operating property portfolio, including our proportionate share of square feet and annualized base rent from properties owned by the Arch Street Joint Venture, as of December 31, 2024 (dollars and square feet in thousands): Property Type Number of Properties Rentable Square Feet % of Total Rentable Square Feet Annualized Base Rent % of Total Annualized Base Rent Traditional Office 46 6,081 75.0 % 82,001 68.2 % Governmental 16 789 9.7 % 20,269 16.8 % Flex/Industrial 7 819 10.1 % 8,238 6.8 % Flex/Laboratory and R&D 4 268 3.3 % 6,210 5.2 % Medical Office 2 155 1.9 % 3,575 3.0 % Total 75 8,112 100.0 % 120,293 100.0 % Item 3.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

7 edited+4 added−0 removed4 unchanged
Biggest changeThe Company’s Board of Directors declared and paid a quarterly dividend of $0.10 per share for each of the four quarters of 2023. As of February 23, 2024, the Company had approximately 9,561 stockholders of record of its common stock. Recent Sales of Unregistered Securities None.
Biggest changeThe Company’s Board of Directors declared and paid a quarterly cash dividend of $0.10 per share for each of the four quarters of 2024.
Repurchases are subject to prevailing market conditions, the trading price of the Company’s common stock, the Company’s liquidity needs, financial performance and other conditions. 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.
Repurchases are subject to prevailing market conditions, the trading price of the Company’s common stock, the Company’s liquidity and anticipated liquidity needs, financial performance and other conditions. 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.
Stock Price Performance Graph Set forth below is a line graph comparing the cumulative total stockholder return on the Company’s common stock, based on the market price of the common stock and assuming reinvestment of dividends, with the Russell 2000 Index and the FTSE National Association of Real Estate Investment Trusts All Equity Office REITs Index (“FTSE Nareit All Equity Office REITs Index”) for the period commencing November 15, 2021 and ending December 31, 2023.
Stock Price Performance Graph Set forth below is a line graph comparing the cumulative total stockholder return on the Company’s common stock, based on the market price of the common stock and assuming reinvestment of dividends, with the Russell 2000 Index and the FTSE National Association of Real Estate Investment Trusts All Equity Office REITs Index (“FTSE Nareit All Equity Office REITs Index”) for the period commencing November 15, 2021 and ending December 31, 2024.
The Company did not purchase any shares under the Share Repurchase Program during the three months ended December 31, 2023. Since inception of the Share Repurchase Program, the Company has repurchased approximately 0.9 million shares of common stock, at a weighted average price of $5.46 for an aggregate purchase price of $5.0 million.
The Company did not purchase any shares under the Share Repurchase Program during the three months ended December 31, 2024. Since inception of the Share Repurchase Program, the Company has repurchased approximately 0.9 million shares of common stock, at a weighted average price of $5.46 for an aggregate purchase price of $5.0 million.
As of December 31, 2023, the approximate dollar value of shares that remain available for repurchase under the Share Repurchase Program was $45.0 million. Item 6. [Reserved]
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. Item 6. [Reserved]
Issuer Repurchases of Equity Securities On November 1, 2022, the Company’s Board of Directors authorized the repurchase of up to $50.0 million of the Company’s outstanding common stock until December 31, 2025, as market conditions warrant (the “Share Repurchase Program”).
Recent Sales of Unregistered Securities None. 31 Table of Contents Issuer Repurchases of Equity Securities On November 1, 2022, the Company’s Board of Directors authorized the repurchase of up to $50.0 million of the Company’s outstanding common stock until December 31, 2025, as market conditions warrant (the “Share Repurchase Program”).
The graph assumes an investment of $100 on November 15, 2021. 28 Table of Contents The graph above and the accompanying text are not “soliciting material,” are not deemed filed with the SEC and are not to be incorporated by reference in any filing by us under the Securities Act or the Exchange Act, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing.
The graph above and the accompanying text are not “soliciting material,” are not deemed filed with the SEC and are not to be incorporated by reference in any filing by us under the Securities Act or the Exchange Act, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing.
Added
The graph assumes an investment of $100 on November 15, 2021.
Added
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, representing a new annualized dividend rate of $0.08 per share.
Added
This change in dividend policy will enable us to retain approximately $17.9 million of cash annually. The new policy is also consistent with our strategy shift as we seek the lowest cost of funds to maintain and grow existing tenancy, continue to shift towards more dedicated use assets and efficiently refinance our debt obligations as they come due.
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As of February 28, 2025, the Company had approximately 8,986 stockholders of record of its common stock.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

110 edited+126 added−76 removed55 unchanged
Biggest changeDuring the year ended December 31, 2023, we entered into new and renewal leases as summarized in the following table (dollars and square feet in thousands): Year Ended December 31, 2023 New Leases Renewals Total Rentable square feet leased 21 240 261 Weighted average rental rate change (cash basis) (1) (2) (19.8) % 6.8 % 5.3 % Tenant leasing costs and concession commitments (3) $ 881 $ 2,053 $ 2,934 Tenant leasing costs and concession commitments per rentable square foot $ 41.89 $ 8.54 $ 11.23 Weighted average lease term (by rentable square feet) (years) (4) 8.1 9.1 9.0 Tenant leasing costs and concession commitments per rentable square foot per year $ 5.15 $ 0.94 $ 1.24 ___________________________________ (1) Represents weighted average percentage increase or decrease in (i) the annualized monthly cash amount charged to the applicable tenants (including monthly base rent receivables and certain fixed contractually obligated reimbursements by the applicable tenants, which may include estimates) as of the commencement date of the new lease term (excluding any full or partial rent abatement period) compared to (ii) the annualized monthly cash amount charged to the applicable tenants (including the monthly base rent receivables and certain fixed contractually obligated reimbursements by the applicable tenants) as of the expiration date of the prior lease term.
Biggest changeDuring the periods indicated below, we entered into new and renewal leases as summarized in the following tables (dollars and square feet in thousands): Year Ended December 31, 2024 New Leases Renewals Total Number of leases 6 9 15 Rentable square feet leased 287 799 1,086 Weighted average rental rate change (cash basis) (1) (2) (9.7) % (6.6) % (7.0) % Tenant rent concessions and leasing costs (3) $ 27,268 $ 19,607 $ 46,875 Tenant rent concessions and leasing costs per rentable square foot (4) $ 94.86 $ 24.54 $ 43.14 Weighted average lease term (by rentable square feet) (years) (5) 10.5 6.9 7.9 Tenant rent concessions and leasing costs per rentable square foot per year $ 9.00 $ 3.55 $ 5.48 Year Ended December 31, 2023 New Leases Renewals Total Number of leases 4 5 9 Rentable square feet leased 21 240 261 Weighted average rental rate change (cash basis) (1) (2) (19.8) % 6.8 % 5.3 % Tenant rent concessions and leasing costs (3) $ 932 $ 3,211 $ 4,143 Tenant rent concessions and leasing costs per rentable square foot (4) $ 44.30 $ 13.36 $ 15.85 Weighted average lease term (by rentable square feet) (years) (5) 8.1 9.1 9.0 Tenant rent concessions and leasing costs per rentable square foot per year $ 5.45 $ 1.47 $ 1.76 ____________________________________ (1) Represents weighted average percentage increase or decrease in (i) the annualized monthly cash amount charged to the applicable tenants (including monthly base rent receivables and certain fixed contractually obligated reimbursements by the applicable tenants, which may include estimates) as of the commencement date of the new lease term (excluding any full or partial rent abatement period) compared to (ii) the annualized monthly cash amount charged to the applicable tenants (including the monthly base rent receivables and certain fixed contractually obligated reimbursements by the applicable tenants, which may include estimates) as of the expiration date of the prior lease term.
Loss on extinguishment of debt, net Loss on extinguishment of debt, net during the year ended December 31, 2023 related to the write off of deferred financing costs due to the early extinguishment of the Company’s Term Loan Facility, as defined below and discussed in Note 6 – Debt, Net.
Loss on extinguishment of debt, net during the year ended December 31, 2023 related to the write off of deferred financing costs due to the early extinguishment of the Company’s Term Loan Facility, as defined below and discussed in Note 6 – Debt, Net.
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.
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.
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, we terminated the interest rate swap agreements that had been entered into during the year ended December 31, 2021, 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, which were designated as cash flow hedges, to hedge interest rate volatility with respect to the our borrowings under the Term Loan Facility.
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, we terminated the interest rate swap agreements that had been entered into during the year ended December 31, 2021, 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, which were designated as cash flow hedges, to hedge interest rate volatility with respect to our borrowings under the Term Loan Facility.
Upon the scheduled expiration of the interest rate swap agreements, we 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.
Upon the scheduled expiration of the interest rate swap agreements, we 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.
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.
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.
Our ability to extend or refinance debt, raise capital and/or sell assets will be affected by various factors existing at the relevant time, such as capital and credit market conditions, the state of the national and regional economies, commercial real estate market conditions, available interest rate levels, the lease terms for and equity in and value of any related collateral, our financial condition and the operating history of the collateral, if any.
Our ability to extend, refinance or repay debt, raise capital and/or sell assets will be affected by various factors existing at the relevant time, such as capital and credit market conditions, the state of the national and regional economies, commercial real estate market conditions, available interest rate levels, the lease terms for and equity in and value of any related collateral, our financial condition and the operating history of the collateral, if any.
CMBS Loan 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”).
CMBS Loan 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”).
(“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”).
(“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”).
Neither the SEC, Nareit, nor any other regulatory body has evaluated the acceptability of the exclusions used to adjust FFO in order to calculate Core FFO and its use as a non-GAAP financial performance measure. 40 Table of Contents The table below presents a reconciliation of FFO and Core FFO to net loss attributable to common stockholders, the most directly comparable U.S.
Neither the SEC, Nareit, nor any other regulatory body has evaluated the acceptability of the exclusions used to adjust FFO in order to calculate Core FFO and its use as a non-GAAP financial performance measure. The table below presents a reconciliation of FFO and Core FFO to net loss attributable to common stockholders, the most directly comparable U.S.
Credit Agreement Obligations In connection with the Separation and the Distribution, on November 12, 2021, we, as parent, and Orion OP, as borrower, entered into (i) a credit agreement (the “Credit Agreement”) providing for a three-year, $425.0 million senior revolving credit facility (the “Revolving Facility”), including a $25.0 million letter of credit sub-facility, and a two-year, $175.0 million senior term loan facility (the “Term Loan Facility”) with Wells Fargo Bank, National Association, as administrative agent, and the 42 Table of Contents lenders and issuing banks party thereto and (ii) a credit agreement (the “Bridge Credit Agreement”) providing for a six-month, $355.0 million senior bridge term loan facility (the “Bridge Facility”) with Wells Fargo Bank, National Association, as administrative agent, and the lenders party thereto.
Credit Agreement Obligations In connection with the Separation and the Distribution, on November 12, 2021, we, as parent, and Orion OP, as borrower, entered into (i) a credit agreement (the “Credit Agreement”) providing for a three-year, $425.0 million senior revolving credit facility (the “Revolving Facility”), including a $25.0 million letter of credit sub-facility, and a two-year, $175.0 million senior term loan facility (the “Term Loan Facility”) with Wells Fargo Bank, National Association, as administrative agent, and the lenders and issuing banks party thereto and (ii) a credit agreement (the “Bridge Credit Agreement”) providing for a six-month, $355.0 million senior bridge term loan facility (the “Bridge Facility”) with Wells Fargo Bank, National Association, as administrative agent, and the lenders party thereto.
As of December 31, 2023, the Company was in compliance with these financial covenants. The Mortgage Borrowers and the Company also provided a customary environmental indemnity agreement, pursuant to which the Mortgage Borrowers and the Company agreed to protect, defend, indemnify, release and hold harmless the Lender from and against certain environmental liabilities relating to the Mortgaged Properties.
As of December 31, 2024, the Company was in compliance with these financial covenants. The Mortgage Borrowers and the Company also provided a customary environmental indemnity agreement, pursuant to which the Mortgage Borrowers and the Company agreed to protect, defend, indemnify, release and hold harmless the Lender from and against certain environmental liabilities relating to the Mortgaged Properties.
As of June 30, 2023, the market value of our common stock held by non-affiliates was less than $700.0 million, and therefore, we expect to remain an “emerging growth company” at least until the next measuring date, which is June 30, 2024.
As of June 30, 2024, the market value of our common stock held by non-affiliates was less than $700.0 million, and therefore, we expect to remain an “emerging growth company” at least until the next measuring date, which is June 30, 2025.
The risks and uncertainties involved in applying the principles related to real estate impairment include, but are not limited to, the following: • The review of impairment indicators and subsequent determination of the undiscounted future cash flows could require us to reduce the value of assets and recognize an impairment loss. 32 Table of Contents • The evaluation of real estate assets for potential impairment requires our management to exercise significant judgment and make certain key assumptions, including the following: (1) capitalization rate; (2) discount rate; (3) number of years the property will be held; (4) property operating expenses; and (5) re-leasing assumptions including the number of months to re-lease, market rental revenue and required tenant improvements.
The risks and uncertainties involved in applying the principles related to real estate impairment include, but are not limited to, the following: • The review of impairment indicators and subsequent determination of the undiscounted future cash flows could require us to reduce the carrying value of assets and recognize an impairment loss. • The evaluation of real estate assets for potential impairment requires our management to exercise significant judgment and make certain key assumptions, including the following: (1) capitalization rate; (2) discount rate; (3) number of years the property will be held; (4) property operating expenses; and (5) re-leasing assumptions including the number of months to re-lease, market rental revenue and required tenant improvements.
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.
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 50 Table of Contents 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.
As of December 31, 2023, Orion OP was in compliance with these financial covenants. The Revolving Facility includes customary representations and warranties of us 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.
As of December 31, 2024, Orion OP was in compliance with these financial covenants. The Revolving Facility includes customary representations and warranties of us 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.
Pursuant to the second amendment described above, if, on any day, Orion OP has unrestricted cash and cash equivalents in excess of $25.0 million (excluding amounts that are then designated for application or use and are subsequently used for such purposes within 30 days), 43 Table of Contents Orion OP will use such excess amount to prepay loans under the Revolving Facility, without premium or penalty and without any reduction in the lenders’ commitment under the Revolving Facility.
Pursuant to the second amendment described above, if, on any day, Orion OP has unrestricted cash and cash equivalents in excess of $25.0 million (excluding amounts that are then designated for application or use and are subsequently used for such purposes within 30 days), Orion OP will use such excess amount to prepay loans under the Revolving Facility, without premium or penalty and without any reduction in the lenders’ commitment under the Revolving Facility.
Dividends We have elected to be taxed as a REIT for U.S. federal income tax purposes beginning with our taxable year ended December 31, 2021. We intend to make regular distributions to our stockholders to satisfy the requirements to maintain our qualification as a REIT.
Distributions We have elected to be taxed as a REIT for U.S. federal income tax purposes beginning with our taxable year ended December 31, 2021. We intend to make distributions to our stockholders to satisfy the requirements to maintain our qualification as a REIT.
As such, we are eligible to take advantage of certain exemptions from various reporting requirements that apply to other public companies that are not emerging growth companies, including compliance with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act and the requirements to hold a non-binding advisory vote on executive compensation and any golden parachute payments not previously approved.
As such, we are eligible to take advantage of certain exemptions from various reporting requirements that apply to other public 35 Table of Contents companies that are not emerging growth companies, including compliance with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act and the requirements to hold a non-binding advisory vote on executive compensation and any golden parachute payments not previously approved.
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 us 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 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 48 Table of Contents Facility (which was undrawn at the time of the second amendment), provide us 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.
In addition, the Revolving Facility requires that Orion OP satisfy certain financial covenants. The following is a summary of financial covenants for the Company’s Revolving Facility and the Company’s compliance therewith as of December 31, 2023, as calculated per the terms of the Credit Agreement, giving effect to the modifications pursuant to the second amendment described above.
In addition, the Revolving Facility requires that Orion OP satisfy certain financial covenants. The following is a summary of financial covenants for the Company’s Revolving Facility and the Company’s compliance therewith as of December 31, 2024, as calculated per the terms of the Credit Agreement, giving effect to the modifications pursuant to the second and third amendment described above.
Derivatives and Hedging Activities During the year ended December 31, 2021, we entered into interest rate swap agreements with an aggregate notional amount of $175.0 million, effective on December 1, 2021 and terminating on November 12, 2023, which were designated as cash flow hedges, in order to hedge interest rate volatility.
The ROFO Agreement expired on November 12, 2024. Derivatives and Hedging Activities During the year ended December 31, 2021, we entered into interest rate swap agreements with an aggregate notional amount of $175.0 million, effective on December 1, 2021 and terminating on November 12, 2023, which were designated as cash flow hedges, in order to hedge interest rate volatility.
Pursuant to the Universal Shelf, the Company is able to offer and sell from time to time in multiple transactions, up to $750.0 million of the Company’s securities, including through “at the market” offering programs or firm commitment underwritten offerings.
Pursuant to the Universal Shelf, 52 Table of Contents the Company is able to offer and sell from time to time in multiple transactions, up to $750.0 million of the Company’s securities, including through “at the market” offering programs or firm commitment underwritten offerings.
As of December 31, 2023, we had not sold any shares of common stock pursuant to the ATM Program. Net proceeds from the securities issued, if any, may be used for general corporate purposes, which may include funding capital expenditures and leasing costs at our properties and repaying outstanding indebtedness.
As of December 31, 2024, we had not sold any shares of common stock pursuant to the ATM Program. Net proceeds from the securities issued, if any, may be used for general corporate purposes, which may include funding capital expenditures and leasing costs at the Company’s properties and repaying outstanding indebtedness.
(the 29 Table of Contents “Company,” “Orion,” “we,” or “us”) makes statements in this section that are forward-looking statements within the meaning of the federal securities laws. For a complete discussion of forward-looking statements, see the section in this report entitled “ Forward-Looking Statements ”.
(the “Company,” “Orion,” “we,” or “us”) makes statements in this section that are forward-looking statements within the meaning of the federal securities laws. For a complete discussion of forward-looking statements, see the section in this report entitled “ Forward-Looking Statements ”.
Recently Issued Accounting Pronouncements Recently issued accounting pronouncements are described in Note 2 – Summary of Significant Accounting Policies to our consolidated and combined financial statements.
Recently Issued Accounting Pronouncements Recently issued accounting pronouncements are described in Note 2 – Summary of Significant Accounting Policies to our consolidated financial statements.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. The following discussion and analysis should be read in conjunction with the accompanying consolidated and combined financial statements and notes thereto appearing elsewhere in this Annual Report on Form 10-K. Orion Office REIT Inc.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. The following discussion and analysis should be read in conjunction with the accompanying consolidated financial statements and notes thereto appearing elsewhere in this Annual Report on Form 10-K. Orion Properties Inc.
Comparison of the year ended December 31, 2022 to the year ended December 31, 2021 (dollars in thousands) For a comparison of the year ended December 31, 2022 to the year ended December 31, 2021, see “Item. 7.
Comparison of the year ended December 31, 2023 to the year ended December 31, 2022 (dollars in thousands) For a comparison of the year ended December 31, 2023 to the year ended December 31, 2022, see “Item. 7.
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.
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.
These securities 46 Table of Contents may include shares of the Company’s common stock, shares of the Company’s preferred stock, depository shares representing interests in shares of the Company’s preferred stock, debt securities, warrants to purchase shares of the Company’s common stock or shares of the Company’s preferred stock and units consisting of two or more shares of common stock, shares of preferred stock, depository shares, debt securities and warrants.
These securities may include shares of the Company’s common stock, shares of the Company’s preferred stock, depository shares representing interests in shares of the Company’s preferred stock, debt securities, warrants to purchase shares of the Company’s common stock or shares of the Company’s preferred stock and units consisting of two or more shares of common stock, shares of preferred stock, depository shares, debt securities and warrants.
As an owner of commercial real estate, the Company is required to make capital expenditures with respect to its portfolio, which include normal building improvements to replace obsolete building components and expenditures to extend the useful life of existing assets and lease related expenditures to retain existing tenants or attract new tenants to our properties.
As an owner of commercial real estate, we are required to make capital expenditures with respect to our portfolio, which include normal building improvements to replace obsolete building components and expenditures to extend the useful life of existing assets and lease related expenditures to retain existing tenants or attract new tenants to our properties.
If the Arch Street Joint Venture is unable to extend or refinance the mortgage notes, our investment in the Arch Street Joint Venture could be materially adversely affected.
If the Arch Street Joint Venture is unable to extend or refinance the mortgage notes, our investment in the Arch Street Joint Venture could be materially adversely affected. See “Item 1A.
Additionally, other companies may utilize different assumptions or estimates that may impact comparability of our results of operations to those of companies in similar businesses.
Additionally, other companies may utilize different assumptions or estimates that may impact comparability of our 36 Table of Contents results of operations to those of companies in similar businesses.
Overview Orion 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.
Overview Orion 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.
(“Nareit”), an industry trade group, has promulgated a supplemental performance measure known as funds from operations (“FFO”), which we believe to be an appropriate supplemental performance measure to reflect 39 Table of Contents the operating performance of a REIT. FFO is not equivalent to our net income or loss as determined under U.S. GAAP.
(“Nareit”), an industry trade group, has promulgated a supplemental performance measure known as funds from operations (“FFO”), which we believe to be an appropriate supplemental performance measure to reflect the operating performance of the Company. FFO is not equivalent to our net income (loss) as determined under U.S. GAAP.
Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2022 Annual Report on Form 10-K filed on March 8, 2023. Non-GAAP Measures Our results are presented in accordance with U.S. GAAP. We also disclose certain non-GAAP measures, as discussed further below.
Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2023 Annual Report on Form 10-K filed on February 27, 2024. Non-GAAP Measures Our results are presented in accordance with U.S. GAAP. We also disclose certain non-GAAP measures, as discussed further below.
In February 2022, as further described below, we refinanced the Bridge Facility in full with the $355.0 million CMBS Loan (defined below), and the Bridge Credit Agreement was terminated. In June 2023, as further described below, the Term Loan Facility was repaid and retired with borrowings under the Revolving Facility.
In February 2022, as further described below, we refinanced the Bridge Facility in full with the $355.0 million CMBS Loan (defined below), and the Bridge Credit Agreement was terminated. In June 2023, as further described below, the Term Loan Facility was repaid and retired with borrowings under the Revolving Facility. We have entered into three amendments to the Credit Agreement.
Right of First Offer Agreement In connection with the entry into the LLCA, we and the Arch Street Joint Venture entered into that certain Right of First Offer Agreement (the “ROFO Agreement”), dated November 12, 2021, pursuant to which, subject to certain limitations, we agreed not to acquire or purchase a fee simple or ground leasehold interest in any office real property, including by way of an acquisition of equity interests, within certain investing parameters without first offering the property for purchase to the Arch Street Joint Venture.
The holders of the Arch Street Warrants will also remain subject to the ownership limitations pursuant to our organizational documents. 51 Table of Contents Right of First Offer Agreement In connection with the entry into the LLCA, we and the Arch Street Joint Venture entered into that certain Right of First Offer Agreement (the “ROFO Agreement”), dated November 12, 2021, pursuant to which, subject to certain limitations, we agreed not to acquire or purchase a fee simple or ground leasehold interest in any office real property, including by way of an acquisition of equity interests, within certain investing parameters without first offering the property for purchase to the Arch Street Joint Venture.
The Company has agreed to provide rent concessions to tenants and incur leasing costs with respect to its properties, including amounts paid directly to tenants to improve their space and/or building systems, or tenant improvement allowances, landlord agreements to perform and pay for certain improvements, and leasing commissions.
We have agreed to provide rent concessions to tenants and incur leasing costs with respect to our properties, including amounts paid directly to tenants to improve their space and/or building systems, or tenant improvement allowances, landlord agreements to perform and pay for certain improvements, and leasing commissions.
The Company has agreed to provide rent concessions to tenants and incur leasing costs with respect to its properties, including amounts paid directly to tenants to improve their space and/or building systems, or tenant improvement allowances, landlord agreements to perform and pay for certain improvements, and leasing commissions.
We have agreed to provide rent concessions to tenants and incur leasing costs with respect to our properties, including amounts paid directly to tenants to improve their space and/or building systems, or tenant improvement allowances, landlord agreements to perform and pay for certain improvements, and leasing commissions.
We believe the following critical accounting policy involves significant judgments and estimates used in the preparation of our financial statements, which should be read in conjunction with the more complete discussion of our accounting policies and procedures included in Note 2 – Summary of Significant Accounting Policies to our consolidated and combined financial statements.
We believe the critical accounting policies described below involve significant judgments and estimates used in the preparation of our financial statements, which should be read in conjunction with the more complete discussion of our accounting policies and procedures included in Note 2 – Summary of Significant Accounting Policies to our consolidated financial statements.
Interest expense for the year ended December 31, 2023 included offsets of $6.7 million of reclassified previous gains on interest rate derivatives from accumulated other comprehensive income (loss), compared with $1.8 million reclassified gains during the same period in 2022.
Interest expense for the year ended December 31, 2024 included no offsets of reclassified previous gains or losses on interest rate derivatives from accumulated other comprehensive income (loss), compared with $6.7 million of reclassified previous gains during the same period in 2023.
Nareit defines FFO as net income or loss computed in accordance with U.S. GAAP adjusted for gains or losses from disposition of real estate assets, depreciation and amortization of real estate assets, impairment write-downs on real estate, and our pro rata share of FFO adjustments related to the unconsolidated joint venture.
Nareit defines FFO as net income (loss) computed in accordance with U.S. GAAP adjusted for gains or losses from disposition of real estate assets, depreciation and amortization of real estate assets, impairment write-downs on real estate, and our proportionate share of FFO adjustments related to the unconsolidated joint venture. We calculate FFO in accordance with Nareit’s definition described above.
GAAP financial measure, for the years ended December 31, 2023, 2022 and 2021 (in thousands, except per share amounts): Year Ended December 31, 2023 2022 Net loss attributable to common stockholders $ (57,302) $ (97,494) Depreciation and amortization of real estate assets 109,011 131,297 Gain on disposition of real estate assets (31) (2,352) Impairment of real estate 33,112 66,359 Proportionate share of adjustments for unconsolidated joint venture 1,851 1,847 FFO attributable to common stockholders $ 86,641 $ 99,657 Transaction related 504 675 Spin related (1) — 964 Amortization of deferred financing costs (2) 3,974 4,364 Amortization of deferred lease incentives, net (2) 302 116 Equity-based compensation (2) 2,728 1,756 Loss on extinguishment of debt, net 504 468 Proportionate share of adjustments for unconsolidated joint venture 117 178 Core FFO attributable to common stockholders $ 94,770 $ 108,178 Weighted-average shares of common stock outstanding - basic and diluted 56,410 56,632 FFO attributable to common stockholders per diluted share $ 1.54 $ 1.76 Core FFO attributable to common stockholders per diluted share $ 1.68 $ 1.91 ____________________________________ (1) Spin related primarily consist of attorney fees and accountant fees related to the Separation and the Distribution and the Company’s start-up activities.
GAAP financial measure, for the periods indicated below (in thousands, except per share amounts): Year Ended December 31, 2024 2023 2022 Net loss attributable to common stockholders $ (103,012) $ (57,302) $ (97,494) Depreciation and amortization of real estate assets 100,682 109,011 131,297 Gain on disposition of real estate assets — (31) (2,352) Impairment of real estate 47,552 33,112 66,359 Proportionate share of adjustments for unconsolidated joint venture 1,856 1,851 1,847 FFO attributable to common stockholders $ 47,078 $ 86,641 $ 99,657 Transaction related 539 504 675 Spin related (1) — — 964 Amortization of deferred financing costs 3,686 3,974 4,364 Amortization of deferred lease incentives, net 509 302 116 Equity-based compensation 3,757 2,728 1,756 Loss on extinguishment of debt, net 1,078 504 468 Proportionate share of adjustments for unconsolidated joint venture 108 117 178 Core FFO attributable to common stockholders $ 56,755 $ 94,770 $ 108,178 Weighted-average shares of common stock outstanding - basic 55,903 56,410 56,632 Effect of weighted-average dilutive securities (2) 74 — — Weighted-average shares of common stock outstanding - diluted 55,977 56,410 56,632 FFO attributable to common stockholders per diluted share $ 0.84 $ 1.54 $ 1.76 Core FFO attributable to common stockholders per diluted share $ 1.01 $ 1.68 $ 1.91 ____________________________________ (1) Spin related primarily consist of attorney fees and accountant fees related to the Separation and the Distribution and the Company’s start-up activities.
Impairment charges totaling $66.4 million with respect to 18 properties were recorded during the same period in 2022. See Note 5 – Fair Value Measures for further information. Transaction related expenses Transaction related expense remained relatively consistent during the year ended December 31, 2023 as compared to the same period in 2022.
Impairment charges totaling $33.1 million with respect to eight properties were recorded during the year ended December 31, 2023. See Note 5 – Fair Value Measures for further information. Transaction related expenses Transaction related expense remained relatively consistent at $0.5 million during the year ended December 31, 2024 as compared to the same period in 2023.
We 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 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).
(3) Based on annualized base rent of our real estate portfolio, including the Company’s pro rata share of annualized base rent for properties owned by the Arch Street Joint Venture, as of December 31, 2023.
(5) Based on annualized base rent of our real estate portfolio, including the Company’s proportionate share of annualized base rent for properties owned by the Arch Street Joint Venture, as of December 31, 2024.
During the year ended December 31, 2023, the Company’s Board of Directors declared quarterly cash dividends on shares of our common stock as follows: Declaration Date Record Date Paid Date Distributions Per Share March 7, 2023 March 31, 2023 April 17, 2023 $0.10 May 3, 2023 June 30, 2023 July 17, 2023 $0.10 August 8, 2023 September 29, 2023 October 16, 2023 $0.10 November 9, 2023 December 29, 2023 January 16, 2024 $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.
During the year ended December 31, 2024, 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 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, representing a new annualized dividend rate of $0.08 per share.
Revolving Facility Financial Covenants Required December 31, 2023 Ratio of total indebtedness to total asset value ≤ 60% 38.3% Ratio of adjusted EBITDA to fixed charges ≥ 1.5x 3.5x Ratio of secured indebtedness to total asset value ≤ 40% 29.2% Ratio of unsecured indebtedness to unencumbered asset value ≤ 60% (1) 13.9% Ratio of unencumbered adjusted NOI to unsecured interest expense ≥ 2.00x 7.8x Unencumbered asset value ≥ $600.0 million $775.2 million ____________________________________ (1) Pursuant to the second amendment described above, if the ratio of unsecured debt to unencumbered asset value exceeds 35% as of the end of two consecutive fiscal quarters, Orion OP will be required, within 90 days and subject to cure rights, to grant the administrative agent a first priority lien on all the properties included in the pool of unencumbered assets (other than properties identified for disposition by us so long as such properties are sold within one year of such identification).
These calculations are presented to show the Company’s compliance with the financial covenants and are not measures of the Company’s liquidity or performance. 49 Table of Contents Revolving Facility Financial Covenants Required December 31, 2024 Ratio of total indebtedness to total asset value ≤ 60% 40.3% Ratio of adjusted EBITDA to fixed charges ≥ 1.5x 2.14x Ratio of secured indebtedness to total asset value ≤ 40% 31.1% Ratio of unsecured indebtedness to unencumbered asset value ≤ 60% (1) 15.7% Ratio of unencumbered adjusted NOI to unsecured interest expense ≥ 2.00x 5.1x Unencumbered asset value ≥ $500.0 million $753.7 million ____________________________________ (1) Pursuant to the second amendment described above, if the ratio of unsecured debt to unencumbered asset value exceeds 35% as of the end of two consecutive fiscal quarters, Orion OP will be required, within 90 days and subject to cure rights, to grant the administrative agent a first priority lien on all the properties included in the pool of unencumbered assets (other than properties identified for disposition by us so long as such properties are sold within one year of such identification).
We calculate FFO in accordance with Nareit’s definition described above. In addition to FFO, we use Core FFO as a non-GAAP supplemental financial performance measure to evaluate the operating performance of the Company.
In addition to FFO, we use Core FFO as a non-GAAP supplemental financial performance measure to evaluate the operating performance of the Company.
(4) Weighted average lease term does not include specified periods of the stated lease term during which a tenant has the right to terminate their space without a termination fee, or “non-firm terms.” The total weighted average lease term for new leases and renewals executed during the year ended December 31, 2023 would be 10.6 years if such non-firm terms were included.
(5) Weighted average lease term does not include specified periods of the stated lease term during which a tenant has the right to terminate their space without a termination fee, or “non-firm terms.” The total weighted average lease term for new leases and renewals executed during the years ended December 31, 2024 and 2023 would be 8.6 years and 10.6 years, respectively, if such non-firm terms were included. 41 Table of Contents During the year ended December 31, 2024, 11 leases expired consisting of approximately 1.3 million square feet across 10 properties.
Including our pro rata share of leasable square feet and annualized base rent from the Arch Street Joint Venture, we owned an aggregate of 8.9 million leasable square feet with an occupancy rate of 80.4%, or 87.2% adjusted for properties that are currently under agreement to be sold, and a weighted-average remaining lease term of 4.0 years, as of December 31, 2023.
Including our proportionate share of leasable square feet and annualized base rent from the Arch Street Joint Venture, we owned an aggregate of 8.1 million leasable square feet with an occupancy rate of 73.7%, or 73.1% adjusted for two operating properties that are currently under agreements to be sold, and a weighted-average remaining lease term of 5.2 years, as of December 31, 2024.
Year Ended December 31, 2023 2022 Financial Metrics Total revenues $ 195,041 $ 208,118 Net loss attributable to common stockholders $ (57,302) $ (97,494) Basic and diluted net loss per share attributable to common stockholders $ (1.02) $ (1.72) FFO attributable to common stockholders (1) $ 86,641 $ 99,657 FFO attributable to common stockholders per diluted share (1) $ 1.54 $ 1.76 Core FFO attributable to common stockholders (1) (2) $ 94,770 $ 108,178 Core FFO attributable to common stockholders per diluted share (1) (2) $ 1.68 $ 1.91 ____________________________________ (1) See the Non-GAAP Measures section below for descriptions of our non-GAAP measures and reconciliations to the most comparable U.S.
Operating Performance In addition, management uses the following financial metrics to assess our operating performance (in thousands, except per share amounts): Year Ended December 31, 2024 2023 2022 Financial Metrics Total revenues $ 164,862 $ 195,041 $ 208,118 Net loss attributable to common stockholders $ (103,012) $ (57,302) $ (97,494) Basic and diluted net loss per share attributable to common stockholders $ (1.84) $ (1.02) $ (1.72) FFO attributable to common stockholders (1) $ 47,078 $ 86,641 $ 99,657 FFO attributable to common stockholders per diluted share (1) $ 0.84 $ 1.54 $ 1.76 Core FFO attributable to common stockholders (1) $ 56,755 $ 94,770 $ 108,178 Core FFO attributable to common stockholders per diluted share (1) $ 1.01 $ 1.68 $ 1.91 ____________________________________ (1) See the Non-GAAP Measures section below for descriptions of our non-GAAP measures and reconciliations to the most comparable U.S.
During the year ended December 31, 2023, amounts capitalized by the Company for lease related costs, lease incentives and building, fixtures and improvements were as follows (in thousands): Year Ended December 31, 2023 Lease related costs (1) $ 1,405 Lease incentives (2) 2,431 Building, fixtures and improvements (3) 17,476 Total capital expenditures $ 21,312 ____________________________________ (1) Lease related costs generally include lease commissions paid in connection with the execution of new and/or renewed leases.
During the periods indicated below, amounts capitalized by the Company for capital expenditures were as follows (in thousands): Year Ended December 31, 2024 2023 2022 Lease related costs (1) $ 10,058 $ 1,405 $ 4,362 Lease incentives (2) 656 2,431 1,810 Building, fixtures and improvements (3) 13,354 17,476 8,452 Total capital expenditures $ 24,068 $ 21,312 $ 14,624 ____________________________________ (1) Lease related costs generally include lease commissions paid in connection with the execution of new and/or renewed leases.
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.
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.
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.
The Company did not repurchase any shares under the Share Repurchase Program during the year ended December 31, 2024. 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.
Other (Expense) Income and Provision for Income Taxes The table below sets forth, for the periods presented, certain financial information and the dollar amount change year over year (in thousands): Year Ended December 31, 2023 2022 2023 vs 2022 Increase/(Decrease) Interest expense, net $ (29,669) $ (30,171) $ (502) Loss on extinguishment of debt, net $ (504) $ (468) $ 36 Other income, net $ 911 $ 223 $ 688 Equity in loss of unconsolidated joint venture, net $ (435) $ (524) $ (89) Gain on disposition of real estate assets $ 31 $ 2,352 $ (2,321) Provision for income taxes $ (456) $ (212) $ 244 38 Table of Contents Interest expense, net Interest expense, net decreased $0.5 million during the year ended December 31, 2023 as compared to the same period in 2022, which was primarily due to lower outstanding debt during the year ended December 31, 2023, partially offset by higher interest rates.
Other (Expense) Income and Provision for Income Taxes The table below sets forth, for the periods presented, certain financial information and the dollar amount change year over year (in thousands): Year Ended December 31, 2024 2023 2024 vs 2023 Increase/(Decrease) Interest expense, net $ (32,637) $ (29,669) $ 2,968 Gain on disposition of real estate assets $ — $ 31 $ (31) Loss on extinguishment of debt, net $ (1,078) $ (504) $ 574 Other income, net $ 987 $ 911 $ 76 Equity in loss of unconsolidated joint venture, net $ (740) $ (435) $ 305 Provision for income taxes $ (214) $ (456) $ (242) Interest expense, net Interest expense, net increased $3.0 million during the year ended December 31, 2024 as compared to the same period in 2023, which was primarily due to higher interest rates, partially offset by lower outstanding debt during the year ended December 31, 2024.
Future Lease Expirations For a tabular summary of scheduled lease expirations in our property portfolio as of December 31, 2023, see the Lease Expirations table under “Item 2.
Future Lease Expirations For a tabular summary of scheduled lease expirations in our property portfolio as of December 31, 2024, see the Lease Expirations table under “Item 2. Properties” in this Annual Report on Form 10-K.
Properties” in this Annual Report on Form 10-K. 36 Table of Contents Results of Operations Comparison of the year ended December 31, 2023 to the year ended December 31, 2022 (dollars in thousands) The results of operations discussed in this section include the accounts of the Company and its consolidated subsidiaries for the years ended December 31, 2023 and 2022.
Results of Operations Comparison of the year ended December 31, 2024 to the year ended December 31, 2023 (dollars in thousands) The results of operations discussed in this section include the accounts of the Company and its consolidated subsidiaries for the years ended December 31, 2024 and 2023.
Our portfolio occupancy rate was 80.0% and we had 75 properties with an aggregate of 8.7 million leasable square feet as of December 31, 2023, as compared to a portfolio occupancy rate of 88.8% and 81 properties with an aggregate of 9.5 million leasable square feet as of December 31, 2022.
We had 69 operating properties with an aggregate of 7.9 million leasable square feet and an occupancy rate of 73.0% as of December 31, 2024, as compared to 75 properties with an aggregate of 8.7 million leasable square feet and an occupancy rate of 80.0% as of December 31, 2023.
General and administrative expenses General and administrative expenses increased $2.8 million during the year ended December 31, 2023 as compared to the same period in 2022, primarily due to increased stock compensation expense for additional equity award issuances during the year ended December 31, 2023 as well as merit base salary increases and higher employee headcount.
General and administrative expenses General and administrative expenses increased $1.4 million during the year ended December 31, 2024 as compared to the same period in 2023, primarily due to increased stock compensation expense of $1.2 million for additional equity award issuances.
Investment-grade tenants are those with a credit rating of BBB- or higher by Standard & Poor’s Financial Services LLC or a credit rating of Baa3 or higher by Moody’s Investor Service, Inc.
Investment-grade tenants are those with a credit rating of BBB- or higher by Standard & Poor’s Financial Services LLC or a credit rating of Baa3 or higher by Moody’s Investor Service, Inc. The ratings may reflect those assigned by Standard & Poor’s Financial Services LLC or Moody’s Investor Service, Inc. to the lease guarantor or the parent company, as applicable.
Leasing Activity and Capital Expenditures The Company remains highly focused on leasing activity, given the 4.0 year weighted-average remaining lease term and the significant lease maturities which will occur across the portfolio over the next few years.
GAAP measure. 39 Table of Contents Leasing Activity and Capital Expenditures We remain highly focused on leasing activity, given the 5.2 year weighted-average remaining lease term and the significant lease maturities which will occur across the portfolio over the next few years.
Revenues The table below sets forth, for the periods presented, revenue information and the dollar amount change year over year (in thousands): Year Ended December 31, 2023 2022 2023 vs 2022 Increase/(Decrease) Rental $ 194,241 $ 207,353 $ (13,112) Fee income from unconsolidated joint venture 800 765 35 Total revenues $ 195,041 $ 208,118 $ (13,077) Rental The decrease in rental revenue of $13.1 million during the year ended December 31, 2023 as compared to the same period in 2022 was primarily due to the decrease in our overall occupied square footage due to scheduled vacancies and property dispositions.
Revenues The table below sets forth, for the periods presented, revenue information and the dollar amount change year over year (in thousands): Year Ended December 31, 2024 2023 2024 vs 2023 Increase/(Decrease) Rental $ 164,055 $ 194,241 $ (30,186) Fee income from unconsolidated joint venture 807 800 7 Total revenues $ 164,862 $ 195,041 $ (30,179) 42 Table of Contents Rental The decrease in rental revenue of $30.2 million during the year ended December 31, 2024 as compared to the same period in 2023 was primarily due to the decrease in our overall occupied square footage from scheduled expiration of leases totaling $26.8 million in rental revenues and the impact from property dispositions of $8.4 million during the year ended December 31, 2024.
(2) Occupancy rate equals the sum of leased square feet divided by rentable square feet. The occupancy rate as of December 31, 2023 equals 87.2% adjusted for properties that are currently under agreement to be sold.
Adjusting for two operating properties that are currently under agreements to be sold, the occupancy rate as of December 31, 2024 equals 73.1%. (4) Leased rate equals the sum of leased square feet divided by rentable square feet of operating properties.
The Company has no immediate plans to issue any securities for capital raising purposes pursuant to the Universal Shelf or otherwise. Share Repurchase Program On November 1, 2022, the Company’s Board of Directors authorized the repurchase of up to $50.0 million of the Company’s outstanding common stock until December 31, 2025, as market conditions warrant (the “Share Repurchase Program”).
Share Repurchase Program On November 1, 2022, the Company’s Board of Directors authorized the repurchase of up to $50.0 million of the Company’s outstanding common stock until December 31, 2025, as market conditions warrant (the “Share Repurchase Program”).
As of December 31, 2023, the Company had outstanding commitments of $42.3 million for tenant improvement allowances and $0.3 million for leasing commissions. The actual amount we pay for tenant improvement allowances may be lower than the commitment in the applicable lease and will depend upon the tenant’s use of the capital on the agreed upon timeline.
The actual amount we pay 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.
During the years ended December 31, 2023 and 2022, the Company recognized $4.3 million and $1.4 million, respectively, of lease termination income. Fee income from unconsolidated joint venture Fee income from unconsolidated joint venture consists of fees earned for providing various services to the Arch Street Joint Venture.
Fee income from unconsolidated joint venture Fee income from unconsolidated joint venture consists of fees earned for providing various services to the Arch Street Joint Venture. Fee income from unconsolidated joint venture remained consistent at $0.8 million during the years ended December 31, 2024 and 2023.
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.
The timing of our 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. We estimate that the foregoing rent concessions and leasing costs will be funded between 2025 and 2039.
Following the Distribution, the Company has been operating as an independent publicly traded company, and the Company has elected to be taxed as a REIT for U.S. federal income tax purposes, commencing with its initial taxable year ended December 31, 2021.
Following the Distribution, we became an independent and publicly traded company, and our common stock, par value $0.001, 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.
Our principal liquidity needs beyond the next twelve months are to: (i) repay, extend or refinance debt at or prior to maturity; (ii) pay dividends to our stockholders; (iii) fund capital expenditures and leasing costs at properties we own; and (iv) fund new acquisitions, including acquisitions related to the Arch Street Joint Venture.
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. 47 Table of Contents Our principal liquidity needs beyond the next twelve months are to: (i) extend, refinance or repay debt at or prior to maturity; (ii) pay dividends to our stockholders; (iii) fund capital expenditures and leasing costs at properties we own; and (iv) fund new acquisitions.
The CMBS Loan is generally not freely prepayable by the Mortgage Borrowers without payment of certain prepayment premiums and costs.
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.
Credit Agreements Summary The following is a summary of the interest rate and scheduled maturities of our consolidated debt obligations as of December 31, 2023 (in thousands): Principal Amounts Due During the Years Ending December 31, Interest Rate Maturity Total 2024 2025 2026 2027 Credit facility revolver (1) (2) SOFR + 3.35% May 2026 $ 116,000 $ — $ — $ 116,000 $ — Mortgages payable (3) 4.971 % February 2027 355,000 — — — 355,000 Total $ 471,000 $ — $ — $ 116,000 $ 355,000 ____________________________________ (1) Includes interest rate margin of 3.25% plus SOFR adjustment of 0.10%.
The following is a summary of the interest rate and scheduled maturities of our consolidated debt obligations as of December 31, 2024 (in thousands): Weighted-Average Interest Rate (1) Weighted-Average Years to Maturity Principal Amounts Due During the Years Ending December 31, Total 2025 2026 2027 Thereafter Credit facility revolver (2) 7.66 % 1.4 $ 119,000 $ — $ 119,000 $ — — Mortgages payable (3) (4) 5.02 % 2.3 373,000 — — 355,000 18,000 Total $ 492,000 $ — $ 119,000 $ 355,000 $ 18,000 ____________________________________ (1) The weighted-average interest rate represents the interest rate in effect as of December 31, 2024.
Loss on extinguishment of debt, net during the year ended December 31, 2022 related to the write off of deferred financing costs due to the early extinguishment of the Company’s Bridge Facility, as defined below and discussed in Note 6 – Debt, Net.
Loss on extinguishment of debt, net Loss on extinguishment of debt, net during the year ended December 31, 2024 related to the proportionate write off of deferred financing costs due to the reduction of the borrowing capacity of the Revolving Facility of $75.0 million in connection with the Third Amendment to the Credit Agreement defined below and discussed in Note 6 – Debt, Net.
As of December 31, 2023, we had $60.0 million of variable rate debt outstanding under the Revolving Facility which was subject to interest rate collar agreements to hedge against interest rate volatility.
(2) Includes interest rate margin of 3.25% plus SOFR adjustment of 0.10%. As of December 31, 2024, a total of $60.0 million of the debt outstanding under the Revolving Facility was subject to interest rate collar agreements to hedge against interest rate volatility.
These properties were subject to cumulative impairment losses of $16.0 million in prior periods. Provision for income taxes The provision for income taxes consists of certain state and local income and franchise taxes. The provision for income taxes increased $0.2 million during the year ended December 31, 2023 as compared to the same period in 2022.
Provision for income taxes The provision for income taxes consists of certain state and local income and franchise taxes. The provision for income taxes decreased modestly during the year ended December 31, 2024 as compared to the same period in 2023.
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. 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.
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.
The Company’s average debt outstanding for the year ended December 31, 2023 was $500.5 million, as compared to $575.0 million during the same period in 2022.
The Company’s average debt outstanding was $481.5 million for the year ended December 31, 2024 compared to $500.5 million during the same period in 2023. The Company’s weighted-average interest rate on its debt obligations was 5.85% for the year ended December 31, 2024 and 4.66% for the same period in 2023.
Liquidity and Capital Resources General Our principal liquidity needs for the next twelve months are to: (i) fund operating expenses; (ii) pay interest on our debt; (iii) pay dividends to our stockholders; (iv) fund capital expenditures and leasing costs at properties we own; and (v) fund new acquisitions, including acquisitions related to the Arch Street Joint Venture.
Such dilutive securities are not included when calculating net loss per diluted share applicable to the Company for the year ended December 31, 2024 as the effect would be antidilutive. 46 Table of Contents Liquidity and Capital Resources General Our principal liquidity needs for the next twelve months are to: (i) fund operating expenses; (ii) pay interest on our debt; (iii) pay dividends to our stockholders; (iv) fund capital expenditures and leasing costs at properties we own; (v) fund capital contributions to the Arch Street Joint Venture and (vi) fund new acquisitions.
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.
We anticipate that we will continue to agree to tenant improvement allowances, the amount of which may increase in future periods. These rent concessions and leasing costs 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 us.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeAny downturn of the economic conditions in one or more of these tenants, geographies or industries could result in a material reduction of our cash flows or material losses to us. 49 Table of Contents The factors we consider in determining the credit risk of our tenants include, but are not limited to: payment history; credit status and change in status (credit ratings for public companies are used as a primary metric); change in tenant space needs ( i.e. , expansion/downsize); tenant financial performance; economic conditions in a specific geographic region; and industry specific credit considerations.
Biggest changeThe factors we consider in determining the credit risk of our tenants include, but are not limited to: payment history; credit status and change in status (credit ratings for public companies are used as a primary metric); change in tenant space needs ( i.e. , expansion/downsize); tenant financial performance; economic conditions in a specific geographic region; and industry specific credit considerations.
The sensitivity analysis related to our variable-rate debt assumes an immediate 100 basis point move in interest rates from December 31, 2023 levels and excludes the impact of the derivative instrument, with all other variables held constant.
The sensitivity analysis related to our variable-rate debt assumes an immediate 100 basis point move in interest rates from December 31, 2024 levels and excludes the impact of the derivative instrument, with all other variables held constant.
As the information presented above includes only those exposures that existed as of December 31, 2023, it does not consider exposures or positions arising after that date. The information presented herein has limited predictive value.
As the information presented above includes only those exposures that existed as of December 31, 2024, it does not consider exposures or positions arising after that date. The information presented herein has limited predictive value.
As of December 31, 2023, the Company had interest rate collar agreements in place on a total notional amount of $60.0 million to hedge against interest rate volatility on the Revolving Facility. See Note 6 – Debt, Net to our consolidated and combined financial statements.
As of December 31, 2024, the Company had interest rate collar agreements in place on a total notional amount of $60.0 million to hedge against interest rate volatility on the Revolving Facility. See Note 6 – Debt, Net to our consolidated financial statements.
The sensitivity analysis related to our fixed-rate debt assumes an immediate 100 basis point move in interest rates from December 31, 2023 levels, with all other variables held constant. A 100 basis point increase in market interest rates would result in a decrease in the fair value of our fixed-rate debt of $9.1 million.
The sensitivity analysis related to our fixed-rate debt assumes an immediate 100 basis point move in interest rates from December 31, 2024 levels, with all other variables held constant. A 100 basis point increase in market interest rates would result in a decrease in the fair value of our fixed-rate debt of $7.2 million.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk See information appearing under the caption “Liquidity and Capital Resources – Orion Office REIT Inc.” appearing in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Annual Report on Form 10-K.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk See information appearing under the caption “Liquidity and Capital Resources” appearing in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Annual Report on Form 10-K.
As of December 31, 2023, our outstanding derivative agreements had a fair value that resulted in net liabilities of $0.3 million. See Note 7 – Derivatives and Hedging Activities to our consolidated and combined financial statements for further discussion.
As of December 31, 2024, our outstanding derivative agreements had a fair value that resulted in net liabilities of less than $0.1 million. See Note 7 – Derivatives and Hedging Activities to our consolidated financial statements for further discussion.
Interest Rate Risk As of December 31, 2023, our debt included fixed-rate debt, with a fair value and carrying value of $334.9 million and $355.0 million, respectively. Changes in market interest rates on our fixed-rate debt impact the fair value of the debt, but they have no impact on interest incurred or cash flow.
Interest Rate Risk As of December 31, 2024, our debt included fixed-rate debt, with a fair value and carrying value of $352.5 million and $373.0 million, respectively. Changes in market interest rates on our fixed-rate debt impact the fair value of the debt, but they have no impact on interest incurred or cash flow.
A 100 basis point decrease in market interest rates would result in an increase in the fair value of our fixed-rate debt of $9.4 million. As of December 31, 2023, our debt included variable-rate debt, with a fair value and carrying value of $116.0 million.
A 100 basis point decrease in market interest rates would result in an increase in the fair value of our fixed-rate debt of $7.5 million. As of December 31, 2024, our debt included variable-rate debt, with a fair value and carrying value of $119.0 million.
Credit Risk Concentrations of credit risk arise when a number of tenants are engaged in similar business activities, or activities in the same geographic region, or have similar economic features that would cause their ability to meet contractual obligations, including those to the Company, to be similarly affected by changes in economic conditions.
These amounts were determined by considering the impact of hypothetical interest rate changes on our borrowing costs and assume no other changes in our capital structure. 54 Table of Contents Credit Risk Concentrations of credit risk arise when a number of tenants are engaged in similar business activities, or activities in the same geographic region, or have similar economic features that would cause their ability to meet contractual obligations, including those to the Company, to be similarly affected by changes in economic conditions.
Future actual realized gains or losses with respect to interest rate fluctuations will depend on cumulative exposures, hedging strategies employed and the magnitude of the fluctuations. These amounts were determined by considering the impact of hypothetical interest rate changes on our borrowing costs and assume no other changes in our capital structure.
Future actual realized gains or losses with respect to interest rate fluctuations will depend on cumulative exposures, hedging strategies employed and the magnitude of the fluctuations.
The Company is subject to tenant, geographic and industry concentrations. See “Item 2. Properties” in this Annual Report on Form 10-K.
The Company is subject to tenant, geographic and industry concentrations. See “Item 1. Business” and “Item 2. Properties” in this Annual Report on Form 10-K. Any downturn of the economic conditions in one or more of these tenants, geographies or industries could result in a material reduction of our cash flows or material losses to us.

Other ONL 10-K year-over-year comparisons