Greetings. Welcome to Orion Office REIT's Second Quarter 2023 Earnings Call. As a reminder, this conference is being recorded. I would now like to turn the call over to, Paul Hughes, General Counsel for Orion. Thank you, Mr. Hughes. You may begin.

Thank you. Good morning, everyone. Yesterday, Orion released its financial results for the quarter ended June 30, 2023, filed its Form 10-Q with the Securities and Exchange Commission and posted its earnings supplement to its Web site. These documents are available in the Investor Section of the company's Web site at onlreit.com. I would like to remind everyone that certain statements [Technical Difficulty]. These statements, which include the company's guidance estimates for calendar year 2023 are based on management's current expectations and beliefs and are subject to a number of risks and uncertainties that could cause actual results to differ materially from our estimates. The risks and uncertainties are discussed in our earnings release as well as in our Form 10-Q and other SEC filings. You should not place undue reliance on these forward-looking statements, and the company undertakes no duty to update any forward-looking statements made during this call. Additionally, during the conference call today, we will be discussing certain non-GAAP financial measures, such as funds from operations or FFO and core funds from operations or core FFO. Company's earnings release and supplement include a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measure. Our presentation of this information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP. Hosting the call today are Paul McDowell, the company's Chief Executive Officer; and Gavin Brandon, the company's Chief Financial Officer. And joining us for the Q&A session is Gary Landriau, our Chief Investment Officer; and Chris Day, our Chief Operating Officer. With that, I am now going to turn the call over to Paul McDowell. Paul?

Good morning, everyone. And welcome to Orion Office REIT’s second quarter 2023 earnings call. On behalf of our team, I want to thank you all for joining us today. I will discuss our performance and operations for the second quarter and highlight our continued progress in executing on our business strategy. I will then turn the call over to Gavin to provide an update on our financial results and on our outlook for the rest of the year. We would certainly welcome an acceleration in the pace of office utilization and leasing momentum. But since we cannot control that timing, we remain focused on executing our strategy to reposition the portfolio of properties we inherited in 2021 from Orion's spinoff from Realty Income. The economic backdrop for commercial real estate and specifically for the office sector remains difficult. At Orion, we are continuing to take proactive steps to reinforce our capital structure to support the necessary investments in our core portfolio in the form of building improvement allowances and lease incentives to retain tenants and extend our portfolio's weighted average lease term, produce sustained cash flows and ultimately position the company to grow. With that in mind, the most important news for us in the quarter was that we successfully secured an amendment to our credit agreement, which retired our term loan ahead of schedule, gives us continued access to significant liquidity and the ability to extend the revolver loan term well into 2026. Gavin will provide a few more details but we appreciate the continued support of Orion and our business plan by all our lenders that allowed us to close this amendment in the midst of a tight credit market and challenging financing environment for office properties. We remain steadfast and confident that owning a diversified portfolio of…

Thanks, Paul. I will start by discussing Orion's GAAP results for the second quarter. We generated total revenues of $52 million as compared to $52.8 million in the same quarter of the prior year. We reported a net loss attributable to common stockholders of $15.7 million or $0.28 per share as compared to a net loss of $15.6 million or $0.27 per share reported in 2022. Core funds from operations for the quarter was $26.9 million or $0.48 per share as compared to $28.4 million or $0.50 per share in the same quarter of 2022. Due to the timing of an expense reimbursement that was received in the quarter, our results benefited by $0.02 per share in the second quarter. This benefit is offset by $0.02 of expense we incurred in the first quarter when we reserved against the reimbursement, thus having no 2023 year-to-date or full year impact. Adjusted EBITDA was $32.7 million versus $34.7 million in the same quarter of 2022. The changes year-over-year are primarily related to vacancies and the disposition of properties. G&A was $4.6 million compared to $3.3 million in the second quarter of 2022. As we have discussed on prior calls, the expiration of spin related expense subsidies from realty income, the achievement of optimal headcount during 2022 and an additional year of stock based compensation expense will impact the year-over-year 2023 comparisons. CapEx this quarter was $2.2 million compared to $2.4 million in the second quarter of 2022, including property improvements of $2.1 million and leasing commissions associated with the company's leasing activity or an additional $93,000. As a reminder, CapEx timing will be dependent on when leases are signed and work is completed on properties. CapEx will likely increase over time as leases rollover and new and existing tenants draw upon tenant…

[Operator Instructions] And the first question comes from the line of Mitch Germain with JMP Securities.

This is Judy on from Mitch. The first one here, could you shed some light on the lease expiration for ‘23, ‘24, just maybe what it looks like in terms of tenant quality, geography, et cetera?

We've got a couple of -- we've got a few lease expirations so far this year. One in Lawrence, Kansas and then we have a few coming up. The big one is primarily the Walgreens campus in Deerfield, Illinois, which expires on 8/31 and Experian property in Schaumburg, Illinois, which expires on 7/31, neither one of those tenants has renewed. Next year we've got about 15% of our total ABR or maybe, I think, it's actually about 20% -- 25% coming due next year. A portion of that likely won't renew but a portion of it will renew still obviously working our way through that in advance of those expirations.

And that was one of my questions on the Walgreens move out, so thanks for answering that. So GSA leased during the quarter, we saw it was a five year renewal. Is this a trend that you're seeing when the government is taking shorter leases right now or is it how just it did in the past?

Well actually that one's a little unusual, Judy. The GSA has from time to time tried to execute some shorter lease extensions. But we have been generally successful with them on executing lease extensions that I think have probably been on average eight or nine years in the past year or two. In the case of the property that renewed this year, or this quarter rather, our expectation is that they will likely execute with us a much longer renewal in a few years as they transfer lease negotiation from the agency, which occupied the property to the GSA, hence the five year lease extension, that's really just an interim step to what we expect will be a longer term lease extension.

The last one for me. Firstly, congratulations on getting the debt deal done, but now that it's in the rear view and maturities are hopefully further down the line. What are your thoughts on stepping up the offensive and perhaps buying assets and maybe discuss like Arch Street's perspective on growing with JV?

Yes, from a buying assets perspective, we've recycled a lot of capital. Since we spun off we have paid down about $90 million of debt. When we refinance the line of credit, we had no outstanding balances on our revolver. We have $42 million of cash and we have some additional disposition scheduled at the later part of this year and the beginning of next year. So we will consider recycling some of that capital into new assets depending upon where we see the market and our opportunities there as compared to paying down debt or other uses of capital. As we said in our prepared remarks, we think that most of the capital that we intent to utilize in coming periods will go back into the existing portfolio, but we will actually consider recycling some capital into assets on the balance sheet. With respect to the Arch Street joint venture, that continues, we still are active with Arch Street. We are continuing to look at potential acquisition opportunities for that JV. One of the impediments to that is the financing market remains pretty challenging. So we are trying to make sure that, to the extent that we add additional assets to that JV, we can do so in a manner that is accretive from a financing perspective.

Ladies and gentlemen, that concludes the question-and-answer session. I would like to turn the floor back over to Paul McDowell for any closing comments.

Thank you all for joining us this quarter. And we look forward to updating you after our Q3 results are published.

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a great day.