Greetings. Welcome to Orion Office REIT’s Fourth 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. You may now begin.

Thank you. Good morning, everyone. Yesterday, Orion released its financial results for the quarter and year-ended December 31, 2023, filed its Form 10-K with the Securities and Exchange Commission and posted its earnings supplement to its website. These documents are available in the Investors section of the company’s website at onlreit.com. Certain statements made during this call are not strictly historical information and constitute forward-looking statements. These statements, which include the company’s guidance estimates for calendar year 2024 are based on management’s current expectations and are subject to a number of risks that could cause actual results to differ materially from our estimates. The risks are discussed in our earnings release as well as in our Form 10-K and other SEC filings. 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. The 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 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 are 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.

Good morning, everyone, and thank you for joining us on Orion Office REIT’s fourth quarter 2023 earnings call. Today, I will discuss our portfolio, performance, and operations for the fourth quarter and full year 2023, as well as our progress on executing our business strategy and our general forward outlook. Following my remarks, Gavin will review our financial results and provide our 2024 outlook. At year-end, we owned 75 properties and six unconsolidated joint venture properties comprising 8.9 million rentable square feet that were 80.4% occupied. Adjusted for properties that are currently under agreement to be sold, our occupancy rate was 87.2%. As of December 31, 2023, the properties in the portfolio are predominantly either triple or double net leased to credit worthy tenants. As a percentage of annualized base rent as of December 31, 2023, 70.6% of our tenants were investment grade. The company’s strong portfolio of assets is well diversified by tenant, tenant industry and geography. Our largest tenant by annualized base rent remains the United States Government, and our two largest tenant industries are healthcare and government, representing 15.3% and 13.9% of annualized base rent, respectively. Over 35% of our annualized base rent is derived from Sunbelt markets. On an annualized base rent basis, our largest markets by state are Texas at 17.2% and New Jersey and New York at 10.2% each. Our portfolio’s weighted average lease term stayed steady at four years at year-end. During the fourth quarter, we gained some traction on renewals and new leases. We entered into a 10-year early lease renewal for 90,000 square feet in Memphis, Tennessee, where the investment grade tenants lease term will now run until year-end 2034. We also secured a five-year early lease renewal at a 39,000 square foot property leased to the United States Postal Service…

Thanks, Paul. I will start by discussing Orion’s results for the fourth quarter and full year and then provide our 2024 financial outlook. Orion generated total revenues of $43.8 million in the fourth quarter as compared to $50.3 million in the same quarter of the prior year. We’ve reported a net loss attributable to common stockholders of $16.2 million or $0.29 per share, as compared to a net loss of $19 million or $0.33 per share reported in the fourth quarter of 2022. Core funds from operations for the quarter was $18.5 million or $0.33 per share as compared to $24.9 million or $0.44 share in the same quarter of 2022. Adjusted EBITDA was $24.6 million versus $30.7 million in the same quarter of 2022. The changes year-over-year are primarily related to vacancies and the disposition of properties. For the full year, Orion’s total revenues were $195 million and net loss attributable to common stockholders was $57.3 million or a loss of $1.02 per share. Core funds from operations was $94.8 million or $1.68 per share. Adjusted EBITDA for the full year was $118.5 million. G&A in the fourth quarter was $5.5 million, compared to $4.4 million in the same quarter of 2022 due to higher compensation expenses as a result of annual merit increases and hiring additional headcount during the year and an additional year of non-cash stock-based compensation expense. CapEx in the fourth quarter was $7.4 million, compared to $6.1 million in the same quarter of 2022. As we had previously discussed, CapEx timing is dependent on when leases are signed and work is completed on properties. CapEx will likely increase over time as leases roll and new and existing tenants draw on tenant improvement allowances. G&A for the full year was $18.7 million and CapEx tenant improvements…

Thank you. At this time, we’ll be conducting a question-and-answer session. [Operator Instructions] Thank you. And our first question is from the line of Mitch Germain with Citizens JMP. Please proceed with your questions.

Good morning. This is Judy on for Mitch. My first question here is, based on the recent leasing trends, what are your thoughts on CapEx, and are you recently rising higher?

Good morning. Yes, I mean, we have a variety – our leasing CapEx has varied pretty dramatically with respect to renewals, we’ve generally been able to maintain relatively smaller CapEx and lease concessions than we have on new leases. So I would say that with respect to new leases, concessions are significantly higher than they may have been traditionally. But on new leases, we’ve been pretty good at maintaining a pretty low level of concessions.

Right. And we should expect that to trend quite high for the 2023 expirations that you address as well, right?

I think when we get – the answer to that is yes.

The 2024, sorry.

Yes. The answer to that is yes. When we get back vacancy, our expectation is that we will be required to attract new tenants. We will be required to spend significant amounts of tenant improvement allowance to attract those tenants, as well as to add some additional landlord work to the buildings to improve amenities and things like that. All that being said, once you’ve been able to do that, we do believe that we can attract good quality tenants on a long duration lease where the return on our investment is significantly better than it would be on investing in new properties.

Yes. Thank you. And second question here. So last quarter, I think you had guided to paying $33 million in debt, but 4Q, there was a $59 million reduction. So what was the reason for the change there?

Yes. This is Gavin. The term loan we took out last quarter with $175 million. We had $59 million in escrow. I’m sorry, $49 million in escrow. Then we paid an additional $10 million at the year-end. So total pay down for the year on that revolver is $59 million.

Okay. Good.

This is the proceeds from escrow that we were carrying throughout the year.

Got it. And the last one from me, Walgreens, the timing, I think you mentioned was 4Q or 1Q 2025. It’s just a due diligence and the timing is delayed because of that.

Yes. I mean, that’s a six campus property in Deerfield, Illinois, as you know. And the redevelopment plan there is very large. So as a result, that redevelopment plan is taking time to develop. The developer who is doing that is working diligently to do that. There are a variety of moving pieces, including getting TIF financing, including getting approval from the local municipality, public comment periods and so on and so forth. And that’s all ongoing. It’s just taking a bit longer than we had initially expected. But we do expect the transaction will reach the goal line, and we hope to have it closed at the end of this year, and if not at the beginning of next.

Okay. Got it. Thank you for taking my questions. That’s all.

Thank you.

Thank you. At this time, I will now turn the call back to Mr. McDowell for any closing remarks.

Thank you, everyone. We appreciate you taking part in the call, and we look forward to updating you at the end of the first quarter.

This will conclude today’s conference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.