Greetings and welcome to Orion Office REIT Inc.'s Fourth Quarter and Full Year 2024 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 Office REIT Inc. Thank you. You may begin.

Thank you and good morning everyone. Yesterday, Orion Office REIT Inc. released its financial results for the quarter and year ended December 31, 2024, filed this annual report on Form 10-K with the Securities and Exchange Commission, and posted its earnings supplement to its website at onlreit.com. During the call today, we will be discussing certain forward-looking statements, such as the company's guidance estimates for calendar year 2025, which are based on management's current expectations and are subject to certain 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. Orion Office REIT Inc. undertakes no duty to update any forward-looking statements made during this call. Today on the call, we will be discussing certain non-GAAP financial measures, which are not the substitute financial information presented in accordance with GAAP, such as funds from operations or FFO and core funds from operations or core FFO. Orion Office REIT Inc.'s earnings release and supplement include a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measure. Hosting the call today are Orion Office REIT Inc.'s Chief Executive Officer, Paul McDowell, and Chief Financial Officer, Gavin Brandon. Joining us for the Q&A session are Gary Landryau, our Chief Investment Officer, and Christopher 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 Inc.'s fourth quarter earnings call. Today, I will provide a recap on the quarter and full year 2024, and then speak to the business and the direction we plan to take the company. Following my remarks, Gavin will review our financial results and provide our outlook for 2025. The highlight of the year was leasing. As we exited 2024, there is no question that the overall market tone was improving, as was reflected in our leasing performance, which totaled about 1.1 million square feet. This was more than four times the leasing we delivered in 2023. A great example of this positive momentum was our approximately 136,000 square foot Hasbro property in downtown Providence, Rhode Island. Last year, Hasbro notified us that they were moving out of this Class A building, and after a brief but intensive marketing effort, we were able to backfill the entire building almost immediately with a long-term 11-year lease to Rhode Island's largest health system, Lifespan Corporation, now called Brown University Health. Hasbro's lease expired in early February, and we expect Lifespan's lease to commence roughly 60 days thereafter. Overall, we signed 287,000 square feet of new leases in 2024, which is more than 13 times the new leases signed in 2023 at 21,000 square feet. This year has started with a robust pipeline of potential new and renewal leasing transactions. We exited 2024 with a portfolio weighted average lease term, or WALT, that now stands at 5.2 years, up from 4 years at the same time last year, which reflects our stabilizing portfolio. Renewal rent spreads for 2024 leasing activity were down 6.6%, primarily because of one lease renewed in the fourth quarter with significant rent roll down. These pressures on…

Thanks, Paul. I will start by discussing Orion Office REIT Inc.'s results for the fourth quarter and full year and then provide our 2025 financial outlook. Orion Office REIT Inc. generated total revenues of $38.4 million in the fourth quarter as compared to $43.8 million in the same quarter of the prior year. We reported a net loss attributable to common stockholders of $32.8 million or $0.59 per share compared to a net loss of $16.2 million or $0.29 per share reported in the fourth quarter of 2023. Core FFO for the quarter was $10.2 million or $0.18 per share as compared to $18.5 million or $0.33 per share in the same quarter of 2023. Adjusted EBITDA was $16.6 million versus $24.6 million in the same quarter of 2023. The changes year over year are primarily related to vacancies and the timing of leasing activity. For the full year, Orion Office REIT Inc.'s revenues were $164.9 million, and a net loss attributable to common stockholders was $103 million, or a net loss of $1.84 per share. Core FFO was $56.8 million or $1.01 per share. Adjusted EBITDA for the full year was $82.8 million. G&A in the fourth quarter came in as expected at $6.1 million compared to $5.5 million in the same quarter of 2023. The change was primarily due to higher compensation expenses as a result of annual merit increases at the beginning of 2024, the hiring of one additional headcount during the year to support our leasing efforts, along with an additional year of non-cash equity-based compensation expense. As it relates to equity-based compensation expenses, our awards have a three-year vesting period. In 2023, there were only years' worth of equity grants being expensed, and at the end of 2024, the company had three years' worth of…

Thank you. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. Pick up your handset before pressing the star keys. Moment, please, while we poll for questions. Our first question today comes from Mitch Germain of Citizens Capital Markets. Please proceed with your question.

Thank you very much. Paul, what gives you the confidence that 2026 is going to start a rebound?

Good morning, Mitch. Well, you know, as you might imagine, we work intensively with the portfolio and then looking at our trends in leasing, and where we expect we can sell vacancy and, you know, a variety of other factors. And when we look at, you know, our results looking backwards in 2025, the leasing momentum in 2024 rounds, and the leasing momentum we have going into 2025, you know, we're starting to see the portfolio stabilize. Where we have disposed of or continue to dispose of the generic or traditional office properties that we don't think have got strong releasing opportunities. And so the core portfolio we have left, we think is stable and that stability is increasing over time, and as that stability increases and we make lease up some more vacancy, you know, we expect to see revenues and then, of course, bottom line core FFO turn the corner, you know, in 2025 or during 2026, you know, depending on a variety of factors.

Gotcha. If I think about your strategic shift that you referenced on the call and in your press release, I'm trying to understand, you said about a third of the portfolio now fits that category. You know, so is the thought that over the next 36 months, to the extent whether it's vacant or occupied, you're going to be pursuing a pretty significant amount of asset sales. Is that the way to think about how the plan is going to evolve over the course of the next couple of years?

Yes. I think that's exactly right, Mitch. You know, of course, it will be dependent upon where the capital markets, you know, where the real estate markets rather, you know, give us opportunity. But, you know, our goal is over time, as we've been doing, by the way, over the past couple of years, been pretty aggressive about trying to sell some of the outdated office properties, traditional office properties that we own. And we've had quite good success in renewing what we call dedicated use assets, whether they be government or flex. So we expect that trend to continue. So we're going to look to sell vacancy to the extent that we have appetite to add additional properties. We'll add additional dedicated use assets. And we'll also look at selling some of the stabilized assets we have and replacing those traditional stabilized office buildings with longer-dated dedicated use assets. And the goal is to grow the portfolio over time and shift the portfolio over time to one where we have a longer weighted average lease term where we have greater confidence in the long-term durability of the cash flows from assets.

Gotcha. Talk to me about the transaction with the joint venture. In reading the K, it seemed like the partner had no capital. They're unwilling. I mean, what's so specifically happening there and what gives me confidence about Art Street's, you know, kind of commitment to that venture on a longer term?

Right. Well, let me stress. We maintain a very strong relationship with Art Street, and they have been a good partner to us. You know, they are essentially a capital aggregator, and they have aggregated capital in Middle Eastern countries for the initial investments in these properties with the initial expectation back when the joint venture was first put together at VEREEC, would be that there would be no additional capital calls on those investors. I think that's what when Art Street or their partners, GateHouse, were selling it to their investors, was essentially invest in long-dated office properties. And you'll enjoy the capital returns associated with those and eventually a return of capital. Markets have changed, and we're now entering a period where we need to renew leases in place, extend financing, and it's difficult for them to access additional capital for those reasons. So rather than fire sale the portfolio, which we think doesn't make any sense at all, we made a loan to the JV at a 15% interest rate. So we believe we're being appropriately compensated for the risk. And that loan amortizes quickly from cash flows from the existing assets, which have a weighted average lease term now of about six years, and are 100% occupied. So I think the loan amortizes at the rate of about $600,000 or so per month. So, you know, we're getting our money back quite quickly, and we feel very comfortable with respect to that.

Gotcha. Okay. Last for me, maybe just some nuance on the economics surrounding the assumptions surrounding the outlook. Is the restructuring charge in the G&A, or is that going to be smoothed out when you look at the bottom line next year?

Hey, Mitch. This is Gavin. We're going to add it. We're going to add that restructuring charge back into core FFO, so it'll be smoothed out throughout the year.

Great. Thank you very much.

Thank you, Mitch.

There are no additional questions at this time. I'd like to turn the call back to Mr. McDowell.

Thank you, everyone. We appreciate the extended time today, and we look forward to updating you on our first quarter results in May.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.