Greetings. Welcome to Orion Office REIT's Third Quarter 2022 Financial Results. As a reminder, this conference is being recorded. I would now like to turn your call over to your host, Paul Hughes, General Counsel for Orion. Please go ahead.

Thank you, operator. Good morning, everyone. Yesterday, Orion released its financial results for the quarter ended September 30, 2022, filed its Form 10-Q 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 www.onlreit.com. Forward-looking statements made during today's call such as the company's guidance estimates for calendar year 2022 are subject to a number of risks and uncertainties that could cause actual results to differ materially from our expectations. These risks and uncertainties are discussed in our earnings release as well as in our Form 10-Q and other SEC filings. The company undertakes no duty to update any forward-looking statements that may be made during the course of today's 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 earned release and supplement include a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures. Hosting the call today are Paul McDowell, the company's Chief Executive Officer; 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. Paul?

Good morning, everyone, and welcome to Orion Office REIT's Third Quarter 2022 Earnings Call. On behalf of our team, I want to thank you all for joining us. On the call today, I will discuss our performance in only our third full quarter of operations as well as highlight the ongoing progress we are making on Orion's portfolio. I will then turn the call over to Gavin to provide an update on our financial results and guidance. As we've detailed since November 2021, following our spin-off from Realty Income, we are working hard to reposition and align the suburban focused office portfolio that we inherited from the merger of Realty Income and VEREIT. Orion is uniquely positioned as the only public net lease REIT that is exclusively focused on owning a diversified portfolio of mission-critical and corporate headquarters office buildings located in high-quality suburban markets throughout the United States. While Orion owns a significant number of high-quality stabilized assets, a sizable portion of our portfolio requires pruning, intensive asset management, repositioning and capital to address lease maturities and vacancies. These efforts are complicated by the current economic backdrop of rising interest rates, inflation, recession fears and return to the office hesitancy, all of which have given pause to businesses looking to sign new or extend current lease. While these trends have been widely reported for several quarters, we began to notice an uptick in the impact in our portfolio toward the end of the third quarter, and it has continued into the fourth. Since our spin-off late last year, we have consistently commented that our efforts to stabilize and rightsize our portfolio would take time and consist of multiple challenges along the way that could impact the timing of our progress. Despite these recent negative trends due to demographic and…

Thanks, Paul. I will begin by discussing Orion's GAAP results for the third quarter of 2022, which is our third full quarter operating as a public company. Orion generated total revenues for the quarter of $51.8 million and reported a net loss attributable to common stockholders of $53 million or a loss of $0.94 per share. Core funds from operations was $24 million or $0.42 per share, and adjusted EBITDA was $32.1 million. G&A in the third quarter was $4.7 million, while CapEx, tenant and property improvements and leasing costs were $3.7 million. As we have discussed, CapEx timing will be dependent on when leases are signed and work is completed on properties and likely will increase over time as our leases roll. Turning to the balance sheet. We ended the quarter with $588.3 million of outstanding debt, including Orion's proportionate share in the joint venture. During the quarter, we utilized a combination of proceeds from asset dispositions and cash flows from operations to repay $40 million outstanding on our revolving credit facility to bring the balance down to $31 million from $71 million. It is worth noting that since the spin and through today, we have reduced debt by approximately $69 million or 11%. At quarter end, we had total liquidity of $418 million, consisting of $394 million of available capacity on our revolving credit facility and $24 million in cash and cash equivalents, including Orion's proportionate share in the joint venture. We have no debt maturities this year and over 94% of our debt is fixed rate or swapped to fixed rate. Our net debt to annualized adjusted EBITDA was 4.39x. The Orion Board of Directors declared a quarterly dividend of $0.10 per share for the fourth quarter of 2022 to be paid on January 17, 2023, to…

[Operator Instructions]. Your first question comes from Jyoti Yadav with JMP Securities.

This is Jyoti on for Mitch. So first thing I want to say, it's really great to see the dispositions come through. What can you call out about the profile of these bias? And if these are just one-off sales?

Yes. The dispositions that we've been able to accomplish this year, we are very pleased about the pace at which we've been able to get to -- get some of these assets that are noncore off the balance sheet. The buyer of these have all been generally -- they all have been one-off transactions, so individual transactions. And the buyers have generally been a combination of investors who look to reposition the asset for the long term and users who intend to buy the asset, reposition it and use it themselves.

Okay. Got it. Secondly, I believe you mentioned in your opening remarks that these tenants have multiple renewals -- extension options. So with the 2 leases signed, is that what you were talking about? That's the renewal option...

Yes. So one of -- the lease that we signed during the quarter, that was just a straight option -- extension option. So that was a 5-year extension with no TIs, no LCs, nothing like that. The lease that we signed at the conclusion of the -- after the conclusion of the quarter was a new lease with a new tenant in a building where they were the previous subtenant.

Right. Okay. So would you say that a 5-year term is kind of a new normal for these renewals?

Well, I would say the tenants typically look for the 5-year term -- sort of a shorter term. We, of course, always try to entice tenants to sign longer terms with us. And during the course of the year, we have had a variety of success in being able to get tenants to sign longer-term leases with us. I think for the course of the year, we've signed leases that are in excess of 5 years. So we have some tenants that have signed 10 years, some tenants that we are looking to sign that may be longer than that even 15 years. So the challenge, of course, is always how do we get tenants to sign a longer-term lease, and that's very typically done by providing additional tenant improvements and providing additional landlord work in exchange for a longer lease term.

Next question comes from Edward Reily with EF Hutton.

I might have missed this, my call cut out a little bit. But you're talking about an uptick on the impact of your portfolio towards the end of Q3 and Q4. Just wondering if you could unpack that a little bit for me. [indiscernible] just have to do with any of the behavioral decisions from tenants. Last quarter, you talked about tenants were taking a longer amount of time to enter into leases and if they were considering that it would be a shorter-term lease. I just want to unpack that a little bit.

Sure. I think that it's been widely reported that there are a lot of headwinds in the office market. And I would say, up until the third quarter, we had not seen too much of that in our portfolio. In other words, we were the tenants that reached the end of their lease term and they moved out of our properties that we had expected that. And the tenants that renewed with us, we had expected those renewals to come through and roughly the terms in which they came through. Although as we noted in the call last quarter, decision-making process, we've noticed has continued to get elongated, and that's still the case. However, in the third quarter, we had some eye on some tenants that we expected to potentially fill some of our vacancy. We've also had some tenants come back to us and say they're not looking for as much space as they anticipated during the renewal as we had anticipated earlier for the renewal. So I think inside of our portfolio, we're starting to see a little bit of what's been widely reported in the broader marketplace. That is tenants are taking longer. They are requesting smaller space. And in some cases, they're changing their point of view entirely about whether or not to expand. So we see some of those headwinds. We think they're transitory, but they're here now in our portfolio. And so as a result, it's -- some of the anticipated leasing we thought might occur towards the end of this year or beginning of next will be pushed out to some degree.

Okay. Got you. And just given the smaller space required from some of the tenants, does this maybe open up an opportunity toward shifting more towards a multi-tenant approach versus a single-tenant approach? And how are you guys thinking about that?

Well, I think we would like to maintain our business model of owning primarily. I use the word primarily single-tenant assets leased on a long-term basis to good credit quality tenants. But the keyword there is tenant. So if we have the option to fill vacancy with tenants that are looking for less than a full building size, we are happy to do that and we'll multi-tenant buildings to the extent that, that makes the most sense for us. And we have done that. We do own a few multi-tenant buildings now. And my suspicion is, over time, that will grow somewhat as we multi-tenant some of the vacant properties that we have. So as I said, we prefer to maintain our single tenant stance for the majority of the portfolio, but we'll take tenancy pretty much wherever we can find it.

Okay. Got you. And on the dispositions, and apologies, if I missed this. Were those properties vacant all of them or were some filled? And I was wondering if you could maybe provide some information about price per square foot on those that were vacant versus those properties that had tenants in them, if there were any.

Sure. So for -- to your first point, it was a combination. So some of the properties we sold had tenancy in place where the -- we had an existing tenant and they continue to pay rent. But in all cases, the lease was very, very short, in general, under -- well under a year. So those are tenants that we knew were going to leave. And so they had a few months left on the lease. So -- and then the property would go vacant. So that was sort of one set, and that's probably about half of the properties we sold. The other half were actually vacant properties. With respect to price per square foot, given the short lease terms on the properties that had leases left versus the vacant, there's not a big disparity on the price per square foot. It's more -- where is the property located, what's the size of the property, so on and so forth. And in general, we found the smaller-sized properties that we've sold trade at a higher per square foot value, not unexpectedly, and the small -- and the bigger properties trade at a somewhat lower per square foot value. I'd say overall, we're pleased with where we're coming out with the sales of these properties. I think when we did the spin, we said we'd hope to be between $40 and $60 a foot on average for selling these properties, and we're right in the middle of that range. So we feel pretty good about that. And of course, it's also -- and one more final thing. One more final thing is that when we sell properties either with a short-term lease or a vacant property, it's not only the price we get per square foot, but it's the savings we get from not having to carry that asset vacant when we think that it's unlikely to be on any type of reasonable economic terms.

I would like to turn the floor over to Mr. McDowell for closing remarks.

Thank you, everyone, for joining us, and we look forward to updating you on our year-end results in the new year.

This concludes today's teleconference. You may disconnect your lines at this time, and thank you for your participation.