Orion Office REIT Inc

Previous wording

•our ability to comply with the terms of our credit agreements or to meet the debt obligations on our properties, including our ability to satisfy the conditions to extend our Revolving Facility;

Current wording

•our ability to comply with the terms of our credit agreements or to meet the debt obligations on our properties;

Previous wording

•risks accompanying the management of OAP/VER Venture, LLC (the “Arch Street Joint Venture”), our unconsolidated joint venture, in which we hold a non-controlling ownership interest;

Current wording

•risks accompanying our investment in and the management of OAP/VER Venture, LLC (the “Arch Street Joint Venture”), our unconsolidated joint venture, in which we hold a non-controlling ownership interest, including that the unconsolidated joint venture may be unable to satisfy the extension conditions or otherwise extend or refinance its outstanding mortgage debt on or prior to maturity;

Previous wording

As of March 31, 2024, 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 75.3% and a weighted-average remaining lease term of 4.0 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 75.8%, or 83.2% adjusted for properties that are currently under agreements to be sold, and a weighted-average remaining lease term of 4.1 years as of March 31, 2024.

Current wording

As of June 30, 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 six properties being removed from the presentation of the Company’s portfolio of operating properties. Additionally, during the three months ended June 30, 2024, we completed a parcel split of our property located in Amherst, New York, which included two buildings. As a result of the split, the two parcels and respective buildings on the parcels are being reported as separate operating properties. As of June 30, 2024, following the reclassification of six properties as non-operating properties and the parcel split, we owned and operated 69 office properties with an aggregate of 8.0 million leasable square feet located in 29 states with an occupancy rate of 79.2% and a weighted-average remaining lease term of 4.2 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 8.2 million leasable square feet with an occupancy rate of 79.7%, or 80.9% adjusted for one operating property that is currently under agreement to be sold, and a weighted-average remaining lease term of 4.2 years as of June 30, 2024.

Previous wording

Our portfolio comprises primarily single-tenant leases, and tenant retention remains a significant challenge, as we have faced and will continue to face significant lease expirations the next few years. For example, leases representing approximately 22.7% and 13.2% of our annualized base rent are scheduled to expire in 2024 and 2025, respectively, and we may be unable to renew leases or find replacement tenants. Certain changes in office space utilization, including increased remote and hybrid work arrangements and tenants consolidating their real estate footprint, continue to impact the office leasing market. The utilization and demand for office space continue to face headwinds and the duration and ultimate impact of current trends on the demands for office space at our properties remains uncertain and subject to change. Accordingly, we do not yet know what the full extent of the impacts will be on our or our tenants’ businesses and operations or the long-term outlook for leasing our properties. Higher interest rates, inflationary pressures, geopolitical hostilities and tensions, and concerns that the U.S. economy may enter an economic recession have caused disruptions in the financial markets and these factors could adversely affect our and our tenants’ financial condition and the ability or willingness of our tenants to renew our leases or pay rent to us.

Current wording

Our portfolio comprises primarily single-tenant leases, and tenant retention remains a significant challenge, as we have faced and will continue to face significant lease expirations the next few years. For example, leases representing approximately 12.7% and 13.6% of our annualized base rent are scheduled to expire during the remainder of 2024 and in 2025, respectively, and we may be unable to renew leases or find replacement tenants. Certain changes in office space utilization, including increased remote and hybrid work arrangements and tenants consolidating their real estate footprint, continue to impact the office leasing market. The utilization and demand for office space continue to face headwinds and the duration and ultimate impact of current trends on the demands for office space at our properties remains uncertain and subject to change. Accordingly, we do not yet know what the full extent of the impacts will be on our or our tenants’ businesses and operations or the long-term outlook for leasing our properties. Higher interest rates, inflationary pressures, geopolitical hostilities and tensions, and concerns that the U.S. economy may enter an economic recession have caused disruptions in the financial markets and these factors could adversely affect our and our tenants’ financial condition and the ability or willingness of our tenants to renew our leases or pay rent to us.

Previous wording

Our leasing and asset disposition activity since the completion of our distribution from Realty Income continues to be adversely impacted by a variety of market and property specific conditions. Since the onset of the COVID-19 pandemic, the office leasing market has experienced significantly reduced demand for space and changes in space usage as tenants seek to attract employees back to the office, in newer, renovated buildings with more amenities. As of March 31, 2024, 59.3%, 35.0% and 5.7% of our office buildings by square feet were classified as class A, class B and class C, respectively, as determined by the most recent appraisals of the properties. In the current office environment, class B and class C buildings generally have been experiencing reduced demand and lease or sell at discounts to class A buildings and our tenants and prospective new tenants across our portfolio sometimes compare the cost and the value of leasing space in our building to the value of newer space with more amenities asking higher rent in other buildings in the market. The class of buildings we own may be negatively impacting our leasing velocity and pushing our leasing costs higher, and has negatively impacted our sales price on non-core asset dispositions.

Current wording

Our leasing and asset disposition activity since the completion of our distribution from Realty Income continues to be adversely impacted by a variety of market and property specific conditions. Since the onset of the COVID-19 pandemic, the office leasing market has experienced significantly reduced demand for space and changes in space usage as tenants seek to attract employees back to the office, in newer, renovated buildings with more amenities. As of June 30, 2024,64.1%,30.9% and 5.0% of our office buildings by square feet were classified as class A, class B and class C, respectively, as determined by the most recent appraisals of the properties. As of June 30, 2024, our class B and class C properties collectively included the following 10% or greater geographic concentration as measured by square footage: Texas (17.7%); and the following 10% or greater property type concentrations as measured by square footage: Traditional Office (67.3%); Flex/Industrial (20.7%); and Governmental Office (10.0%). In the current office environment, class B and class C buildings generally have been experiencing reduced demand and lease or sell at discounts to class A buildings and our tenants and prospective new tenants across our portfolio sometimes compare the cost and the value of leasing space in our building to the value of newer space with more amenities asking higher rent in other buildings in the market. The class of buildings we own may be negatively impacting our leasing velocity and pushing our leasing costs higher, and has negatively impacted our sales price on non-core asset dispositions.

Previous wording

We have incurred significant amounts of indebtedness and, therefore, are subject to the risks normally associated with debt financing, including that we may be unable to extend or refinance our debt obligations as they come due. Deteriorating office fundamentals, high interest rates and market sentiment towards the office sector may restrict our access to, and likely increase our cost of, capital as we seek to extend or refinance our debts. We intend to exercise our extension option to extend the maturity date our Revolving Facility until May 12, 2026, and upon doing so, our nearest debt maturity are the non-recourse mortgage notes associated with the Arch Street Joint Venture of $136.7 million as of March 31, 2024 which are scheduled to mature on November 27, 2024. The Arch Street Joint Venture has two successive one-year options to extend the maturity date until November 27, 2026, however, the extension options are subject to satisfaction of certain conditions, including satisfaction of certain financial and operating covenants. The Arch Street Joint Venture may be unable to satisfy the extension conditions, and is also evaluating alternatives to refinance this obligation. We cannot provide any assurance that the Arch Street Joint Venture will be able to satisfy the extension conditions or otherwise extend or refinance the loan. 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.

Current wording

We have incurred significant amounts of indebtedness and, therefore, are subject to the risks normally associated with debt financing, including that we may be unable to extend or refinance our debt obligations as they come due. Deteriorating office fundamentals, high interest rates and market sentiment towards the office sector may restrict our access to, and likely increase our cost of, capital as we seek to extend or refinance our debts. On May 16, 2024, we exercised our option to extend the maturity date of our Revolving Facility for 18 months from November 12, 2024 to May 12, 2026. Upon exercising the extension, our nearest debt maturity is the non-recourse mortgage notes associated with the Arch Street Joint Venture of $136.4 million, which are scheduled to mature on November 27, 2024. As of June 30, 2024, our proportionate share of the non-recourse mortgage notes associated with the Arch Street Joint Venture was $27.3 million. The Arch Street Joint Venture has two successive one-year options to extend the maturity date until November 27, 2026, however, the extension options are subject to satisfaction of certain conditions, including satisfaction of certain financial and operating covenants. The Arch Street Joint Venture may be unable to satisfy the extension conditions, and has preliminarily agreed with the existing lenders to extend the mortgage notes for one year and on other mutually acceptable terms, subject to definitive documentation and other conditions. We cannot provide any assurance that the Arch Street Joint Venture will be able to satisfy the extension conditions or reach final agreement with its lenders to extend the mortgage notes or otherwise refinance the mortgage notes. 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.

Previous wording

One of our main asset management strategies since the completion of our distribution from Realty Income has been to sell vacant and identified non-core assets that do not fit our long-term investment objectives. The sale of these assets will allow us to both reduce carry costs and avoid the uncertainty and significant capital expenditures associated with re-tenanting. We expect to continue this non-core asset disposition strategy in 2024. We cannot provide any assurance as to whether we will be able to sell non-core assets on favorable terms and in a timely manner, or at all.

Current wording

One of our main asset management strategies since the completion of our distribution from Realty Income has been to sell vacant and identified non-core assets that do not fit our long-term investment objectives. The sale of these assets will allow us to both reduce carry costs and avoid the uncertainty and significant capital expenditures associated with re-tenanting. We expect to continue this non-core asset disposition strategy through the remainder of 2024. We cannot provide any assurance as to whether we will be able to sell non-core assets on favorable terms and in a timely manner, or at all.

Previous wording

For the three months ended March 31, 2024 and 2023, the consolidated financial statements of the Company include the accounts of the Company and its consolidated subsidiaries and a consolidated joint venture.

Current wording

For the three and six months ended June 30, 2024 and 2023, the consolidated financial statements of the Company include the accounts of the Company and its consolidated subsidiaries and a consolidated joint venture.

Previous wording

•During the three months ended March 31, 2024, we completed approximately 0.1 million square feet of lease renewals and new leases across four different properties, including a new lease with the United States Government for approximately 86,000 square feet at our property in Lincoln, Nebraska. The United States Government will be backfilling vacant space and is expected to take occupancy in the third quarter of 2025, following landlord’s build-out of the United States Government premises, at which time the Lincoln, Nebraska property will be fully leased to two tenants. During April 2024, the United States Government exercised a 4.0-year renewal option for approximately 413,000 square feet at our property in Covington, Kentucky. Additionally, we entered into a 2.3-year lease for approximately 1,000 square feet at one our properties in The Woodlands, Texas.

Current wording

•During the six months ended June 30, 2024, we completed approximately 578,000 square feet of lease renewals and new leases across six different properties, including a new lease with the United States Government for approximately 86,000 square feet at our property in Lincoln, Nebraska, and a new lease with a law firm tenant for approximately 56,000 square feet at our property in Parsippany, New Jersey. Both tenants are expected to take occupancy in the third quarter of 2025. The United States Government also exercised a 4.0-year renewal option for approximately 413,000 square feet at our property in Covington, Kentucky.

Previous wording

•During the three months ended March 31, 2024, three leases expired consisting of 424,000 square feet. As of March 31, 2024, we had a total of 14 fully vacant properties, seven of which had pending agreements for sale. Also during the three months ended March 31, 2024, we modified one lease to take back approximately 16,000 square feet of space at the Company’s property in Lincoln, Nebraska, and the tenant vacated the space on April 1, 2024. Substantially all of this vacant space will be backfilled by the United States Government as part of their new lease at the Lincoln, Nebraska property described above.

Current wording

•During the six months ended June 30, 2024, five leases expired consisting of 597,000 square feet. As of June 30, 2024, we had a total of nine fully vacant operating properties. Also during the six months ended June 30, 2024, we modified one lease to take back approximately 16,000 square feet of space at the Company’s property in Lincoln, Nebraska, and the tenant vacated the space on April 1, 2024. Substantially all of this vacant space will be backfilled by the United States Government as part of their new lease at the Lincoln, Nebraska property described above.

Previous wording

•On May 3, 2024, we entered into an amendment to the Credit Agreement (the “Third Amendment”), pursuant to which we have rightsized the revolver to $350.0 million through a $75.0 million-capacity reduction. See “Part II, Item 5. Other Information” for more details about the Third Amendment.

Current wording

•On May 3, 2024, we entered into an amendment to the Credit Agreement (the “Third Amendment”), pursuant to which we have rightsized the Revolving Facility to $350.0 million through a $75.0 million-capacity reduction.

Previous wording

•As of March 31, 2024 and after giving effect to the Third Amendment to the Revolving Facility described above, we had $234.0 million of borrowing capacity under the Revolving Facility and $116.0 million of outstanding borrowings thereunder. Our interest rate collar agreements with an aggregate notional amount of $60.0 million remain in effect until May 12, 2025.

Current wording

•During the six months ended June 30, 2024, we made repayments of debt obligations of $9.0 million, utilizing a combination of cash flows from operations and proceeds from real estate dispositions. As of June 30, 2024, we had $243.0 million of borrowing capacity under the Revolving Facility and $107.0 million of outstanding borrowings thereunder. Our interest rate collar agreements with an aggregate notional amount of $60.0 million remain in effect until May 12, 2025.

Previous wording

•The Company’s Board of Directors declared a quarterly cash dividend of $0.10 per share for the first quarter of 2024 which was paid on April 15, 2024. On May 7, 2024 the Company’s Board of Directors declared a quarterly cash dividend of $0.10 per share for the second quarter of 2024, payable on July 15, 2024, to stockholders of record as of June 28, 2024.

Current wording

•The Company’s Board of Directors declared a quarterly cash dividend of $0.10 per share for the first and second quarters of 2024 which were paid on April 15, 2024 and July 15, 2024. On August 7, 2024 the Company’s Board of Directors declared a quarterly cash dividend of $0.10 per share for the third quarter of 2024, payable on October 15, 2024, to stockholders of record as of September 30, 2024.

Previous wording

(1)Represents leasable square feet of operating properties and the Company’s pro rata share of leasable square feet of properties owned by the Arch Street Joint Venture.

Current wording

(2)Represents leasable square feet of operating properties and the Company’s pro rata share of leasable square feet of properties owned by the Arch Street Joint Venture.

Previous wording

(2)Occupancy rate equals the sum of leased square feet divided by rentable square feet. The occupancy rate as of March 31, 2024 equals 83.2% adjusted for properties that are currently under agreements to be sold.

Current wording

(3)Occupancy rate equals the sum of occupied square feet divided by rentable square feet of operating properties. Adjusting for one operating property that is currently under agreement to be sold, the occupancy rate as of June 30, 2024 equals 80.9%.

Previous wording

(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 March 31, 2024. 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.

Current wording

(5)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 June 30, 2024. 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.

Previous wording

We remain highly focused on leasing activity, given the 4.1 year weighted-average remaining lease term and the significant lease maturities which will occur across the portfolio over the next few years. 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. Our properties may not be as attractive to existing or new tenants as properties owned by our competitors due to age of buildings, physical condition, lack of amenities or other similar factors. 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, improvements or concessions to tenants, may be less favorable to us than current lease terms. As a result, our net income and ability to pay dividends to stockholders could be materially adversely affected. 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 effectively dispose of those properties and could require us to expend capital to fund necessary capital improvements or alterations. 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.

Current wording

We remain highly focused on leasing activity, given the 4.2 year weighted-average remaining lease term and the significant lease maturities which will occur across the portfolio over the next few years. 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. Our properties may not be as attractive to existing or new tenants as properties owned by our competitors due to age of buildings, physical condition, lack of amenities or other similar factors. 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, improvements or concessions to tenants, may be less favorable to us than current lease terms. As a result, our net income and ability to pay dividends to stockholders could be materially adversely affected. 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 effectively dispose of those properties and could require us to expend capital to fund necessary capital improvements or alterations. 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.

Previous wording

(2)Rent concessions include free rent for future periods under our leases where the lease term has commenced and include estimates of property operating expenses, where applicable.

Current wording

(2)Rent concessions include free rent for future periods under our leases where the lease term has commenced, following any build out period, and include estimates of property operating expenses, where applicable.

Previous wording

We have funded and intend to continue to fund our outstanding leasing costs with cash on hand, which may include proceeds from dispositions. For assets financed on our CMBS Loan, we have funded reserves with the lender for tenant improvement allowances and rent concessions. The restricted cash included in this reserve totaled $34.7 million as of March 31, 2024, including $23.6 million for tenant improvement allowances and $11.1 million for rent concessions, and is included in other assets, net in our consolidated balance sheets.

Current wording

We have funded and intend to continue to fund our outstanding leasing costs with cash on hand, which may include proceeds from dispositions. For assets financed on our CMBS Loan, we have funded reserves with the lender for tenant improvement allowances and rent concessions. The restricted cash included in this reserve totaled $34.7 million as of June 30,

Previous wording

During the three months ended March 31, 2024 and 2023, we entered into new and renewal leases as summarized in the following tables (dollars and square feet in thousands):

Current wording

During the three and six months ended June 30, 2024, we entered into new and renewal leases as summarized in the following tables (dollars and square feet in thousands):

Previous wording

(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. Contractually obligated reimbursements include estimated amortization of certain landlord funded improvements under our United States Government leases. If a space has been vacant for more than 12 months prior to the execution of a new lease or was previously otherwise not generating full cash rental revenue, the lease will be excluded from the rental rate change calculation.

Current wording

(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. Contractually obligated reimbursements include estimated amortization of certain landlord funded improvements under our United States Government leases. If a space has been or will be vacant for more than 12 months prior to the commencement of a new lease or was previously otherwise not generating full cash rental revenue, the lease will be excluded from the rental rate change calculation.

Previous wording

(3)Includes tenant improvement allowances and base building allowances, leasing commissions and free rent (includes estimates of property operating expenses, where applicable). Beginning in 2024, we have updated this calculation to also include estimates for certain reimbursable and non-reimbursable landlord funded improvements, and have applied this change retrospectively for comparison purposes.

Current wording

(3)Includes tenant improvement allowances and base building allowances, leasing commissions and free rent (includes estimates of property operating expenses, where applicable). Beginning in 2024, we have updated this calculation to also include estimates for certain reimbursable and non-reimbursable landlord funded improvements, and have applied this change retrospectively for comparison purposes. For our multi-tenant properties, we have allocated the estimated cost of landlord funded improvements that benefit the property generally and/or the common areas and not the tenant’s premises in particular, to the applicable lease based on square footage of the relevant tenant.

Previous wording

(4)Includes reimbursable landlord funded improvements of $51.89 per rentable square foot for new leases, $17.09 per rentable square foot for renewals, and $46.77 per rentable square foot in total for the three months ended March 31, 2024. There were no reimbursable landlord funded improvements included in the tenant rent concessions and leasing costs for the three months ended March 31, 2023.

Current wording

(4)Includes reimbursable landlord funded improvements of $32.02 per rentable square foot for new leases, $0.63 per rentable square foot for renewals, and $8.73 per rentable square foot in total for the six months ended June 30, 2024. There were no reimbursable landlord funded improvements included in the tenant rent concessions and leasing costs for the three months ended June 30, 2024. Includes reimbursable tenant improvement allowances of $34.09 per rentable square foot for new leases and $4.14 per rentable square foot in total for the three months ended June 30, 2024 and $13.05 per rentable square foot for new leases and $3.37 per rentable square foot in total for the six months ended June 30, 2024.

Previous wording

(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 three months ended March 31, 2024 and 2023 would be 14.2 years and 17.1 years, respectively, if such non-firm terms were included.

Current wording

(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 three and six months ended June 30, 2024 would be 5.3 years and 7.0 years, respectively, if such non-firm terms were included.

Previous wording

(2)Excludes two new leases for approximately 92,000 square feet of space for the three months ended March 31, 2024 and one new lease for approximately 4,000 square feet of space for the three months ended March 31, 2023, that had been vacant for more than 12 months at the time the new lease was executed.

Current wording

(2)Excludes one new lease for approximately 4,000 square feet of space for the six months ended June 30, 2023, that had been vacant for more than 12 months at the time the new lease was executed. There were no excluded leases for the three months ended June 30, 2023.

Previous wording

During the three months ended March 31, 2024, three leases across two properties expired consisting of 424,000 square feet. Subsequent to March 31, 2024, we entered into a contract to sell one of the properties comprising approximately 96,000 square feet and expect that sale to close in the second quarter of 2024. We currently intend to re-tenant the other property comprising approximately 328,000 square feet over time. For the property we intend to re-let, the base rent per square foot under the lease at expiration was approximately $22.00 per square foot, and our estimate of market rent at this property is $25.00 to $28.00 per square foot. Our market rent estimates are based on a variety of assumptions and we cannot provide any assurance that we will be able to re-let vacant space to new tenants on these or any other terms, in a timely manner, or at all. Our plans with respect to vacant properties are subject to change.

Current wording

During the six months ended June 30, 2024, five leases across four properties expired consisting of 597,000 square feet. During the six months ended June 30, 2024, we closed on the sale of one of these four properties comprising approximately 96,000 square feet. During the three months ended June 30, 2024, two leases expired comprising a total of 173,000 square feet, including one lease where the tenant occupied all 172,000 square feet at the property. We currently intend to re-tenant the vacancy at this property. The base rent per square foot under the lease at expiration was approximately $21.00 per square foot, and our estimate of market rent at this property is $17.00 to $19.00 per square foot. Our market rent estimates are based on a variety of assumptions and we cannot provide any assurance that we will be able to re-let vacant space to new tenants on these or any other terms, in a timely manner, or at all. Our plans with respect to vacant properties are subject to change.

Previous wording

During the three months ended March 31, 2024 and 2023, amounts capitalized by the Company for lease related costs, lease incentives and building, fixtures and improvements were as follows (in thousands):

Current wording

During the three and six months ended June 30, 2024 and 2023, amounts capitalized by the Company for lease related costs, lease incentives and building, fixtures and improvements were as follows (in thousands):

Previous wording

The results of operations discussed in this section include the accounts of the Company and its consolidated subsidiaries for the three months ended March 31, 2024 and 2023.

Current wording

The results of operations discussed in this section include the accounts of the Company and its consolidated subsidiaries for the three and six months ended June 30, 2024 and 2023.

Previous wording

The decrease in rental revenue of $3.0 million during the three months ended March 31, 2024 as compared to the same period in 2023 was primarily due to the impact from a decrease in our overall occupied square footage due to scheduled vacancies of $4.0 million and the impact from property dispositions of $2.0 million. Our portfolio occupancy rate was 75.3% and we had 75 properties with an aggregate of 8.7 million leasable square feet as of March 31, 2024, as compared to a portfolio occupancy rate of 87.2% and 81 properties with an aggregate of 9.5 million leasable square feet as of March 31, 2023. The decrease in revenues was partially offset by $2.7 million of reimbursements from previous tenants for certain end of lease obligations during the three months ended March 31, 2024.

Current wording

The decreases in rental revenue of $11.9 million and $14.9 million during the three and six months ended June 30, 2024, respectively, as compared to the same periods in 2023 was primarily due to the impact from a decrease in our overall occupied square footage due to scheduled vacancies of $8.8 million and $12.7 million during the three and six months ended June 30, 2024, respectively, and the impact from property dispositions of $2.5 million and $4.7 million during the three and six months ended June 30, 2024, respectively. Our portfolio occupancy rate was 79.2% and we had 69 operating properties with an aggregate of 8.0 million leasable square feet and six non-operating properties as of June 30, 2024, as compared to a portfolio occupancy rate of 86.2% and 81 operating properties with an aggregate of 9.5 million leasable square feet as of June 30, 2023. The decrease in revenues during the six months ended June 30, 2024 was partially offset by $2.7 million of reimbursements from previous tenants for certain end of lease obligations.

Previous wording

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 $0.2 million during the three months ended March 31, 2024 as compared to the same period in 2023.

Current wording

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 $0.2 million and $0.4 million during the three and six months ended June 30, 2024, respectively, as compared to the same periods in 2023.

Previous wording

Property operating expenses such as taxes, insurance, ground rent and maintenance include both reimbursable and non-reimbursable property expenses. Property operating expenses remained relatively consistent at $16.0 million and $15.3 million during the three months ended March 31, 2024 and 2023, respectively, which is primarily the net result of increases due to timing of certain operating expenses of $1.5 million and from additional property vacancies which resulted in the recognition of certain operating expenses which were previously paid directly by the tenant such as property taxes of $0.9 million, offset by decreases in expenses resulting from property dispositions of $1.8 million.

Current wording

Property operating expenses such as taxes, insurance, ground rent and maintenance include both reimbursable and non-reimbursable property expenses. Property operating expenses increased $0.3 million and $0.9 million during the three and six months ended June 30, 2024, respectively, as compared to the same periods in 2023. The increase during the three months ended June 30, 2024 compared to the same period in 2023 is the result of property vacancies which led to the recognition of certain operating expenses which were previously paid directly by the tenant of $1.0 million, offset by decreases in property operating expenses resulting from property dispositions of $0.5 million and the timing of certain operating expenses of $0.2 million. The increase during the six months ended June 30, 2024 compared to the same period in 2023 is the result of expenses from property vacancies of $1.4 million and timing of certain operating expenses of $0.8 million, offset by decreases in property operating expenses resulting from property dispositions of $1.2 million.

Previous wording

General and administrative expenses increased $0.6 million during the three months ended March 31, 2024 as compared to the same period in 2023, primarily due to increased stock compensation expense for additional equity award issuances of $0.3 million and timing of corporate expenses of $0.3 million during the three months ended March 31, 2024.

Current wording

General and administrative expenses increased $0.6 million during the six months ended June 30, 2024, as compared to the same period in 2023, primarily due to increased stock compensation expense of $0.6 million for additional equity award issuances. General and administrative expenses for the three months ended June 30, 2024 were essentially unchanged compared to the same period in 2023.

Previous wording

Depreciation and amortization expenses decreased $3.7 million during the three months ended March 31, 2024 as compared to the same period in 2023 primarily due to the full amortization of certain intangible assets as a result of leases expiring in accordance with their terms and early terminations.

Current wording

Depreciation and amortization expenses increased $10.7 million and $7.1 million during the three and six months ended June 30, 2024, respectively, as compared to the same periods in 2023 primarily due to the full depreciation of $15.9 million during the three and six months ended June 30, 2024 of the buildings at a six-property campus in Deerfield, Illinois. This accelerated depreciation was the result of the adjustment to the useful life of the assets due to management’s plans to demolish the buildings. The increase of depreciation and amortization expense during the three and six months ended June 30, 2024 compared to the same periods in 2023 was partially offset by the full amortization of certain intangible assets as a result of leases expiring in accordance with their terms and early terminations of $5.1 million and $8.8 million, respectively.

Previous wording

Impairments increased $15.9 million during the three months ended March 31, 2024 as compared to the same period in 2023. The impairment charges of $19.7 million in the three months ended March 31, 2024, include a total of two properties and the charges reflect management’s estimates of lease renewal probability, timing and terms of such renewals, carrying costs for vacant properties, sale probability and estimates of sale proceeds. Impairment charges totaling $3.8 million with respect to three properties were recorded during the same period in 2023. See Note 5 - Fair Value Measures for further information.

Current wording

Impairments decreased $6.1 million and increased $9.8 million during the three and six months ended June 30, 2024, respectively, as compared to the same periods in 2023. The impairment charges of $5.7 million and $25.4 million in the three and six months ended June 30, 2024, include a total of seven and eight properties, respectively, and the charges were incurred primarily with respect to real estate assets expected to be sold or sold and reflect management’s estimates of lease renewal probability, timing and terms of such renewals, carrying costs for vacant properties, sale probability and estimates of sale proceeds. Impairment charges totaling $11.8 million and $15.6 million with respect to four properties were recorded during the same periods in 2023. See Note 5 - Fair Value Measures for further information.

Previous wording

Transaction related expense remained relatively consistent at $0.1 million during the three months ended March 31, 2024 as compared to the same period in 2023.

Current wording

Transaction related expense remained relatively consistent at $0.2 million and $0.3 million during the three and six months ended June 30, 2024, respectively, as compared to the same periods in 2023.

Previous wording

Interest expense, net increased $1.0 million during the three months ended March 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 three months ended March 31, 2024. The Company’s average debt outstanding and weighted-average interest rate on its debt obligations were $471.0 million and 5.88%, respectively for the three months ended March 31, 2024, compared to $530.0 million and 4.38%, respectively, for the three months ended March 31, 2023. Interest expense for the three months ended March 31, 2024 included no offsets of reclassified previous gains or losses on interest rate derivatives from accumulated other comprehensive income (loss), compared with $1.7 million reclassified gains during the three months ended March 31, 2023.

Current wording

Interest expense, net increased $0.8 million and $1.8 million during the three and six months ended June 30, 2024 as compared to the same periods in 2023, which was primarily due to higher interest rates, partially offset by lower outstanding debt during the three and six months ended June 30, 2024. The Company’s average debt outstanding was $471.0 million and $466.5 million for the three and six months ended June 30, 2024, respectively compared to $530.0 million for each of the same periods in 2023. The Company’s weighted-average interest rate on its debt obligations was 5.87% for the three and six months ended June 30, 2024, and 4.63% for the three and six months ended June 30, 2023. Interest expense for the three and six months ended June 30, 2024 included no offsets of reclassified previous gains or losses on interest rate derivatives from accumulated other comprehensive income (loss), compared with $1.9 million and $3.6 million of reclassified gains during the three and six months ended June 30, 2023, respectively.

Previous wording

Other income, net increased $0.1 million during the three months ended March 31, 2024 as compared to the same period in 2023, which was primarily due to interest income from money market accounts and notes receivable.

Current wording

Other income, net increased less than $0.1 million and $0.2 million during the three and six months ended June 30, 2024, respectively as compared to the same periods in 2023, which was primarily due to interest income from money market accounts and notes receivable.

Previous wording

Equity in loss of the unconsolidated joint venture remained relatively consistent during the three months ended March 31, 2024 as compared to the same period in 2023.

Current wording

Equity in loss of the unconsolidated joint venture remained relatively consistent during the three and six months ended June 30, 2024 as compared to the same periods in 2023.

Previous wording

The provision for income taxes consists of certain state and local income and franchise taxes. The provision for income taxes remained relatively consistent during the three months ended March 31, 2024 as compared to the same period in 2023.

Current wording

The provision for income taxes consists of certain state and local income and franchise taxes. The provision for income taxes remained relatively consistent during the three and six months ended June 30, 2024, respectively, as compared to the same periods in 2023.

Previous wording

The table below presents a reconciliation of FFO and Core FFO to net loss attributable to common stockholders, the most directly comparable U.S. GAAP financial measure, for the three months ended March 31, 2024 and 2023 (in thousands, except per share amounts):

Current wording

The table below presents a reconciliation of FFO and Core FFO to net loss attributable to common stockholders, the most directly comparable U.S. GAAP financial measure, for the three and six months ended June 30, 2024 and 2023 (in thousands, except per share amounts):