Orion Office REIT Inc. Annual report pursuant to Section 13 and 15(d)

Orion Office REIT, Real Estate Investments and Related Intangibles (Tables)

Orion Office REIT, Real Estate Investments and Related Intangibles (Tables)

12 Months Ended

Dec. 31, 2022

The following table summarizes the Company’s property dispositions for the years ended December 31, 2022, 2021 and 2020 (dollars in thousands):


	Year Ended December 31,
	2022		2021		2020
Total dispositions	11		—		—
Aggregate gross sales price	$	33,098	$	—	$	—

Gain on disposition of real estate assets	$	2,352	$	—	$	—
Property count	5		—		—

Impairments on disposition of real estate assets	$	5,089	$	—	$	—
Property count	6		—		—

Schedule of Finite-Lived Intangible Assets

Intangible lease assets consisted of the following (in thousands, except weighted-average useful life):


	Weighted-Average Useful Life (Years)	December 31, 2022		December 31, 2021
Intangible lease assets:
In-place leases, net of accumulated amortization of $144,798 and $65,247, respectively	5.4	$	177,698	$	272,743
Leasing commissions, net of accumulated amortization of $1,553 and $456, respectively	12.4	13,614		10,349
Above-market lease assets, net of accumulated amortization of $11,391 and $6,239, respectively	5.5	9,826		15,015
Deferred lease incentives, net of accumulated amortization of $116	4.7	1,694		—
Total intangible lease assets, net		$	202,832	$	298,107

Intangible lease liabilities:
Below-market leases, net of accumulated amortization of $17,249 and $14,459, respectively	8.4	$	14,068	$	20,609

Schedule of Finite-Lived Intangible Assets, Future Amortization Expense

The following table provides the projected amortization expense and adjustments to rental revenue related to the intangible lease assets and liabilities for the next five years as of December 31, 2022 (in thousands):


	2023		2024		2025		2026		2027
In-place leases:
Total projected to be included in amortization expense	$	73,501	$	49,185	$	21,652	$	15,499	$	7,441
Leasing commissions:
Total projected to be included in amortization expense	$	1,340	$	1,297	$	1,229	$	1,229	$	1,226
Above-market lease assets:
Total projected to be deducted from rental revenue	$	4,776	$	2,995	$	860	$	682	$	237
Deferred lease incentives:
Total projected to be deducted from rental revenue	$	403	$	403	$	386	$	288	$	212
Below-market lease liabilities:
Total projected to be added to rental revenue	$	5,994	$	3,786	$	1,036	$	817	$	655

Schedule of Company's Investment in Unconsolidated Joint Venture

The following is a summary of the Company’s investment in the Arch Street Joint Venture, as of December 31, 2022 and 2021 and for the year ended December 31, 2022 and 2021 (dollars in thousands):


	Ownership % (1)	Number of Properties	Carrying Value of Investment				Equity in Loss, Net
							Year Ended (2)
Investment	December 31, 2022		December 31, 2022		December 31, 2021		December 31, 2022		December 31, 2021		December 31, 2020
Arch Street Joint Venture (3) (4)	20%	6	$	15,824	$	18,631	$	(524)	$	(56)	$	—

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(1)The Company’s ownership interest reflects its legal ownership interest. The Company’s legal ownership interest may, at times, not equal the Company’s economic interest because of various provisions in the joint venture agreement regarding capital contributions, distributions of cash flow based on capital account balances and allocations of profits and losses. As a result, the Company’s actual economic interest (as distinct from its legal ownership interest) in certain of the properties could fluctuate from time to time and may not wholly align with its legal ownership interest.

(2)The interest in the Arch Street Joint Venture was acquired by Realty Income as part of the Mergers and was transferred to the Company upon the consummation of the Distribution. Therefore, the Company’s equity in loss, net reflects operations following the Merger Effective Time.

(3)During the year ended December 31, 2022, the Arch Street Joint Venture did not acquire any properties. During the year ended December 31, 2021, the Arch Street Joint Venture acquired one property from a third party for a purchase price of $30.5 million.

(4)The total carrying value of the Company’s investment in the Arch Street Joint Venture was greater than the underlying equity in net assets by $0.9 million and $2.1 million as of December 31, 2022 and 2021, respectively. This difference is related to a step up in the fair value of the investment in the Arch Street Joint Venture in connection with the Mergers. The step up in fair value was allocated based on the underlying assets and liabilities of the Arch Street Joint Venture and is being amortized over the estimated useful lives of the respective assets and liabilities in accordance with the Company’s accounting policies.