Q4 2024 Office Properties Income Trust Earnings Call

Good day and welcome to the OPI fourth quarter 'twenty 'twenty four earnings conference call. All participants will be in listen only mode should you need assistance. Please signal a conference specialist by pressing the star key followed by zero.

Operator: Good day and welcome to the OPI 4th Quarter 2024 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero.

Operator: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star and one on your touchtone phone.

After today's presentation there'll be an opportunity to ask questions to ask a question you May Press Star then one on your touch sensor.

Speaker Change: But I would now like to turn the conference over to Kevin Berry of Investor Relations. Please go ahead.

Kevin Barry: But I would now like to turn the conference over to Kevin Barry of Investor Relations. Please go ahead. Thank you and good morning everyone. Thanks for joining us today. With me on the call are OPI's President and Chief Operating Officer Yael Duffy and Chief Financial Officer and Treasurer Bryan Donley. In just a moment they will provide details about our business and our performance for the fourth quarter of 2024.

Kevin Berry: Thank you and good morning, everyone. Thanks for joining us today.

Speaker Change: With me on the call are Opi's, President and Chief operating Officer, and Chief Financial Officer, and Treasurer, Brian Donlin.

Speaker Change: In just a moment they will provide details about our business and our performance for the fourth quarter of 2024, I would like to note that the recording and retransmission of today's conference call is prohibited without the prior written consent of the company.

Kevin Barry: I would like to note that the recording and retransmission of today's conference call is prohibited without the prior written consent of the company. Also note that today's conference call contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other securities laws. These forward-looking statements are based on OPI's beliefs and expectations as of today, Friday, February 14, 2025, and actual results may differ materially from those that we project. The company undertakes no obligation to revise or publicly release the results of any revision to the forward-looking statements made in today's conference call.

Speaker Change: So note that todays conference call contains forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995 and other securities laws.

Forward looking statements are based on Opi's beliefs and expectations as of today Friday February 14th 2025, and actual results may differ materially from those that we project.

Speaker Change: The company undertakes no obligation to revise or publicly release the results of any revision to the forward looking statements made in today's conference call.

Kevin Barry: Additional information concerning factors that could cause those differences is contained in our filings with the Securities and Exchange Commission, or SEC, which can be accessed from our website, opiread.com, or the SEC's website. Investors are cautioned not to place undue reliance upon any forward-looking statement.

Speaker Change: Additional information concerning factors that could cause those differences is contained in our filings with the securities and exchange Commission or SEC, which can be accessed from our website OPI red dot com or the Sec's website.

Speaker Change: Investors are cautioned not to place undue reliance upon any forward looking statements. In addition, we will be discussing non-GAAP numbers. During this call, including normalized funds from operations or normalized <unk> and cash basis, net operating income or cash basis NOI a reconciliation of these non-GAAP figures.

Kevin Barry: In addition, we will be discussing non-GAAP numbers during this call, including normalized funds from operations, or normalized FFO, and cash-basis net operating income, or cash-basis NOI. A reconciliation of these non-GAAP figures to net income are available in OPI's earnings release presentation that we issued last night, which can be found on our website. We will be providing guidance on this call, including normalized FFO and cash-based SNLI. We are not providing reconciliation of these non-GAAP measures as part of our guidance because certain information required for such reconciliation is not available without unreasonable efforts or at all, such as gains and losses or impairment charges related to the disposition of real estate.

Speaker Change: Net income are available in the earnings release presentation that we issued last night, which can be found on our website.

Kevin Barry: And finally, last week OPI announced it has commenced offers to exchange of its outstanding unsecured senior notes. Because the offering period is open, management will not be taking questions on today's conference call.

Yael Duffy: I will now turn the call over to Yael. Thank you, Kevin, and good morning. Before we begin, I would like to highlight the steps we have taken in 2024 to address our debt maturities and liquidity constraints. Through a series of transactions, we completed $1.8 billion in secured financings, including exchanging $488 million of new notes during the fourth quarter for $378 million of our outstanding 2025 senior unsecured notes that were coming due in February 2025. We paid the balance of these notes off last month with $113 million of cash using the proceeds from the sale of 24 properties.

Speaker Change: Through a series of transactions, we completed $1 $8 billion in secured financings, including exchanging $488 million of new notes during the fourth quarter.

Speaker Change: $378 million of our outstanding 2025, senior unsecured notes that were coming due in February 2025.

Speaker Change: We paid the balance of these notes off last month with $113 million of cash using the proceeds from the sale of 24 properties.

Yael Duffy: totaling approximately 2.8 million square feet for nearly $200 million in 2024. As a result of the exchanges and repayment, OPI's 2025 debt maturity was satisfied in its entirety and OPI's total debt principal was reduced by nearly $200 million as compared to the prior year. As we look ahead, our next debt maturity is $140 million of senior unsecured notes due in June 2026. To address this maturity and reduce debt coming due in 2027 and 2031, last week OPI announced that it has commenced additional offers to exchange certain of its outstanding unsecured senior notes for up to $175 million of new senior guaranteed unsecured notes.

Speaker Change: Totaling approximately two 8 million square feet for nearly $200 million in 2024.

Speaker Change: As a result of the exchanges and repaying that.

Speaker Change: Yeah, 2025 debt maturity was satisfied in its entirety and OPI, although debt principal was reduced by nearly $200 million as compared to the prior year.

Speaker Change: As we look ahead, our next debt maturity is $140 million of senior unsecured notes due in June 2026.

Speaker Change: To address this maturity and reduce debt coming due in 2027 and 2031 last week O. P. I know that he has commenced additional offers to exchange certain of its outstanding unsecured senior notes for up to $175 million of new senior.

Speaker Change: Guaranteed unsecured notes.

Yael Duffy: Now turning to the quarter. I will start with an overview of our portfolio and market fundamentals, summarize leasing activity for 2024 as well as the fourth quarter, and provide an update on OPI's upcoming lease expiration. I will then turn the call over to Bryan to review our financial results. As of December 31st, 2024, OPI's portfolio consisted of 128 properties totaling 17.8 million square feet, with a weighted average remaining lease term of 7.4 years. The portfolio generates $428 million of annualized revenue, down from $513 million a year ago. Our portfolio is diversified by industry and geography with approximately 58% of our revenues coming from investment grade rated tenants or their subsidiaries.

Speaker Change: Now turning to the quarter.

Speaker Change: I'll start with an overview of our portfolio and market fundamentals summarize leasing activity for 2024 as well as the fourth quarter and provide an update on OPI upcoming lease expirations.

Speaker Change: I will then turn the call over to Brian to review our financial results.

Speaker Change: As of December 31st 2024.

Speaker Change: Opi's portfolio consisted of 128 properties totaling $17 8 million square feet with a weighted average remaining lease term of seven four years, the portfolio generate $420 million of annualized revenue.

Speaker Change: From $513 million a year ago.

Speaker Change: Our portfolio is diversified by industry and geography with approximately 58 per fan of our revenues coming from investment grade rated tenants or their subsidiary.

Yael Duffy: Single tenant properties represent 61% of our square footage and nearly 80% of our properties are in suburban locations. Recent research and news publications have begun to highlight green shoots within the office sector. The economy remains strong, employers in both the private sector and the federal government are actively promoting return-to-office mandates, and there is minimal new supply hitting the market. However, these positive trends have not yet materialized in our portfolio. In Washington, D.C., our largest MSA, OPI's vacancy is nearly 33%, and leasing conditions remain challenging as competition among landlords continues to put further pressure on net effective rents.

Speaker Change: Single tenant properties represent 61% of our square footage and nearly 80% of our properties are in suburban locations.

Speaker Change: Recent research and news publications have begun to highlight green shoots within the office sector. The economy remains strong employers in both the private sector and the federal government are actively promoting return to office mandates and there isn't a minimal new supply hitting the market.

Speaker Change: However, these positive trends have not yet materialized in our portfolio.

Speaker Change: In Washington D C. Our largest MSA opi's vacancy has nearly 33% and leasing conditions remain challenging as competition. Among landlords continues to put further pressure on net effective rents.

Speaker Change: As the new presidential administration begins to implement efficiency measures the impact on Opi's largest tenant the GSA, maybe a headwind for our portfolio today. The GSA represents two 4 million square feet or approximately $70 million of annualized.

Yael Duffy: As the new presidential administration begins to implement efficiency measures, the impact on OPI's largest tenant, the GSA, may be a headwind for our portfolio. Today, the GSA represents 2.4 million square feet, or approximately $70 million of annualized revenue. Of this, approximately $413,000 square feet, or $10.5 million in annualized revenue, is within their soft term, which gives the GSA a right to terminate the lease, in whole or in part, without penalty. We anticipate and have forecasted that at least one agency, the Department of Safety and Environmental Enforcement, that leases 110,000 square feet, representing $856,000 in annual revenue, may terminate its lease in the second quarter of 2025.

Speaker Change: Revenue.

Speaker Change: Of this approximately 413000 square feet or 10, and a half million dollars in annualized revenue is within their soft term, which gives the GSA a right to terminate the lease in whole or in part without penalty.

Speaker Change: We anticipate and have forecasted that at least one agency the department of safety and environmental enforcement, but at least there's a 110000 square feet.

Speaker Change: Representing $856000 in annual revenue may terminate its lease in the second quarter of 2025.

Yael Duffy: The balance of the leases in soft term are leased to what we believe, but cannot be certain, are mission critical agencies with low risk of vacating, such as the Secret Service, Veterans Affairs, Social Security, and the Department of Justice. The essential nature of the work these agencies do and their need to physically occupy our properties has historically provided OPI with stable cash flows.

Speaker Change: The balance of the leases and soft term or at least to what we believe but cannot be certain our mission critical agencies with low risk of vacating such as the secret service Veterans Affairs, Social security and the department of Justice.

Speaker Change: The essential nature of the work these agencies do.

Speaker Change: And their need to physically occupy our properties has historically provided OPI with stable cash flows.

Yael Duffy: Although, the Department of Government Efficiency's efforts are broad-based and unpredictable.

Speaker Change: Although the department of government efficiencies efforts are broad based and unpredictable.

Yael Duffy: Turning to our leasing results. In 2024, our total leasing volume increased more than 20% year-over-year, driven by renewal activity. We signed 52 leases for more than 2 million square feet at a weighted average lease term of nearly 9 years and a rental rate increase of 6.3%. The impact of this activity is an increase of $2.9 million in annualized rental revenue, of which 59% has not yet been realized and will take effect in 2025 or beyond. However, despite these efforts, OPI's lease square footage decreased 2.8 million square feet during 2024, and we finished the year with total portfolio occupancy of 85% and same property occupancy of 89.4%.

Speaker Change: Turning to our leasing results.

Speaker Change: In 2024, our total leasing volume increased more than 20% year over year, driven by renewal activity, we signed 52 leases for more than 2 million square feet at a weighted average lease term of nearly nine years and our rental rate increase of six 3%.

Speaker Change: The impact of this activity is an increase of $2 $9 million in annualized rental revenue of which 59% and has not yet been realized and will take effect in 2025 or beyond.

However, despite these efforts OPI leased square footage decreased $2 8 million square feet. During 2024, and we finished the year with total portfolio occupancy of 85% and same property occupancy of 89, 4%.

Speaker Change: In the fourth quarter, we executed 13 leases totaling 359000 square feet at a weighted average lease term of seven one years and a 24, 3% roll up in rent representing the strongest quarterly growth in over four years leasing activity include.

Yael Duffy: In the fourth quarter, we executed 13 leases totaling 359,000 square feet at a weighted average lease term of 7.1 years and a 24.3 percent roll-up in rent, representing the strongest quarterly growth in over four years. Leasing activity included a six-year renewal with the AT&T for 191,000 square feet in Plano, Texas at a 25 percent roll-up in rent. A 13-year expansion and early renewal for 74,000 square feet with a residential services company in Naperville, Illinois, at a 36% roll-up in rent. And a 14-year renewal with the GSA for 60,000 square feet in Sacramento, California, at a 20% roll-up in rent.

Speaker Change: Dead.

Speaker Change: Our six year renewal with the AT&T for 191000 square feet in Plano, Texas at a 25% roll up in rent.

Speaker Change: Our 10 year expansion, an early renewal for 74000 square feet with a residential services company in Naperville, Illinois at a 36% roll up in rent and.

Speaker Change: And a 14 year renewal with the GSA for 60000 square feet in Sacramento, California, and a 20% roll up in rack.

Yael Duffy: concessions and capital commitments of $5.92 per square foot per year declined 10% quarter over quarter.

Speaker Change: Concessions and capital commitments of $5 92 per square foot per year declined 10% quarter over quarter.

Speaker Change: Almost a year ago, we completed the redevelopment of unison Elliott Bay, a 30000 square foot lifestyle and office project in Seattle, Washington.

Yael Duffy: Almost a year ago, we completed the redevelopment of Unison Elliott Bay, a 30,000 square foot life science and office project in Seattle, Washington. The Seattle market has been burdened by oversupply and minimal demand with vacancy rates of 30% for lab space and 22% for office space. Though the property was 28% pre-leased prior to its completion, we have seen no tour or proposal activity in recent months.

Speaker Change: The Seattle market has been burdened by oversupply and minimal demand with vacancy rates of 30% for lab space and 22% for office space.

Speaker Change: So the property was 28% pre leased prior to its completion, we have seen no tour our proposal activity in recent months.

Yael Duffy: As such, we are not optimistic about the leasing prospects of this project in 2025 or in the first half of 2026. Looking ahead, 2 million square feet, representing $42 million, or nearly 10% of OPI's annualized rental income, is set to expire in 2025. As we have long telegraphed, $1.5 million square feet or $29.3 million of annualized revenue are known vacancies. Many of these pending vacancies represent large single-tenant properties which face challenging market conditions and low tenant demand. Additionally, significant downtime, declining market rents, and increased tenant improvement and concession packages, plus the cost to multi-tenant these properties, are likely to put further pressure on OPI's liquidity.

As such we are not optimistic about the leasing prospects at this project in 2025 or in the first half of 2026.

Speaker Change: Looking ahead 2 million square feet, representing $42 million or nearly 10% of opi's annualized rental income is set to expire in 2025.

Speaker Change: As we have long telegraphed, one and a half million square feet or $29 $3 million of annualized revenue are known vacates.

Speaker Change: Many of these pending vacancies represent large single tenant properties, which faced challenging market conditions and low tenant demand.

Speaker Change: Additionally, significant downtime declining market rents and increased tenant improvement and concession packages plus the cost to multi tenant. These properties are likely to put further pressure on opioids liquidity.

Speaker Change: As of December 31, 2020 for 522000 square feet or $18 $1 million of annualized revenue is scheduled to expire in 2026.

Yael Duffy: As of December 31, 2024, 522,000 square feet or $18.1 million of annualized revenue is scheduled to expire in 2026. down from $1.4 million square feet or $41 million of annualized revenue compared to a year ago. Additionally, our current leasing pipeline totals 1.3 million square feet, of which approximately half could result in a mid-single-digit roll-up in rent.

Speaker Change: Down from one 4 million square feet or $41 million of annualized revenue compared to a year ago. Additionally.

Speaker Change: Additionally, our current leasing pipeline totaled one 3 million square feet of which approximately half could result in a mid single digit roll up in rent.

Speaker Change: Turning to dispositions, we are under agreement to sell six properties totaling 581000 square feet for an aggregate sales price of $55 million.

Yael Duffy: Turning to dispositions, we are under agreement to sell six properties totaling 581,000 square feet for an aggregate sales price of $55 million. These properties are either vacant or soon to become vacant and located in markets with weak leasing fundamentals. Five of these assets held for sale are unencumbered properties, and one is collateral for our senior secured notes due in 2027. We expect to complete the majority of these sales by the end of the second quarter.

Speaker Change: These properties are either vacant or soon to become vacant and located in markets with weak leasing fundamentals five of these assets assets held for sale, our unencumbered properties and one as collateral for our senior secured notes due in 2027.

Speaker Change: We expect to complete the majority of these sales by the end of the second quarter.

Speaker Change: Last month, we launched a marketing campaign to sell our 427000 square foot mixed use development at 20 Mass Avenue in Washington D C.

Yael Duffy: Last month, we launched a marketing campaign to sell our 427,000 square foot mixed-use development at 20 Mass Ave. in Washington, D.C. Sonesta International Hotels operates a 274-key hotel on floors 2 through 6 of the property, or 56% of the square footage. We anticipate the likely buyer of this project to be a hotel investor. Effective January 1, 2025, we restructured our agreement with Finesta to convert the existing lease to a hotel management agreement. Under this agreement, any earnings OPI may receive from the hotel will now be tied to the revenue and expenses of the hotel's operations.

Speaker Change: So not the international hotels operates a 274 key hotel on floors two through six of the property are 56% of the square footage.

Speaker Change: We anticipate the likely buyer of this project to be a hotel investor.

Speaker Change: Effective January one 2025, we restructured our agreement with sonesta to convert the existing lease to a hotel management agreement.

Speaker Change: Under this agreement any earnings Okay. I may receive from the hotel will now be tied to the revenue and expenses of the hotel's operations.

Yael Duffy: We believe the change from a lease to a more customary hotel management agreement enhances the marketability of the property to hotel investors and improves the valuation compared to having the previous lease agreement in place. Today, no additional properties are being marketed for sale, but we continue to evaluate additional disposition opportunities that could further mitigate occupancy risk and the associated carry costs of vacant properties.

Speaker Change: We believe the change from a lease to a more customary hotel management agreement enhances the marketability of the property to hotel investors and improves the valuation compared to having the pre previous lease agreement in place.

Speaker Change: Today, no additional properties are being marketed for sale, but we continue to evaluate additional disposition opportunities that could further mitigate occupancy risks and the associated carrying costs of vacant properties.

Yael Duffy: However, as we consider any future sales, we must balance the impact the potential dispositions would have on our liquidity, debt covenants, and operating metrics.

Speaker Change: However, as we consider any future sales, we must balance the impact the potential dispositions would have on our liquidity debt covenants and operating metrics I will now turn the call over to Brian.

Bryan Donley: I will now turn the call over to Bryan. Thank you, Yael, and good morning. For the fourth quarter, we reported normalized FFO of $20.9 million, or $0.36 per share for the quarter, which came in a penny above our guidance range as a result of the impact and timing of our disposition. This compares to normalized FFO, $22.1 billion, or 43 cents per share for the third quarter of 2024. Decrease on a sequential quarter basis was driven by higher interest expense, partially offset by an increase in NOI. Same property cash basis NOI was $60.9 million, representing an increase of 4.9% compared to the fourth quarter of 2023, beating our expectations for the quarter due to lower operating expenses at our comparable properties and the sale of certain vacant properties.

Brian Donlin: Thank you Jan and good morning.

Brian Donlin: For the fourth quarter, we reported normalized <unk> of <unk>.

Brian Donlin: $9 million or <unk> 36 per share for the quarter, which came in a penny above our guidance range as a result of the impact and timing of our dispositions.

Brian Donlin: This compares to normalized <unk> $22 $1 billion or 43 cents per share for the third quarter of 2024.

Brian Donlin: Decrease on a sequential quarter basis was driven by higher interest expense, partially offset by an increase in NOI.

Brian Donlin: Same property cash basis, NOI was $69 million representing.

Brian Donlin: Representing an increase of four 9% compared to the fourth quarter of 2023, raising our expectations for the quarter due to lower operating expenses at our comparable properties.

Brian Donlin: They all have certain vacant properties.

Brian Donlin: Turning to our outlook for the first quarter of 2025, we expect normalized <unk> to be between eight and 10 cents per share for Q1 the.

Bryan Donley: Turning to our outlook for the first quarter of 2025, we expect normalized FFO to be between 8 and 10 cents per share for Q1. The decrease sequentially from Q4 is primarily driven by lower NOI as a result of asset sales, tenant vacancies, and increased interest expense. Our current estimated quarterly interest expense run rate is approximately $52 million, consisting of $41 million of cash interest expense and $11 million of non-cash amortization of financing costs, discounts, and premiums. This guidance does not include any potential impact on the debt exchange offer we launched last week. We expect same property cash basis NOI to decrease 8 to 10% as compared to the first quarter of 2024, driven by tenant vacancies and an increase of free rent from recent leasing activities.

Brian Donlin: The decrease sequentially from Q4 is primarily driven by lower NOI as a result of asset sales tenant vacancies and increased interest expense.

Brian Donlin: Our current estimated quarterly interest expense run rate is approximately $52 million.

Brian Donlin: Consisting of $41 million of cash interest expense at $11 billion of non cash amortization of financing cost discounts and premiums.

Brian Donlin: This guidance does not include any potential impact on the debt exchange offer we launched last week.

Brian Donlin: We expect same property cash basis, NOI decreased 8% to 10% as compared to the first quarter of 2024, driven by tenant vacancies that an increase of free rent from recent leasing activity.

Bryan Donley: This NOI guide does not include any potential changes to our same store portfolio. Turning to our investing activities, we spent $36.1 million on capital expenditures during the fourth quarter, and our 2025 full-year CapEx guidance is expected to be a total spend of approximately $80 million, comprised of $18 million of building capital and $62 million of leasing capital. During the fourth quarter, we sold 17 properties with 1.8 million square feet for proceeds of up to $114.5 million. At quarter end, we had five properties with a carrying value of $32 million classified as held for sale. We took an $8 million impairment charge during the quarter to write down the carrying value of one of these properties.

Brian Donlin: Its NOI guidance does not include any potential changes to our same store portfolio.

Brian Donlin: Turning to our investing activities, we spent $36 1 million on capital expenditures during the fourth quarter 2025 full year Capex guidance is expected to be a total spend of approximately $80 million comprised of $18 million of building capital and $62 million of leasing capital.

Brian Donlin: During the fourth quarter, we sold 17 properties with one 8 million square feet for proceeds of $114 $5 billion at quarter end, we had five properties with a carrying value of $32 million classified as held for sale we.

Brian Donlin: We took an $8 million impairment charge during the quarter to write down the carrying value of one of these properties.

Bryan Donley: As of today, we have six properties under agreement for sale for $55 million, including five of the properties classified as held for sale.

Brian Donlin: As of today, we have six properties under agreement for sale for $55 million, including five of the properties classified as held for sale.

Bryan Donley: Turning to the balance sheet, in mid-December, we completed a private debt exchange of $340 million of outstanding 4.5% senior unsecured notes due in 2025 to $445 million of new 3.25% senior secured notes due 2027 and 11.5 million common shares. In January, we used the proceeds from asset dispositions to repay our remaining unsecured notes due in 2025. I would also like to highlight that we have enhanced our disclosures and provided additional visibility into our properties, securing our various debt transactions within our earnings presentation posted to our website. Our total liquidity today is $113 million of cash.

Brian Donlin: Turning to the balance sheet in mid December we completed a private debt exchange of $340 million of outstanding four 5% senior unsecured notes due in 2000 $25 million to $445 million of Nu, 3.25% senior secured notes due 2027, and 11 5 million common shares.

Brian Donlin: In January we used the proceeds from asset dispositions to repay our remaining unsecured notes due in 2025.

Brian Donlin: I would also like to highlight that we have enhanced our disclosures and provided us additional visibility into our property securing our various debt transactions with our earnings within our earnings presentation posted to our website.

Brian Donlin: Our total liquidity today is $113 million of cash.

Bryan Donley: We are currently projecting to burn $60 to $70 million of cash from operations in 2025, including capital expenditures.

Brian Donlin: We are currently projecting to earn $60 million to $70 million of cash from operations in 2025, including capital expenditures.

Bryan Donley: Given our liquidity position, financial covenant constraints under our debt agreements, and debt principal repayments coming due in 2026, we have limited options to address our upcoming debt maturities, and we do not believe that those options include cash repayments or debt for equity exchanges. OPI's next maturity consists of approximately $140 million of senior unsecured notes due June 2026, which we are looking to address with the debt exchange offer we announced last week of up to $175 million of new 8% senior priority guaranteed unsecured notes. Under the offer, priority will be given to holders of OPI's 2.65% senior notes due in 2026.

Brian Donlin: Given our liquidity position financial covenant constraints under our debt agreements and debt principal repayments coming due in 2026, we have limited options to address our upcoming debt maturities. We do not believe that those options include cash repayments or debt for equity exchanges.

Brian Donlin: Opi's next maturity consists of approximately $140 million of senior unsecured notes due June 2026, which we are looking to address with the debt exchange offer we announced last week of up to $175 million of new 8% senior priority guaranteed unsecured notes.

Under the offer priority will be given to holders of opioids to six 5% senior notes due in 2026.

Bryan Donley: The offer is subject to a number of conditions, including that a minimum of 75% or $105 million of our existing 2026 notes participate in the exchange. Under the debt exchange we completed in the fourth quarter, our new $445 million of 3.25% senior secured notes due in 2027 require quarterly principal amortization of $6.5 million and a principal payment of $125 million by March 2026.

The offer is subject to a number of conditions, including that a minimum of a 75%, but $105 million of our existing 2026 nodes participate in the exchange.

Brian Donlin: Under the debt exchange, we completed in the fourth quarter, our new $445 million of 3.25% senior secured notes due in 2027 required quarterly principal amortization of $6 5 million.

Brian Donlin: And a principal payment of $125 million by March 2026.

Bryan Donley: We're currently projecting asset sales, including the potential sale of 20 Mass Ave. in Washington, D.C., which serves as collateral to the 2027 notes, will be our source of liquidity to make this payment.

Brian Donlin: We're currently projecting asset sales, including the potential sale of 20 mass Avenue in Washington, D C, which serves as collateral to the 2027 notes will be our source of liquidity to make this payment.

Bryan Donley: We look forward to providing updates about our progress in the future.

Speaker Change: We look forward to providing updates about our progress in the future as Kevin highlighted earlier now that Opi's debt exchange offer period is open we will not be taking any questions on our call today. Thank you for joining US. This concludes our conference call.

Kevin Barry: As Kevin highlighted earlier, now that OPI's debt exchange offer period is open, we will not be taking any questions on our call today. Thank you for joining us. This concludes our conference call. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Yeah.

Speaker Change: Okay.

Speaker Change: [music].