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ONL

Orion Office REIT NYSE:ONL Stock Report

Last Price

US$10.94

Market Cap

US$619.6m

7D

0.7%

1Y

n/a

Updated

08 Aug, 2022

Data

Company Financials +
ONL fundamental analysis
Snowflake Score
Valuation4/6
Future Growth1/6
Past Performance0/6
Financial Health3/6
Dividends3/6

ONL Stock Overview

Orion Office REIT specializes in the ownership, acquisition and management of a diversified portfolio of mission-critical and corporate headquarters office buildings in high-quality suburban markets across the U.S.

Orion Office REIT Competitors

Price History & Performance

Summary of all time highs, changes and price drops for Orion Office REIT
Historical stock prices
Current Share PriceUS$10.94
52 Week HighUS$32.25
52 Week LowUS$10.04
Beta0
1 Month Change4.09%
3 Month Change-9.89%
1 Year Changen/a
3 Year Changen/a
5 Year Changen/a
Change since IPO-56.24%

Recent News & Updates

Aug 02

Orion Office REIT Q2 2022 Earnings Preview

Orion Office REIT (NYSE:ONL) is scheduled to announce Q2 earnings results on Wednesday, August 3rd, after market close. The consensus EPS Estimate is -$0.15 and the consensus Revenue Estimate is $51.53M Over the last 3 months, EPS estimates have seen 1 upward revision and 0 downward. Revenue estimates have seen 0 upward revisions and 1 downward.

Jul 25

Orion Office REIT: No Win For This REIT Spin (Yet)

Orion Office REIT is a tricky investment. It's a sub-$1B market capitalization REIT with a great set of assets, that's being hated by the market. By hated, we mean that it has dropped almost 30% since late March, despite the market being down "only" around 15%. It's clear that people have strong opinions on this REIT - here are ours. This article was coproduced with Wolf Report. The initial set-up for Orion Office REIT (ONL) can only be said to be "spectacular". We covered the company, considering it a "Strong Buy". Why did we believe this? Because when this REIT debuted through its spin-off, coming from the merger of VEREIT and Realty Income (O), it held 92 mission-critical office assets with headquarter-like quality scores. It can even be said to be "unique", and we equated its quality being like that of Realty Income, which of course is known as the "Monthly Dividend Company". Aside from the company's asset quality, the company's management team was, and is, extremely well-versed in the market. The CEO, Paul McDowell, comes from an executive V.P. and COO of Vereit and was for 7 years. He was also the founder of a former net-lease REIT that was covered by iREIT until it was M&A'd by American Realty in 2014. (Here's our last interview with the CEO, Paul McDowell) ONL's CFO was the chief accounting officer at Vereit, the CIO was in senior industrial asset management at Vereit, and the COO came from a senior VP position. So, all in all, the C-suite was essentially all from Vereit, all with plenty of expertise. All good, right? ONL carries a portfolio of no less than 10.5M rentable square feet, that's around 94% leased, with over 70% of investment-grade tenancy and an average ABR of $16.7 per square foot. So, Orion is essentially the office version of Realty Income and Vereit. The company has a 100% office exposure, primarily found in the single-tenant suburban net lease sector. Its mission is focusing on single-tenant net-lease properties in attractive suburban markets, with a Sunbelt focus due to pop growth and economic growth. All good thoughts here, as I see it. There is also no external management to this REIT, which is sometimes the case. No, ONL is entirely internally managed by the aforementioned team with over a quarter of a decade of combined experience in the net lease space. ONL Investor Presentation So, on the surface, this sounds like a splendid deal. A great mission. Experienced management, great properties, only moderate leverage, plenty of liquidity available, and with a robust platform. Why is there supposedly such an upside in this space, then? Well, the continued de-urbanization in areas in the U.S. is enhanced by the COVID-19 pandemic - previous and ongoing. 82% of urban centers saw net move-outs during COVIDs, and 91% of suburban counties saw net move-ins, clearly outlining this trend. This was especially noticeable in New York, San Francisco, and Los Angeles, with the highest net move-outs and population losses that continue. What's more important, this trend is being driven by the future workforce - young, affluent, and highly educated urban dwellers. Sunbelt markets are in special demand, with Texas, Florida, North Carolina, Arizona, and Georgia being primary targets. 75% of the last 10-year population growth has been sunbelt - and these states combine low-cost tax-friendly sunbelt market with now-attractive demographics. The corporate office space is repositioning. ONL Investor Presentation We combine this with the trends of: Good school systems Limited new office supplies Access to communications Supply of affordable houses Pretty much the exact opposite of geographies like Cali or NYC - and we can start to understand what ONL Bulls are starting to see here. Investment-grade average tenant quality with lease terms of between 8-12 years on average, annual escalators in the rents, and with only triple-net, double net or modified gross leases, we have some very attractive fundamentals. Some examples of attractive markets here. ONL Investor Presentation So, what of the portfolio? Well, it has good diversification. 12.5% is government and public services - which is great. That's the sort of quality I'm looking for when delving into these things because these tenants usually or very rarely ever go anywhere. Aside from that, large tenants are health care equipment and services, insurance clients, and financial institutions. Those clients are in line with the future few decades in the US, with the biggest risk from the financial space. But it's a good mix. You can argue about the quality of some of them, but over 45% of the mix is in the top 10, and those companies are well-worth considering "safe". ONL Investor Presentation The pure-play office REIT already has the diversification we want to be looking at, with perhaps a slight over-emphasis on the New Jersey and NYC area. ONL Investor Presentation ONL has a current leverage target of around 5.5-6.5X net debt/adj. EBITDA. Its current debt has an average outstanding maturity of 3.5 years, with an average interest of 4.07%. The company has south of half a billion available in its revolver, and some millions in cash. Now we start slowly seeing some of the weaknesses of ONL - but one more moment of bullishness here. Since the company began less than a year ago, the company has managed: A JV with a 127,000 sqft. property in St. Louis leased to an investment-grade energy tenant. Sold off three assets of around 185,000 sqft, with another $13M in additional potential divestments. Signed early lease extensions in late 2021 (11 years), with the largest property the company owns. 2022 extensions are signed with tenants in key properties in Texas and Georgia. So, lease extensions, and divestments, things are going quite well for the business - at least from that perspective. So what exactly is the issue? Seeking Alpha (Warning) Wolf Report sold close to all of his ONL when he received it - and he received quite a bit, thanks to his large stake in Realty Income. His reason at the time was that he didn't like the risk/reward ratio, the dividend, and the potential downside. He sold before the slight "pop" as well and now holds only a very marginal position. (I still own shares from the O spin - Brad Thomas) We've gone through bull - let's move to bear. Bearish view on Orion Office REIT The market is expecting that tenants, not landlords, are going to be holding the chips in the office space when it comes to negotiating extensions. Why? Because as we start seeing lease extensions, we're going to see significant rising costs in CapEx due to inflation, overall price increases and related pressures. This muddies the waters around Orion Office, and that's part of the reason we're seeing issues here. Another one is the dividend. ONL was expected, even by iREIT, to provide a dividend at a very high yield and were expecting a 65%+ payout ratio on FFO, compared to around 77.5% for the sector in the iREIT coverage spectrum. Enter our disappointment when the company went to a 24% FFO payout ratio at $0.4/share. That makes the yield at the current price 3.9%. Not exactly sub-par low, but less than half of what we actually expected the company would go for. The company sees its re-leasing and other challenges and seeks to prepare its balance sheet and its operations for the challenges. The latest report in May was a beat on the expectations for FFO, and a miss by revenues. ONL hasn't disappointed the market, in our view, in a way that justifies a 50%+ 1-year drop since late last year. The company wants to spin the massive amounts (over half of the portfolio until 2024) of re-leases in the next few years as an opportunity. Indeed, it might be - but this puts immense pressure on management and its ability to execute under difficult conditions. Can you fault anyone, really, for being careful in this market? The company's CFO was very clear in the earnings call regarding the dividend. The dividend was sized to permit future growth while preserving meaningful cash flow for reinvestment into the current portfolio and for accretive investments. So, we need to basically be buckling up for the "long game" when it comes to Orion. They're asking for your trust, as well as your money, with a low rate of dividend in an environment that's high-inflation, and simply as a product of the company's size, a higher risk. The office space isn't an easy one. (We only recommended two office REITs in our "Anchor & Buoy" portfolio and ONL was not one of them). It's not a growth story for Orion Office - this is a deep value play that requires patience. (Bears will argue ONL is a value trap) The company expects an FFO just above $1.6/share. Current analyst expectations are for around $1.75/share, followed by an actual decline in 2023E, to around $1.6/share. We expect that the company will increase its payout ratio on a year-by-year basis. There are risks - deep risks to this investment. However, there is a bright spot when we look at what can be called "capitulation". There's an end to it. Have you seen ONL going bankrupt? Of course not. Is it in danger of doing so? We would argue that there is absolutely no such danger. There are risks - the company's single-tenant focus can be viewed as a volatile negative as opposed to an asset, and investment-grade ratings don't necessarily make things better when we're talking about re-leasing negotiations. Tenants are being targeted by plenty of office lessors, which means that they can go anywhere (or at least, into other areas than Orion properties). Occupancy is down to just south of 88.1% as opposed to above 94% a few months back. And 4 years average remaining lease term is not very long, compared to what some other companies have. The argument that single-lease tenant properties in the office space are perhaps one of the riskiest plays out there is certainly one that deserves weighting because if a company decides they want to go back to WFH or some sort of hybrid solution towards which the space is no longer suitable, there are plenty of options out on the market which wouldn't hurt the company but would hurt Orion. Also, Orion management itself is expecting significant cost increases. Why do we say this? Because of their own guidance of maintaining the 4.7X to 5.5X to December 2022 was said in the last earnings call. Because of their very conservative P/O ratio, that FFO net of dividends should be combined with share price pressure, driving the comparative net debt/EBITDA down towards just north of 4X.

Shareholder Returns

ONLUS REITsUS Market
7D0.7%-0.3%1.1%
1Yn/a-6.7%-13.0%

Return vs Industry: Insufficient data to determine how ONL performed against the US REITs industry.

Return vs Market: Insufficient data to determine how ONL performed against the US Market.

Price Volatility

Is ONL's price volatile compared to industry and market?
ONL volatility
ONL Average Weekly Movement4.3%
REITs Industry Average Movement4.4%
Market Average Movement7.9%
10% most volatile stocks in US Market17.1%
10% least volatile stocks in US Market3.2%

Stable Share Price: ONL is less volatile than 75% of US stocks over the past 3 months, typically moving +/- 4% a week.

Volatility Over Time: ONL's weekly volatility (4%) has been stable over the past year.

About the Company

FoundedEmployeesCEOWebsite
202126Paul McDowellhttps://www.onlreit.com

Orion Office REIT specializes in the ownership, acquisition and management of a diversified portfolio of mission-critical and corporate headquarters office buildings in high-quality suburban markets across the U.S. The portfolio is leased primarily on a single-tenant net lease basis to creditworthy tenants. The company’s team of experienced industry leaders employs a proven, cycle-tested investment evaluation framework which serves as the lens through which capital allocation decisions are made for the current portfolio and future acquisitions.

Orion Office REIT Fundamentals Summary

How do Orion Office REIT's earnings and revenue compare to its market cap?
ONL fundamental statistics
Market CapUS$619.59m
Earnings (TTM)-US$81.80m
Revenue (TTM)US$160.02m

3.9x

P/S Ratio

-7.6x

P/E Ratio

Earnings & Revenue

Key profitability statistics from the latest earnings report
ONL income statement (TTM)
RevenueUS$160.02m
Cost of RevenueUS$50.01m
Gross ProfitUS$110.01m
Other ExpensesUS$191.82m
Earnings-US$81.80m

Last Reported Earnings

Jun 30, 2022

Next Earnings Date

n/a

Earnings per share (EPS)-1.44
Gross Margin68.75%
Net Profit Margin-51.12%
Debt/Equity Ratio56.3%

How did ONL perform over the long term?

See historical performance and comparison

Dividends

3.7%

Current Dividend Yield

16%

Payout Ratio

Does ONL pay a reliable dividends?

See ONL dividend history and benchmarks
When do you need to buy ONL by to receive an upcoming dividend?
Orion Office REIT dividend dates
Ex Dividend DateSep 29 2022
Dividend Pay DateOct 17 2022
Days until Ex dividend50 days
Days until Dividend pay date68 days

Does ONL pay a reliable dividends?

See ONL dividend history and benchmarks
We’ve recently updated our valuation analysis.

Valuation

Is ONL undervalued compared to its fair value, analyst forecasts and its price relative to the market?

Valuation Score

4/6

Valuation Score 4/6

  • Price-To-Sales vs Peers

  • Price-To-Sales vs Industry

  • Price-To-Sales vs Fair Ratio

  • Below Fair Value

  • Significantly Below Fair Value

  • Analyst Forecast

Key Valuation Metric

Which metric is best to use when looking at relative valuation for ONL?

Other financial metrics that can be useful for relative valuation.

ONL key valuation metrics and ratios. From Price to Earnings, Price to Sales and Price to Book to Price to Earnings Growth Ratio, Enterprise Value and EBITDA.
Key Statistics
Enterprise Value/Revenue7.5x
Enterprise Value/EBITDA12.1x
PEG Ration/a

Price to Sales Ratio vs Peers

How does ONL's PS Ratio compare to its peers?

ONL PS Ratio vs Peers
The above table shows the PS ratio for ONL vs its peers. Here we also display the market cap and forecasted growth for additional consideration.
CompanyPSEstimated GrowthMarket Cap
Peer Average3.3x
CIO City Office REIT
3.1x4.1%US$541.7m
OPI Office Properties Income Trust
1.6x0.4%US$955.4m
PSTL Postal Realty Trust
6.6x17.4%US$375.6m
FSP Franklin Street Properties
1.9x-8.7%US$343.8m
ONL Orion Office REIT
3.9x13.4%US$619.6m

Price-To-Sales vs Peers: ONL is expensive based on its Price-To-Sales Ratio (3.9x) compared to the peer average (3.3x).


Price to Earnings Ratio vs Industry

How does ONL's PE Ratio compare vs other companies in the US REITs Industry?

Price-To-Sales vs Industry: ONL is good value based on its Price-To-Sales Ratio (3.9x) compared to the US REITs industry average (5.8x)


Price to Sales Ratio vs Fair Ratio

What is ONL's PS Ratio compared to its Fair PS Ratio? This is the expected PS Ratio taking into account the company's forecast earnings growth, profit margins and other risk factors.

ONL PS Ratio vs Fair Ratio.
Fair Ratio
Current PS Ratio3.9x
Fair PS Ratio5.3x

Price-To-Sales vs Fair Ratio: ONL is good value based on its Price-To-Sales Ratio (3.9x) compared to the estimated Fair Price-To-Sales Ratio (5.3x).


Share Price vs Fair Value

What is the Fair Price of ONL when looking at its future cash flows? For this estimate we use a Discounted Cash Flow model.

Below Fair Value: ONL ($10.94) is trading below our estimate of fair value ($19.95)

Significantly Below Fair Value: ONL is trading below fair value by more than 20%.


Analyst Price Targets

What is the analyst 12-month forecast and do we have any statistical confidence in the consensus price target?

Analyst Forecast: Insufficient data to show price forecast.


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Future Growth

How is Orion Office REIT forecast to perform in the next 1 to 3 years based on estimates from 1 analyst?

Future Growth Score

1/6

Future Growth Score 1/6

  • Earnings vs Savings Rate

  • Earnings vs Market

  • High Growth Earnings

  • Revenue vs Market

  • High Growth Revenue

  • Future ROE


31.6%

Forecasted annual earnings growth

Earnings and Revenue Growth Forecasts


Analyst Future Growth Forecasts

Earnings vs Savings Rate: ONL is forecast to remain unprofitable over the next 3 years.

Earnings vs Market: ONL is forecast to remain unprofitable over the next 3 years.

High Growth Earnings: ONL is forecast to remain unprofitable over the next 3 years.

Revenue vs Market: ONL's revenue (13.4% per year) is forecast to grow faster than the US market (8% per year).

High Growth Revenue: ONL's revenue (13.4% per year) is forecast to grow slower than 20% per year.


Earnings per Share Growth Forecasts


Future Return on Equity

Future ROE: Insufficient data to determine if ONL's Return on Equity is forecast to be high in 3 years time


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Past Performance

How has Orion Office REIT performed over the past 5 years?

Past Performance Score

0/6

Past Performance Score 0/6

  • Quality Earnings

  • Growing Profit Margin

  • Earnings Trend

  • Accelerating Growth

  • Earnings vs Industry

  • High ROE


-90.4%

Historical annual earnings growth

Earnings and Revenue History

Quality Earnings: ONL is currently unprofitable.

Growing Profit Margin: ONL is currently unprofitable.


Past Earnings Growth Analysis

Earnings Trend: ONL is unprofitable, and losses have increased over the past 5 years at a rate of 90.4% per year.

Accelerating Growth: Unable to compare ONL's earnings growth over the past year to its 5-year average as it is currently unprofitable

Earnings vs Industry: ONL is unprofitable, making it difficult to compare its past year earnings growth to the REITs industry (45.8%).


Return on Equity

High ROE: ONL has a negative Return on Equity (-7.73%), as it is currently unprofitable.


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Financial Health

How is Orion Office REIT's financial position?

Financial Health Score

3/6

Financial Health Score 3/6

  • Short Term Liabilities

  • Long Term Liabilities

  • Debt Level

  • Reducing Debt

  • Stable Cash Runway

  • Forecast Cash Runway

Financial Position Analysis

Short Term Liabilities: ONL's short term assets ($91.1M) exceed its short term liabilities ($22.5M).

Long Term Liabilities: ONL's short term assets ($91.1M) do not cover its long term liabilities ($633.7M).


Debt to Equity History and Analysis

Debt Level: ONL's net debt to equity ratio (54.5%) is considered high.

Reducing Debt: Insufficient data to determine if ONL's debt to equity ratio has reduced over the past 5 years.


Balance Sheet


Cash Runway Analysis

For companies that have on average been loss making in the past we assess whether they have at least 1 year of cash runway.

Stable Cash Runway: Whilst unprofitable ONL has sufficient cash runway for more than 3 years if it maintains its current positive free cash flow level.

Forecast Cash Runway: ONL is unprofitable but has sufficient cash runway for more than 3 years, due to free cash flow being positive and growing by 13.1% per year.


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Dividend

What is Orion Office REIT current dividend yield, its reliability and sustainability?

Dividend Score

3/6

Dividend Score 3/6

  • Notable Dividend

  • High Dividend

  • Stable Dividend

  • Growing Dividend

  • Earnings Coverage

  • Cash Flow Coverage


3.66%

Current Dividend Yield

Upcoming Dividend Payment

TodayAug 09 2022Ex Dividend DateSep 29 2022Dividend Pay DateOct 17 202218 days from Ex DividendBuy in the next 50 days to receive the upcoming dividend

Dividend Yield vs Market

Notable Dividend: ONL's dividend (3.66%) is higher than the bottom 25% of dividend payers in the US market (1.52%).

High Dividend: ONL's dividend (3.66%) is low compared to the top 25% of dividend payers in the US market (4.1%).


Stability and Growth of Payments

Stable Dividend: Too early to tell whether ONL's dividend payments have been stable as they only just started paying a dividend.

Growing Dividend: Too early to tell if ONL's dividend payments are increasing as they only just started paying a dividend.


Earnings Payout to Shareholders

Earnings Coverage: With its low payout ratio (16.2%), ONL's dividend payments are well covered by earnings.


Cash Payout to Shareholders

Cash Flow Coverage: With its reasonably low cash payout ratio (30.9%), ONL's dividend payments are well covered by cash flows.


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Management

How experienced are the management team and are they aligned to shareholders interests?

0.8yrs

Average management tenure


CEO

Paul McDowell (62 yo)

0.75

Tenure

US$958,715

Compensation

Mr. Paul H. McDowell, J.D., has been President of Office & Industrial Group at ARC Advisory Services, LLC since September 27, 2013. He has been Director, Chief Executive Officer and President of Orion Offi...


CEO Compensation Analysis

Compensation vs Market: Paul's total compensation ($USD958.72K) is below average for companies of similar size in the US market ($USD3.94M).

Compensation vs Earnings: Insufficient data to compare Paul's compensation with company performance.


Leadership Team

Experienced Management: ONL's management team is not considered experienced ( 0.8 years average tenure), which suggests a new team.


Board Members

Experienced Board: ONL's board of directors are not considered experienced ( 0.8 years average tenure), which suggests a new board.


Ownership

Who are the major shareholders and have insiders been buying or selling?


Insider Trading Volume

Insider Buying: Insufficient data to determine if insiders have bought more shares than they have sold in the past 3 months.


Ownership Breakdown

Dilution of Shares: ONL only recently listed within the past 12 months.


Top Shareholders

Company Information

Orion Office REIT Inc.'s employee growth, exchange listings and data sources


Key Information

  • Name: Orion Office REIT Inc.
  • Ticker: ONL
  • Exchange: NYSE
  • Founded: 2021
  • Industry: Office REITs
  • Sector: Real Estate
  • Implied Market Cap: US$619.587m
  • Shares outstanding: 56.64m
  • Website: https://www.onlreit.com

Number of Employees


Location

  • Orion Office REIT Inc.
  • 2325 East Camelback Road
  • Floor 8
  • Phoenix
  • Arizona
  • 85016
  • United States

Listings


Company Analysis and Financial Data Status

All financial data provided by Standard & Poor's Capital IQ.
DataLast Updated (UTC time)
Company Analysis2022/08/08 00:00
End of Day Share Price2022/08/08 00:00
Earnings2022/06/30
Annual Earnings2021/12/31


Unless specified all financial data is based on a yearly period but updated quarterly. This is known as Trailing Twelve Month (TTM) or Last Twelve Month (LTM) Data. Learn more here.