Orion Properties Inc. Q2 FY2025 earnings call

• Leasing momentum: 639,000 square feet of leasing completed by July 31, including new and renewal transactions with a weighted average lease term of 6.4 years. Notable leases include a 15.7-year agreement for 46,000 sq ft in Parsippany, NJ; a 5.4-year agreement for 80,000 sq ft in Kennesaw, GA; and a 7.6-year agreement for 23,000 sq ft in Plano, TX. Also, 110,000 sq ft of short-term lease extensions at 2 properties with over 6% positive lease spreads.
• Asset sales: Closed on sale of 4 vacant properties totaling 434,000 sq ft for $26.9 million in Q2. Have agreements to sell 5 traditional office properties totaling 540,000 sq ft for $57 million, expected to close in H2 2025. Demolition of outdated office buildings on former Walgreens campus in Deerfield, IL is underway, to be completed by year-end.
• Portfolio shift: Shifting away from traditional suburban office properties towards DUA properties, which have stronger renewal trends, higher tenant investment, and more durable cash flows. At quarter end, 32.2% of portfolio by annualized base rent and 25.3% by sq ft were DUA properties.
• Balance sheet: Significant liquidity maintained with $257.7 million total liquidity at quarter end. Net debt to annualized year-to-date adjusted EBITDA was 6.93x at quarter end. Discussions ongoing with lenders regarding extending/refinancing credit facility revolver maturing in May 2026.

At quarter end, approximately 32.2% of Orion Properties' portfolio by annualized base rent and approximately 25.3% by square footage were DUA (dedicated use assets) properties. These DUA properties include medical, lab, R&D flex, and non-CBD government properties, and this percentage is expected to increase over time through disposition activity and targeted acquisitions.

• Core FFO is now expected to range from $0.67 to $0.71 per diluted share, up from $0.61 to $0.70 per diluted share.
• Net debt to adjusted EBITDA is now expected to range from 7.3x to 8.3x, down from 8.0x to 8.8x.
• G&A range remains $19.5 million to $20.5 million, unchanged.

• Higher interest rates could continue to put cash flow pressure.
• Elevated vacancy from recent lease roll could impact performance.
• Impact of 23 properties sold since the spin may affect the business.

Q: Are there any questions?

A: There are no questions at this time.