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    ONL
    Earnings call· Jun 2026(Q2 FY26)

    Orion Properties Q2 FY26 earnings call ONL

    Aug 7, 2026 Source

    Executive summary

    Orion Properties Inc. Q2 FY26 — Strong Leasing, Deleveraging, and Raised FFO Guidance

    Orion Properties delivered strong Q2 FY26 results, marked by robust leasing activity and significant deleveraging, leading to an upward revision of full-year Core FFO guidance. The company continues to execute its strategy of portfolio stabilization, non-core asset dispositions, and prudent leverage management, despite ongoing volatility in rent spreads and occupancy. The strategic review process remains active, with management emphasizing expeditious progress without arbitrary deadlines.

    Highlights

    5

    • Completed 673,000 square feet of leasing year-to-date, including 202,000 square feet in Q2.

    • Weighted average lease term (WALT) increased to 6.2 years from 5.5 years YoY.

    • Net debt to annualized adjusted EBITDA improved to 5.4x from 6.4x YoY.

    • Raised full-year Core FFO guidance to $0.72-$0.77/share from $0.69-$0.76/share.

    • Reduced annual carrying costs by over $12 million from 2025/2026 vacant property sales.

    Concerns

    3

    • Cash rent spreads on Q2 renewals were down 7.7% when comparing ending rents to starting rents.

    • Consolidated portfolio occupancy rate decreased to 78.1% from 78.8% QoQ.

    • Strategic review process ongoing since January, with no assurance of a transaction.

    Guidance & targets

    4
    CategoryTargetConfidence
    Core FFO per diluted share
    $0.72 to $0.77
    high materiality
    High
    Net debt to adjusted EBITDA
    6 to 6.8 times
    high materiality
    High
    G&A expense
    $19.8 million to $20.8 million
    medium materiality
    High
    Additional CapEx
    $30 million to $40 million
    medium materiality
    Medium

    Operational metrics

    27
    Total Revenues
    $34.3 millioncompared to $37.3 million in Q2 FY25
    Q2 FY26
    Net Income
    $24.6 million
    Q2 FY26
    Adjusted EBITDA
    $17.2 millionversus $18 million in Q2 FY25
    Q2 FY26
    G&A Expense
    $4.6 millioncompared to $4.8 million in Q2 FY25
    Q2 FY26

    Benefited from headcount reduction.

    Strategic Review G&A Cost
    $100,000
    Q2 FY26

    Included in total G&A expense.

    Strategic Review G&A Cost
    $200,000
    YTD FY26

    Included in total G&A expense.

    CapEx and Leasing Costs
    $8.9 millioncompared to $15.6 million in Q2 FY25
    Q2 FY26

    Timing dependent on lease execution and work completion.

    Total Liquidity
    $177 million
    as of June 30th, 2026
    Cash and Cash Equivalents
    $63.5 million
    as of June 30th, 2026

    Includes restricted cash.

    Available Credit Facility Capacity
    $113 million
    as of June 30th, 2026
    Outstanding Debt
    $436.6 millioncompared to $483 million a year ago
    as of June 30th, 2026

    Excludes proportionate share of unconsolidated joint ventures debt.

    Debt Repaid from Dispositions
    $61 million
    H1 FY26

    Used proceeds from opportunistic asset sales.

    CMBS Debt Repaid
    $35 million
    Q2 FY26

    Part of total debt repayment.

    Interest Expense Reduction
    $700,000compared to Q2 FY25
    Q2 FY26

    Due to debt repayment and refinance efforts.

    Interest Expense Reduction
    $1.6 millioncompared to YTD FY25
    YTD FY26

    Due to debt repayment and refinance efforts.

    Property Operating Expenses Reduction
    $3.4 millioncompared to Q2 FY25
    Q2 FY26

    Due to selling properties with difficult re-leasing prospects and high carrying costs.

    Property Operating Expenses Reduction
    $5.1 millioncompared to YTD FY25
    YTD FY26

    Due to selling properties with difficult re-leasing prospects and high carrying costs.

    Annual Carrying Cost Savings from Sales
    more than $12 million
    Annual

    Estimated savings from 2025 and 2026 vacant or near-term vacant property sales.

    Dedicated Use Assets (DUA) as % of ABR
    38.7%up from 37.1% QoQ and 32.6% YoY
    Q2 FY26

    Reflects sales of traditional office assets and purchase of DUA properties.

    Total Leasing Square Feet
    673,000
    YTD FY26
    Post-Quarter End Leasing Square Feet
    116,000
    after Q2 FY26

    Includes first new lease at Tulsa property.

    Vacant Properties Sold
    39
    since spin
    Square Feet Sold
    4.2 million
    since spin
    Debt Reduction
    $183 million
    since spin
    Quarterly Cash Dividend
    $0.02
    Q3 FY26

    Declared by Board of Directors on August 5th.

    Weighted Average Lease Term (WALT)
    6.2up from 5.5 years in Q2 FY25
    Q2 FY26

    Continuing steady improvement of this crucial metric.

    Signed-not-commenced leasing backlog
    1.1 million
    Q2 FY26

    Includes substantial number of new long-term leases for currently vacant space and some full building renewals.

    Industry KPIs

    7
    MetricValueDetails
    Occupancy rate78.1%%
    Disposition volume$70.6 millionUSD
    Investment volume closed—
    Net debt adjusted EBITDA5.4x
    Leasing bookings volume signed202,000square feet
    Ffo core ffo normalized ffo per share$0.20per share
    Lease renewal spread re leasing recapturedown 7.7%%

    Deals & partnerships

    4
    Existing tenantStrategic disposition of an operating property

    One of two strategic dispositions in Q2 FY26, contributing to $70.6 million in aggregate gross sales price.

    Adjacent userStrategic disposition of a recently vacated asset

    One of two strategic dispositions in Q2 FY26, contributing to $70.6 million in aggregate gross sales price.

    Government tenantSale of an asset where the government tenant is downsizing

    Asset is in a very remote area, and disposition is considered the best outcome despite meeting DUA criteria.

    BarillaPurchase of a Dedicated Use Asset (DUA) property

    Acquisition made earlier this year, contributing to the increase in DUA percentage of annualized base rent.

    Risks & headwinds

    4
    Strategic Review Outcome Uncertainty

    No assurance that this process will result in Orion concluding any particular transaction.

    Mitigation: Moving as expeditiously as possible; prioritizing shareholder interest over arbitrary deadlines.

    Occupancy Rate VolatilityQuarter-to-quarter

    Consolidated portfolio occupancy rate of 78.1% at the end of Q2 FY26 was down from Q1 FY26.

    Mitigation: Overall trends show steady improvement; strong leasing pipeline of 1.1 million square feet.

    Cash Rent Spread Decline on RenewalsQuarter-to-quarter

    Cash rent spreads on Q2 FY26 renewals were down 7.7% (ending rents vs. starting rents).

    Mitigation: Rent spreads are up 2.1% when comparing current ending rents to new ending rents due to escalations; year-to-date cash rent spreads are only down 0.2%.

    Government Tenancy Risk on Specific Asset

    Government tenant looking to downsize on an asset under contract for sale.

    Mitigation: Decision to sell the asset due to this risk and its remote location, aiming for the best overall outcome.

    What to watch in Q3 FY26

    5

    Strategic Review Outcome

    Next quarter
    CurrentOngoing diligence with several parties
    TargetAnnouncement of conclusion (transaction or independent operation)

    Why it matters

    Determines the future ownership and strategic direction of the company.

    when we come to a conclusion of the process, whatever that is, we will make an announcement

    Q&A highlights

    7

    Why sell a government-leased asset that aligns with DUA criteria?

    The asset is being sold because the government tenant is looking to downsize, and its remote location makes disposition the best outcome for the company.

    “The asset that we're under contract to sell, it's one where the government's looking to downsize on that asset. So there is some risk around the government tenancy in that one asset. Plus, it's in a... very remote area.”

    asked by Mitch Germain · answered by Christopher Day

    2 min read6 chapters

    Detailed Narrative

    01

    Strategic Review Process

    Orion Properties is actively engaged in a strategic options process, initiated in late January, with financial advisors Wells Fargo and J.P. Morgan. This effort includes broad outreach and due diligence by several interested parties. Management is moving as expeditiously as possible, but offers no assurance that the process will result in a transaction, stating that a formal announcement will be made upon conclusion, regardless of the outcome.

    02

    Leasing Performance and Portfolio Stabilization

    The company completed 673,000 square feet of leasing year-to-date, with 202,000 square feet executed in Q2. The weighted average lease term (WALT) for the consolidated portfolio improved to 6.2 years at quarter-end, up from 5.5 years YoY. Despite a Q2 cash rent spread decline of 7.7% on renewals (ending vs. starting rents), rent spreads were up 2.1% when comparing current ending rents to new ending rents, driven by escalations. The leasing pipeline remains strong at over 1.1 million square feet, representing over 17% of the total portfolio.

    03

    Disposition and Deleveraging Efforts

    Orion generated gross proceeds of almost $84 million from the sale of four properties and the Deerfield campus in the first half of the year, with Q2 sales totaling $70.6 million from two strategic dispositions. These sales were executed at cash capitalization rates of 5.6% and an implied 5%. Proceeds were primarily used to repay $61 million of debt, including $35 million on a CMBS loan in Q2, contributing to a reduction in net debt to annualized adjusted EBITDA to 5.4x from 6.4x YoY.

    04

    Portfolio Transformation Towards Dedicated Use Assets (DUA)

    The company is actively shifting its portfolio concentration towards dedicated use assets (DUA), such as medical, lab, R&D, flex, and government properties. At quarter-end, DUA represented 38.7% of annualized base rent, an increase from 37.1% last quarter and 32.6% YoY. This transformation is driven by the disposition of traditional office assets and targeted acquisitions like the Barilla DUA property earlier this year, with expectations for continued growth in this segment.

    05

    Cost Management and Financial Health

    Property operating expenses were reduced by $3.4 million in Q2 and $5.1 million year-to-date compared to 2025, largely due to the sale of properties with high carrying costs, saving over $12 million annually. G&A expenses improved to $4.6 million in Q2 from $4.8 million YoY, benefiting from headcount reductions. Total liquidity stands at $177 million, comprising $63.5 million in cash and $113 million in available credit facility capacity, with total outstanding debt reduced to $436.6 million from $483 million YoY.

    06

    Tulsa Property Leasing Progress

    Following the first new lease at the Tulsa property, management expressed high confidence in further leasing momentum for the Class A building in downtown Tulsa. Discussions are underway for at least one more significant lease, leveraging the property's quality and limited competing product in the market.

    AI-generated summary of the company’s earnings call. Not investment advice.