Orion Properties (ONL) and the Looming Going Concern Risk: Implications for Investors

The real estate investment trust (REIT) sector has long been a barometer for economic resilience, but for Orion Properties (ONL), the current environment is testing the limits of its financial flexibility. As the company navigates a complex web of liquidity constraints and solvency risks, investors must grapple with a critical question: Can Orion Properties sustain its operations without a significant restructuring of its debt obligations?

A Delicate Balance: Liquidity and Leverage

Orion Properties' third-quarter 2025 results underscored a mixed financial picture. While the company reported a net loss of $69 million, or $1.23 per share, it managed to generate Core FFO of $11.0 million, or $0.19 per diluted share, and raised its full-year guidance to $0.74–$0.76 per share. However, the underlying liquidity metrics tell a more precarious story. As of September 30, 2025, Orion had $273.0 million in liquidity, comprising $33.0 million in cash and $240.0 million in available revolver capacity under its credit facility according to the company's earnings report. This liquidity, though substantial on paper, is overshadowed by a total debt load of $508.9 million, including a $355.0 million securitized mortgage loan and a $110.0 million revolver set to mature in May 2026 as disclosed in the Q3 2025 earnings call.

The company's debt-to-EBITDA ratio of 6.75x, while improved from 7.3x earlier in the year according to the earnings call transcript, remains elevated for a REIT. For context, the Office REITs industry average has historically hovered around 6.0x–7.0x, but Orion's near-term refinancing needs amplify the risk of a liquidity crunch. According to a report by BusinessWire, Orion has sold or contracted to sell 27 properties totaling 2.7 million square feet since its spin-off, including $110 million in proceeds from recent dispositions as reported in the company's earnings announcement. While these sales have bolstered liquidity, they also signal a strategic retreat from non-core assets, raising questions about the long-term value proposition for shareholders.

The Going Concern Warning: A Red Flag for Investors

The most alarming development came in Orion's Q3 10-Q filing, where management explicitly warned of "substantial doubt" about the company's ability to continue as a going concern as stated in the earnings call transcript. This red flag was tied to the impending maturity of its $110.0 million revolver, which lacks extension options and must be refinanced by May 2026. The filing also highlighted that Orion's $25.9 million share of mortgage debt in the Arch Street Joint Venture could require additional covenant compliance by November 2026 as disclosed in the financial filing.

While Orion is currently in compliance with its debt covenants as confirmed in the public filing, the absence of a clear refinancing plan introduces significant uncertainty. Management has stated it is "actively evaluating strategies" to extend or refinance the revolver, including preliminary discussions with its administrative agent as reported in the earnings call. However, the company's reliance on external financing-particularly in a high-interest-rate environment-poses a substantial risk. If Orion fails to secure new financing, it may be forced to liquidate additional assets or issue equity, both of which could dilute shareholder value.

Strategic Moves and Market Realities

Orion's leadership has emphasized its progress in stabilizing the portfolio, including 3.8 million square feet of leasing activity since the spin-off and a reduction in net debt-to-EBITDA to 6.75x. These efforts are commendable, but they must be weighed against the broader market context. The Office REIT sector has been under pressure due to high interest rates and weak tenant demand, with Orion's earnings declining at an average annual rate of -29% over the past five years-far worse than the industry's -2.5% according to SimplyWall St data.

Moreover, Orion's recent asset sales, while necessary for liquidity, reflect a portfolio in transition. The company sold three properties in Q3 2025 for $21.8 million and has agreements to sell four more for $46.6 million as detailed in the earnings announcement. While these transactions provide short-term relief, they also suggest a lack of confidence in the long-term viability of certain holdings. For investors, this raises the question: Is Orion Properties evolving into a more sustainable business, or is it merely delaying the inevitable?

Implications for Investors

The key takeaway for investors is that Orion Properties' survival hinges on its ability to refinance its $110.0 million revolver and maintain covenant compliance. The company's current liquidity position-$273.0 million as of September 30-provides a buffer, but this may not be sufficient to navigate a prolonged refinancing standoff. Data from Yahoo Finance indicates that Orion's stock has already priced in significant downside risk, with a 12-month volatility of 35% compared to the S&P 500's 15% as reported on the financial site.

For risk-tolerant investors, Orion could present a speculative opportunity if management successfully executes its refinancing strategy or secures alternative capital. However, the going concern warning and elevated leverage make this a high-stakes bet. Conservative investors, on the other hand, may want to avoid the stock until Orion provides a clearer path to deleveraging and operational stability.

Conclusion

Orion Properties stands at a crossroads. Its liquidity crisis and solvency concerns are not abstract risks-they are concrete challenges that could reshape the company's trajectory. While management's asset sales and leasing efforts offer some hope, the looming refinancing deadline in May 2026 remains a critical inflection point. For now, investors must tread carefully, balancing Orion's strategic initiatives against the stark realities of its balance sheet.