Orion Properties' Earnings Call: Lease-vs.-Sell Strategy and Non-Core Asset Claims Don't Match

Date of Call: Aug 7, 2026

Financials Results

• Revenue: $34.3 million, down from $37.3 million in Q2 2025
• EPS: $0.43 per share, including a $28.8M non-recurring gain; Core FFO $0.20 per share, flat YOY

Guidance:

• Core FFO for 2026 now expected to range from $0.72 to $0.77 per diluted share, up from prior range of $0.69 to $0.76.
• Net debt to adjusted EBITDA expected to range from 6.0x to 6.8x, down from prior range of 6.5x to 7.3x.
• G&A range unchanged at $19.8 million to $20.8 million.

Business Commentary:

Strategic Review and Asset Disposition:

• Orion Properties has been conducting a strategic review process since late January, exploring options that include potential asset sales and other transactions, supported by outreach and a virtual data room.
• The company has successfully sold properties, including four in the first half of the year, generating nearly $84 million in gross proceeds, which has been used primarily for deleveraging.

Leasing Activity and Portfolio Quality:

• The company completed 673,000 square feet of leasing year-to-date, including 202,000 square feet in the second quarter, with a weighted average lease term increasing to 6.2 years.
• This improvement was driven by efforts to stabilize the portfolio through increased leasing activity and a focus on dedicated use assets (DUAs), which now represent 38.7% of annualized base rent.

Financial Performance and Guidance:

• Orion reported total revenues of $34.3 million for Q2 2026, with a net income of $24.6 million or $0.43 per share, including a non-recurring gain from asset sales.
• Core FFO per share guidance for 2026 was raised to a range of $0.72 to $0.77, driven by reduced operating expenses and improved leasing expectations.

Debt Management and Leverage Reduction:

• The company reduced its net debt to annualized adjusted EBITDA to 5.4 times, down from 6.4 times a year ago, and decreased outstanding debt by $46.4 million.
• This was achieved through debt repayment and refinancing efforts, with proceeds from asset sales used to pay down debt, including over $35 million on a CMBS loan in Q2.

Operational Efficiency and Cost Management:

• G&A expenses improved to $4.6 million in Q2 2026, down from $4.8 million in Q2 2025, due to lower headcount and operational efficiencies.
• The company has reduced property operating expenses by $3.4 million in Q2 and $5.1 million year-to-date by selling vacant properties and reducing carrying costs.

Sentiment Analysis:

Overall Tone: Positive

• CEO expresses confidence in executing the business plan to grow Core FFO, notes 'strong results', 'positive about the overall trends', and believes the market will 'begin to recognize the meaningful, intrinsic value of this company'.

Q&A:

• Question from Mitch Germain (Citizens JMP): I'm curious about your decision to potentially sell an asset, at least to the government, which kind of meets your criteria for the existing portfolio.
  Response: Sells assets that are costly to re-tenant or lack long-term demand; moved most vacant properties off the balance sheet, with a few remaining under evaluation.

• Question from Mitch Germain (Citizens JMP): 57 assets, 6.4 million square feet. What percentage would you characterize to be kind of non-core at this point?
  Response: Only a few percent are characterized as non-core; confident in the remaining assets' leasing potential.

• Question from Mitch Germain (Citizens JMP): ...will there be a formal announcement if you decide to continue to operate?
  Response: Will make a formal announcement when the strategic review process concludes, whether it results in a transaction or continuing independent operations.

• Question from Matthew Erdner (Jones Trading): ...what percentage are you looking to get those dedicated use assets to in kind of the near term and then over the long term?
  Response: Long-term goal is for DUAs to be well over a majority of the portfolio, but progress is steady and incremental without outside capital; timing depends on capital access.

• Question from Matthew Erdner (Jones Trading): ...do you guys have any idea of what you are expecting kind of across the remainder of the year [for CapEx]?
  Response: Additional CapEx for the remainder of the year is expected to range from $30 to $40 million, a volatile figure dependent on lease execution timing.

• Question from Matthew Erdner (Jones Trading): ...how are discussions going for the remainder of [Tulsa] building? And, you know, what's your confidence level there?
  Response: Confidence is relatively high due to the building's high quality and lack of competition; one lease done with at least one more significant lease in discussion.

Contradiction Point 1

Strategy for Vacant Assets

Contradiction on primary goal for remaining vacant assets—lease vs. sell.

Mitch Germain (Citizens JMP) - Mitch Germain (Citizens JMP)

2026Q2: The process is dynamic and ongoing. Future vacant sales will depend on leasing progress. - [Paul McDowell](CEO)

Will the potential sale of an asset to the government align with your existing portfolio criteria? - Mitch Germain (Citizens JMP)

2026Q1: The primary goal is to lease all three properties. However, the company will closely monitor leasing progress and may consider sale if leasing stalls... - [Paul McDowell](CEO)

Contradiction Point 2

Non-Core Asset Definition

Contradiction on the percentage of non-core assets in the portfolio.

Mitch Germain (Citizens JMP) - Mitch Germain (Citizens JMP)

2026Q2: The percentage of non-core assets is estimated to be just a few percent. - [Paul McDowell](CEO)

What percentage of the 57 assets (6.4 million sq ft) are considered non-core? - Mitch Germain (Citizens JMP)

2026Q1: The company will look at all properties for sale, including those with strong tenants and WALT. - [Paul McDowell](CEO)

Contradiction Point 3

Leasing Pipeline Volatility and Market Conditions

Contradiction on the primary driver of leasing pipeline changes.

What is Mitch Germain's (Citizens JMP) assessment of the earnings performance? - Mitch Germain (Citizens JMP)

2026Q2: The company is confident in the remaining assets' ability to be leased... Future vacant sales will depend on leasing progress. - [Paul McDowell](CFO)

What percentage of the 57 assets totaling 6.4 million square feet are non-core? - Mitch Germain (Citizens JMP Securities, LLC)

2025Q4: The increase in the leasing pipeline is due to both a smaller portfolio size where leasing activity on a few properties can significantly move numbers and an improvement in the market backdrop leading to better leasing momentum. The numbers may be volatile quarter-over-quarter. - [Paul McDowell](CFO)

Contradiction Point 4

Pace and Strategy for Vacant Property Sales

Contradiction on the independence of future vacant sales decisions.

Mitch Germain (Citizens JMP) - Mitch Germain (Citizens JMP)

2026Q2: Most vacant properties have been sold, and confidence remains high for leasing up... Future vacant sales will depend on leasing progress. - [Paul McDowell](CFO)

Can you elaborate on your decision to potentially sell an asset to the government that meets your existing portfolio criteria? - Matthew Erdner (JonesTrading Institutional Services, LLC)

2025Q4: Future pace will depend on generating vacancy; the company will evaluate each case to decide between selling or holding for lease-up. - [Paul McDowell](CFO)

Contradiction Point 5

Leasing Pipeline Status

Contradiction on the leasing pipeline's size and underlying reasons for changes.

Mitch Germain (Citizens JMP) - Mitch Germain (Citizens JMP)

2026Q2: Confidence remains high for leasing up remaining assets like the Tulsa property. The process is dynamic and ongoing. - [Paul McDowell](CEO)

Can you elaborate on your decision to potentially sell an asset to the government that meets your existing portfolio criteria? - Mitch Germain (Citizens JMP Securities, LLC)

2025Q3: The pipeline shrinkage is not due to weak demand but rather because some properties previously in the pipeline now have signed leases. The smaller portfolio size and reduced expected vacancies for 2026 also contribute to a naturally smaller pipeline. - [Paul McDowell](CEO)