Portfolio & Strategy - Orion Properties is shifting its focus to properties with specialized use components, targeting sectors like government, medical, laboratory, and R&D facilities[7, 30] - The company aims to reduce exposure to traditional office properties and recycle capital into dedicated use assets[7, 26] - Orion seeks to increase exposure to creditworthy tenants on long net leases to reduce portfolio income volatility[26] - As of June 30, 2025, the portfolio consists of 66 operating properties and 6 Arch Street Joint Venture properties, totaling 7,780,000 rentable square feet with 77.4% occupancy[34] - The portfolio's annualized base rent (ABR) is $118,884,000, with an average of $15.28 per rentable square foot[34] - 68.5% of the ABR comes from investment-grade tenants, and the weighted average remaining lease term is 5.5 years[34] Diversification & Leasing - The top 10 tenants account for 56.0% of the ABR[39] - The portfolio is diversified across industries, with Government & Public Services being the largest at 16.8% of ABR[38] - The largest geographic concentration is in Texas, accounting for 17.4% of ABR[41] - In 2025, Orion completed 639,000 square feet of lease renewals and new leases across nine properties, with a weighted average lease term of 6.4 years[53] Balance Sheet - As of June 30, 2025, Orion Properties had $257,700,000 in liquidity, including $17,700,000 in cash and $240,000,000 available on the credit facility revolver[53]

PART I — FINANCIAL INFORMATION This section presents Orion Properties Inc.'s unaudited financial statements, management's discussion, and related disclosures for the reporting period [Item 1. Unaudited Financial Statements](index=3&type=section&id=Item%201.%20Unaudited%20Financial%20Statements) This section presents Orion Properties Inc.'s unaudited consolidated financial statements for the quarter ended June 30, 2025, including balance sheets, statements of operations, comprehensive income (loss), equity, and cash flows, along with detailed notes. A significant concern is raised regarding the Company's ability to continue as a going concern due to the upcoming maturity of its Revolving Facility - **Substantial doubt about the Company's ability to continue as a going concern** exists for at least one year from the issuance of these consolidated financial statements due to uncertainty with regard to the Company's ability to extend or refinance the **Revolving Facility**, which matures on May 12, 2026[25](index=25&type=chunk)[26](index=26&type=chunk) [Consolidated Balance Sheets](index=3&type=section&id=ORION%20PROPERTIES%20INC.%20CONSOLIDATED%20BALANCE%20SHEETS) This section provides a snapshot of the Company's financial position, detailing assets, liabilities, and equity at specific points in time Consolidated Balance Sheet Highlights (in thousands) | Metric | June 30, 2025 | December 31, 2024 | Change | % Change | | :-------------------------------- | :------------ | :---------------- | :----- | :------- | | Total assets | $1,288,188 | $1,336,422 | $(48,234) | -3.61% | | Total liabilities | $558,858 | $571,166 | $(12,308) | -2.16% | | Total stockholders' equity | $728,012 | $763,916 | $(35,904) | -4.70% | | Cash and cash equivalents | $17,384 | $15,600 | $1,784 | 11.44% | | Real estate investments, net | $1,073,927 | $1,104,546 | $(30,619) | -2.77% | | Mortgages payable, net | $371,587 | $371,222 | $365 | 0.10% | | Credit facility revolver | $110,000 | $119,000 | $(9,000) | -7.56% | [Consolidated Statements of Operations](index=4&type=section&id=ORION%20PROPERTIES%20INC.%20CONSOLIDATED%20STATEMENTS%20OF%20OPERATIONS) This section outlines the Company's revenues, expenses, and net loss over specific reporting periods Consolidated Statements of Operations Highlights (in thousands, except per share data) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change (YoY) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change (YoY) | | :----------------------------------- | :------------------------------- | :------------------------------- | :----------- | :----------------------------- | :----------------------------- | :----------- | | Total revenues | $37,305 | $40,124 | $(2,819) | $75,306 | $87,321 | $(12,015) | | Total operating expenses | $55,239 | $64,762 | $(9,523) | $94,380 | $130,009 | $(35,629) | | Net loss | $(25,101) | $(33,801) | $8,700 | $(34,456) | $(60,027) | $25,571 | | Net loss attributable to common stockholders | $(25,103) | $(33,801) | $8,698 | $(34,464) | $(60,033) | $25,569 | | Basic and diluted net loss per share | $(0.45) | $(0.60) | $0.15 | $(0.61) | $(1.07) | $0.46 | [Consolidated Statements of Comprehensive Income (Loss)](index=5&type=section&id=ORION%20PROPERTIES%20INC.%20CONSOLIDATED%20STATEMENTS%20OF%20COMPREHENSIVE%20INCOME%20%28LOSS%29) This section presents the Company's net loss and other comprehensive income (loss) components, reflecting total changes in equity from non-owner sources Consolidated Statements of Comprehensive Income (Loss) Highlights (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change (YoY) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change (YoY) | | :------------------------------------------------ | :------------------------------- | :------------------------------- | :----------- | :----------------------------- | :----------------------------- | :----------- | | Net loss | $(25,101) | $(33,801) | $8,700 | $(34,456) | $(60,027) | $25,571 | | Total other comprehensive (loss) income | $(24) | $31 | $(55) | $(10) | $250 | $(260) | | Total comprehensive loss | $(25,125) | $(33,770) | $8,645 | $(34,466) | $(59,777) | $25,311 | | Total comprehensive loss attributable to common stockholders | $(25,127) | $(33,770) | $8,643 | $(34,474) | $(59,783) | $25,309 | [Consolidated Statements of Equity](index=6&type=section&id=ORION%20PROPERTIES%20INC.%20CONSOLIDATED%20STATEMENTS%20OF%20EQUITY) This section details changes in the Company's equity accounts, including net loss, distributions, and equity-based compensation Consolidated Statements of Equity Highlights (in thousands) | Metric | Balance, January 1, 2025 | Balance, June 30, 2025 | Change | | :-------------------------- | :----------------------- | :--------------------- | :----- | | Total Stockholders' Equity | $763,916 | $728,012 | $(35,904) | | Total Equity | $765,256 | $729,330 | $(35,926) | | Metric | Balance, January 1, 2024 | Balance, June 30, 2024 | Change | | :-------------------------- | :----------------------- | :--------------------- | :----- | | Total Stockholders' Equity | $885,623 | $816,105 | $(69,518) | | Total Equity | $887,003 | $817,491 | $(69,512) | - For the six months ended June 30, 2025, **net loss attributable to common stockholders** was **$(34,464) thousand**, and **distributions totaled** **$(2,490) thousand**. **Equity-based compensation, net, added** **$1,526 thousand**[14](index=14&type=chunk) - For the six months ended June 30, 2024, **net loss attributable to common stockholders** was **$(60,033) thousand**, and **distributions totaled** **$(11,298) thousand**. **Equity-based compensation, net, added** **$1,725 thousand**[14](index=14&type=chunk) [Consolidated Statements of Cash Flows](index=7&type=section&id=ORION%20PROPERTIES%20INC.%20CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) This section summarizes the Company's cash inflows and outflows from operating, investing, and financing activities Consolidated Statements of Cash Flows Highlights (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change (YoY) | | :----------------------------------- | :------------------------------- | :------------------------------- | :----------- | | Net cash provided by operating activities | $9,316 | $28,009 | $(18,693) | | Net cash provided by (used in) investing activities | $3,489 | $(4,835) | $8,324 | | Net cash used in financing activities | $(16,501) | $(21,409) | $4,908 | | Net change in cash and cash equivalents and restricted cash | $(3,696) | $1,765 | $(5,461) | | Cash and cash equivalents and restricted cash, end of period | $53,474 | $58,963 | $(5,489) | [Notes to Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Orion%20Properties%20Inc.%20Consolidated%20Financial%20Statements) This section provides detailed explanations and additional information supporting the consolidated financial statements [Note 1 – Organization](index=9&type=section&id=Note%201%20%E2%80%93%20Organization) Orion Properties Inc. is an internally managed REIT focused on owning, acquiring, and managing a diversified portfolio of office properties, primarily single-tenant net lease assets. The Company recently changed its name to reflect a broader strategy shift towards dedicated use assets (government, medical, lab, R&D, flex operations) away from traditional office properties. As of June 30, 2025, Orion owned 66 operating properties and an equity interest in the Arch Street Joint Venture - Orion Properties Inc. changed its name from Orion Office REIT Inc. on March 5, 2025, to reflect a broader investment strategy shifting from traditional office properties to **dedicated use assets** (e.g., government, medical, laboratory, R&D, flex operations)[21](index=21&type=chunk) - As of June 30, 2025, the Company owned and operated **66 operating properties** (**7.6 million** leasable square feet across **29** states) and **six** non-operating properties. It also holds a **20%** equity interest in the Arch Street Joint Venture, which owns **six** properties (**1.0 million** leasable square feet)[24](index=24&type=chunk) [Note 2 – Summary of Significant Accounting Policies](index=9&type=section&id=Note%202%20%E2%80%93%20Summary%20of%20Significant%20Accounting%20Policies) This note outlines Orion's significant accounting policies, including principles of consolidation, use of estimates, and revenue recognition for rental income and joint venture fees. Critically, it discloses substantial doubt about the Company's ability to continue as a going concern due to the uncertainty of refinancing its Revolving Facility, which matures in May 2026 - **Substantial doubt about the Company's ability to continue as a going concern** exists for at least one year from the issuance of these financial statements due to uncertainty in extending or refinancing the **$110.0 million Revolving Facility**, which matures on May 12, 2026, and has no remaining extension options[25](index=25&type=chunk)[26](index=26&type=chunk) - The Company recognizes **rental revenue** on a straight-line basis for operating leases with scheduled rent increases, and variable lease payments are recognized as they occur. Collectability is continuously assessed, and revenue is recorded on a cash basis if collection is not probable[33](index=33&type=chunk)[37](index=37&type=chunk) - The Company operates in one business segment: commercial real estate, with the CEO as the chief operating decision maker, reviewing net income (loss) attributable to common stockholders and significant expenses[42](index=42&type=chunk) [Note 3 – Real Estate Investments and Related Intangibles](index=12&type=section&id=Note%203%20%E2%80%93%20Real%20Estate%20Investments%20and%20Related%20Intangibles) This note details the Company's real estate investment activities, including no acquisitions in H1 2025 but four property dispositions totaling $26.9 million in gross sales price. It also provides a breakdown of intangible lease assets and liabilities, showing a decrease in total net intangible lease assets from $95.9 million to $85.3 million - During the six months ended June 30, 2025, the Company had no property acquisitions. In contrast, during the six months ended June 30, 2024, one parcel of land was acquired for no consideration due to a finance lease maturity[47](index=47&type=chunk)[48](index=48&type=chunk) Property Dispositions (in thousands) | Metric | Three Months Ended June 30, 2025 | Six Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :----------------------------- | :------------------------------- | :----------------------------- | | Total dispositions (count) | 4 | 4 | 1 | 1 | | Aggregate gross sales price | $26,930 | $26,930 | $2,100 | $2,100 | | Gain on disposition of real estate assets | $891 | $891 | $— | $— | | Impairments on disposition of real estate assets | $1,165 | $1,165 | $20 | $20 | Intangible Lease Assets and Liabilities (in thousands) | Category | June 30, 2025 | December 31, 2024 | | :----------------------------------- | :------------ | :---------------- | | Total intangible lease assets, net | $85,270 | $95,944 | | Below-market leases, net | $19,469 | $20,596 | - The Arch Street Joint Venture's non-recourse mortgage notes of **$130.2 million** mature on November 27, 2025, with one remaining **12-month extension option**. The Company's proportionate share is **$26.0 million**[56](index=56&type=chunk) - The Company provided an additional **$8.3 million member loan** to the Arch Street Joint Venture in February 2025 for leasing costs, with **$7.6 million** receivable as of June 30, 2025, earning **15% interest per annum**[57](index=57&type=chunk) [Note 4 – Receivables and Other Assets](index=14&type=section&id=Note%204%20%E2%80%93%20Receivables%20and%20Other%20Assets) This note details the composition of accounts receivable and other assets. Accounts receivable, net, increased to $27.0 million from $22.8 million, primarily due to a rise in straight-line rent receivable. Restricted cash, included in other assets, decreased to $36.1 million from $41.6 million Accounts Receivable, Net (in thousands) | Category | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :---------------- | | Accounts receivable, net | $4,915 | $5,852 | | Straight-line rent receivable, net | $22,068 | $16,981 | | Total | $26,983 | $22,833 | Other Assets, Net (in thousands) | Category | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | Restricted cash | $36,090 | $41,570 | | Right-of-use assets, net | $21,744 | $22,216 | | Investment in unconsolidated joint venture | $11,305 | $11,822 | | Notes receivable | $7,605 | $3,900 | | Deferred costs, net | $3,134 | $4,596 | | Prepaid expenses | $2,826 | $2,133 | | Other assets, net | $1,920 | $1,591 | | Total | $84,624 | $87,828 | - **Notes receivable** increased significantly from **$3.9 million** to **$7.6 million**, primarily due to an additional **member loan** to the Arch Street Joint Venture[62](index=62&type=chunk) [Note 5 – Fair Value Measures](index=15&type=section&id=Note%205%20%E2%80%93%20Fair%20Value%20Measures) This note outlines the Company's fair value measurements for financial instruments and real estate assets. Derivative liabilities, primarily interest rate collars, increased from $15 thousand to $25 thousand. Impairment provisions for real estate assets decreased to $21.2 million in H1 2025 from $25.4 million in H1 2024, affecting six properties Derivative Liabilities Measured at Fair Value (in thousands) | Category | June 30, 2025 | December 31, 2024 | | :------------------ | :------------ | :---------------- | | Derivative liabilities | $25 | $15 | Provisions for Impairment (in thousands) | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------- | :------------------------------- | :------------------------------- | | Number of properties | 6 | 8 | | Carrying value of impaired properties | $64,209 | $62,710 | | Provisions for impairment | $(21,212) | $(25,365) | | Estimated fair value | $42,997 | $37,345 | - For H1 2025, **impairment charges** of **$18.3 million** were recorded for held and used properties, and **$2.9 million** for disposed properties, including **$1.7 million** for properties classified as held for sale[73](index=73&type=chunk) Fair Value of Long-Term Financial Instruments (in thousands) | Instrument | Level | Carrying Value at June 30, 2025 | Fair Value at June 30, 2025 | Carrying Value at December 31, 2024 | Fair Value at December 31, 2024 | | :----------------- | :---- | :------------------------------ | :-------------------------- | :---------------------------------- | :-------------------------------- | | Notes receivable | 3 | $7,605 | $7,605 | $3,900 | $3,900 | | Mortgages payable | 2 | $373,000 | $361,275 | $373,000 | $352,476 | | Derivative liabilities | 2 | $25 | $25 | $15 | $15 | | Total | | $373,025 | $361,300 | $373,015 | $352,491 | [Note 6 – Debt, Net](index=17&type=section&id=Note%206%20%E2%80%93%20Debt%2C%20Net) This note details the Company's debt structure, totaling $481.6 million as of June 30, 2025, with a weighted average maturity of 1.6 years and an effective interest rate of 5.68%. The Revolving Facility, with $110.0 million outstanding, matures on May 12, 2026, and poses a significant going concern risk due to uncertainty in refinancing. The CMBS Loan ($355.0 million) matures in February 2027, and the San Ramon Loan ($18.0 million) matures in December 2031 - As of June 30, 2025, the Company had **$481.6 million** in **debt outstanding**, with a **weighted average maturity** of **1.6 years** and a **weighted average effective interest rate** of **5.68%** for the six months ended June 30, 2025[80](index=80&type=chunk) Debt Outstanding and Activity (in thousands) | Debt Type | Balance as of Dec 31, 2024 | Debt Issuances | Repayments, Extinguishment and Assumptions | Accretion and Amortization | Balance as of June 30, 2025 | | :-------------------- | :------------------------- | :------------- | :--------------------------------------- | :------------------------- | :-------------------------- | | Mortgages payable, net | $371,222 | $— | $— | $365 | $371,587 | | Credit facility revolver | $119,000 | $13,000 | $(22,000) | $— | $110,000 | | Total debt | $490,222 | $13,000 | $(22,000) | $365 | $481,587 | - The **Revolving Facility**, with **$110.0 million** outstanding, matures on May 12, 2026, and has no remaining extension options. **Substantial doubt about the Company's ability to continue as a going concern** due to the uncertainty of refinancing this facility[86](index=86&type=chunk) - The **CMBS Loan** of **$355.0 million** bears a fixed interest rate of **4.971%** and matures on February 11, 2027. The **San Ramon Loan** of **$18.0 million** bears a fixed interest rate of **5.90%** and matures on December 1, 2031[100](index=100&type=chunk)[108](index=108&type=chunk) - The Company entered into a new **interest rate collar agreement** effective May 12, 2025, to hedge **$75.0 million** of the **Revolving Facility**, capping the benchmark rate between **3.28%** and **4.29%** until May 12, 2026[90](index=90&type=chunk) [Note 7 – Derivatives and Hedging Activities](index=21&type=section&id=Note%207%20%E2%80%93%20Derivatives%20and%20Hedging%20Activities) This note details the Company's use of interest rate collar agreements as cash flow hedges to mitigate interest rate volatility on its Revolving Facility. As of June 30, 2025, these derivatives had an aggregate notional amount of $75.0 million, resulting in net liabilities of $25 thousand - As of June 30, 2025, the Company had **interest rate collar agreements** with an aggregate **notional amount** of **$75.0 million**, designated as **cash flow hedges** for the **Revolving Facility**, with a fair value of **$(25) thousand**[114](index=114&type=chunk)[115](index=115&type=chunk) - The new **interest rate collar agreement**, effective May 12, 2025, hedges **$75.0 million** of the **Revolving Facility**, with the benchmark rate floating between **3.28%** and **4.29%** per annum until May 12, 2026[114](index=114&type=chunk) - During the three and six months ended June 30, 2025, the Company recorded **net unrealized losses** of less than **$0.1 million** for changes in the fair value of its **cash flow hedge** in accumulated other comprehensive loss[115](index=115&type=chunk) [Note 8 – Supplemental Cash Flow Disclosures](index=22&type=section&id=Note%208%20%E2%80%93%20Supplemental%20Cash%20Flow%20Disclosures) This note provides supplemental cash flow information, including cash paid for interest and income taxes, and non-cash investing and financing activities. Accrued capital expenditures and leasing costs significantly increased to $14.4 million in H1 2025 from $5.3 million in H1 2024 Supplemental Cash Flow Information (in thousands) | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | | Cash paid for interest, net | $14,399 | $14,540 | | Cash paid for income taxes, net of refunds | $214 | $213 | | Accrued capital expenditures and leasing costs | $14,401 | $5,307 | | Distributions declared and unpaid | $1,126 | $5,595 | | Land acquired upon finance lease termination | $— | $3,470 | [Note 9 – Accounts Payable and Accrued Expenses](index=22&type=section&id=Note%209%20%E2%80%93%20Accounts%20Payable%20and%20Accrued%20Expenses) This note details the components of accounts payable and accrued expenses, which increased to $36.0 million as of June 30, 2025, from $31.6 million at December 31, 2024. The primary driver was a significant increase in accrued capital expenditures and leasing costs Accounts Payable and Accrued Expenses (in thousands) | Category | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | Accrued capital expenditures and leasing costs | $16,127 | $8,040 | | Accrued real estate and other taxes | $8,638 | $11,228 | | Accrued operating and other | $7,613 | $9,141 | | Accrued interest | $1,906 | $2,017 | | Accounts payable | $1,747 | $1,159 | | Total | $36,031 | $31,585 | [Note 10 – Commitments and Contingencies](index=22&type=section&id=Note%2010%20%E2%80%93%20Commitments%20and%20Contingencies) This note outlines the Company's commitments related to leasing activities, including tenant improvement allowances and landlord work, totaling $69.2 million as of June 30, 2025. It also addresses routine litigation and environmental matters, which are not expected to have a material adverse effect Estimated Total Outstanding Leasing Costs Commitments (in thousands) | Category | Total | | :-------------------------- | :------ | | Tenant improvement allowances | $43,225 | | Reimbursable landlord work | $11,070 | | Non-reimbursable landlord work | $14,929 | | Total | $69,224 | - As of June 30, 2025, **$35.8 million** in **restricted cash was reserved** for outstanding leasing costs under the **CMBS Loan**, including **$29.1 million** for tenant improvement allowances and **$6.7 million** for rent concession commitments[132](index=132&type=chunk) - The Company does not believe any current legal proceedings or environmental conditions will have a **material adverse effect** on its consolidated position or results of operations[133](index=133&type=chunk)[134](index=134&type=chunk) [Note 11 – Leases](index=23&type=section&id=Note%2011%20%E2%80%93%20Leases) This note details the Company's role as both a lessor and lessee. As a lessor, total rental revenue decreased to $37.1 million for Q2 2025 from $39.9 million for Q2 2024. Future minimum base rent payments total $603.9 million. As a lessee, operating lease costs remained consistent at $0.3 million for Q2 2025 Components of Rental Revenue from Operating Leases (in thousands) | Category | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total fixed rental revenue | $27,926 | $31,816 | $57,661 | $66,941 | | Total variable rental revenue | $9,176 | $8,107 | $17,238 | $19,977 | | Total rental revenue | $37,102 | $39,923 | $74,899 | $86,918 | Future Minimum Base Rent Payments (Lessor) (in thousands) | Period | Future Minimum Base Rent Payments | | :-------------------------- | :------------------------------ | | July 1, 2025 - December 31, 2025 | $41,990 | | 2026 | $86,793 | | 2027 | $75,528 | | 2028 | $66,362 | | 2029 | $50,275 | | 2030 | $48,275 | | Thereafter | $234,654 | | Total | $603,877 | - As a lessee, the Company's **operating lease costs** were **$0.3 million** for both the three months ended June 30, 2025 and 2024, and **$0.6 million** for both the six months ended June 30, 2025 and 2024[141](index=141&type=chunk) [Note 12 – Stockholders' Equity](index=25&type=section&id=Note%2012%20%E2%80%93%20Stockholders%27%20Equity) This note details changes in stockholders' equity, including common stock issuances and dividend declarations. The Company declared quarterly cash dividends of $0.02 per share for Q1 and Q2 2025, a significant decrease from $0.10 per share in Q1 and Q2 2024. The Share Repurchase Program has $45.0 million remaining available as of June 30, 2025, with no repurchases made in H1 2025 or H1 2024 Quarterly Cash Dividends Declared | Declaration Date | Record Date | Paid Date | Distributions Per Share | | :---------------- | :---------- | :-------- | :---------------------- | | March 4, 2025 | March 31, 2025 | April 15, 2025 | $0.02 | | May 6, 2025 | June 30, 2025 | July 15, 2025 | $0.02 | | February 27, 2024 | March 29, 2024 | April 15, 2024 | $0.10 | | May 7, 2024 | June 28, 2024 | July 15, 2024 | $0.10 | - On August 5, 2025, the Board declared a **quarterly cash dividend** of **$0.02 per share** for Q3 2025[146](index=146&type=chunk)[158](index=158&type=chunk) - The Company's **Share Repurchase Program**, authorized for up to **$50.0 million** until December 31, 2025, had **$45.0 million** remaining as of June 30, 2025. No shares were repurchased in H1 2025 or H1 2024[147](index=147&type=chunk)[149](index=149&type=chunk) [Note 13 – Equity-Based Compensation](index=26&type=section&id=Note%2013%20%E2%80%93%20Equity-Based%20Compensation) This note describes the Company's Equity Plan, which grants Time-Based RSUs and Performance-Based RSUs to officers, employees, and directors. Equity-based compensation expense for H1 2025 was $1.5 million, down from $1.7 million in H1 2024. Total unrecognized compensation expense was approximately $4.8 million as of June 30, 2025 - **Equity-based compensation expense** for Time-Based RSUs and Performance-Based RSUs was **$0.8 million** for Q2 2025 (vs. **$0.9 million** in Q2 2024) and **$1.5 million** for H1 2025 (vs. **$1.7 million** in H1 2024)[153](index=153&type=chunk) - As of June 30, 2025, total **unrecognized compensation expense** related to equity awards was approximately **$4.8 million**, with a **weighted average remaining term** of **1.8 years**[153](index=153&type=chunk) [Note 14 – Net Loss Per Share](index=27&type=section&id=Note%2014%20%E2%80%93%20Net%20Loss%20Per%20Share) This note provides the computation of basic and diluted net loss per share. For H1 2025, the net loss per share attributable to common stockholders was $(0.61), an improvement from $(1.07) in H1 2024. All potentially dilutive securities were excluded as their effect would have been antidilutive Net Loss Per Share Attributable to Common Stockholders | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net loss attributable to common stockholders | $(25,103) | $(33,801) | $(34,464) | $(60,033) | | Weighted average shares outstanding - basic and diluted | 56,254 | 55,910 | 56,149 | 55,857 | | Basic and diluted net loss per share | $(0.45) | $(0.60) | $(0.61) | $(1.07) | - Potentially dilutive securities, including unvested Time-Based RSUs, Performance-Based RSUs, and stock warrants, were excluded from diluted EPS calculations as their effect would have been **antidilutive**[157](index=157&type=chunk) [Note 15 – Subsequent Events](index=27&type=section&id=Note%2015%20%E2%80%93%20Subsequent%20Events) This note reports subsequent events, including the declaration of a $0.02 per share cash dividend for Q3 2025 and a new 5.4-year, 80,000 square foot lease signed in Kennesaw, Georgia, scheduled to commence in April 2028 - On August 5, 2025, the Board of Directors declared a **quarterly cash dividend** of **$0.02 per share** for Q3 2025, payable on October 15, 2025[158](index=158&type=chunk) - In July 2025, the Company completed a **new 5.4-year, 80,000 square foot lease** at its Kennesaw, Georgia property, set to commence in April 2028, with a sublease to the new tenant starting September 2025[159](index=159&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=28&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on Orion Properties Inc.'s financial condition and operational results for the quarter ended June 30, 2025. It highlights the Company's strategic shift towards dedicated use assets, ongoing challenges in the office leasing market, and the critical uncertainty surrounding the refinancing of its Revolving Facility, which raises substantial doubt about its ability to continue as a going concern. The discussion also covers key financial metrics, leasing activities, capital expenditures, and liquidity management - **Substantial doubt about the Company's ability to continue as a going concern** exists due to the uncertainty of extending or refinancing the **Revolving Facility**, which matures on May 12, 2026, and has no remaining extension options[177](index=177&type=chunk)[254](index=254&type=chunk) - The Company is **actively evaluating strategies** including alternative debt/equity instruments, **property dispositions**, and continued **leasing efforts** to address the **Revolving Facility** maturity[177](index=177&type=chunk)[254](index=254&type=chunk) - The Company is **shifting its portfolio concentration** from **traditional office properties** to **more dedicated use assets** (e.g., government, medical, laboratory, R&D, flex operations) and plans to **selectively dispose of non-core assets**[166](index=166&type=chunk)[178](index=178&type=chunk) [Forward-Looking Statements](index=28&type=section&id=Forward-Looking%20Statements) This section outlines the inherent uncertainties and risks associated with future events, financial condition, and operations discussed in the report - The report contains **forward-looking statements** regarding future events, financial condition, and operations, which are subject to known and unknown risks and uncertainties[162](index=162&type=chunk) - **Key risks include** rising interest rates, inflation, global market conditions, oversupply of office space, tenant credit risk, impact of remote work, ability to acquire/dispose of properties, and the ability to extend or refinance debt obligations, particularly the **Revolving Facility**[163](index=163&type=chunk) [Overview](index=29&type=section&id=Overview) This section provides a high-level summary of Orion Properties Inc.'s business, strategic focus, and current portfolio composition - Orion Properties Inc. is an **internally managed REIT** focused on diversified office properties, shifting its strategy from traditional office to **dedicated use assets** (government, medical, lab, R&D, flex operations)[166](index=166&type=chunk) - As of June 30, 2025, the Company owned **66 operating properties** (**7.6 million** leasable sq ft, **76.8% occupancy**, **5.5 years weighted average lease term**) and a **20%** equity interest in the Arch Street Joint Venture (**1.0 million** leasable sq ft, **100% occupancy**, **6.8 years weighted average lease term**)[170](index=170&type=chunk) [Factors That May Influence Our Operating Results and Financial Condition](index=30&type=section&id=Factors%20That%20May%20Influence%20Our%20Operating%20Results%20and%20Financial%20Condition) This section discusses key internal and external factors, including market conditions and debt refinancing, that significantly impact the Company's financial performance and stability - **Operating results** are primarily influenced by **rental revenue**, which depends on **occupancy** levels and the ability to re-lease expiring space at favorable rates, alongside significant **lease expirations** (**5.6%** of ABR in H2 2025, **10.7%** in 2026)[171](index=171&type=chunk)[172](index=172&type=chunk) - The **office leasing market** faces headwinds from remote/hybrid work, tenant consolidation, higher interest rates, and inflation, impacting demand and increasing leasing costs, particularly for **Class B** and **Class C** properties (**65.9% Class A**, **28.8% Class B**, **5.3% Class C** by rentable square feet)[172](index=172&type=chunk)[173](index=173&type=chunk)[175](index=175&type=chunk) - **Substantial doubt about the Company's ability to continue as a going concern** due to the uncertainty of refinancing the **$110.0 million Revolving Facility**, which matures on May 12, 2026, and has no remaining extension options[177](index=177&type=chunk) - The Company intends to **shift its portfolio towards dedicated use assets** and **selectively dispose of non-core traditional office properties**, with proceeds funding **capital investments**, acquisitions, and general corporate purposes[178](index=178&type=chunk) [Significant Transactions Summary](index=34&type=section&id=Significant%20Transactions%20Summary) This section summarizes major business activities, including leasing, property dispositions, dividend declarations, and acquisition proposals during the reporting period - The Company completed **559,000 square feet** of **lease renewals and new leases** across **eight** properties in H1 2025, with a **weighted average lease term** of **6.5 years**[195](index=195&type=chunk) - **Four vacant properties** totaling **434,000 square feet** were sold for **$26.9 million** in H1 2025. **Five** traditional office properties are currently under **pending sale agreements** for **$56.9 million**[195](index=195&type=chunk) - The Board of Directors declared **quarterly cash dividends** of **$0.02 per share** for Q1, Q2, and Q3 2025[195](index=195&type=chunk) - The Company rejected **two unsolicited, non-binding acquisition proposals** from Kawa Capital Management, Inc. (**$2.50** and **$2.75 per share**), concluding they **undervalued the Company**[192](index=192&type=chunk)[193](index=193&type=chunk) [Portfolio Overview](index=35&type=section&id=Portfolio%20Overview) This section provides key metrics and characteristics of the Company's real estate portfolio, including property count, square footage, and occupancy rates Real Estate Portfolio Metrics | Metric | June 30, 2025 | December 31, 2024 | Change | | :------------------------------------ | :------------ | :---------------- | :----- | | Operating properties | 66 | 69 | -3 | | Rentable square feet (in thousands) | 7,780 | 8,112 | -332 | | Annualized base rent (in thousands) | $118,884 | $120,293 | $(1,409) | | Occupancy rate | 77.4% | 73.7% | 3.7% | | Leased rate | 79.1% | 74.7% | 4.4% | | Investment-grade tenants | 68.5% | 74.4% | -5.9% | | Weighted average remaining lease term (in years) | 5.5 | 5.2 | 0.3 | [Operating Performance](index=35&type=section&id=Operating%20Performance) This section presents a summary of the Company's financial results, including revenues, net loss, and key non-GAAP metrics like FFO and Core FFO Key Financial Metrics (in thousands, except per share amounts) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change (YoY) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change (YoY) | | :------------------------------------------------ | :------------------------------- | :------------------------------- | :----------- | :----------------------------- | :----------------------------- | :----------- | | Total revenues | $37,305 | $40,124 | $(2,819) | $75,306 | $87,321 | $(12,015) | | Net loss attributable to common stockholders | $(25,103) | $(33,801) | $8,698 | $(34,464) | $(60,033) | $25,569 | | Basic and diluted net loss per share | $(0.45) | $(0.60) | $0.15 | $(0.61) | $(1.07) | $0.46 | | FFO attributable to common stockholders | $8,881 | $10,925 | $(2,044) | $17,686 | $29,314 | $(11,628) | | FFO attributable to common stockholders per diluted share | $0.16 | $0.20 | $(0.04) | $0.31 | $0.52 | $(0.21) | | Core FFO attributable to common stockholders | $11,458 | $14,171 | $(2,713) | $22,111 | $34,536 | $(12,425) | | Core FFO attributable to common stockholders per diluted share | $0.20 | $0.25 | $(0.05) | $0.39 | $0.62 | $(0.23) | [Leasing Activity and Capital Expenditures](index=36&type=section&id=Leasing%20Activity%20and%20Capital%20Expenditures) This section details the Company's leasing efforts, including new leases and renewals, along with associated capital investments and tenant improvement costs - The Company remains highly focused on leasing due to a **5.5-year weighted average remaining lease term** and significant upcoming lease maturities. Challenges include **re-leasing vacant space**, potential less favorable terms, and the need for substantial **capital improvements**[201](index=201&type=chunk) Leasing Activity Summary (Three Months Ended June 30) | Metric | 2025 New Leases | 2025 Renewals | 2025 Total | 2024 New Leases | 2024 Renewals | 2024 Total | | :------------------------------------------------ | :-------------- | :------------ | :--------- | :-------------- | :------------ | :--------- | | Number of leases | 2 | 2 | 4 | 2 | 1 | 3 | | Rentable square feet leased (in thousands) | 69 | 110 | 179 | 57 | 413 | 470 | | Weighted average rental rate change (cash basis) | N/A | 6.2% | 6.2% | N/A | 1.1% | 1.1% | | Tenant rent concessions and leasing costs (in thousands) | $9,251 | $373 | $9,624 | $11,510 | $791 | $12,301 | | Weighted average lease term (years) | 13.0 | 1.6 | 6.0 | 15.1 | 4.0 | 5.3 | Leasing Activity Summary (Six Months Ended June 30) | Metric | 2025 New Leases | 2025 Renewals | 2025 Total | 2024 New Leases | 2024 Renewals | 2024 Total | | :------------------------------------------------ | :-------------- | :------------ | :--------- | :-------------- | :------------ | :--------- | | Number of leases | 3 | 5 | 8 | 4 | 4 | 8 | | Rentable square feet leased (in thousands) | 229 | 330 | 559 | 149 | 429 | 578 | | Weighted average rental rate change (cash basis) | N/A | (14.2)% | (14.2)% | N/A | 2.2% | 2.2% | | Tenant rent concessions and leasing costs (in thousands) | $23,343 | $4,761 | $28,104 | $19,942 | $1,479 | $21,421 | | Weighted average lease term (years) | 10.9 | 3.4 | 6.5 | 10.2 | 4.3 | 5.8 | Capital Expenditures (in thousands) | Category | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Lease related costs | $2,512 | $3,104 | $4,623 | $3,755 | | Lease incentives | $883 | $— | $1,030 | $77 | | Building, fixtures and improvements | $12,177 | $3,215 | $18,260 | $5,932 | | Total capital expenditures | $15,572 | $6,319 | $23,913 | $9,764 | [Results of Operations](index=39&type=section&id=Results%20of%20Operations) This section provides a detailed analysis of the Company's revenues, operating expenses, and other income/expense items for the reporting periods Revenue Information (in thousands) | Category | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change (YoY) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change (YoY) | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------- | :----------------------------- | :----------------------------- | :----------- | | Rental | $37,102 | $39,923 | $(2,821) | $74,899 | $86,918 | $(12,019) | | Fee income from unconsolidated joint venture | $203 | $201 | $2 | $407 | $403 | $4 | | Total revenues | $37,305 | $40,124 | $(2,819) | $75,306 | $87,321 | $(12,015) | - **Rental revenues decreased** by **$2.8 million** (QoQ) and **$12.0 million** (YoY) primarily due to decreasing **occupied square footage** from lease expirations and a reduction in reimbursements from previous tenants[229](index=229&type=chunk) Operating Expenses (in thousands) | Category | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change (YoY) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change (YoY) | | :-------------------------- | :------------------------------- | :------------------------------- | :----------- | :----------------------------- | :----------------------------- | :----------- | | Property operating | $15,895 | $15,757 | $138 | $32,345 | $31,756 | $589 | | General and administrative | $4,838 | $4,544 | $294 | $9,734 | $9,493 | $241 | | Depreciation and amortization | $14,928 | $38,614 | $(23,686) | $30,950 | $63,118 | $(32,168) | | Impairments | $19,503 | $5,680 | $13,823 | $21,212 | $25,365 | $(4,153) | | Transaction related | $75 | $167 | $(92) | $139 | $277 | $(138) | | Total operating expenses | $55,239 | $64,762 | $(9,523) | $94,380 | $130,009 | $(35,629) | - **Depreciation and amortization expenses significantly decreased** by **$23.7 million** (QoQ) and **$32.2 million** (YoY) due to the full depreciation of buildings on the Deerfield, Illinois campus and full amortization of certain intangible assets[235](index=235&type=chunk) - **Impairments increased** by **$13.8 million** (QoQ) but decreased by **$4.2 million** (YoY), primarily related to real estate assets sold or expected to be sold, reflecting management's estimates of lease renewal probability and sale proceeds[236](index=236&type=chunk) Other (Expense) Income and Provision for Income Taxes (in thousands) | Category | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change (YoY) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change (YoY) | | :------------------------------------------ | :------------------------------- | :------------------------------- | :----------- | :----------------------------- | :----------------------------- | :----------- | | Interest expense, net | $(8,016) | $(8,058) | $42 | $(16,172) | $(16,204) | $32 | | Gain on disposition of real estate assets | $891 | $— | $891 | $891 | $— | $891 | | Loss on extinguishment of debt, net | $— | $(1,078) | $(1,078) | $— | $(1,078) | $(1,078) | | Equity in loss of unconsolidated joint venture, net | $(271) | $(163) | $108 | $(517) | $(279) | $238 | | Provision for income taxes | $(67) | $(73) | $(6) | $(133) | $(150) | $(17) | - **Gain on disposition of real estate assets** was **$0.9 million** for H1 2025, compared to no gains in H1 2024, related to three property dispositions that had prior cumulative impairment losses of **$12.2 million**[239](index=239&type=chunk) - **Equity in loss of unconsolidated joint venture, net, increased** by **$0.2 million** (YoY) due to higher interest expense following the expiration of an interest rate swap agreement on the Arch Street Joint Venture mortgage notes[241](index=241&type=chunk) [Non-GAAP Measures](index=41&type=section&id=Non-GAAP%20Measures) This section explains the Company's use of non-GAAP financial measures like FFO and Core FFO to supplement GAAP results and aid performance evaluation - The Company uses **Funds From Operations (FFO)** and **Core FFO**, as defined by Nareit and the Company respectively, as **supplemental non-GAAP performance measures** to evaluate operating performance and compare with other REITs[243](index=243&type=chunk)[245](index=245&type=chunk)[246](index=246&type=chunk) Reconciliation of FFO and Core FFO to Net Loss Attributable to Common Stockholders (in thousands, except per share amounts) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net loss attributable to common stockholders | $(25,103) | $(33,801) | $(34,464) | $(60,033) | | FFO attributable to common stockholders | $8,881 | $10,925 | $17,686 | $29,314 | | FFO attributable to common stockholders per diluted share | $0.16 | $0.20 | $0.31 | $0.52 | | Core FFO attributable to common stockholders | $11,458 | $14,171 | $22,111 | $34,536 | | Core FFO attributable to common stockholders per diluted share | $0.20 | $0.25 | $0.39 | $0.62 | [Liquidity and Capital Resources](index=43&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the Company's ability to meet its financial obligations, manage cash flows, and fund future operations and investments, highlighting debt maturities and available capital - **Principal liquidity needs** for the next **12 months** include funding operations, debt interest, dividends, **capital expenditures**, joint venture contributions, acquisitions, and debt refinancing. **Short-term liquidity sources** include **cash on hand** (**$17.4 million**), **cash flows from operations**, **disposition proceeds**, and **Revolving Facility borrowings** (**$240.0 million** available)[250](index=250&type=chunk) - **Substantial doubt about the Company's ability to continue as a going concern** exists due to the uncertainty of extending or refinancing the **Revolving Facility** (**$110.0 million** outstanding), which matures on May 12, 2026, and has no remaining extension options[254](index=254&type=chunk) Consolidated Debt Obligations as of June 30, 2025 (in thousands) | Debt Type | Weighted Average Interest Rate | Weighted Average Years to Maturity | Total Outstanding | Principal Amounts Due 2026 | Principal Amounts Due 2027 | Principal Amounts Due Thereafter | | :-------------------- | :----------------------------- | :------------------------------- | :---------------- | :------------------------- | :------------------------- | :------------------------------- | | Credit facility revolver | 7.64% | 0.9 | $110,000 | $110,000 | $— | $— | | Mortgages payable | 5.02% | 1.9 | $373,000 | $— | $355,000 | $18,000 | | Total | | | $483,000 | $110,000 | $355,000 | $18,000 | - The Company was in **compliance with all Revolving Facility financial covenants** as of June 30, 2025, including a **total indebtedness to total asset value ratio** of **41.8%** (required ≤ **60%**) and **unencumbered asset value** of **$704.0 million** (required ≥ **$500.0 million**)[272](index=272&type=chunk)[273](index=273&type=chunk) - The Company's **dividend policy is discretionary** and subject to change, with recent quarterly cash dividends reduced to **$0.02 per share**[292](index=292&type=chunk) - The Company has a **Universal Shelf registration statement** for up to **$750.0 million** in securities and an **'at the market' (ATM) offering program** for up to **$100.0 million** of common stock, though no shares have been sold under the ATM program as of June 30, 2025[293](index=293&type=chunk)[294](index=294&type=chunk) [Cash Flow Analysis](index=50&type=section&id=Cash%20Flow%20Analysis) This section analyzes the changes in cash flows from operating, investing, and financing activities, explaining the drivers behind these movements Changes in Cash Flows (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change (YoY) | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------- | | Net cash provided by operating activities | $9,316 | $28,009 | $(18,693) | | Net cash provided by (used in) investing activities | $3,489 | $(4,835) | $8,324 | | Net cash used in financing activities | $(16,501) | $(21,409) | $4,908 | - **Net cash from operating activities decreased** by **$18.7 million** (YoY) primarily due to a **$6.1 million** decrease in cash revenue from a tenant's rent concession period and increased property vacancies[298](index=298&type=chunk) - **Net cash from investing activities increased** by **$8.3 million** (YoY), driven by **$22.8 million** from **real estate dispositions and loan repayments**, partially offset by **$15.6 million** in **capital expenditures** and a new **$8.3 million member loan to the Arch Street Joint Venture**[299](index=299&type=chunk) - **Net cash used in financing activities decreased** by **$4.9 million** (YoY) due to a **$4.4 million reduction in distributions paid to stockholders**, resulting from a **change in cash dividend policy**[300](index=300&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=51&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section discusses the Company's exposure to market risks, primarily interest rate risk and credit risk. It details the impact of hypothetical interest rate changes on fixed and variable-rate debt and highlights concentrations of credit risk from tenants, geographic regions, and industries - The Company's **primary market risk** arises from **interest rate risk** related to **variable-rate borrowings**, which it mitigates through **interest rate hedge contracts** like collars[302](index=302&type=chunk) - A **100 basis point increase** in market interest rates would decrease the **fair value of fixed-rate debt** by **$6.0 million** and increase **annual interest expense on variable-rate debt** by **$1.1 million** (excluding derivatives)[303](index=303&type=chunk)[304](index=304&type=chunk) - The Company is subject to **tenant, geographic, and industry concentrations of credit risk**, with **New York properties** representing **9.2%** of **total portfolio annualized base rent** as of June 30, 2025[309](index=309&type=chunk) [Item 4. Controls and Procedures](index=52&type=section&id=Item%204.%20Controls%20and%20Procedures) This section confirms the effectiveness of the Company's disclosure controls and procedures as of June 30, 2025, at a reasonable assurance level. It also states that there were no material changes in internal control over financial reporting during the three months ended June 30, 2025 - The Company's **disclosure controls and procedures were evaluated and concluded to be effective** at a reasonable assurance level as of June 30, 2025[312](index=312&type=chunk) - There were **no material changes in internal control over financial reporting** during the three months ended June 30, 2025[313](index=313&type=chunk) PART II - OTHER INFORMATION This section provides additional non-financial information, including legal proceedings, risk factors, equity security details, and other required disclosures [Item 1. Legal Proceedings](index=53&type=section&id=Item%201.%20Legal%20Proceedings) As of June 30, 2025, the Company is not a party to any material pending legal proceedings, nor are any of its properties subject to such proceedings - The Company is **not a party to any material pending legal proceedings** as of June 30, 2025[314](index=314&type=chunk) [Item 1A. Risk Factors](index=53&type=section&id=Item%201A.%20Risk%20Factors) This section updates the Company's risk factors, emphasizing significant debt and refinancing risks. It reiterates the substantial doubt about the Company's ability to continue as a going concern due to the uncertainty of extending or refinancing the Revolving Facility, which matures in May 2026. Inability to refinance could force asset sales on unfavorable terms or lead to default - **Substantial doubt about the Company's ability to continue as a going concern** due to uncertainty in extending or refinancing the **Revolving Facility**, which matures on May 12, 2026, and has no remaining extension options[316](index=316&type=chunk) - **Failure to extend or refinance the Revolving Facility** could **force asset sales on unfavorable terms**, **lead to default on debt payments**, foreclosure on assets, and **materially adversely affect financial condition and stock price**[317](index=317&type=chunk) - The **Arch Street Joint Venture's non-recourse mortgage notes** (**$131.6 million** as of Dec 31, 2024) mature on November 27, 2025, with one remaining **extension option**. Inability to extend or refinance could **materially adversely affect the Company's investment**[318](index=318&type=chunk)[319](index=319&type=chunk) [Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities](index=54&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%2C%20Use%20of%20Proceeds%2C%20and%20Issuer%20Purchases%20of%20Equity%20Securities) This section confirms that there were no unregistered sales of equity securities, no use of proceeds from registered securities sales, and no issuer purchases of equity securities during the reporting period - **No unregistered sales of equity securities**, **no use of proceeds from registered securities sales**, or **no issuer purchases of equity securities** occurred during the period[321](index=321&type=chunk)[322](index=322&type=chunk)[323](index=323&type=chunk) [Item 3. Defaults Upon Senior Securities](index=54&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The Company reported no defaults upon senior securities during the period - There were **no defaults upon senior securities** during the reporting period[324](index=324&type=chunk) [Item 4. Mine Safety Disclosures](index=54&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the Company - **Mine Safety Disclosures** are not applicable to Orion Properties Inc[325](index=325&type=chunk) [Item 5. Other Information](index=54&type=section&id=Item%205.%20Other%20Information) This section states that none of the Company's directors or officers adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement during the three months ended June 30, 2025 - **No directors or officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements** during Q2 2025[326](index=326&type=chunk) [Item 6. Exhibits](index=55&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Quarterly Report on Form 10-Q, including certifications from the CEO and CFO, and Inline XBRL Taxonomy Extension documents - The report includes **certifications from the Chief Executive Officer and Chief Financial Officer** (Exhibits **31.1**, **31.2**, **32.1**, **32.2**) and **Inline XBRL Taxonomy Extension documents** (Exhibits **101.SCH**, **101.CAL**, **101.DEF**, **101.LAB**, **101.PRE**, **104**)[328](index=328&type=chunk) [Signatures](index=56&type=section&id=SIGNATURES) The Quarterly Report on Form 10-Q was duly signed on behalf of Orion Properties Inc. by Gavin B. Brandon, Chief Financial Officer, Executive Vice President, and Treasurer, on August 6, 2025 - The Quarterly Report on Form 10-Q was **signed by Gavin B. Brandon**, Chief Financial Officer, Executive Vice President and Treasurer, on August 6, 2025[332](index=332&type=chunk)

[Orion Properties Inc. Second Quarter 2025 Earnings Release](index=1&type=section&id=Orion%20Properties%20Inc.%20Second%20Quarter%202025%20Earnings%20Release) [Overview and Key Announcements](index=1&type=section&id=Overview%20and%20Key%20Announcements) The company announced significant leasing, asset sales, increased FFO guidance, and a Q3 dividend - Completed **639,000 square feet** of leasing year-to-date, including 179,000 in Q2 and 80,000 subsequent to quarter end[1](index=1&type=chunk)[3](index=3&type=chunk) - Sold four vacant properties during the second quarter for an aggregate price of **$26.9 million**[1](index=1&type=chunk)[7](index=7&type=chunk) - Increased the **2025 Core FFO guidance range** and lowered the **2025 Net Debt to Adjusted EBITDA range**[2](index=2&type=chunk) - The company's strategic priorities include leasing, monetizing non-core assets, and shifting the portfolio toward dedicated use assets (DUAs)[3](index=3&type=chunk) [Financial Performance](index=1&type=section&id=Financial%20Performance) The company reported decreased Q2 revenue and Core FFO but an improved net loss compared to the prior year [Second Quarter 2025 Financial Results](index=1&type=section&id=Second%20Quarter%202025%20Financial%20Results) Q2 2025 vs Q2 2024 Financial Results | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Total Revenues | $37.3 million | $40.1 million | | Net Loss Attributable to Common Stockholders | $(25.1) million | $(33.8) million | | Net Loss per Share | $(0.45) | $(0.60) | | Core FFO | $11.5 million | $14.2 million | | Core FFO per Diluted Share | $0.20 | $0.25 | Q2 2025 Key Metrics | Metric | Value | | :--- | :--- | | FFO | $8.9 million ($0.16/share) | | EBITDA | $(1.1) million | | EBITDAre | $17.5 million | | Adjusted EBITDA | $18.0 million | | Net Debt to Annualized YTD Adjusted EBITDA | 6.93x | - The company incurred **$0.6 million** in demolition costs during the first six months of 2025, which were excluded from Core FFO and Adjusted EBITDA calculations[4](index=4&type=chunk) [Consolidated Financial Statements](index=12&type=section&id=Consolidated%20Financial%20Statements) - As of June 30, 2025, total assets were **$1.29 billion**, down from $1.34 billion at year-end 2024, while total liabilities decreased to **$558.9 million**[64](index=64&type=chunk) Statement of Operations Summary (Three Months Ended June 30) | Line Item | 2025 | 2024 | | :--- | :--- | :--- | | Total Revenues | $37.3M | $40.1M | | Total Operating Expenses | $55.2M | $64.8M | | Net Loss | $(25.1)M | $(33.8)M | | Net Loss per Share | $(0.45) | $(0.60) | [Non-GAAP Reconciliations](index=14&type=section&id=Non-GAAP%20Reconciliations) Non-GAAP Performance (Three Months Ended June 30) | Metric | 2025 | 2024 | | :--- | :--- | :--- | | FFO | $8.9M | $10.9M | | Core FFO | $11.5M | $14.2M | | FAD | $(6.7)M | $7.8M | | Adjusted EBITDA | $18.0M | $20.5M | [Operational Performance](index=2&type=section&id=Operational%20Performance) The company executed significant leasing and disposition activities during and subsequent to the second quarter [Leasing Activity](index=2&type=section&id=Leasing%20Activity) Q2 2025 Leasing Transactions | Location | Type | Square Feet | Term | | :--- | :--- | :--- | :--- | | Parsippany, NJ | New Lease | 46,000 | 15.7 years | | Plano, TX | New Lease | 23,000 | 7.6 years | | The Woodlands, TX | Renewal | 27,000 | 2.0 years | | Indianapolis, IN | Renewal | 83,000 | 1.5 years | - Subsequent to quarter end, the company completed a new **5.4-year, 80,000 square foot lease** at its property in Kennesaw, Georgia[6](index=6&type=chunk) [Disposition Activity](index=2&type=section&id=Disposition%20Activity) - During Q2 2025, four vacant properties totaling 434,000 square feet were sold for an aggregate gross price of **$26.9 million**[7](index=7&type=chunk) - As of August 6, 2025, the company has agreements to sell five additional operating properties for a total gross price of **$56.9 million**[7](index=7&type=chunk) [Portfolio and Capital Structure](index=2&type=section&id=Portfolio%20and%20Capital%20Structure) The company's portfolio comprised 66 properties with a 77.4% occupancy rate, supported by $257.7 million in liquidity [Real Estate Portfolio](index=2&type=section&id=Real%20Estate%20Portfolio) - The portfolio consisted of **66 Operating Properties** and a 20% interest in the Arch Street Joint Venture[8](index=8&type=chunk) Portfolio Statistics as of June 30, 2025 | Metric | Value | | :--- | :--- | | Annualized Base Rent | $118.9 million | | % ABR from Investment-Grade Tenants | 68.5% | | Occupancy Rate | 77.4% | | Weighted Average Remaining Lease Term | 5.5 years | - The Arch Street Joint Venture properties had an **Occupancy Rate of 100%** and a Weighted Average Remaining Lease Term of 6.8 years[9](index=9&type=chunk) [Balance Sheet and Liquidity](index=2&type=section&id=Balance%20Sheet%20and%20Liquidity) - Total debt as of June 30, 2025 was **$509.0 million**, primarily comprising a $355.0 million CMBS loan and $110.0 million drawn on the credit facility revolver[10](index=10&type=chunk) - The company had **$257.7 million of liquidity**, consisting of $17.7 million in cash and cash equivalents and $240.0 million of available capacity on its credit facility revolver[11](index=11&type=chunk) [Shareholder Returns and 2025 Outlook](index=2&type=section&id=Shareholder%20Returns%20and%202025%20Outlook) The company declared a Q3 dividend and raised its full-year 2025 guidance for Core FFO and Net Debt to Adjusted EBITDA [Dividend Declaration](index=2&type=section&id=Dividend%20Declaration) - A quarterly cash dividend of **$0.02 per share** for the third quarter of 2025 was declared, payable on October 15, 2025, to stockholders of record as of September 30, 2025[12](index=12&type=chunk) [Updated 2025 Guidance](index=2&type=section&id=Updated%202025%20Guidance) Improved 2025 Guidance | Metric | Prior 2025 Guidance | Improved 2025 Guidance | | :--- | :--- | :--- | | Core FFO per share | $0.61 - $0.70 | $0.67 - $0.71 | | Net Debt to Adjusted EBITDA | 8.0x - 8.8x | 7.3x - 8.3x | - The 2025 General and Administrative Expense guidance range remains unchanged at **$19.5 million to $20.5 million**[15](index=15&type=chunk) [Supplemental Information](index=3&type=section&id=Supplemental%20Information) This section provides definitions for key non-GAAP measures and operational terms, along with forward-looking statements and risk factors [Definitions of Key Terms](index=3&type=section&id=Definitions%20of%20Key%20Terms) - The report provides detailed definitions for non-GAAP measures including FFO (Funds from Operations), Core FFO, FAD (Funds Available for Distribution), EBITDAre, and Adjusted EBITDA[19](index=19&type=chunk)[27](index=27&type=chunk)[32](index=32&type=chunk)[34](index=34&type=chunk) - Definitions for operational metrics such as Annualized Base Rent, Occupancy Rate, and Investment-Grade Tenants are also included to provide clarity on portfolio metrics[23](index=23&type=chunk)[45](index=45&type=chunk)[52](index=52&type=chunk) [Forward-Looking Statements and Risk Factors](index=9&type=section&id=Forward-Looking%20Statements%20and%20Risk%20Factors) - The report contains forward-looking statements regarding future events, financial conditions, and operations, which are subject to various risks and uncertainties[59](index=59&type=chunk) - Key risks identified include **rising interest rates, inflation, oversupply of office space**, and changes in workplace practices such as remote and hybrid work arrangements[60](index=60&type=chunk) - Additional risks include **tenant defaults**, ability to re-let vacant space on favorable terms, and the risk of failing to maintain REIT income tax qualification[60](index=60&type=chunk)[62](index=62&type=chunk)

Group 1 - The upcoming Q2 2025 report from Orion Properties (NYSE: ONL) is anticipated by investors, who may consider waiting for its release before making investment decisions [1] - The article hints at a potential catch regarding the stock, suggesting that there may be factors influencing the decision-making process for investors [1] Group 2 - The author, an economics teacher from the Netherlands, focuses on identifying Real Estate Investment Trusts (REITs) that are currently out of favor, indicating a contrarian investment strategy [2] - The investment approach is based on fundamental economic insights to assess the intrinsic value of stocks, with a long-term investment horizon [2]

Financial Data and Key Metrics Changes - Orion generated total revenues of $38 million in the first quarter compared to $47.2 million in the same quarter of the prior year, reflecting a decrease [18] - The net loss attributable to common stockholders was $9.4 million or $0.17 per share, an improvement from a net loss of $26.2 million or $0.47 per share reported in the first quarter of 2024 [18] - Core FFO for the quarter was $10.7 million or $0.19 per share, down from $20.4 million or $0.36 in the same quarter of 2024 [18] - Adjusted EBITDA was $17.4 million versus $26.7 million in the same quarter of 2024 [18] - G&A expenses in the first quarter were $4.9 million, consistent with the same quarter of 2024 [19] Business Line Data and Key Metrics Changes - Over 450,000 square feet of leasing was completed as of May 6, which includes both new and renewal transactions with a weighted average lease term of 7.4 years [6] - Initial rent spreads on renewal leases during the first quarter were down about 18%, while ending rent spreads were up about 7% on average since the spin [9] - The operating property occupancy rate was 74.3% at quarter end, with a leased rate of 77.4% and a weighted average lease term of 5.2 years [9] Market Data and Key Metrics Changes - The company noted significant macroeconomic uncertainty impacting the broader markets, which could affect leasing activity [7] - The demand for dedicated use assets, which include medical, lab, R&D flex, and non-CBD government properties, is increasing, with approximately 32% of the portfolio by annualized base rent being dedicated use assets [12] Company Strategy and Development Direction - Orion is shifting its portfolio concentration away from traditional suburban office assets towards dedicated use assets, which are expected to provide more stable cash flows [11] - The company plans to continue monetizing non-core assets and redeploying capital to improve the quality of its remaining portfolio [10] - Future capital expenditures will focus on enhancing asset value to retain tenants and attract new ones [15] Management's Comments on Operating Environment and Future Outlook - Management anticipates that the next year or two will represent the low point for revenue and core FFO earnings, followed by accelerating growth into 2027 and beyond [15] - The company remains focused on maintaining significant liquidity to support ongoing leasing efforts and capital commitments [20] - Management expressed confidence in the transformation of the company and the positive direction of its strategic plan [17] Other Important Information - Orion's Board of Directors declared a quarterly cash dividend of $0.02 per share for the second quarter of 2025 [21] - The company expects G&A expenses for 2025 to be in line or slightly better than 2024 [21] Q&A Session Summary Question: What is the tone of discussions with prospects and is there a lengthening of the deal pipeline for leases? - Management noted that decision-making periods for tenants have been long, but there has not been a significant change recently [24] Question: Can you provide background on the recent property sales? - Management confirmed that the sold assets were vacant and expressed satisfaction with the pricing achieved [26] Question: Are you testing the waters with vacant and occupied assets for potential sales? - Management indicated that they are actively evaluating the market for both vacant and occupied properties [28] Question: What is happening with the former Walgreens assets? - Management stated that they are under an agreement with an institutional group to market the site for retail and entertainment use, with demolition of existing buildings starting [30]

Financial Data and Key Metrics Changes - Orion generated total revenues of $38 million in the first quarter compared to $47.2 million in the same quarter of the prior year [17] - The company reported a net loss attributable to common stockholders of $9.4 million or $0.17 per share, an improvement from a net loss of $26.2 million or $0.47 per share in the first quarter of 2024 [17] - Core FFO for the quarter was $10.7 million or $0.19 per share, down from $20.4 million or $0.36 in the same quarter of 2024 [17] - Adjusted EBITDA was $17.4 million versus $26.7 million in the same quarter of 2024 [17] - G&A expenses in the first quarter were $4.9 million, consistent with the same quarter of 2024 [18] Business Line Data and Key Metrics Changes - The company completed over 450,000 square feet of leasing as of May 6, which includes both new and renewal transactions with a weighted average lease term of 7.4 years [5] - Initial rent spreads on renewal leases during the first quarter were down about 18%, while average ending rent spreads were up about 7% since the spin [7] - The operating property occupancy rate was 74.3% at quarter end, with a leased rate of 77.4% and a weighted average lease term of 5.2 years [7] Market Data and Key Metrics Changes - The company noted significant variability in leasing spreads quarter to quarter due to the smaller size of its portfolio [7] - The demand for dedicated use assets, which include medical, lab, R&D flex, and non-CBD government properties, is increasing, with approximately 32% of the portfolio by annualized base rent being dedicated use assets [10] Company Strategy and Development Direction - Orion is shifting its portfolio concentration away from traditional suburban office assets towards dedicated use assets, which are expected to provide more stable cash flows [9] - The company plans to continue monetizing non-core assets and redeploying capital to improve the quality of its remaining portfolio [9] - The strategy includes maintaining significant liquidity to support ongoing leasing efforts and capital expenditures [12][19] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the significant macroeconomic uncertainty affecting the broader markets and its impact on tenant retention [6] - The company anticipates that the next year or two will represent the low point for revenue and core FFO earnings, followed by accelerating growth into 2027 and beyond [13] - Management remains focused on investing in well-located properties within target markets and enhancing asset value through capital expenditures [13] Other Important Information - Orion's liquidity remains strong at $244.5 million, comprised of cash on hand and available balance on the revolver [12] - The company declared a quarterly cash dividend of $0.02 per share for the second quarter of 2025 [20] Q&A Session Summary Question: What is the tone of discussions with prospects and is there a lengthening of the deal pipeline for leases? - Management noted that decision-making periods for tenants have been long since the market collapse, but no significant change has been observed recently [24] Question: Can you provide background on the recent property sales? - Management expressed satisfaction with the sales of vacant properties and indicated that they are testing the market for both vacant and occupied assets [26][28] Question: What is happening with the former Walgreens assets? - Management confirmed that they are under an agreement with an institutional group to market the site for retail and entertainment development, with demolition of existing buildings starting to reduce carrying costs [31][32]

Company Strategy & Portfolio - Orion Properties Inc is shifting its focus to properties with specialized use components, targeting sectors like government, medical, laboratory, R&D, and flex operations[7, 27] - The company aims to reduce exposure to traditional office properties and recycle capital into dedicated use assets[7, 23] - Orion is focused on key growth markets with strong fundamentals and demographic tailwinds[28] - The company seeks to build and maintain a sustainable investment-grade tenant base[30] Portfolio Highlights & Financials - As of March 31, 2025, Orion Properties Inc operated 68 properties with 8,037,000 rentable square feet and an occupancy rate of 74.3%[31] - The annualized base rent (ABR) was $14.95 per rentable square foot, totaling $120,121,000, with 72.3% from investment-grade tenants and a weighted average remaining lease term of 5.2 years[31] - The company had $227,800,000 in liquidity as of March 31, 2025, including $9,800,000 in cash and cash equivalents and $218,000,000 available on the credit facility revolver[57] Recent Activities - Orion completed 380,000 square feet of lease renewals and new leases during the first quarter of 2025, with a weighted average lease term of 6.7 years[57] - In April 2025, the company closed on the sale of three vacant properties for an aggregate gross sales price of $19,100,000[57] - As of May 7, 2025, agreements were in place to sell two operating properties for an aggregate gross sale price of $27,300,000[57]

[PART I - FINANCIAL INFORMATION](index=3&type=section&id=PART%20I) [Item 1. Unaudited Financial Statements](index=3&type=section&id=Item%201.%20Unaudited%20Financial%20Statements) Presents Orion Properties Inc.'s unaudited consolidated financial statements for Q1 2025 and 2024, covering balance sheets, operations, cash flows, and notes [Consolidated Balance Sheets](index=3&type=section&id=Orion%20Properties%20Inc.%20Consolidated%20Balance%20Sheets) Total assets decreased to $1.328 billion as of March 31, 2025, with liabilities increasing and equity decreasing Consolidated Balance Sheet Summary (in thousands) | Account | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | | :--- | :--- | :--- | | Total real estate investments, net | $1,095,910 | $1,104,546 | | Cash and cash equivalents | $9,384 | $15,600 | | **Total assets** | **$1,327,866** | **$1,336,422** | | Mortgages payable, net | $371,403 | $371,222 | | Credit facility revolver | $132,000 | $119,000 | | **Total liabilities** | **$573,070** | **$571,166** | | **Total equity** | **$754,796** | **$765,256** | [Consolidated Statements of Operations](index=4&type=section&id=Orion%20Properties%20Inc.%20Consolidated%20Statements%20of%20Operations) Net loss improved to $9.4 million in Q1 2025, primarily due to reduced impairment charges despite lower revenues Consolidated Statements of Operations Summary (in thousands, except per share data) | Metric | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | | :--- | :--- | :--- | | Total revenues | $38,001 | $47,197 | | Total operating expenses | $39,141 | $65,247 | | Impairments | $1,709 | $19,685 | | Net loss attributable to common stockholders | $(9,361) | $(26,232) | | Basic and diluted net loss per share | $(0.17) | $(0.47) | [Consolidated Statements of Cash Flows](index=7&type=section&id=Orion%20Properties%20Inc.%20Consolidated%20Statements%20of%20Cash%20Flows) Q1 2025 saw net cash used in operations of $2.2 million, a shift from Q1 2024, with increased investing and financing activities Consolidated Cash Flow Summary (in thousands) | Cash Flow Activity | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | $(2,247) | $11,022 | | Net cash used in investing activities | $(13,113) | $(3,751) | | Net cash provided by (used in) financing activities | $6,667 | $(5,826) | | **Net change in cash and cash equivalents** | **$(8,693)** | **$1,445** | [Notes to Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Orion%20Properties%20Inc.%20Consolidated%20Financial%20Statements) Detailed notes cover organization, accounting policies, real estate portfolio, debt, and leasing commitments, highlighting a strategic shift - Name changed to Orion Properties Inc., reflecting a strategic shift to **dedicated use assets** (government, medical, lab, flex)[18](index=18&type=chunk) - As of March 31, 2025, the company owned **68 operating properties** (7.8 million sq. ft.) and a **20% equity interest** in a 6-property joint venture[21](index=21&type=chunk) - Subsequent to quarter-end in April 2025, the company sold **three vacant properties** for a gross price of **$19.1 million**[44](index=44&type=chunk)[151](index=151&type=chunk) Debt Summary as of March 31, 2025 (in thousands) | Debt Instrument | Outstanding Balance (in thousands) | Maturity | | :--- | :--- | :--- | | Mortgages payable, net | $371,403 | 2027 & Thereafter | | Credit facility revolver | $132,000 | 2026 | | **Total Debt** | **$503,403** | | Estimated Outstanding Leasing Cost Commitments as of March 31, 2025 (in thousands) | Commitment Type | Amount (in thousands) | | :--- | :--- | | Tenant improvement allowances | $49,241 | | Reimbursable landlord work | $11,077 | | Non-reimbursable landlord work | $14,310 | | **Total** | **$74,628** | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=26&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses financial condition and operations, highlighting a strategic shift, tenant retention challenges, Q1 2025 revenue decrease, and reduced net loss [Overview and Strategy](index=27&type=section&id=Overview%20and%20Strategy) Orion Properties, an internally managed REIT, is strategically shifting its portfolio from traditional office to **dedicated use assets**, with 74.3% occupancy in Q1 2025 - The company is strategically shifting from traditional office properties to **dedicated use assets** (government, medical, lab, R&D, flex)[158](index=158&type=chunk)[168](index=168&type=chunk) - Key challenges include **tenant retention** (11.3% of ABR expiring in 2025), hybrid work impacts, and **indebtedness risks**[164](index=164&type=chunk)[167](index=167&type=chunk) [Portfolio and Operating Performance](index=32&type=section&id=Portfolio%20and%20Operating%20Performance) Q1 2025 portfolio occupancy was 74.3%, with total revenues of $38.0 million and Core FFO per diluted share at $0.19 Portfolio Metrics as of March 31, 2025 | Metric | Value | | :--- | :--- | | Rentable square feet (in thousands) | 8,037 | | Occupancy rate | 74.3% | | Leased rate | 77.4% | | Investment-grade tenants (by ABR) | 72.3% | | Weighted average remaining lease term (years) | 5.2 | Q1 2025 Leasing Activity | Metric | New Leases | Renewals | Total | | :--- | :--- | :--- | :--- | | Rentable square feet leased (in thousands) | 160 | 220 | 380 | | Weighted avg. rental rate change (cash, in percent) | N/A | (17.9)% | (17.9)% | | Weighted avg. lease term (years) | 10.0 | 4.3 | 6.7 | Key Financial Metrics (in thousands, except per share) | Metric | Q1 2025 (in thousands) | Q1 2024 (in thousands) | | :--- | :--- | :--- | | Total revenues | $38,001 | $47,197 | | Net loss attributable to common stockholders | $(9,361) | $(26,232) | | Core FFO attributable to common stockholders | $10,653 | $20,365 | | Core FFO per diluted share | $0.19 | $0.36 | [Results of Operations Analysis](index=35&type=section&id=Results%20of%20Operations%20Analysis) Q1 2025 rental revenue decreased by $9.2 million due to lease expirations, while operating expenses decreased by $26.1 million, primarily from reduced impairment charges - Rental revenue decreased by **$9.2 million** YoY, primarily due to **$7.1 million** from expired leases and a non-recurring **$2.7 million** reimbursement[209](index=209&type=chunk) - Depreciation and amortization expenses decreased by **$8.5 million** YoY as certain intangible assets related to expired leases became fully amortized[215](index=215&type=chunk) - Impairment charges dropped significantly to **$1.7 million** in Q1 2025 from **$19.7 million** in Q1 2024, driving the reduced net loss[216](index=216&type=chunk) [Liquidity and Capital Resources](index=38&type=section&id=Liquidity%20and%20Capital%20Resources) As of March 31, 2025, the company had **$9.4 million** cash, **$218.0 million** available credit, and **$505.0 million** total debt, maintaining covenant compliance - Primary liquidity sources include **$9.4 million** cash, cash from operations, dispositions, and **$218.0 million** borrowing capacity under the Revolving Facility[227](index=227&type=chunk) Consolidated Debt Summary as of March 31, 2025 (in thousands) | Debt Type | Principal Amount (in thousands) | Weighted Avg. Interest Rate (in percent) | Maturity | | :--- | :--- | :--- | :--- | | Credit facility revolver | $132,000 | 7.66% | 2026 | | Mortgages payable | $373,000 | 5.02% | 2027 & Thereafter | | **Total** | **$505,000** | | | - The company was in compliance with all financial covenants for its Revolving Facility as of March 31, 2025[248](index=248&type=chunk) - The Board authorized a **$50.0 million** share repurchase program, with **$45.0 million** remaining, though no shares were repurchased in Q1 2025[271](index=271&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=44&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk is interest rate risk from **$132.0 million** in variable-rate debt, partially mitigated by interest rate collars - The company's main market risk is interest rate risk from **$132.0 million** of variable-rate debt under the Revolving Facility[276](index=276&type=chunk)[279](index=279&type=chunk) - A **100 basis point increase** in variable interest rates would increase annual interest expense by approximately **$1.3 million**[279](index=279&type=chunk) - To manage interest rate risk, the company has interest rate collar agreements on a notional amount of **$60.0 million**, effective until May 12, 2025[280](index=280&type=chunk) [Item 4. Controls and Procedures](index=46&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls and procedures were effective as of March 31, 2025, with no material changes to internal control - The CEO and CFO concluded that disclosure controls and procedures were **effective** at a reasonable assurance level as of March 31, 2025[287](index=287&type=chunk) - No material changes occurred during the quarter affecting the company's internal control over financial reporting[288](index=288&type=chunk) [PART II - OTHER INFORMATION](index=47&type=section&id=PART%20II) [Item 1. Legal Proceedings](index=47&type=section&id=Item%201.%20Legal%20Proceedings) The company is not a party to any material pending legal proceedings as of the end of the quarter - As of March 31, 2025, the company is not involved in any **material pending legal proceedings**[290](index=290&type=chunk) [Item 1A. Risk Factors](index=47&type=section&id=Item%201A.%20Risk%20Factors) No material changes to risk factors, except for expanded discussion on risks from government tenants and potential lease impacts from DOGE and GSA initiatives - A key risk is government tenants reducing leased space due to initiatives like DOGE, aiming to shrink the federal real estate portfolio[292](index=292&type=chunk) - GSA could exercise termination options or not renew leases, with a recent suspension of funded obligations causing delays in negotiations and landlord work[292](index=292&type=chunk) [Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities](index=47&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%2C%20Use%20of%20Proceeds%2C%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company reported no unregistered sales or issuer purchases of equity securities during the period - The company did not conduct any unregistered sales or repurchase its own equity securities during Q1 2025[293](index=293&type=chunk)[295](index=295&type=chunk) [Item 5. Other Information](index=48&type=section&id=Item%205.%20Other%20Information) No directors or officers adopted or terminated Rule 10b5-1 trading arrangements during Q1 2025 - No directors or officers adopted or terminated a Rule 10b5-1 trading arrangement during the quarter[298](index=298&type=chunk)

Orion Properties Inc. Q1 2025 Results Announcement [Management Commentary](index=1&type=section&id=Management%20Commentary) Management emphasized strong leasing, strategic dispositions, and a portfolio shift to dedicated-use assets for stable cash flows - The company has achieved strong leasing of over **450,000 square feet** so far in 2025, with a robust pipeline of further transactions under discussion[2](index=2&type=chunk) - Since 2021, Orion has sold **22 vacant properties**, totaling **2.2 million square feet**, including three properties sold subsequent to the quarter's end[2](index=2&type=chunk) - The company is strategically focusing on increasing its portfolio concentration in dedicated-use assets like flex, laboratory, medical, and governmental properties to support long-term cash flow stability[2](index=2&type=chunk) Q1 2025 Operating and Financial Performance [Financial Highlights](index=1&type=section&id=Financial%20Highlights) Q1 2025 revenues decreased to $38.0 million, net loss improved to $(9.4) million, but Core FFO declined to $10.7 million ($0.19/share) Q1 2025 vs Q1 2024 Financial Results | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | **Total Revenues** | $38.0 million | $47.2 million | | **Net Loss (to common stockholders)** | $(9.4) million | $(26.2) million | | **Net Loss per Share** | $(0.17) | $(0.47) | | **Core FFO** | $10.7 million | $20.4 million | | **Core FFO per Diluted Share** | $0.19 | $0.36 | Key Financial Metrics for Q1 2025 | Metric | Value | | :--- | :--- | | **FFO** | $8.8 million ($0.16/share) | | **EBITDA** | $15.9 million | | **Adjusted EBITDA** | $17.4 million | | **Net Debt to Annualized YTD Adj. EBITDA** | 7.48x | [Leasing and Disposition Activity](index=1&type=section&id=Leasing%20and%20Disposition%20Activity) Q1 2025 leasing totaled 380,000 sq ft, with further post-quarter activity and significant property dispositions and pending sales Q1 2025 Leasing Transactions (in thousands sq ft) | Location | Type | Square Feet | Term | | :--- | :--- | :--- | :--- | | Buffalo, New York | New Lease | 160 | 10.0 years | | Denver, Colorado | Renewal | 145 | 2.0 years | | East Windsor, New Jersey | Renewal | 42 | 8.0 years | | Lincolnshire, Illinois | Renewal | 33 | 10.0 years | - Completed an additional **73,000 square feet** of leasing activity subsequent to quarter end, including a **15.7-year lease** for **46,000 square feet** in Parsippany, New Jersey[8](index=8&type=chunk) - In April 2025, the company sold three vacant properties (**287,000 sq ft**) for a gross sales price of **$19.1 million**[9](index=9&type=chunk) [Real Estate Portfolio](index=3&type=section&id=Real%20Estate%20Portfolio) The portfolio as of March 31, 2025, featured 68 operating properties at 74.3% occupancy, $120.1 million Annualized Base Rent, and a fully occupied JV portfolio Portfolio Snapshot (as of March 31, 2025) | Metric | Value | | :--- | :--- | | **Operating Properties** | 68 | | **Occupancy Rate** | 74.3% | | **Annualized Base Rent** | $120.1 million | | **% from Investment-Grade Tenants** | 72.3% | | **Weighted Avg. Remaining Lease Term** | 5.2 years | - The Arch Street Joint Venture portfolio of six properties was **100% occupied**, with a weighted average remaining lease term of **7.1 years**[11](index=11&type=chunk) [Arch Street Joint Venture](index=3&type=section&id=Arch%20Street%20Joint%20Venture) Orion provided an $8.3 million member loan to the Arch Street Joint Venture in February 2025, bringing the total receivable to $8.9 million at 15.0% annual interest - In February 2025, the Company made an **$8.3 million** member loan to the Arch Street Joint Venture to fund leasing costs[12](index=12&type=chunk) - The total member loan receivable from the joint venture was **$8.9 million** as of March 31, 2025, earning **15.0% annual interest**[12](index=12&type=chunk) [Balance Sheet and Liquidity](index=3&type=section&id=Balance%20Sheet%20and%20Liquidity) As of March 31, 2025, total debt was $531.2 million, with $227.8 million in liquidity, including $9.8 million cash and $218.0 million credit facility capacity Total Debt Composition (as of March 31, 2025) | Debt Instrument | Amount | | :--- | :--- | | CMBS Loan | $355.0 million | | Credit Facility Revolver | $132.0 million | | San Ramon Loan | $18.0 million | | Proportionate Share of JV Debt | $26.2 million | | **Total Debt** | **$531.2 million** | - Total liquidity as of March 31, 2025, was **$227.8 million**, consisting of **$9.8 million** in cash and cash equivalents and **$218.0 million** available on the credit facility revolver[14](index=14&type=chunk) Corporate Updates and Outlook [Dividend Declaration](index=3&type=section&id=Dividend) The Board of Directors declared a Q2 2025 quarterly cash dividend of $0.02 per share, payable July 15, 2025, to stockholders of record as of June 30, 2025 - The Board of Directors declared a Q2 2025 quarterly cash dividend of **$0.02 per share**[15](index=15&type=chunk) [2025 Outlook](index=4&type=section&id=2025%20Outlook) Orion Properties reaffirmed its 2025 full-year guidance, projecting Core FFO per share between $0.61 and $0.70, and Net Debt to Adjusted EBITDA between 8.0x and 8.8x Reaffirmed 2025 Full-Year Guidance | Metric | Low | High | | :--- | :--- | :--- | | **Core FFO per share** | $0.61 | $0.70 | | **General and Administrative Expenses** | $19.5 million | $20.5 million | | **Net Debt to Adjusted EBITDA** | 8.0x | 8.8x | Appendix: Financial Statements and Reconciliations [Consolidated Balance Sheets](index=12&type=section&id=Consolidated%20Balance%20Sheets) As of March 31, 2025, total assets were $1.328 billion, with total liabilities at $573.1 million and stockholders' equity at $753.5 million Key Balance Sheet Items (in thousands) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Total Assets** | $1,327,866 | $1,336,422 | | **Total Liabilities** | $573,070 | $571,166 | | **Total Stockholders' Equity** | $753,480 | $763,916 | [Consolidated Statements of Operations](index=13&type=section&id=Consolidated%20Statements%20of%20Operations) Q1 2025 total revenues were $38.0 million, with net loss attributable to common stockholders improving to $(9.4) million, or $(0.17) per share, due to lower impairment charges Consolidated Statements of Operations (in thousands, except per share data) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | **Total Revenues** | $38,001 | $47,197 | | **Total Operating Expenses** | $39,141 | $65,247 | | **Impairments** | $1,709 | $19,685 | | **Net Loss Attributable to Common Stockholders** | $(9,361) | $(26,232) | | **Net Loss Per Share (Basic and Diluted)** | $(0.17) | $(0.47) | [Reconciliation of FFO, Core FFO, and FAD](index=14&type=section&id=FFO%2C%20CORE%20FFO%20AND%20FAD) This section reconciles net loss to non-GAAP metrics, showing Q1 2025 FFO of $8.8 million, Core FFO of $10.7 million, and negative FAD of $(1.5) million, all declining year-over-year Reconciliation of Key Performance Metrics (in thousands) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | **Net Loss Attributable to Common Stockholders** | $(9,361) | $(26,232) | | **FFO Attributable to Common Stockholders** | $8,805 | $18,389 | | **Core FFO Attributable to Common Stockholders** | $10,653 | $20,365 | | **FAD Attributable to Common Stockholders** | $(1,475) | $16,035 | [Reconciliation of EBITDA, EBITDAre, and Adjusted EBITDA](index=15&type=section&id=EBITDA%2C%20EBITDAre%20AND%20ADJUSTED%20EBITDA) Q1 2025 EBITDA was $15.9 million, EBITDAre $17.6 million, and Adjusted EBITDA $17.4 million, with Adjusted EBITDA decreasing from Q1 2024 due to lower revenues EBITDA Reconciliation (in thousands) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | **Net Loss Attributable to Common Stockholders** | $(9,361) | $(26,232) | | **EBITDA** | $15,860 | $7,355 | | **EBITDAre** | $17,569 | $27,040 | | **Adjusted EBITDA** | $17,426 | $26,729 | [Financial and Operations Statistics and Ratios](index=16&type=section&id=FINANCIAL%20AND%20OPERATIONS%20STATISTICS%20AND%20RATIOS) Q1 2025 key financial ratios, including Interest Coverage (2.25x) and Fixed Charge Coverage (2.12x), declined from Q1 2024, with Net Debt at $521.4 million and Net Debt to Annualized Adjusted EBITDA at 7.48x Key Coverage Ratios | Ratio | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | **Interest Coverage Ratio** | 2.25x | 3.52x | | **Fixed Charge Coverage Ratio** | 2.12x | 3.52x | Key Leverage Ratios (as of March 31, 2025) | Ratio | Value | | :--- | :--- | | **Net Debt** | $521.4 million | | **Net Debt to Annualized Adj. EBITDA** | 7.48x | | **Net Debt Leverage Ratio** | 33.5% | | **Unencumbered Asset Ratio** | 58.4% | Appendix: Definitions and Important Disclosures [Definitions of Key Terms and Non-GAAP Measures](index=4&type=section&id=Non-GAAP%20Financial%20Measures%20and%20Definitions) This section defines non-GAAP financial measures like FFO, Core FFO, FAD, EBITDAre, and Adjusted EBITDA, along with key operational terms, clarifying their use and adjustments - The report includes non-GAAP financial measures such as FFO, Core FFO, FAD, EBITDAre, and Adjusted EBITDA to supplement GAAP results and provide a basis for comparison with other REITs[19](index=19&type=chunk)[37](index=37&type=chunk) - Definitions are provided for key operational and financial terms, including Annualized Base Rent, Occupancy Rate, Net Debt, and Weighted Average Remaining Lease Term, to clarify the metrics used in the report[23](index=23&type=chunk)[49](index=49&type=chunk)[52](index=52&type=chunk) [Forward-Looking Statements](index=10&type=section&id=Forward-Looking%20Statements) This section outlines risks and uncertainties for forward-looking statements, including rising interest rates, inflation, office oversupply, tenant credit risk, and remote work impacts - The report contains forward-looking statements regarding future events, financial conditions, and results of operations, which are based on current assumptions and subject to risks[59](index=59&type=chunk) - Identified risks include rising interest rates, inflation, oversupply of office space, tenant credit risk, and the continued impact of remote and hybrid work arrangements on office demand[60](index=60&type=chunk)

Portfolio Overview - Orion Properties operates 69 properties with 8,112,000 rentable square feet and an occupancy rate of 73.7%[31] - The portfolio's annualized base rent (ABR) is $1483 per rentable square foot, totaling $120,293,000[31] - Investment-grade tenancy accounts for 74.4% of the ABR, with a weighted average remaining lease term of 52 years[31] Tenant and Industry Diversification - The top 10 tenants comprise 53.9% of the ABR[36] - The largest tenant accounts for 16.3% of the ABR and has a credit rating of AA+[36] - Government & Public Services is the top industry, accounting for 16.8% of ABR[35] Geographic Diversification - Texas represents the largest geographic concentration, accounting for 16.5% of the ABR[40] - New Jersey accounts for 12.5% of the ABR[40] Balance Sheet and Liquidity - The company has $247,000,000 in liquidity, including $16,000,000 in cash and $231,000,000 available on the credit facility[57] - Total principal outstanding debt is $518,329,000 with a weighted average interest rate of 5.73%[52]