Peakstone Realty Trust(PKST) - 2025 Q2 - Quarterly Results

Executive Summary & Business Update Peakstone Realty Trust is strategically transforming into an industrial REIT with a focus on Industrial Outdoor Storage (IOS), reporting Q2 2025 revenue of $54.0 million, a significant net loss due to impairment, and a 6.3% increase in Same Store Cash NOI Company Overview & Strategic Direction Peakstone Realty Trust is actively transforming into an industrial REIT, with a strategic focus on Industrial Outdoor Storage (IOS). Industrial assets now constitute approximately 65% of the net book value of its real estate assets. The company is executing this strategy through IOS acquisitions, leasing, and the monetization of its office portfolio, while also reducing leverage - Peakstone Realty Trust is accelerating its shift to an industrial REIT, with a strategic emphasis on Industrial Outdoor Storage ("IOS")[1][20] - Industrial assets now represent approximately 65% of the net book value of the company's real estate assets[2] - Key achievements include expanding IOS footprint with two acquisitions, fully leasing an IOS redevelopment property, completing $182 million in office sales, and improving leverage to 6.6x from 7.0x[2] Second Quarter 2025 Financial Highlights For Q2 2025, Peakstone Realty Trust reported approximately $54.0 million in revenue and a significant net loss of $(286.8) million, primarily due to a $286.1 million non-cash impairment on office properties. Core FFO was $0.60 per share/unit, and AFFO was $0.61 per share/unit. Same Store Cash NOI increased by 6.3% year-over-year | Metric | Value (approx.) | | :----- | :-------------- | | Revenue | $54.0 million | | Net loss | $(286.8) million | | Net loss attributable to common shareholders | $(265.3) million | | Net loss per basic and diluted share | $(7.22) | | Core FFO per basic and diluted share/unit | $0.60 | | AFFO per basic and diluted share/unit | $0.61 | | Same Store Cash NOI | $35.6 million | | Same Store Cash NOI increase YoY | 6.3% | - The net loss was primarily driven by a $286.1 million non-cash impairment, largely attributable to 18 office properties, due to shortened anticipated hold periods and estimated selling prices[3] Portfolio Performance & Activity This section details Peakstone's portfolio composition, including industrial and office assets, and summarizes recent acquisition, leasing, and disposition activities, particularly focusing on IOS expansion and office divestment Portfolio Overview As of June 30, 2025, Peakstone's portfolio consisted of 94 properties, including 89 operating and 5 redevelopment properties, segmented into Industrial and Office. The Industrial segment, comprising 70 properties (46 IOS, 19 Traditional Industrial, 5 Redevelopment), showed strong occupancy. The Office segment had 24 operating properties with 98.6% occupancy | Segment | Number of Properties | Occupancy Percentage (rentable sq ft) | Occupancy Percentage (usable acres) | WALT (in years) | ABR ($ in thousands) | Percentage of ABR | | :-------------------- | :------------------- | :---------------------------------- | :-------------------------------- | :-------------- | :------------------- | :---------------- | | Industrial | 70 | 100.0 % | 99.6 % | 5.1 | $74,898 | 44.6% | | Operating | 65 | — | — | 5.1 | $74,898 | 44.6% | | IOS | 46 | — | 99.6 % | 4.4 | $24,453 | 14.6% | | Traditional Industrial | 19 | 100.0 % | — | 5.5 | $50,445 | 30.0% | | Redevelopment | 5 | — | — | — | — | —% | | Office | 24 | 98.6% | — | 6.3 | $93,098 | 55.4% | | Operating | 24 | 98.6% | — | 6.3 | $93,098 | 55.4% | | Portfolio Total / Weighted-Average | 94 | 99.5% | 99.6 % | 5.8 | $167,996 | 100.0% | Acquisition Activity Subsequent to the second quarter, Peakstone Realty Trust acquired two IOS properties for a total of $52.4 million. These acquisitions include a 27.0-acre property in Smyrna, GA, and a 9.2-acre property in Port Charlotte, FL, both 100% leased with favorable WALT and annual rent escalations - Acquired two IOS properties for $52.4 million subsequent to quarter-end[9] - A 27.0 usable acre IOS property in Smyrna, GA, acquired for $42.0 million, 100% leased with a 5.0-year WALT and 3.8% average annual rent escalations[9] - A 9.2 usable acre IOS property in Port Charlotte, FL, acquired for $10.4 million, 100% leased with a 6.8-year WALT and 3% average annual rent escalations[9] Leasing Activity Subsequent to quarter-end, the Company secured a new 2.5-year, full-site lease for 7.5 usable acres at an IOS redevelopment property in Savannah, GA, which includes 4% annual rent escalations - Executed a new 2.5-year, full-site lease for 7.5 usable acres at an IOS redevelopment property in Savannah, GA, with 4% annual rent escalations, subsequent to quarter-end[7] Disposition Activity Peakstone Realty Trust continued its office portfolio divestment, selling seven properties totaling 836,500 square feet for approximately $158 million during the quarter. An additional two properties were sold for approximately $24 million subsequent to quarter-end - Sold seven office properties totaling 836,500 square feet for approximately $158 million during the quarter[10] - Sold two additional office properties totaling 178,700 square feet for approximately $24 million subsequent to quarter-end[10] Detailed Financial Results This section provides a detailed breakdown of Peakstone's Q2 2025 financial performance, including revenue, net loss, Core FFO, AFFO, and Same Store Cash NOI, with comparisons to the prior year Revenue Total revenue for the second quarter of 2025 was approximately $54.0 million, a decrease from $56.0 million reported in the same quarter last year | Metric | Q2 2025 | Q2 2024 | | :----- | :------ | :------ | | Total Revenue | $54.0 million | $56.0 million | Net Loss Attributable to Common Shareholders The net loss attributable to common shareholders significantly widened to approximately $(265.3) million, or $(7.22) per basic and diluted share, in Q2 2025, compared to a net loss of $(3.8) million, or $(0.11) per share, in Q2 2024. This substantial increase was primarily due to a large non-cash impairment charge | Metric | Q2 2025 | Q2 2024 | | :----- | :------ | :------ | | Net loss attributable to common shareholders | $(265.3) million | $(3.8) million | | Net loss per basic and diluted share | $(7.22) | $(0.11) | Core FFO and AFFO Core FFO for Q2 2025 was $23.8 million, or $0.60 per basic and diluted share/unit, down from $25.6 million, or $0.65 per share/unit, in Q2 2024. AFFO also decreased to $24.3 million, or $0.61 per share/unit, from $27.6 million, or $0.70 per share/unit, in the prior year's quarter | Metric | Q2 2025 | Q2 2024 | | :----- | :------ | :------ | | Core FFO | $23.8 million | $25.6 million | | Core FFO per basic and diluted share/unit | $0.60 | $0.65 | | AFFO | $24.3 million | $27.6 million | | AFFO per basic and diluted share/unit | $0.61 | $0.70 | Same Store Cash NOI Same Store Cash NOI increased by 6.3% to approximately $35.6 million in Q2 2025, up from $33.5 million in the same quarter last year. The Industrial segment contributed significantly with a 9.3% increase, while the Office segment saw a 4.7% rise | Segment | Q2 2025 (USD in Thousands) | % Change vs Q2 2024 | | :-------------------- | :------------------------- | :------------------ | | Industrial | $12,549 | 9.3% | | Office | $23,079 | 4.7% | | Total / Weighted-Average | $35,628 | 6.3% | Financial Position & Capital Management This section outlines Peakstone's balance sheet metrics, including debt, liquidity, and leverage, and details dividend declarations for Q2 and Q3 2025, reflecting the company's capital management strategy Balance Sheet Metrics As of June 30, 2025, Peakstone Realty Trust reported total debt of $1,260.3 million and net debt of $995.9 million. The company maintained total liquidity of $355.8 million and a net debt to Adjusted EBITDAre ratio of 6.4x, reflecting an improvement from the prior quarter | Metric ($ in millions, unless otherwise noted) | As of June 30, 2025 | | :------------------------------------ | :------------------ | | Total Debt | $1,260.3 | | Cash and Cash Equivalents | $264.4 | | Net Debt | $995.9 | | Available Revolver Capacity | $91.4 | | Total Liquidity | $355.8 | | Weighted Average Debt Maturity | 3.0 years | | Fixed Rate Debt, including Swaps (%) | 88% | | Total Wtd. Avg. Effective Interest Rate (including Swaps) | 4.38% | | Net Debt to Adjusted EBITDAre | 6.4x | - Leverage improved to 6.6x, down from 7.0x at the end of the first quarter[2] Dividends The company paid a dividend of $0.225 per common share for Q2 2025 on July 17, 2025. The Board of Trustees approved a Q3 2025 dividend of $0.10 per common share, payable on October 17, 2025, aligning with the anticipated cash flow profile of the industrial segment | Dividend Quarter | Amount per Common Share | Record Date | Payment Date | | :--------------- | :---------------------- | :---------- | :----------- | | Q2 2025 | $0.225 | June 30, 2025 | July 17, 2025 | | Q3 2025 | $0.10 | September 30, 2025 | October 17, 2025 | - The Board of Trustees has set the dividend to a level that aligns with the anticipated cash flow profile of the industrial segment, establishing a foundation as the company continues to scale IOS[2] Consolidated Financial Statements This section presents the company's consolidated balance sheets and statements of operations, offering a comprehensive view of its financial position and performance for the reported periods Consolidated Balance Sheets The consolidated balance sheets provide a detailed snapshot of the company's financial position as of June 30, 2025, and December 31, 2024, showing total assets, liabilities, and equity. Total assets decreased from $2,676.2 million at year-end 2024 to $2,190.6 million at Q2 2025 | Metric (in thousands) | June 30, 2025 | December 31, 2024 | | :-------------------- | :------------ | :---------------- | | Total assets | $2,190,570 | $2,676,232 | | Total liabilities | $1,414,333 | $1,524,210 | | Total equity | $776,237 | $1,152,022 | Consolidated Statements of Operations The consolidated statements of operations detail the company's financial performance for the three and six months ended June 30, 2025, and 2024. It highlights a significant increase in net loss attributable to common shareholders in Q2 2025, primarily due to a substantial real estate impairment provision | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | | Rental income | $54,026 | $55,952 | | Total expenses | $326,720 | $49,318 | | Net (loss) income | $(286,760) | $(4,101) | | Net (loss) income attributable to common shareholders | $(265,300) | $(3,768) | | Net (loss) income per share, basic and diluted | $(7.22) | $(0.11) | - Real estate impairment provision increased significantly to $286,126 thousand in Q2 2025 from $6,505 thousand in Q2 2024[32] Non-GAAP Financial Measures & Reconciliations This section defines and reconciles key non-GAAP financial measures, including FFO, Core FFO, AFFO, NOI, Cash NOI, Same Store Cash NOI, EBITDA, EBITDAre, and Adjusted EBITDAre, providing alternative perspectives on the company's operational and financial performance Funds from Operations (FFO, Core FFO, AFFO) FFO, Core FFO, and AFFO are non-GAAP measures used to supplement GAAP net earnings, providing insights into operating performance by excluding certain non-cash items and real estate-specific adjustments. For Q2 2025, FFO was $23.9 million, Core FFO was $23.8 million, and AFFO was $24.3 million, all showing a decrease compared to Q2 2024 - FFO is defined by NAREIT as GAAP net income or loss, excluding gains/losses from sales of depreciable real estate assets, impairment losses, and real estate-related depreciation and amortization[35] - Core FFO adjusts FFO to exclude items like goodwill impairment, debt extinguishment gains/losses, unrealized derivative gains/losses, and transaction costs, to better reflect core business operations[36] - AFFO further adjusts Core FFO for non-cash items such as straight-line rent, share-based compensation amortization, and deferred rent, to provide a useful supplemental measure of operating performance[37] | Metric | Q2 2025 (in thousands) | Q2 2024 (in thousands) | | :----- | :--------------------- | :--------------------- | | FFO | $23,898 | $25,556 | | Core FFO | $23,832 | $25,637 | | AFFO | $24,271 | $27,563 | | FFO per share/unit | $0.60 | $0.65 | | Core FFO per share/unit | $0.60 | $0.65 | | AFFO per share/unit | $0.61 | $0.70 | Net Operating Income (NOI, Cash NOI, Same Store Cash NOI) NOI, Cash NOI, and Same Store Cash NOI are non-GAAP measures used to assess property-level operating performance, excluding corporate and financing costs. For Q2 2025, Total NOI was $45.4 million, Total Cash NOI was $43.2 million, and Total Same Store Cash NOI increased by 6.3% to $35.6 million - NOI is a non-GAAP measure calculated as net income or loss, excluding general and administrative expenses, interest expense, depreciation and amortization, impairment of real estate, and gains/losses on sales of real estate[39] - Cash NOI adjusts NOI by excluding the effect of straight-line rent and amortization of acquired above- and below-market lease intangibles[39] - Same Store Cash NOI applies Cash NOI to properties held for the entirety of all periods presented, adjusted for lease termination fees, to measure actual cash basis rental growth[39] | Metric | Q2 2025 (in thousands) | Q2 2024 (in thousands) | | :----- | :--------------------- | :--------------------- | | Total NOI | $45,392 | $45,422 | | Total Cash NOI | $43,196 | $44,002 | | Total Same Store Cash NOI | $35,628 | $33,522 | EBITDA, EBITDAre, and Adjusted EBITDAre EBITDA, EBITDAre, and Adjusted EBITDAre are non-GAAP financial measures used to evaluate the company's business performance by excluding certain non-operating and non-cash items. For Q2 2025, EBITDA was $(248.3) million, EBITDAre was $38.9 million, and Adjusted EBITDAre was $38.8 million - EBITDA is defined as earnings before interest, tax, depreciation and amortization[47] - EBITDAre, as defined by NAREIT, adjusts GAAP net income/loss by adding back interest expense, income tax expense, depreciation and amortization, and accounting for gains/losses on property dispositions and impairment write-downs[48] - Adjusted EBITDAre further modifies EBITDAre to exclude acquisition-related expenses, employee separation expenses, stock-based compensation, and other non-portfolio performance indicators, including adjustments for full-period NOI on acquired/disposed properties[49] | Metric | Q2 2025 (in thousands) | | :----- | :--------------------- | | Net loss | $(286,760) | | EBITDA | $(248,255) | | EBITDAre | $38,937 | | Adjusted EBITDAre | $38,799 | Appendix & Other Information This section includes supplementary information such as details for the earnings webcast, an overview of Peakstone Realty Trust, cautionary statements regarding forward-looking statements, a notice on non-GAAP financial measures, and key definitions Earnings Webcast Peakstone Realty Trust will host a webcast on Thursday, August 7, 2025, at 5:00 p.m. Eastern Time to present its second quarter 2025 results. Details for accessing the live webcast and replay are provided - The Company will host a webcast to present the second quarter 2025 results on Thursday, August 7, 2025 at 5:00 p.m. Eastern Time[19] - Access details: https://investors.pkst.com/investors/events-and-presentations/events/event-details/2025/Second-Quarter-2025-Earnings-Call/default.aspx or via phone at 1-877-407-9716 (domestic) / 1-201-493-6779 (international)[19] About Peakstone Realty Trust Peakstone Realty Trust (NYSE: PKST) is a real estate investment trust focused on a strategic transition to an industrial REIT, specifically targeting growth in the industrial outdoor storage (IOS) sector. This strategy involves divesting office assets and expanding its IOS platform to drive long-term value creation - Peakstone Realty Trust (NYSE: PKST) is a REIT executing a strategic transition to an industrial REIT, targeting growth in the industrial outdoor storage ("IOS") sector[20] - The company is actively reshaping its portfolio by divesting office assets and growing its IOS platform to drive long-term value creation[20] Cautionary Statement Regarding Forward-Looking Statements This section highlights that the document contains forward-looking statements, which are subject to numerous known and unknown risks, uncertainties, and changes in circumstances. These factors could cause actual results to differ materially from projections, and investors are advised not to place undue reliance on these statements - The document contains forward-looking statements covered by safe harbor provisions, relating to expectations, beliefs, projections, future plans, and strategies[23] - Forward-looking statements are subject to numerous known and unknown risks, uncertainties, assumptions, and changes in circumstances that may cause actual results to differ significantly[24] - Investors are cautioned not to place undue reliance on any forward-looking statements, which are based only on information currently available[26] Notice Regarding Non-GAAP Financial Measures This notice clarifies that the document includes non-GAAP financial measures, which are presented as supplemental information and are not intended to be substitutes for or superior to GAAP measures. Reconciliations to the most directly comparable GAAP financial measures are provided - This document contains and may refer to certain non-GAAP financial measures in addition to U.S. GAAP financial measures[27] - These non-GAAP measures are not substitutes for or superior to measures of financial performance prepared in accordance with GAAP[27] - Reconciliations to the most directly comparable GAAP financial measures are included where applicable[27] Appendix: Key Definitions This appendix provides definitions for key operational and financial terms used throughout the report, including Annualized Base Rent (ABR), Net Debt, Occupancy, and Weighted Average Lease Term (WALT) - "Annualized Base Rent" or "ABR" is the monthly contractual base rent for commenced leases, excluding abatements, multiplied by 12 months, deducting base year operating expenses for gross and modified leases[51] - "Net Debt" is total debt (excluding deferred financing costs and debt premiums/discounts) less cash and cash equivalents (excluding restricted cash)[52] - "WALT" is the weighted average lease term in years (excluding unexercised renewal options and early termination rights) based on Annualized Base Rent[53]