Financial Data and Key Metrics Changes - Annualized revenue decreased to $398 million, down $85 million or nearly 18% year-over-year [7] - Interest expense increased to $53 million, up $14 million or 37% year-over-year [7] - Normalized FFO for Q2 was $9.4 million or $0.13 per share, compared to $4.4 million or $0.06 per share for the same quarter last year [11] Business Line Data and Key Metrics Changes - Same property occupancy stood at 85.2% as of June 30, 2025 [5] - Executed 15 leases totaling 416,000 square feet with a weighted average lease term of 5.4 years, at rental rates 6.4% higher than prior rates [8] - Concessions and capital commitments declined by 24% quarter-over-quarter to $3.53 per square foot per year [8] Market Data and Key Metrics Changes - Approximately 59% of revenues come from investment-grade rated tenants or their subsidiaries, with the U.S. Government as the largest tenant, representing 17.1% of annualized revenue [6] - 1.3 million square feet of leases are scheduled to expire through 2026, representing $30 million or 7.6% of annualized rental income [9] Company Strategy and Development Direction - The company suspended the quarterly dividend to preserve approximately $3 million of cash annually [8] - Focus on leasing and operating properties while exploring options to address financial commitments and reduce costs [7] Management's Comments on Operating Environment and Future Outlook - Management acknowledged that financial performance has materially declined due to ongoing leasing challenges in the office sector [6] - For Q3 2025, normalized FFO is expected to be between $0.07 and $0.09 per share, with a projected decrease in same property cash basis NOI of 7% to 9% compared to 2024 [12] Other Important Information - Total liquidity is currently $90 million in cash, with projected cash from operations being a use of $45 million to $55 million during the remainder of 2025 [14] - The company has three properties under agreement to sell for $28.9 million, with expected closings in September 2025 and 2027 [13] Q&A Session Summary - No specific questions or answers were provided in the content regarding the Q&A session.

Financial Data and Key Metrics Changes - Cash basis NOI grew by nearly 2% year over year, while normalized FFO increased 43% year over year and 52% sequentially [7][15] - NOI for the quarter was reported at $87,500,000, with cash basis NOI at $83,800,000 and adjusted EBITDAre at $85,300,000, all showing increases year over year and sequentially [16] - Interest expense decreased to $69,800,000, reflecting a reduction in interest rate cap costs [16] Business Line Data and Key Metrics Changes - The company executed over 2,300,000 square feet of total leasing activity with an occupancy rate of 94.6%, reflecting a sequential increase of 20 basis points [7] - The Mainland properties accounted for nearly 80% of renewal activity, with significant leases signed with major tenants [11] - In Hawaii, 492,000 square feet of renewals were signed at rental rates 18.2% higher than prior rents [9] Market Data and Key Metrics Changes - The company is monitoring the evolving landscape surrounding global tariffs, which may impact tenant demand and the overall leasing environment [10] - The leasing pipeline includes 32 deals for more than 7,400,000 square feet, with anticipated roll-ups in rent of 20% on the Mainland and 30% in Hawaii [13] Company Strategy and Development Direction - The company aims to maximize mark-to-market growth opportunities, maintain strong tenant retention, and lease vacancies, particularly in undeveloped land parcels [10] - There is a focus on evaluating opportunities to improve the balance sheet and reduce leverage, potentially through refinancing existing debt and strategic property dispositions [10][30] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the portfolio's ability to withstand short-term volatility due to its high-quality assets and diversified tenant roster [10] - The company anticipates that tariffs may positively impact tenant demand, leading to higher tenant retention in the short term [38] Other Important Information - The company reported a strong start to the year with solid financial performance and steady demand for industrial real estate [17] - The company has no debt maturities until 2027, with all debt currently carried at fixed rates [17] Q&A Session Summary Question: Details on bad debt recovery impact - The financial impact from bad debt recovery in the first quarter was around $750,000, which is reflected in revenues [20][21] Question: Insights on leasing timelines - Leasing timelines have elongated, with tenants looking to start renewal processes earlier due to more stakeholders involved in lease decisions [22][23] Question: Status of notable vacancies in Hawaii and Indianapolis - Activity has been seen for the Hawaii property, with proposals out, while the Indianapolis property is actively being marketed with proposals but no finalized leases yet [24][26] Question: Motivation for leverage reduction and property sales - The company is evaluating unsolicited offers for properties, particularly from owner-users, which may lead to higher valuations [28][30] Question: Impact of tariffs on tenant decisions - Tariffs are anticipated to be beneficial for tenant demand, with some tenants opting to stay in place rather than relocate due to concerns about construction costs [37][38] Question: Exposure of Hawaii portfolio to inbound travel - The portfolio's exposure to inbound travel is minimal, as tenants generally serve the local economy rather than relying on tourism [39]