Orion Office REIT’s Earnings Call: Mixed Sentiment with Optimistic Guidance

Orion Office Reit, Inc. ((ONL)) has held its Q2 earnings call. Read on for the main highlights of the call.

Orion Office REIT, Inc. recently held its earnings call, revealing a mixed sentiment among stakeholders. The company showcased strong leasing momentum and significant progress in property dispositions, which have positively impacted portfolio quality and occupancy rates. However, challenges such as reduced revenues, decreased core funds from operations (FFO), and increased costs were also highlighted. Despite these hurdles, the financial guidance has been improved, signaling optimism for the future.

Leasing Momentum and Achievements

Orion demonstrated robust leasing activity, completing 639,000 square feet of leasing as of July 31, 2025. The leases boast a weighted average term of 6.4 years, with notable agreements in Parsippany, New Jersey; Kennesaw, Georgia; and Plano, Texas. This leasing success underscores Orion’s strong market presence and strategic positioning.

Property Dispositions

The company successfully sold four vacant properties totaling 434,000 square feet for $26.9 million. Additionally, agreements are in place to sell five more properties for $57 million. This marks a significant increase in property sales compared to the previous year, where only two properties were sold, highlighting Orion’s strategic focus on optimizing its portfolio.

Portfolio Occupancy Improvement

Orion’s operating property occupancy rate saw a notable increase of 310 basis points, reaching 77.4%. The lease rate also improved by 170 basis points to 79.1% sequentially. These improvements indicate a positive trend in the company’s ability to attract and retain tenants.

Increased Focus on DUA Properties

Approximately 32.2% of Orion’s portfolio by annualized base rent is now dedicated use assets (DUA), which are known for stronger renewal trends and more durable cash flows. This strategic focus is likely to enhance the stability and predictability of Orion’s revenue streams.

Improved Financial Guidance

Orion raised its core FFO guidance for 2025 to $0.67-$0.71 per share, up from $0.61-$0.70. The net debt to adjusted EBITDA guidance has also improved to 7.3x-8.3x, down from 8.0x-8.8x. These adjustments reflect the company’s confidence in its financial and operational performance.

Reduction in Total Revenues

The earnings call revealed a decrease in total revenues for the second quarter, which stood at $37.3 million, down from $40.1 million in the same quarter of the previous year. This decline poses a challenge for the company as it navigates through a competitive market environment.

Decrease in Core FFO and Adjusted EBITDA

Orion reported a decline in core FFO for the quarter, which was $11.5 million, down from $14.2 million in the same quarter of 2024. Adjusted EBITDA also decreased to $18 million from $20.5 million in the previous year, indicating financial pressures that the company needs to address.

Increased CapEx and Leasing Costs

Capital expenditures and leasing costs rose to $15.6 million in the second quarter, compared to $6.3 million in the same quarter of 2024. This increase was driven by accelerated leasing activity, reflecting Orion’s commitment to expanding its market footprint.

Potential Rise in Net Debt to EBITDA

The company’s net debt to annualized year-to-date adjusted EBITDA was 6.93x at the quarter’s end. There is an expectation of a modest rise in this metric in the coming year, which will require careful financial management.

Forward-Looking Guidance

During the earnings call, Orion provided updated guidance and key metrics reflecting its performance and strategic direction. The company completed 639,000 square feet of leasing by July 31, with a weighted average lease term of 6.4 years, and improved its operating property occupancy rate to 77.4%, up 310 basis points sequentially. Orion raised its core FFO guidance to $0.67-$0.71 per diluted share and adjusted its net debt to adjusted EBITDA range to 7.3x-8.3x, reflecting improved leasing and financial performance.

In conclusion, Orion Office REIT, Inc.’s earnings call presented a nuanced picture of the company’s current standing. While there are challenges such as reduced revenues and increased costs, the strong leasing momentum and improved financial guidance provide a positive outlook. The company’s strategic focus on property dispositions and DUA properties is expected to enhance its portfolio quality and financial stability moving forward.