Orion Office REIT Q4 Earnings Call Highlights

Orion Office REIT (NYSE:ONL) used its year-end 2025 earnings call to highlight progress in stabilizing its portfolio, increasing leasing activity, and extending key debt maturities, while also noting the start of a strategic options review process aimed at “unlocking value” for shareholders.

Strategic options review underway

Chief Executive Officer Paul McDowell said the company has begun a strategic options review process, describing it as an early-stage effort in which management and the board will evaluate potential alternatives to maximize stockholder value. McDowell emphasized that the call would remain focused on operating performance and the company’s business plan execution. He added that management and the board have “devoted time” over the past three years to consider avenues beyond the existing plan and said the company remains open to actionable proposals.

Leasing activity picked up, lease roll profile improved

McDowell said Orion completed more than 900,000 square feet of leasing in 2025, following 1.1 million square feet leased in 2024. The company also signed an additional 183,000 square feet after year-end. He called the volumes meaningful given the reduced size of the portfolio and said the activity improved the quality and stability of lease roll.

Among the leasing metrics management highlighted:

• Weighted average lease term (WALT): Nearly 10 years on new leases signed in 2025, nearly double the portfolio average WALT; average WALT for all 2025 leasing activity was 7.5 years, and the portfolio was “approaching 6 years.”
• Rent spreads: Cash rent spreads on fourth-quarter renewals were up for the third straight quarter at 12.8%. For full-year 2025, rent spreads were down 7.1%, though McDowell said they were up an average of 3.7% when comparing ending rents in the current term versus ending rents in the renewal term.
• Occupancy and leased rate: Leasing momentum and non-core dispositions contributed to a 600-basis-point improvement in leased rate year over year to over 80% at year-end, and a 500-basis-point improvement in occupancy to 78.7% at year-end.

McDowell also pointed to a reduced near-term rollover burden, saying Orion entered 2026 with scheduled lease expirations totaling $11.4 million of annualized base rent, down from nearly $16.2 million scheduled in 2025 and $39.4 million in 2024.

Management said early 2026 leasing momentum remained constructive. McDowell cited a pipeline of more than 1 million square feet in either discussion or documentation stages, including several full-building leases and longer-duration renewals and new leases with terms greater than the portfolio average.

During the Q&A, management attributed a larger leasing pipeline to both an improving market and the company’s smaller portfolio size, which can make quarterly changes appear more volatile. McDowell also said Orion’s success rate converting inquiries into signed leases has “improved very significantly” over the past two years, and that tenant decision-making has shortened.

Dispositions, carry-cost reduction, and a shift toward dedicated use assets

Dispositions were another focus. McDowell said Orion sold 10 properties in 2025 totaling more than 960,000 square feet for approximately $81 million of gross proceeds. In the fourth quarter, that included two vacant traditional office properties and one stabilized traditional office property sold for $32 million. After year-end, the company sold two more vacant properties in Bedford, Massachusetts, and Malvern, Pennsylvania, totaling an additional 516,000 square feet for over $13 million.

Orion also said it is under contract to sell additional non-core properties for gross proceeds of roughly $36 million, including a 37.4-acre Deerfield, Illinois property where the company completed demolition of six buildings formerly leased to Walgreens during the fourth quarter. McDowell said sale pricing varied widely—$17 per square foot to $216 per square foot—but the objective was to exit assets where releasing prospects did not justify ongoing carry costs. Management estimated the combined transactions would reduce annual carry costs on the vacant properties by $10.3 million.

McDowell said 2025 and near-term dispositions are expected to generate roughly $130 million in total, supporting debt management and funding tenant improvements, leasing commissions, and other capital expenditures tied to leasing activity. He added Orion is evaluating opportunities to recycle a modest percentage of proceeds into acquisitions to continue shifting exposure away from traditional suburban office and toward dedicated use assets (DUAs) such as medical, lab, R&D, flex, and government properties.

As an example, Orion discussed its recent acquisition of the Barilla Americas headquarters in Northbrook, Illinois. McDowell said the 75,000-square-foot building includes Barilla’s sole U.S. test kitchen and R&D facility and is roughly half R&D/test space and half office. The asset is subject to a 10.8-year lease with net rents at approximately $15.30 per square foot, growing 2.5% annually. The company bought it for $15 million, equating to an 8.1% going-in cash capitalization rate and an average capitalization rate of 9% over the roughly 11-year lease term. McDowell said DUAs represented approximately 35.8% of annualized base rent at year-end, up from 31.8% at the end of 2024.

Financial results, capital spending, and 2026 outlook

Chief Financial Officer Gavin Brandon reviewed results and guidance. For the fourth quarter of 2025, Orion reported total revenues of $35.2 million compared with $38.4 million in the fourth quarter of 2024, and Core FFO of $0.19 per share compared with $0.18 per share. Brandon said the company recognized $0.03 per share of lease termination income in the quarter associated with the Fresno, California asset sale. Adjusted EBITDA was $16.1 million versus $16.6 million.

For full-year 2025, Orion reported total revenues of $147.6 million compared with $164.9 million in 2024. Core FFO was $0.78 per share, which included approximately $0.09 per share of income from lease terminations and end-of-lease obligations. That compared with Core FFO of $1.01 in 2024, which included $0.04 per share of lease termination income. Adjusted EBITDA was $69.0 million versus $82.8 million.

Brandon said year-over-year declines in operating income were primarily related to vacancies and Deerfield demolition costs, offset by income from the San Ramon property acquired in 2024, carrying cost savings from dispositions of vacant assets, and successful property tax appeals.

Capital spending rose sharply. Fourth-quarter CapEx and leasing costs were $17.8 million versus $8.2 million in the prior-year quarter, primarily tied to work at a Buffalo, New York property for a 160,000-square-foot lease with Ingram Micro expected to commence in April 2026, and work at a Lincoln, Nebraska property for an 86,000-square-foot lease with the U.S. government that commenced in February 2026. For full-year 2025, CapEx and leasing costs were $60.0 million versus $24.1 million in 2024, which Brandon attributed to completion of landlord and tenant improvement work tied to increased leasing activity.

On expenses, management highlighted discipline on corporate overhead. McDowell said Orion reduced headcount by more than 10% in 2025 and early 2026 and estimated about $1.8 million of annualized savings, though he noted offsets from inflation, anticipated higher accounting fees due to SOX 404 requirements beginning in 2026, and legal and other expenses related to an activist investor.

For 2026, Brandon guided Core FFO to a range of $0.69 to $0.76 per diluted share. He noted that Core FFO in 2025 would have been $0.69 excluding the $0.09 of lease termination-related income. The company also guided:

• G&A: $19.8 million to $20.8 million.
• Net debt to adjusted EBITDA: 6.5x to 7.3x.

Orion’s board declared a quarterly cash dividend of $0.02 per share for the first quarter of 2026, according to Brandon.

Debt maturities extended; Arch Street JV written down amid uncertainty

Management said it addressed major upcoming debt maturities in February. McDowell noted the company entered into a new $215 million secured revolving facility maturing in February 2029, with two six-month extension options. Brandon added the new revolver reduced the lender commitment to align with the business plan, lowered the interest rate margin by 50 basis points to SOFR plus 2.75%, and eliminated a 10-basis-point SOFR adjustment. As of March 5, 2026, Orion had $127 million outstanding and $88 million of remaining borrowing capacity under the revolver.

Orion also amended its $355 million CMBS loan. Brandon said the modification extends maturity to February 2029, with two borrower extension options totaling 18 months to August 2030, while maintaining the fixed interest rate of 4.971%. He said excess cash flows will be swept to apply to principal paydowns and reserves, which can be accessed primarily for capital expenditures. The company also negotiated release provisions for certain assets and eliminated yield maintenance premiums for principal payments during the term.

On liquidity, Brandon said that as of December 31, 2025—adjusted for the new revolver—Orion had total liquidity of $145.9 million, including $22.9 million of cash and $123 million of available revolver capacity. The company also had $39.9 million of restricted cash, including its pro rata share of restricted cash in a joint venture.

Brandon also discussed the Arch Street joint venture, describing uncertainty stemming from the partner’s capital constraints and the JV’s inability to make an approximately $16 million loan principal prepayment required to extend debt. He said lenders have provided short-term extensions while discussions continue, and the JV entered into a contract to sell one asset and is in discussions on additional asset sales to repay debt. Due to uncertainties, Orion reduced the carrying value of its investment to zero and recorded a loan loss reserve against its member loan to the JV as of December 31, 2025. Brandon said the JV contributed approximately $0.05 of Core FFO in 2025, primarily from interest income on the member loan and management fees, but Orion did not include JV income in its 2026 outlook past February 2026. Despite the write-down, Brandon said management continues to believe the JV portfolio—reported at 100% occupancy with a 6.3-year weighted average lease term—has positive equity.

About Orion Office REIT (NYSE:ONL)

Orion Office REIT is a publicly traded real estate investment trust that acquires, owns and manages a diversified portfolio of Class A office properties across high-growth U.S. markets. The company focuses on suburban and infill locations, targeting properties with strong tenant credit profiles and long-term lease structures. Its business strategy emphasizes active asset management, capital recycling and selective development to enhance income stability and potential total return for shareholders.

Orion Office REIT debuted on the New York Stock Exchange under the ticker ONL following a spin-off from Government Properties Income Trust in June 2021, though many of its core assets trace back to acquisitions made as early as 2013.