Q1 2025 Orion Properties Inc Earnings Call
Greetings and welcome to Orion properties first quarter 2025 earnings call. As a reminder, this conference is being recorded.
Operator: Greetings. Welcome to Orion Properties first quarter 2025 earnings call. As a reminder, this conference is being recorded.
Paul Hughes: I would now like to turn the call over to Paul Hughes, General Counsel for Orion. Thank you. You may begin. Thank you and good morning everyone.
Speaker Change: Now I'd like to turn the call over to Paul He is general counsel alright. Thank you you may begin.
Speaker Change: Thank you and good morning, everyone yesterday, Oh, Ryan released its results for the quarter ended March 31 2025.
Paul Hughes: Yesterday, Orion released its results for the quarter ended March 31, 2025. filed its Form 10-Q with the Securities and Exchange Commission and posted its earning supplement to its website at onlreit.com.
Speaker Change: Filed its Form 10-Q, with the Securities and Exchange Commission and posted its earnings supplement to its website at <unk> Dot com.
Speaker Change: During the call today, we will be discussing orion's guidance estimates for calendar year 2025. Another forward looking statements, which are based on management's current expectations.
Paul Hughes: During the call today, we will be discussing Orion's Guidance Estimates for calendar year 2025, another forward-looking state . which are based on management's current expectations and are subject to certain risks that could cause actual results to differ materially from our estimates. The risks are discussed in our earnings release, as well as in our Form 10-Q and other SEC filings, and Orion undertakes no duty to update any forward-looking statements made during this call.
Speaker Change: Subject to certain risks that could cause actual results to differ materially from our estimates.
Speaker Change: The risks are discussed in our earnings release as well as in our Form 10-Q, and other SEC filings.
Speaker Change: And Orion undertakes no duty to update any forward looking statements made during this call.
Speaker Change: Today on the call, we will be discussing funds from operations or <unk> and core funds from operations or core SFO and other non-GAAP financial measures. These non-GAAP financial measures are not a substitute for financial information presented in accordance with GAAP and <unk>.
Paul Hughes: Today on the call, we will be discussing funds from operations, or FFO, and core funds from operations, or core FFO, and other non-GAAP financial measures. These non-GAAP financial measures are not a substitute for financial information presented in accordance with GAAP.
Paul Hughes: and Orion's earnings release and supplement include a reconciliation of our non-GAAP financial measures to the most directly comparable GAAP Hosting the call today are Orion's Chief Executive Officer, Paul McDowell, and Chief Financial Officer, Gavin Brandon.
Speaker Change: <unk> earnings release and supplemental include a reconciliation of our non-GAAP financial measures to the most directly comparable GAAP measure.
Paul McDowell: Hosting the call today are Orion's, Chief Executive Officer, Paul Mcdowell, and Chief Financial Officer Gavin Brandon.
Paul McDowell: And joining us for the Q&A session are Gary Landriau, our Chief Investment Officer, and Chris Day, our Chief Operating With that, I am now going to turn the call over to Paul McDowell. Good morning, everyone, and thank you for joining us on Orion Properties first quarter earnings call today. I will highlight the progress we are making executing on our new business strategy and discuss our first quarter performance and operations.
Paul McDowell: And joining us for the Q&A session are Gary laundry out, our Chief investment Officer, and Chris Day, our Chief operating officer.
Paul McDowell: With that I am now going to turn the call over to Paul Mcdowell.
Paul McDowell: Good morning, everyone and thank you for joining us on Orion properties first quarter earnings call today, I will highlight the progress we are making executing on our new business strategy and discuss our first quarter performance and operations. Following my remarks, Gavin will review our financial results.
Paul McDowell: Following my remarks, Gavin will review our financial results and provide our outlook for the rest of the year. With over 450,000 square feet of leasing completed as of May 6, we are successfully building on last year's strong leasing momentum that saw Orion lease 1.1 million square feet. Specifically, the over 450,000 square feet of leasing is a combination of new and renewal transactions with a weighted average lease term of 7.4 years. Included in this total is a 15.7 year lease for 46,000 square feet. at our Parsippany, NJ property, bringing that formerly vacant building to more than 60% lease to two tenants.
Paul McDowell: And provide our outlook for the rest of the year.
Paul McDowell: With over 450000 square feet of leasing completed as of May six we are successfully building on last year's strong leasing momentum that saw Orion leased one 1 million square feet.
Paul McDowell: Specifically the over 450000 square feet of leasing is a combination of new and renewal transactions with a weighted average lease term of seven four years.
Paul McDowell: Included in this total is at 15.7 year lease for 46000 square feet.
Paul McDowell: At our Parsippany, New Jersey property, bringing that formerly vacant building to more than 60% leased to two tenants.
Paul McDowell: In addition, we signed a new 10 year lease for 160000 square feet in Buffalo, New York with Ingram Micro who will be relocating from our Amhurst New York property.
Paul McDowell: In addition, we signed a new 10 year lease for 160,000 square feet in Buffalo, New York with Ingram Micro, who will be relocating from our Amherst, New York property. We are encouraged by this strong leasing activity to start the year as it reflects the slowly improving market tone we started to see last We continue to work hard to sustain this momentum. However, we cannot control the impact from the very significant macroeconomic uncertainty that has been injected into the broader markets recently. Given the smaller size of our portfolio, there will be significant variability in leasing spreads quarter to quarter and even year to year as we lease individual property.
Paul McDowell: We are encouraged by the strong leasing activity to start the year as it reflects the slowly improving market tone, we started to see last year.
Paul McDowell: We continue to work hard to sustain this momentum.
Paul McDowell: However, we cannot control the impact from the very significant macroeconomic uncertainty that has been injected into the broader markets recently.
Paul McDowell: Given the smaller size of our portfolio there will be significant variability in leasing spreads quarter to quarter and even year to year as released individual properties too.
Paul McDowell: To that point, initial rent spreads on renewal leases during the first quarter were off about 18%, primarily related to the particular dynamics of the properties renewed in specific markets. To give a more rounded picture, when measured on all leasing activity since the spin, our initial rent spreads are down about 5%, and ending rent spreads are up about 7% on average during the same time period. Orion's operating property occupancy rate was 74.3% at quarter end, the operating property lease rate was 77.4%, and the weighted average lease term was 5.2 years. Although we anticipate tenant retention to remain challenged this year, we expect that our portfolio occupancy will begin to rise after this year as we continue to lease vacant space.
Paul McDowell: To that point initial rent spreads on renewal leases during the first quarter, we're off about 18% primarily related to the particular dynamics of the properties renewed in specific markets.
Paul McDowell: To give a more rounded picture when measured on all leasing activity since the spin our initial rent spreads are down about 5% and ending rent spreads are up about 7% on average during the same time period.
Paul McDowell: Oh Ryans operating property occupancy rate was 74, 3% at quarter end.
Paul McDowell: The operating property leased rate was 77, 4% and the weighted average lease term was 5.2 years.
Paul McDowell: Although we anticipate tenant retention to remain challenged this year.
Paul McDowell: We expect that our portfolio occupancy will begin to rise. After this year as we continue to lease vacant space.
Paul McDowell: sell vacant properties that do not meet our long-term goals, and generally work to overcome the significant lease expirations and rollover of the past few years. This will be important as we continue to work to reduce property operating costs.
Paul McDowell: Sell vacant properties that do not meet our long term goals and generally work to overcome the significant lease explorations and rollover of the past few years.
Paul McDowell: This will be important as we continue to work to reduce property operating costs.
Paul McDowell: After the quarter end, we closed on the sale of three vacant properties totaling 287000 square feet for a gross sales price of $19 $1 million or approximately $66 per square foot.
Paul McDowell: After the quarter end, we close on the sale of three vacant properties totaling 287,000 square feet for a gross sales price of $19.1 million or approximately $66 per square foot. One of those transactions is the sale of 119,000 square foot traditional office property located in Denver, Colorado, to a developer who intends to convert the vacant office building into multi-family affordable housing. This transaction was two years in the making and was executed at a purchase price of $101 per square foot, showing our creativity and patience in order to achieve the best possible result.
Paul McDowell: One of those transactions is the sale of 119000 square foot traditional office property located in Denver, Colorado to a developer who intends to convert the vacant office building into multifamily affordable housing.
Paul McDowell: This transaction was two years in the making and was executed at a purchase price of $101 per square foot.
Paul McDowell: Showing our creativity and patients in order to achieve the best possible result.
Paul McDowell: Additionally, two properties totaling 211000 square feet are currently under contract for $27.3 million or $129 per square foot.
Paul McDowell: Additionally, two properties totaling 211,000 square feet are currently under contract for $27.3 million or $129 per square foot. with one with one sale scheduled to close later in the quarter and the other early in the fourth quarter.
Paul McDowell: With one skus with one sale is scheduled to close later in the quarter and the other early in the fourth quarter.
Paul McDowell: These transactions demonstrate our continued ability to monetize non-core assets and redeploy capital while improving the overall quality and durability of our remaining portfolio. We expect to have additional dispositions throughout the remainder of the year.
Paul McDowell: These transactions demonstrate our continued ability.
Paul McDowell: To monetize non core assets and redeploy capital, while improving the overall quality and durability of our remaining portfolio.
Paul McDowell: We expect to have additional dispositions throughout the remainder of the year.
Paul McDowell: We've made significant progress in Reorienting, our portfolio since our spin despite an unprecedented collapse in demand across the broader office markets and.
Paul McDowell: We've made significant progress in reorienting our portfolio since our spin, despite an unprecedented collapse in demand across the broader office market. And we believe the progress we have made positions us well to capitalize on our strategic plan to build a more stable, long-duration property.
Paul McDowell: And we believe the progress we have made positions us well to capitalize on our strategic plan to build a more stable long duration property mix.
Paul McDowell: As discussed on last quarter's call, we are shifting our portfolio concentration over time away from traditional generic suburban office assets and toward dedicated use assets or DUA properties where our tenants perform work that cannot be replicated from home or relocated to a generic office setting. These property types include medical, lab, R&D flex, and non-CBD government properties, all of which we already own. Our experience is that these assets tend to exhibit stronger renewal trends, higher tenant investments, and more durable cash. At quarter end, approximately 32% of our portfolio by annualized base rent and approximately 25% by square footage were dedicated use assets.
Paul McDowell: As discussed on last quarters call. We are shifting our portfolio concentration over time away from traditional generic suburban office assets and toward dedicated used assets or D. UA properties, where our tenants perform work that cannot be replicated from home or relocated to a G.
Paul McDowell: And Eric office setting.
Paul McDowell: These property types include medical lab.
Paul McDowell: Randy flax and non CBD government properties, all of which we already own.
Paul McDowell: Our experience is is that these assets tend to exhibit stronger renewal trends higher tenant investments and more durable cash flows.
Paul McDowell: At quarter end, approximately 32% of our portfolio by annualized base rent and approximately 25% by square footage. We're dedicated used assets and we expect this percentage to increase over time through disposition activity and targeted acquisitions.
Paul McDowell: And we expect this percentage to increase over time through disposition activity and targeted acquisition. The continued demand we're seeing for dedicated use assets reinforces our confidence in this direction. While leasing pace and interest is improving, it is from a very low base.
Paul McDowell: The continued demand we're seeing for dedicated used assets reinforces our confidence in this direction.
Paul McDowell: While leasing pace and interest is improving it is from a very low base.
Paul McDowell: What has not changed is the many challenges all office property owners, including Orion, must continue to address, including obsolescence of property. To that point, tenant concessions remain high, and rents continue to be pressured on both renewals and re-tenanting. Furthermore, the governmental uncertainty around DOJ could cause additional leasing unpredictability around our government-owned assets. That said, we continue to have productive and routine interactions with the GSA.
Paul McDowell: It has not changed is the many challenges all office property owners, including Orion must continue to address including obsolescence of properties.
Paul McDowell: To that point tenant concessions remain high and rents continue to be pressured on both renewals and re tenant it.
Paul McDowell: Furthermore, the governmental uncertainty around Doge could cause additional leasing unpredictability around our government owned assets.
Paul McDowell: That said, we continue to have productive and routine interactions with the GSA.
Paul McDowell: For example, following a relatively short 50 day delay we received approval from the GSA to perform the landlord work at our Lincoln, Nebraska property and that New 86000 square foot lease is expected to commence in December 2025.
Paul McDowell: For example, following a relatively short 50-day delay, we received approval from the GSA to perform the landlord work at our Lincoln, Nebraska property, and that new 86,000-square-foot lease is expected to commence in December 2025. Additionally, nearly our entire GSA portfolio is in the firm term, during which the GSA does not have the option to terminate the lease, and none is located in the immediate Washington, D.C. area.
Paul McDowell: Additionally, nearly our entire GSA portfolio was in the firm term during which the GSA does not have the option to terminate the lease and none is located in the immediate Washington D C area.
Paul McDowell: Turning briefly to the balance sheet as we have been communicating for more than three years.
Paul McDowell: Turning briefly to the balance sheet, as we have been communicating for more than three years, Orion has been very successful maintaining significant liquidity to support our ongoing leasing effort. To do so, we have sold vacant properties, used sale proceeds and cash flow to pay down debt, managed G&A, have been highly selective and targeted on acquisitions, and recently aligned our dividend policy. As a result, at May 5th, our liquidity remained strong at $244.5 million represented by cash on hand and the available balance on our revolvers. We will inevitably see debt levels rising on both an absolute and debt to EBITDA basis in coming years, which we expect to be offset by anticipated earnings growth in subsequent years.
Paul McDowell: Brian has been very successful maintaining significant liquidity to support our ongoing leasing efforts.
Paul McDowell: To do so we have sold vacant properties, you sale proceeds and cash flow to pay down debt.
Speaker Change: Manish G&A.
Speaker Change: I've been highly selective and targeted on acquisitions and recently aligned our dividend policy.
Speaker Change: As a result at May 5th our liquidity remains strong at 244.5 million represented by cash on hand, and the available balance on our revolver.
Speaker Change: We will inevitably see debt levels rising on both an absolute and debt to EBITDA basis in coming years, which we expect to be offset by anticipated earnings growth in subsequent years.
Paul McDowell: We anticipate that the next year or two will represent the low point for our revenue and core FFO earnings, followed by accelerating growth as we move into 2027 and beyond.
Speaker Change: We anticipate that the next year or two will represent the low point for our revenue and core F. O earnings followed by accelerating growth as we move into 2027 and beyond.
Speaker Change: As we head into the second quarter, we have solid leasing activity momentum and we remain focused on investing in our well located properties within target markets.
Paul McDowell: As we head into the second quarter, we have solid leasing activity momentum, and we remain focused on investing in our well located properties within target market. To support this, we will continue to fund capital expenditures that enhance asset value, that enable us to lease space, retain tenants, and attract new ones. Our disciplined approach to capital allocation, including maintaining a low-leverage balance sheet over the past several years, has positioned us to navigate the current environment even as we face continued cash flow pressure from higher interest rates. elevated vacancy from recent lease roll and the impact of the 22 properties we've sold.
Speaker Change: To support this we will continue to fund capital expenditures that enhance asset value that enable us to lease space retained tenants and attract new ones.
Speaker Change: Our disciplined approach to capital allocation, including maintaining a low leverage balance sheet over the past several years has positioned us to navigate the current environment, even as we face continued cash flow pressure from higher interest rates.
Speaker Change: Elevated vacancy from recent lease roll and the impact of the 22 properties we sold.
Speaker Change: From a G&A perspective, we are highly cognizant that as a smaller company evolving our strategy and shrinking the size of the portfolio before growing we must control this line item.
Paul McDowell: From a GNA perspective, we are highly cognizant that as a smaller company, evolving our strategy and shrinking the size of the portfolio before growing, we must control this line item.
Paul McDowell: To that point, as mentioned last quarter, our Chief Investment Officer, Gary Landriau, will retire on June 30, and we will reallocate his responsibilities internally. Gavin and I have foregone any salary increase for this year. Average salary increases for the rest of the Orion team are below inflation, and as inevitable attrition has occurred, we have shrunk our optimal headcount.
Speaker Change: To that point as mentioned last quarter, our Chief investment Officer, Gary Laundry I will retire on June 30, and we will reallocate his responsibilities internally.
Speaker Change: Gavin and I have foregone any salary increase for this year.
Speaker Change: Average salary increases for the rest of the Orion team are below inflation.
Speaker Change: And as inevitable attrition has occurred we have shrunk our optimal head count.
Speaker Change: That said it is imperative that we maintain the team to operate as a public company and to execute on our asset management intensive strategy to manage our portfolio given the growing multichannel component.
Paul McDowell: That said, it is imperative that we maintain the team to operate as a public company and to execute on our asset management intensive strategy to manage our portfolio, giving the growing multi-tenant component. We recognize, as a smaller size REIT, that GNA as a percentage of assets and revenues is of particular importance, and we are doing our best to ensure that they are aligned. Importantly, due to these efforts, along with other initiatives, we remain solidly profitable on both an FFO and core FFO per share basis. With another strong quarter of leasing and asset sales behind us and a healthy leasing pipeline ahead, we are encouraged that Orion's transformation is heading in a positive direction.
Speaker Change: We recognized as a smaller sized REIT that G&A as a percentage of assets and revenues is of particular importance and we are doing our best to ensure that they are aligned.
Speaker Change: Importantly, due to these efforts along with other initiatives, we remain solidly profitable on both an <unk> and core <unk> per share basis.
Speaker Change: With another strong quarter of leasing and asset sales behind us.
Speaker Change: And a healthy leasing pipeline ahead, we are encouraged that our Ryan's transfer transformation is heading in a positive direction.
Speaker Change: We look forward to further portfolio stabilization and building on the company's many strengths with that I will pass the call to GAAP.
Paul McDowell: We look forward to further portfolio stabilization and building on the company's many strengths.
Gavin Brandon: With that, I will pass the call to Gavin. Thanks, Paul. Orion generated total revenues of 38 million in the first quarter, as compared to 47.2 million in the same quarter of the prior year. We reported a net loss attributable to common stockholders of $9.4 million, or $0.17 per share, as compared to a net loss of $26.2 million, or $0.47 per share, reported in the first quarter of 2024. Core FFO for the quarter was $10.7 million, or $0.19 per share, as compared to $20.4 million, or $0.36 in the same quarter of 2024. Adjusted EBITDA was $17.4 million versus $26.7 million in the same quarter of 2024.
GAAP: Thanks, Paul.
Speaker Change: Orion generated total revenues of $38 million in the first quarter as compared to $47 2 million in the same quarter of the prior year.
Speaker Change: We reported a net loss attributable to common stockholders of $9 4 million or <unk> 17 per share as compared to a net loss of $26 2 million or <unk> 47 per share reported in the first quarter of 2024.
Speaker Change: Core F F O for the quarter was $10 7 million or <unk> 19 per share as compared to $20 4 million or <unk> 36 in the same quarter of 2024.
Adjusted EBITDA was $17 4 million versus $26 7 million in the same quarter of 2024.
Gavin Brandon: The changes year-over-year are primarily related to vacancies and timing of leasing activity. G&A in the first quarter came in as expected at $4.9 million, consistent with the same quarter of 2024. Savings to G&A brought on by our restructuring efforts Paul mentioned earlier will begin to contribute in the third and fourth quarters of this year. CapEx in the first quarter was $8.3 million compared to $3.4 million in the same quarter of 2024. As we have previously discussed, CapEx timing is dependent on when leases are signed and work is completed on properties. CapEx will likely increase over time as leases roll and new and existing tenants draw upon tenant improvement allowances.
Speaker Change: The changes year over year are primarily related to vacancies and timing of leasing activity.
Speaker Change: G&A in the first quarter came in as expected at $4 9 million consistent with the same quarter of 2024.
Paul McDowell: Savings to G&A brought on by our restructuring efforts Paul mentioned earlier will begin to contribute in the third and fourth quarters of this year.
Paul McDowell: Capex in the first quarter was $8 3 million compared to $3 4 million in the same quarter of 2024.
Paul McDowell: As we have previously discussed Capex timing is dependent on when leases are signed and work is completed on properties Capex will likely increase over time as leases roll and new and existing tenants draw upon tenant improvement allowances.
Paul McDowell: Turning to the balance sheet at.
Gavin Brandon: Turning to the balance sheet. At quarter end, we had total liquidity of $227.8 million, comprised of $9.8 million cash and cash equivalents, including the company's pro rata share of cash from the Arc Street Joint Venture, and $218 million available capacity on the Credit Facility Revolver.
Paul McDowell: At quarter end, we had total liquidity of $227 8 million comprised of $9 8 million cash and cash equivalents.
Paul McDowell: <unk> the company's pro rata share of cash from the arch Street joint venture and $218 million available capacity on the credit facility revolver.
Paul McDowell: As Paul discussed, we intend to maintain significant liquidity on the balance sheet for their foreseeable future unexpected capital commitments to support our future leasing efforts and provide the financial flexibility needed to execute on our business plan for the next several years.
Gavin Brandon: As Paul discussed, we intend to maintain significant liquidity on the balance sheet for the foreseeable future to fund expected capital commitments to support our future leasing efforts and provide the financial flexibility needed to execute on our business plan for the next several years. We ended the quarter with $531.2 million of outstanding debt, including a $355 million CMBS loan that is a Securitized Mortgage Loan collateralized by 19 properties maturing in February 2027, $132 million of floating rate debt on the Credit Facility Revolver maturing in May 2026, $18 million under the Mortgage Loan for the San Ramon property maturing in December of 2031, and $26.2 million representing our share of the Arc Street Joint Venture Mortgage Debt maturing in November of 2025, with a borrower option to extend for an additional 12 months until November of 2026.
Paul McDowell: We ended the quarter with $531 2 million of outstanding debt, including a 355 million <unk> loan that has a securitized mortgage loan collateralized by 19 properties maturing in February 2027.
Paul McDowell: $132 million of floating rate debt on our credit facility revolver maturing in May 2026, 18 million under the mortgage loan for the San Ramon property maturing in December of 2031, and $26 2 million, representing our share of the arch Street joint venture mortgage debt maturing in November.
Paul McDowell: 2025, with a borrower option to extend for an additional 12 months until November 2026.
Paul McDowell: On May six 2025, Orion's board of directors declared a quarterly cash dividend of <unk> <unk> per share for the second quarter of 2025 payable on July 15th 2025 to stockholders of record as of June 32025.
Gavin Brandon: On May 6, 2025, Orion's Board of Directors declared a quarterly cash dividend of two cents per share for the second quarter of 2025, payable on July 15, 2025, to stockholders of record as of June 30, 2025. Moving on to our outlook for 2025. We are reaffirming our expectations for our full year 2025 guidance for core FFO range of 61 to 70 cents per diluted share, GNA range of 19.5 million to 20.5 million and net debt to adjusted EBITDA is expected to range from eight times to 8.8 times.
Paul McDowell: Moving onto our outlook for 2025, we are reaffirming our expectations for our full year 2025 guidance for core <unk> range of 61% to 70.
Paul McDowell: Per diluted share G&A range of $19 5 million to $20 5 million and net debt to adjusted EBITDA is expected to range from eight times to eight eight times, excluding noncash compensation, we expect 2025 Genie will be in line or slightly better than 2024.
Gavin Brandon: Excluding non-cash compensation, we expect 2025 G&A will be in line or slightly better than 2024.
Operator: With that, we will open the line for questions. Operator? Thank you.
Paul McDowell: With that we will open the line for questions operator.
Paul McDowell: Thank you.
Operator: We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the start key. One moment, please, while we poll for questions.
Paul McDowell: We'll now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue.
Paul McDowell: May press star two to remove yourself from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys.
Paul McDowell: One moment, please while we poll for questions.
Paul McDowell: Our first question comes from the line of Mitch Germain with citizens Bank. Please proceed with your question.
Mitch Germain: Our first question comes from the line of Mitch Germain with Citizens Bank, please proceed with your question. Good morning. I'm curious about tone of discussions with prospect And if you're seeing any sort of lengthening of the...
Speaker Change: Good morning I'm.
Speaker Change: I'm curious about tone of discussions with prospects.
Speaker Change: And if you're seeing any sort of lengthening of the.
Speaker Change: Ah.
Speaker Change: Our deal pipeline for leases.
Mitch Germain: of the American Heart Institute. See you next week. Good morning, Mitch. And by lengthening, you mean the decision-making period from, you know, for a tenant to make a decision to stay on, stay in the property? Exactly. I know it's been longer than typical, and I'm curious if that's shifted even more unfavorably. Well, it has been long. Ever since the collapse in the market, we've experienced long delays in tenants making decisions. I say our portfolio is a little idiosyncratic in that we've got a small number of properties, so any given renewal in any given quarter has an outsized impact.
Speaker Change: Good morning mentioned by lengthening you mean, the decision making period from you know for tenants to make a decision to stay on to stay in the property exactly I know it's been.
Speaker Change: Longer than typical and I'm curious if if that's shifted even more unfavorably.
Speaker Change: Well it has been long you know ever since the sort of the collapse in the market, we've experienced long delays in tenants making decisions.
Speaker Change: I'd say our portfolio is a little idiosyncratic in that you know we've got.
Speaker Change: You know a small number of properties so any given renewal in any given quarter has an outsized impact.
Paul McDowell: You know, I would say that we have not yet noticed a big change in the decision-making speed, but that decision-making speed has still been, you know, quite long, you know, for the past We have had, on the GSA front, we've had a little bit of interaction with the GSA, and as I mentioned in my prepared remarks, we did have a delay there of an approval from the GSA that we expected to happen relatively quickly, but in fact, it took about 50 days to occur, but then it did, in fact, happen, and we're off to the races.
Speaker Change: You know I would say that we have not yet noticed.
Speaker Change: A big change in the decision, making speed, but that decision, making speed has still been quite long for.
Speaker Change: For the past.
Speaker Change: Six months or a year.
Speaker Change: We have had on the GSA front, we've had a little bit of interaction with the GSA and as I mentioned in my prepared remarks.
Speaker Change: We did have a delay there of an approval from the GSA that we expected to happen relatively quickly but in fact, it took about 50 days to occur, but then it did in fact happen and were off to the races cell.
Mitch Germain: So, you know, haven't yet seen a big impact on the current environment of decision-making. helpful.
Speaker Change: Haven't yet seen a big impact on the current environment and the decision making.
Speaker Change: That's helpful I'm curious about.
Mitch Germain: I'm curious about I think you may have some opportunities. Property Sales of Occupied Assets. Is there any sort of background that you can share on, I think, one closed in April and one's pending for the fourth quarter? Anything you could share there? Yeah, I mean, the assets we sold were vacant. And, you know, we have a couple that are pending, you know, one that continues to be occupied, but that has a very, very short lease term. You know, I would say we have been quite pleased with the ability to get properties sold and the absolute value at which we've been able to sell them.
Speaker Change: I think he made some opportunistic.
Speaker Change: Property shelves of occupied assets.
Speaker Change: Is there any sort of background that you can share on I think one closed in April and one's pending for the fourth quarter anything you can share there.
Speaker Change: Yeah, I mean, the assets, we sold were vacant and.
Speaker Change: We have a couple that are pending.
Speaker Change: One that continues to be occupied but that has a very very short.
Speaker Change: Lease term.
Speaker Change: I would say we have been quite pleased with the ability to get properties sold and the absolute value at which we've been able to sell.
Paul McDowell: And that includes some of the ones that are in the future, the ones we have this year, we've got some, you know, what we think is favorable pricing from an average perspective as compared to where we have been selling properties. But again, you know, each property is individual in nature, and it has its own characteristics. And, you know, our buyers, for the most part, are focused on these individual properties and willing to pay what we think are good prices for them.
Speaker Change: And that includes some of the ones that are in the future of the ones. We have this year. We've got some you know what we think is favorable.
Speaker Change: Pricing from an average perspective as compared to where we have been selling properties, but again you know these each property is individual in nature and it has its own characteristics and our buyers for the most part are focused on these individual properties and willing to pay what we think are good prices for.
Speaker Change:
Speaker Change: On a going forward basis, I think we will look to sell we may look to sell stabilized properties. If we think that we can recycle that capital into dedicated use assets that gives us you know longer duration and more stabilized cash flows.
Paul McDowell: On a going forward basis, I think we will look to sell, we may look to sell stabilized properties if we think that we can recycle that capital into dedicated use assets that gives us you know, longer duration and more stabilized cash. Got you. So three sold, two under contract. How are you testing waters now with vacant and occupied assets? Is that how we should consider how this process may play out? Yes, that's exactly how you should consider it, Mitch. We are, in fact, you know, we have a number of properties, you know, what I would characterize as in the market.
Speaker Change: Got you show three sold she went under contract.
Speaker Change: Are you testing waters now with vacant and occupied assets is that how we should consider how this process may play out yeah.
Speaker Change: Yes, that's exactly how you should consider it Mitch we are in fact.
Speaker Change: We have a number of properties.
Speaker Change: I would characterize as in the market and by that I mean, we have brokers engaged who are looking to gauge where the potential sales could be and that's for both the occupied both for vacant properties and for occupied properties and look I would say that pretty much every time we.
Paul McDowell: And by that, I mean, we have brokers engaged, who are looking to, you know, gauge where the potential sales could be, and that's for both for vacant properties and for occupied properties. And look, I would say that pretty much, you know, every time we have a vacant property that's for lease, we also advertise it for sale at the same time. So, you know, we're always constantly evaluating the market. Our anticipation is that we will have some additional sales this year, but we have to see where the pricing comes out.
Speaker Change: Have a vacant property that's for lease we also advertise it for sale at the same time. So you know we're always constantly evaluating the market.
Speaker Change: Our anticipation is that we will have some additional sales.
Speaker Change: This year, but we have to see where the pricing comes out.
Speaker Change: Gotcha and last one for me.
Mitch Germain: That's your last one for me.
Speaker Change: I I might I have to apologize for my memory, what's happening with the former Walgreens assets.
Mitch Germain: I have to apologize for my memory. What's happening with the former Walgreens?
Speaker Change: I'm going to let Gary laundry I'll answer that one.
Gary Landriau: I'm going to let Gary Landriau answer that. Yeah Mitch, so we are under an agreement with an institutional group that is currently marketing the site, trying to develop a list of prospects that would anchor the site, and it will ultimately be converted to, my expectation is some retail and entertainment combination of users. We've also gotten the green light to begin work to demolish the existing office So that work is starting. It's done mostly to reduce our carry costs. But also because we expect the development to start sometime in 2026 is our expectation, although obviously subject to a lot of.
Speaker Change: Yeah, Mitch So we we are under an agreement with a.
Speaker Change: In institutional group that is currently marketing the site trying to develop a list of prospects that would anchor the site.
Speaker Change: And it will ultimately be converted to.
Speaker Change: My expectation is from a retail and entertainment.
Speaker Change: Combination of users. We've also gotten the green light to begin work to demolish the existing office buildings. So that work is starting its done mostly to reduce our carrying cost.
Speaker Change: But also because we expect the development to start.
Speaker Change: Sometime in 2026 is our expectation, although obviously subject to a lot of factors.
Gary Landriau: So the deal would be subject to them being able to execute on some sort of lease, right? Is that the way to think about it? That's correct. They're in due diligence right now on the site on the prospects and on the feasibility of the of the business plan that they're developing. Excellent.
Speaker Change: So the deal would be subject to them being able to execute on some sort of lease right is that the way to think about it.
Speaker Change: Thats correct. They are in due diligence right now on the site on the prospects and on the feasibility of the of the business plan that they're developing.
Speaker Change: Excellent and congrats to you Gary on a fantastic career and appreciate your time guys. Thank you. Thank you very much Mitch.
Mitch Germain: And congrats to you, Gary, on a fantastic career and appreciate your time, guys. Thank you. Thank you very much. Thank you.
Gary Laundry: Thank you.
Gary Laundry: And we have reached the end of the question and answer session and I would like to turn the call back over to the management for closing comments.
Paul McDowell: And we have reached the end of the question and answer session, and I would like to turn the call back over to the management for a closing comment. Okay, thank you all very much. We appreciate you taking the time this morning and we look forward to further updating you at the conclusion of the second quarter. Thank you.
Gary Laundry: Okay. Thank you all very much. We appreciate you taking the time this morning, and we look forward to further updating you.
Gary Laundry: At the conclusion of the second quarter.
Gary Laundry: Thank you.
Speaker Change: Thank you and this concludes today's conference you may disconnect your lines at this time.
Operator: This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.
Speaker Change: You for your participation.
Speaker Change: Yeah.
Speaker Change: [music].
Speaker Change: Yes.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: Okay.