Orion Office REIT (NYSE:ONL) said its first-quarter results reflected continued progress on leasing, asset sales and balance-sheet management, while its board and management continue to evaluate strategic options with advisers Wells Fargo and JPMorgan.
Chief Executive Officer Paul McDowell said the strategic review process is “ongoing and progressing well,” but added that the company is not yet prepared to discuss specifics or timing. He said Orion remains open to “any actionable proposals that maximize shareholder value,” while continuing to execute its business plan as a standalone company.
“Our improving results reflect ongoing confidence in our standalone prospects should the strategic review determine that is the best path forward,” McDowell said.
Leasing Activity Lifts Occupancy
Orion completed 355,000 square feet of leasing activity during the first quarter, building on 2 million square feet leased over the past two years. McDowell highlighted a 172,000-square-foot, full-building lease with a 12-year term at the company’s previously vacant Irving, Texas property.
McDowell said Orion had invested about $5 per square foot during 2024 and 2025 to improve common areas and the overall appearance of the Irving asset, which helped support the leasing effort. New leases signed during the quarter had a weighted average lease term of nearly 12 years, while the consolidated portfolio’s average weighted average lease term is approaching six years.
Cash rent spreads on first-quarter renewals increased 2.5%, marking the fourth consecutive quarter of improvement. McDowell cautioned that rent spreads can be volatile from quarter to quarter but said management feels positive about current trends.
Portfolio occupancy rose to 83.1% at the end of the first quarter, compared with 73.7% in the year-earlier period. McDowell said occupancy may fluctuate due to lease rollovers in Orion’s largely single-tenant portfolio, but the company expects improvement over the coming years.
The company’s leasing pipeline remains above 1 million square feet, including leases in discussion or documentation stages. McDowell said the pipeline includes several full-building leases, potential longer-duration renewals and new leases with terms “materially greater” than the portfolio average.
Dispositions Remain Central to Stabilization Plan
Orion continued selling non-core properties as part of its effort to stabilize the portfolio, reduce carrying costs and manage leverage. Since its spin-off, the company has sold 38 properties totaling 4.1 million square feet.
During the first quarter, Orion sold two vacant properties in the Northeast, one in Massachusetts and one in Pennsylvania, for aggregate gross proceeds of $13.1 million. In the second quarter, the company sold its 37.4-acre Deerfield, Illinois properties for $13.1 million and a 120,000-square-foot property in Glen Burnie, Maryland, for $22.5 million.
McDowell described the Glen Burnie sale as “very successful and accretive,” noting that the tenant’s lease was terminated shortly before the sale and that the pricing represented a 5% capitalization rate on expiring rent, or $188 per square foot.
Orion is also under contract to sell three additional properties for gross proceeds of $46 million, with nearly all of the proceeds expected to be used to reduce debt. McDowell said 2025 and 2026 sales of vacant or near-term vacant properties are estimated to save more than $12 million in annual carrying costs.
In response to an analyst question, McDowell said buyers of vacant properties have included users and developers seeking to repurpose assets. He said the best outcomes have generally come from users or buyers planning alternative uses, while investor buyers seeking to re-lease properties can be more challenging.
Shift Toward Dedicated Use Assets Continues
Orion said it remains focused on shifting its portfolio toward dedicated use assets, which McDowell described as properties where tenants perform work that cannot be replicated from home or relocated to a generic office setting. These include medical, lab, research and development, flex and government properties.
The company acquired the Barilla America headquarters and R&D facility in Northbrook, Illinois, for $15 million during the first quarter, using what McDowell described as a targeted capital recycling approach.
At quarter-end, dedicated use assets represented 37.1% of the consolidated portfolio by annualized base rent, up from 32.2% at the end of the first quarter of 2025. McDowell said Orion expects that percentage to increase over time through dispositions of traditional office properties and targeted acquisitions of dedicated use assets.
First-Quarter Financial Results and Liquidity
Chief Financial Officer Gavin Brandon said Orion reported first-quarter revenue of $36.3 million, compared with $38 million in the prior-year quarter. Net loss was $0.24 per share, compared with a net loss of $0.17 per share a year earlier. Core funds from operations were $0.21 per share, compared with $0.19 per share in the first quarter of 2025.
Brandon said first-quarter Core FFO included a one-time expected lease termination payment of $1.9 million tied to the company’s East Syracuse, New York property. Adjusted EBITDA was $17.2 million, compared with $17.4 million a year earlier.
General and administrative expenses were $5.1 million, compared with $4.9 million, with the increase primarily driven by about $100,000 of legal expenses related to the strategic options review and activist shareholder relations costs.
Capital expenditures and leasing costs rose to $18.7 million from $8.3 million. Brandon said the increase was primarily due to completion of landlord and tenant improvement work tied to Orion’s leasing activity.
As of March 31, Orion had total liquidity of $148.5 million, including $60.5 million of cash, cash equivalents and restricted cash, and $88 million of available revolver capacity. Net debt to annualized most recent quarter adjusted EBITDA was 6.36 times at quarter-end.
Brandon said Orion has repaid a net $166 million of outstanding debt since its spin-off, including a recent repayment. The company entered into a new senior secured credit facility revolver during the first quarter, extending maturity to February 2029, inclusive of two six-month borrower extension options. After a subsequent $25 million repayment, the company had $113 million of available borrowing capacity.
Guidance Reaffirmed
Orion reaffirmed its 2026 guidance, with Core FFO expected to range from $0.69 to $0.76 per diluted share. The company expects G&A expenses of $19.8 million to $20.8 million and net debt to adjusted EBITDA of 6.5 times to 7.3 times.
Brandon said the company expects 2026 G&A, excluding non-cash compensation, to be in line with or slightly better than 2025 levels and does not expect G&A to rise significantly in future periods. Orion’s board declared a quarterly cash dividend of $0.02 per share for the second quarter of 2026.
McDowell said Orion’s priorities for the balance of 2026 include improving portfolio quality, extending lease terms, renewing tenants, filling or selling vacant space, and managing expenses and leverage while working to maximize value for investors and potential strategic partners.
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.
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