This article first appeared on GuruFocus .
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Total Revenues:$34.3 million in Q2 2026, compared to $37.3 million in Q2 2025.
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Net Income:$24.6 million, or $0.43 per share, including a $28.8 million gain from the sale of two operating properties.
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Core FFO:$11.8 million, or $0.20 per share, roughly flat year-over-year.
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Adjusted EBITDA:$17.2 million, versus $18.0 million in the prior-year quarter.
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G&A Expense:$4.6 million in Q2 2026, down from $4.8 million in Q2 2025.
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CapEx and Leasing Costs:$8.9 million in Q2 2026, compared to $15.6 million in Q2 2025.
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Net Debt to Annualized Adjusted EBITDA:5.4 times at quarter end, improved from 6.4 times a year ago.
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Total Liquidity:Approximately $177 million, including $63.5 million in cash and restricted cash and $113 million available under the credit facility.
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Outstanding Debt:$436.6 million at quarter end, down from $483 million a year ago.
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Net Debt to Gross Real Estate Assets:27.9%, compared to 29.5% a year ago.
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2026 Core FFO Guidance:Raised to $0.72 to $0.77 per diluted share, up from the prior range of $0.69 to $0.76.
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2026 Net Debt to Adjusted EBITDA Guidance:Lowered to 6.0 to 6.8 times, from the previous range of 6.5 to 7.3 times.
Release Date: August 07, 2026
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
Positive Points
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Completed 673,000 square feet of leasing year-to-date, including 202,000 square feet in Q2 and 116,000 square feet post-quarter-end, with a strong pipeline of over 1.1 million square feet in discussion or documentation.
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Improved portfolio quality metrics: WALT increased to 6.2 years from 5.5 years year-over-year, and occupancy rose to 78.1% from 76.8% in Q2 2025.
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Significant deleveraging: net debt to annualized Adjusted EBITDA improved to 5.4x from 6.4x year-over-year, and total debt reduced by $183 million since spin-off.
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Successful asset sales: generated $84 million in gross proceeds from four property sales and a land parcel, with increasing average sale prices per square foot for vacant properties.
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Raised 2026 Core FFO guidance to $0.72-$0.77 per share from $0.69-$0.76, and lowered net debt to Adjusted EBITDA guidance to 6.0-6.8x from 6.5-7.3x.
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Reduced property operating expenses by $3.4 million in Q2 and $5.1 million year-to-date, with estimated annual savings of $12 million from vacant property sales.
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Increased dedicated use assets (DUA) to 38.7% of annualized base rent, up from 32.6% a year ago, aligning with strategic focus.
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Lowered G&A expenses to $4.6 million in Q2 from $4.8 million year-over-year, despite ongoing strategic review costs.
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Strong liquidity position with $177 million total, including $63.5 million cash and $113 million revolver capacity.
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Continued strategic review with multiple parties conducting diligence, indicating potential for value realization.
Negative Points
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Occupancy declined to 78.1% from 80.1% in Q1 2026 due to scheduled move-outs and opportunistic dispositions, though up year-over-year.
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Cash rent spreads on renewals were down 7.7% in Q2, though up 2.1% when including escalations over the new lease term.
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Total revenues decreased to $34.3 million from $37.3 million year-over-year, reflecting asset sales and lower occupancy.
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Core FFO per share remained flat at $0.20 in Q2 compared to the prior year, indicating limited near-term earnings growth.
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Adjusted EBITDA declined to $17.2 million from $18.0 million year-over-year, partly due to asset sales.
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CapEx and leasing costs are expected to be $30-$40 million for the remainder of 2026, which could pressure cash flows.
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The strategic review process has no set timeline, creating uncertainty for shareholders, and may not result in a transaction.
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The company's share price remains discounted, limiting access to outside capital for faster portfolio transformation.
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A government-leased asset is under contract to sell due to tenant downsizing risk, highlighting potential tenancy challenges.
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The portfolio still has a few vacant assets, including the Tulsa property, which is only beginning to lease up.
Q & A Highlights
Q: Can you provide an update on the strategic options process that began in late January? A: Paul McDowell (CEO) stated that the company, with advisors Wells Fargo and JPMorgan, has conducted a robust effort with broad outreach and a virtual data room. Several parties are continuing diligence, and management believes it is in shareholders' interest to see the process through to a reasonable conclusion rather than set arbitrary deadlines. He offered no assurance that the process will result in a transaction but confirmed that an announcement will be made when a conclusion is reached, including if they decide to continue with their independent business plan.
Q: Why did you decide to sell an asset leased to the government, which seems to meet your criteria for the existing portfolio? A: Christopher Day (COO) explained that the asset under contract to sell is one where the government tenant is looking to downsize, creating risk around the tenancy. Additionally, the asset is in a very remote area, and after analysis, the disposition was deemed the best overall outcome for that specific property.
Q: What is your process for deciding whether to sell or re-lease vacant assets? A: Paul McDowell (CEO) detailed a consistent, dynamic process. The team evaluates whether an asset is worth the capital investment to lease up over time or if it lacks long-term demand factors. He cited examples of successful re-leasing efforts in Parsippany, New Jersey, and Buffalo, New York, while noting that most vacant properties have been moved off the balance sheet. The remaining few are being evaluated based on their potential for leasing momentum.
Q: What percentage of the current portfolio would you characterize as non-core? A: Paul McDowell (CEO) stated that based on expectations for long-term leases, only a few percent of the portfolio is considered non-core at this stage. Management feels confident about the remaining assets' ability to stay leased or be leased up if vacant, though they may still execute some vacant sales depending on how leasing shapes up.
Q: What is the target percentage for dedicated use assets (DUA) in the near term and over the next three to five years? A: Paul McDowell (CEO) noted that long-term progress toward a majority DUA portfolio will depend on access to outside capital, which is currently not supported by the share price. Working within the existing portfolio, progress will be steady but incremental through capital recycling. If outside capital becomes accessible, the transition could occur much more rapidly.
Q: What are your expectations for capital expenditures (CapEx) for the remainder of the year? A: Paul McDowell (CEO) reported that roughly $27 million in CapEx has been spent year-to-date, a figure that includes building updates, tenant improvements, and leasing commissions. He expects an additional $30 million to $40 million in CapEx for the remainder of the year, noting the number is volatile due to tenant drawdowns on existing obligations. These expectations are incorporated into the company's guidance.
Q: How are discussions going for the remainder of the Tulsa property, and what is your confidence level in strengthening occupancy there? A: Paul McDowell (CEO) expressed relatively high confidence in the Tulsa property, describing it as a high-quality building in downtown Tulsa with limited competing Class A product. After completing the first lease, they are in discussions on at least one more lease of relatively significant size, and they feel good about the property's prospects over time.
Q: Can you elaborate on the drivers behind the improved 2026 guidance for Core FFO and net debt to Adjusted EBITDA? A: Gavin Brandon (CFO) confirmed the guidance raise, with Core FFO now expected to range from $0.72 to $0.77 per diluted share, up from $0.69 to $0.76. Net debt to Adjusted EBITDA is now expected to range from 6 to 6.8 times, down from 6.5 to 7.3 times. The improvements are driven by recurring items like reduced operating expenses and improved leasing expectations, as well as one-time items such as lease termination income and property tax appeals.
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
