Orion Properties Inc. Quarterly report [Sections 13 or 15(d)]

Quarterly report [Sections 13 or 15(d)]

Real Estate Investments and Related Intangibles

Real Estate Investments and Related Intangibles

9 Months Ended

Sep. 30, 2025

Real Estate [Abstract]

Real Estate Investments and Related Intangibles

Note 3 – Real Estate Investments and Related Intangibles

Property Acquisitions

During the three and nine months ended September 30, 2025, the Company had no acquisitions.

During the nine months ended September 30, 2024, the Company acquired fee simple, controlling financial interest in one real property and the improvements thereon including an approximate 97,000 square foot flex/laboratory and R&D facility located in San Ramon, California for a gross purchase price of $34.6 million and external acquisition-related expenses of $0.1 million that were capitalized. The property was fully leased to a single tenant with a remaining lease term of 15.0 years as of the acquisition date.

The following table presents the allocation of the purchase consideration and capitalized transaction costs to the assets acquired and liabilities assumed based on their relative fair values during the nine months ended September 30, 2024 (in thousands):




Real estate investment, at cost:
Land	$	12,250
Building, fixtures and improvements	25,269
Total real estate investment, at cost	37,519
Acquired intangible assets:
Intangible lease asset	13,847
Assumed intangible liabilities:
Below-market lease liability	(16,632)
Net assets acquired	$	34,734

uring the nine months ended September 30, 2024, the Company acquired for no consideration, the fee simple interest in one parcel of land in connection with the maturity of the tax advantaged bond and ground lease structure. As a result of the transaction, $3.5 million that was previously classified as a finance lease right-of-use asset with respect to such land parcel previously subject to the ground lease was reclassified from other assets, net to land in the accompanying consolidated balance sheet as of September 30, 2024.

Property Dispositions and Real Estate Assets Held for Sale

The following table summarizes the Company’s property dispositions during the periods indicated below (dollars in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2025		2024		2025		2024
Total dispositions	3		—		7		1
Aggregate gross sales price	$	21,750	$	—	$	48,680	$	2,100

Gain on disposition of real estate assets	$	3,265	$	—	$	4,156	$	—
Property count	1		—		4		—

Impairments on disposition of real estate assets	$	5,233	$	—	$	6,399	$	20
Property count	2		—		3		1

As of September 30, 2025, the Company had one property classified as held for sale with a carrying value of $15.0 million, primarily comprised of land of $3.2 million, building, fixtures and improvements, net, of $11.2 million, and intangible lease assets, net, of $0.6 million, included in real estate assets held for sale, net in the accompanying consolidated balance sheets. During October 2025, the Company closed on the sale of this held for sale property. See Note 15 – Subsequent Events, below.

During the nine months ended September 30, 2025, the Company recorded losses of $7.7 million related to properties that were classified as held for sale and subsequently disposed, which are included as part of impairments in the accompanying consolidated statements of operations. There were no recorded losses related to properties that were classified as held for sale during the nine months ended September 30, 2024.

Intangible Lease Assets and Liabilities

Intangible lease assets and liabilities consisted of the following as of the dates indicated below (in thousands, except weighted average useful life as of September 30, 2025):


	Weighted Average Useful Life (Years)	September 30, 2025		December 31, 2024
Intangible lease assets:
In-place leases, net of accumulated amortization of $152,520 and $169,898, respectively	10.5	$	48,343	$	68,099
Leasing commissions, net of accumulated amortization of $7,084 and $4,508, respectively	12.5	26,276		21,834
Above-market lease assets, net of accumulated amortization of $12,254 and $12,831, respectively	11.4	1,390		2,041
Deferred lease incentives, net of accumulated amortization of $1,167 and $927, respectively	11.5	4,093		3,970
Total intangible lease assets, net		$	80,102	$	95,944

Intangible lease liabilities:
Below-market leases, net of accumulated amortization of $19,701 and $24,877, respectively	15.1	$	18,959	$	20,596

The aggregate amount of amortization of above-market and below-market leases included as a net increase to rental revenue in the accompanying statements of operations was $0.3 million and less than $0.1 million for the three months ended September 30, 2025 and 2024, respectively, and $1.0 million for the nine months ended September 30, 2025 and 2024. The aggregate amount of amortization of deferred lease incentives included as a net decrease to rental revenue was $0.2 million and $0.1 million for the three months ended September 30, 2025 and 2024, respectively, and $0.4 million for the nine months ended September 30, 2025 and 2024. The aggregate amount of in-place leases, leasing commissions and other lease intangibles amortized and included in depreciation and amortization expense in the accompanying statements of operations was $6.3 million and $20.7 million for the three and nine months ended September 30, 2025, respectively, and $11.7 million and $42.1 million for the three and nine months ended September 30, 2024, respectively.

The following table provides the projected amortization expense and adjustments to rental revenue related to the intangible lease assets and liabilities for the next five years as of September 30, 2025 (in thousands):


	Remainder of 2025		2026		2027		2028		2029		2030
In-place leases:
Total projected to be included in amortization expense	$	4,436	$	14,873	$	7,810	$	5,517	$	2,797	$	2,377
Leasing commissions:
Total projected to be included in amortization expense	$	752	$	2,745	$	2,585	$	2,348	$	2,055	$	2,030
Above-market lease assets:
Total projected to be deducted from rental revenue	$	198	$	680	$	237	$	115	$	63	$	63
Deferred lease incentives:
Total projected to be deducted from rental revenue	$	136	$	471	$	448	$	434	$	424	$	420
Below-market lease liabilities:
Total projected to be added to rental revenue	$	510	$	1,928	$	1,766	$	1,682	$	1,500	$	1,425

Investment in Unconsolidated Joint Venture

The following is a summary of the Company’s investment in the Arch Street Joint Venture, as of the dates and for the periods indicated below (dollars in thousands):


	Ownership % (1)	Number of Properties	Carrying Value of Investment				Equity in Loss, Net
							Nine Months Ended
Investment	September 30, 2025		September 30, 2025		December 31, 2024		September 30, 2025		September 30, 2024
Arch Street Joint Venture (2)	20%	6	$	11,049	$	11,822	$	(773)	$	(497)

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(1)The Company’s ownership interest reflects its legal ownership interest. The Company’s legal ownership interest may, at times, not equal the Company’s economic interest because of various provisions in the joint venture agreement regarding capital contributions, distributions of cash flow based on capital account balances and allocations of profits and losses. As a result, the Company’s actual economic interest (as distinct from its legal ownership interest) in certain of the properties could fluctuate from time to time and may not wholly align with its legal ownership interest.

(2)The total carrying value of the Company’s investment in the Arch Street Joint Venture was less than the underlying equity in net assets by $0.4 million and less than $0.1 million as of September 30, 2025 and December 31, 2024, respectively. This difference is related to the recognition of the fair value of the investment in the Arch Street Joint Venture in connection with the Separation and the Distribution. The difference in fair value and carrying value of the investment was allocated based on the underlying assets and liabilities of the Arch Street Joint Venture and is being amortized over the estimated useful lives of the respective assets and liabilities in accordance with the Company’s accounting policies.

The non-recourse mortgage notes associated with the Arch Street Joint Venture are scheduled to mature on November 27, 2025, with one remaining option to extend the maturity for an additional 12 months until November 27, 2026. As of September 30, 2025, there was $129.5 million outstanding under the mortgage notes and the Company’s proportionate share was $25.9 million. During September 2025, the Arch Street Joint Venture exercised the remaining option to extend the maturity date of the mortgage notes until November 27, 2026, and the lenders are working to confirm all extension conditions are met, including a maximum loan-to-value of 60% which may require the Arch Street Joint Venture to partially repay the mortgage notes to satisfy this condition. The Company cannot provide any assurance that the Arch Street Joint Venture will be able to

satisfy the conditions to extend the maturity date of this debt obligation, including that the joint venture partner will be able to contribute its share of capital requirements to partially repay the mortgage notes if required to satisfy the loan-to-value condition, or otherwise extend or refinance this debt obligation prior to maturity. If the Arch Street Joint Venture is unable to extend or refinance the mortgage notes, the Company’s investment in the Arch Street Joint Venture could be materially adversely affected.

The Arch Street Joint Venture mortgage notes have a variable interest rate and the spread on a SOFR (the secured overnight financing rate as administered by the Federal Reserve Bank of New York) loan is 2.60%, and the spread on a base rate loan is 0.50%. The Arch Street Joint Venture has entered into an interest rate cap agreement that caps the SOFR rate at 5.50%.

During November 2024, the Company provided a member loan to the Arch Street Joint Venture of $1.4 million in connection with the partial repayment of the Arch Street Joint Venture mortgage notes to satisfy the maximum 60% loan-to-value extension condition. During February 2025, the Company made an additional member loan of $8.3 million to fund leasing costs related to a lease extension that was completed for one of the properties in the Arch Street Joint Venture portfolio. The Company’s member loan to the Arch Street Joint Venture, which had $6.7 million receivable as of September 30, 2025, earns interest at 15%, matures on November 27, 2026, and is non-recourse and unsecured, structurally subordinate to the Arch Street Joint Venture mortgage notes. Interest and principal are payable monthly solely out of the excess cash from the joint venture after payment of property operating expenses, interest and principal on the Arch Street mortgage notes and other joint venture expenses and excess proceeds from the sale of any of the joint venture properties.