Item 1. Business
Item 1. Business.
Overview
Orion Properties Inc. is an internally managed real estate investment trust (“REIT”) engaged in the ownership, acquisition, and management of a diversified portfolio of office properties located in high-quality suburban markets across the United States and leased primarily on a single-tenant net lease basis to creditworthy tenants. Our portfolio is comprised of traditional office properties, as well as governmental, medical office, flex/laboratory and R&D and flex/industrial properties. As part of our investment strategy, we intend to shift our portfolio concentration over time away from traditional office properties, towards more dedicated use assets with specialized uses that include an office component.
The Company was initially formed as a wholly owned subsidiary of Realty Income Corporation (“Realty Income”). Following completion of the merger transaction involving Realty Income and VEREIT, Inc. (“VEREIT”) on November 1, 2021, Realty Income contributed the combined business comprising certain office real properties and related assets previously owned by subsidiaries of Realty Income, and certain office real properties and related assets previously owned by subsidiaries of VEREIT (the “Separation”), to the Company and its operating partnership, Orion Properties LP (“Orion OP”), and on November 12, 2021, effected a special distribution to Realty Income’s stockholders of all the outstanding shares of common stock of the Company (the “Distribution”).
Following the Distribution, we became an independent and publicly traded company, and our common stock, par value $0.001, trades on the New York Stock Exchange (the “NYSE”) under the symbol “ONL”. The Company has elected to be taxed as a REIT for U.S. federal income tax purposes, commencing with its initial taxable year ended December 31, 2021.
Cooperation Agreement and Strategic Review Process
On January 26, 2026, we entered into a cooperation agreement (the “Cooperation Agreement”) with one of our stockholders, The Kawa Fund Limited and its affiliate, Kawa Capital Management, Inc. (collectively, “Kawa”).
Also on January 26, 2026, pursuant to the Cooperation Agreement, we commenced a review of strategic options for the Company, which review may include, without limitation, the consideration of potential acquisition and merger targets, the potential sale of the Company and continuing to operate as an independent publicly traded entity. The Cooperation Agreement does not obligate the Company to pursue or consummate any such transaction or require our Board of Directors to take any action that it determines in good faith is inconsistent with its duties under applicable law.
The Cooperation Agreement contains customary standstill and non-disparagement provisions and will terminate on September 1, 2026. Pursuant to the Cooperation Agreement, Kawa withdrew its notice of intent to nominate director candidates for election to our Board of Directors at our 2026 annual meeting of stockholders, and Kawa must cause all shares of common stock pursuant to which it has the sole or shared power to direct the voting to be present for quorum purposes at our 2026 annual meeting of stockholders and to refrain from “withholding” or voting “against” the directors nominated by our Board of Directors for election at such annual meeting.
Real Estate Portfolio
As of December 31, 2025, we owned and operated 58 operating properties with an aggregate of 6.5 million leasable square feet located in 26 states with an occupancy rate of 78.1% and a weighted average remaining lease term of 5.6 years. As of December 31, 2025, we had eight properties designated as non-operating properties. We also owned a 20% equity interest in the Arch Street Joint Venture, which as of December 31, 2025, owned a portfolio of six properties with an aggregate of 1.0 million leasable square feet located in six states with an occupancy rate of 100% and a weighted average remaining lease term of 6.3 years. Including our proportionate share of leasable square feet and annualized base rent from the Arch Street Joint Venture, we owned an aggregate of 6.7 million leasable square feet with an occupancy rate of 78.7%, or 78.2% adjusted for one consolidated operating property and our proportionate share of the square footage of one Arch Street Joint Venture operating property that are currently under agreements to be sold, and a weighted average remaining lease term of 5.7 years as of December 31, 2025.
As of December 31, 2025, two tenants accounted for 10% or more of our annualized base rent: the General Services Administration at 17.8% and Merrill Lynch at 10.0%. As of December 31, 2025, we had a total of 15 leases with the General
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Services Administration with a weighted average remaining lease term of 4.0 years and one lease with Merrill Lynch with a weighted average remaining lease term of 9.9 years.
As of December 31, 2025, properties located in the following states accounted for 10% or more of our annualized base rent:
Geographic Concentration % of Total Annualized Base Rent
Texas 18.9%
New Jersey 13.4%
New York 10.0%
As of December 31, 2025, tenants in the following industries accounted for 10% or more of our annualized base rent:
Tenant Industry Concentration % of Total Annualized Base Rent
Government & Public Services 18.3%
Health Care Equipment & Services 13.7%
Capital Goods 10.8%
Financial Institutions 10.0%
Investment Strategy
We employ a proven, cycle-tested investment evaluation framework which serves as the lens through which we make capital allocation decisions. This framework prescribes that investments are evaluated along the following parameters:
Asset Management. We employ active asset management strategies and work to leverage our tenant relationships to attract and retain high-quality creditworthy tenants, drive re-leasing and renewal activity and maximize our tenant retention rates. As part of our asset management efforts, we assess each property in our portfolio, including with respect to its existing leases, property type and tenant utilization, future leasing opportunities, geographic market, and marketability for sale, as well as how each property contributes to the portfolio as a whole, to determine the appropriate strategy, including potential disposition opportunities. Additionally, we may seek to address any lease roll or vacancy in our portfolio by converting the space to multi-tenant office or other use if our management team considers conversion to be the value-maximizing alternative for the subject property.
Capital Recycling . We intend to shift our portfolio concentration over time away from traditional office properties, towards more dedicated use assets that have an office component. We expect to continue to selectively dispose of properties in our current portfolio if we determine that they do not fit our investment strategies. Proceeds from the sale of real estate assets are expected to be redeployed to fund capital investment into our existing portfolio to further enhance the quality of our portfolio and stability of our cash flows, selective acquisitions and other general corporate purposes. As part of our capital recycling efforts, we are seeking opportunities to invest in properties featuring, among other uses, government, medical, laboratory and research and development, and flex operations. Our experience is that these properties have greater tenant utilization and higher renewal probability, given their generally specialized uses and general inability for the tenant’s employees to conduct business at these sites on a remote or hybrid basis. As of December 31, 2025, approximately 35.8% of our annualized base rent was derived from properties we deemed dedicated use assets. We will continue to invest in the properties we own today when we believe those properties will produce attractive risk-adjusted yields on our investment plus any incremental capital we must invest and we will consider adding traditional office properties to the portfolio when we expect those properties to produce attractive, risk adjusted yields during our hold period through disposition but we intend to increase our focus on and exposure to dedicated use assets.
Preferred Market Features. We primarily own commercial real properties located in suburban markets and seek to capitalize on de-urbanization trends amplified by the migration of millennials to the suburbs in the post-COVID environment. We possess a geographical preference for Sun Belt markets, which we believe will continue to benefit from an increasing number of corporate relocations from urban coastal markets to inland secondary markets, as companies and employees alike seek a lower cost of living, business-friendly tax and regulatory environments, less density, and better weather. Additionally, we believe there are a variety of markets outside the Sun Belt which possess similar attractive characteristics and will benefit
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from similar trends. We will look to opportunistically emphasize both Sun Belt and other similar high-quality markets to the extent we are able to grow our portfolio.
Net Lease Investment Characteristics. We seek to invest in stable cash flow from primarily long-term leases with high credit quality tenants and inflation protection from embedded rent growth. Net leases can enhance stability of cash flows by shifting some or all operating expense burden to the tenant.
Tenant Credit Underwriting. We primarily own commercial real properties leased to investment-grade rated tenants and creditworthy non-investment-grade rated or unrated tenants. To the extent we are able to continue to grow our portfolio, we intend to utilize our credit underwriting and real estate expertise to underwrite creditworthy investment-grade and non-investment-grade tenants that we believe will offer enhanced yield and attractive risk-adjusted returns.
Real Estate Attributes. Our portfolio includes regional and corporate headquarters office locations and other properties that are well-located with easy access to commuting routes and on-site amenities that enhance the tenant’s propensity to renew. As part of our asset management efforts, we expect to increase the quality and desirability of our portfolio by continuing to make select capital investments in our properties to add tenant amenities ( e.g. , cafe, lounge, gym, conference center) or other building features intended to augment the asset’s attractiveness to its marketplace of commercial users and/or the incumbent occupant.
External Growth. We intend to grow our portfolio by acquiring properties that fit the characteristics defined in our investment evaluation framework, including dedicated use assets that have an office component, through multiple sourcing channels, while leveraging our management team’s extensive relationship network and decades of experience transacting in the single-tenant net lease market. We intend to pursue both individual assets as well as portfolio opportunities sourced from a wide range of marketed and off-market transactions. As described in more detail in the section in this report entitled “Risk Factors”, our acquisition strategy is subject to risks, including that we may not be in a position or have the opportunity in the future, to make suitable property acquisitions on advantageous terms and/or that such acquisitions will fail to perform as expected.
Financing
We use debt as a means of providing additional funds for asset management and other general corporate purposes. We believe we have used and expect to continue to use leverage prudently, assessing the appropriateness of new equity or debt capital based on market conditions, including reasonable assumptions regarding future cash flow, the creditworthiness of tenants and future rental rates. If our Board of Directors determines to seek additional capital, we may raise such capital by offering equity or debt securities, creating joint ventures with existing ownership interests in properties, entering into joint venture arrangements for new development projects, retaining cash flows or a combination of any of these methods. Borrowings may be in the form of bank borrowings, publicly and privately placed debt instruments or purchase money obligations to the sellers of properties. Any such indebtedness may be secured or unsecured. Any such indebtedness may also have full or limited recourse to the borrower or be cross-collateralized with other debt, or may be fully or partially guaranteed by us.
We believe we are positioned to enable access to multiple forms of capital. If the Board of Directors determines to raise equity capital, it may, without stockholder approval, authorize us to issue additional shares of common stock or other capital stock. Our Board of Directors may authorize us to issue a number of shares up to the amount of our authorized capital in any manner and on such terms and for such consideration as it deems appropriate. Such securities may be senior to the outstanding class of common stock.
As of December 31, 2025, we had $465.0 million of total consolidated debt outstanding, consisting of a $355.0 million fixed rate securitized mortgage loan collateralized by 19 properties (the “CMBS Loan”), $92.0 million borrowed under our $350.0 million senior revolving credit facility (the “Original Revolving Facility”) which was refinanced with a new $215.0 million senior secured revolving credit facility during February 2026 (the “New Revolving Facility”), and an $18.0 million fixed rate mortgage note secured by our San Ramon, California property (the “San Ramon Loan”). Additionally, our proportionate share of the non-recourse mortgage notes associated with the Arch Street Joint Venture was $25.8 million as of December 31, 2025 (the “Arch Street Joint Venture Mortgage Debt”). See “Management’s Discussion and Analysis of Results of Operations and Financial Condition - Liquidity and Capital Resources” for additional information about our debt obligations, including the New Revolving Facility, a recent amendment entered into with respect to the CMBS Loan and the Arch Street Joint Venture Mortgage Debt.
We believe our prudent leverage and liquidity will enable us to continue to make the capital investments needed to enhance the quality of our existing portfolio and stability of our cash flows, as well as opportunistically take advantage of high-quality acquisition opportunities as market conditions permit.
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Competitive Strengths
Our portfolio consists of high-quality, diversified properties with favorable exposure to investment-grade credit and is located in attractive suburban markets across the United States and leased primarily on a single-tenant net lease basis.
We have a strong management team with a wide-ranging network of industry relationships and an average of over 25 years of experience transacting in the single-tenant net lease market.
Our platform is vertically integrated across functions, including investment, finance, property management, leasing and legal. Our integrated structure enables us to identify value creation opportunities and realize significant operating efficiencies. Our organization includes property managers and leasing professionals who maintain direct relationships and dialogue with our tenants and broker communities. We believe proactive, in-house property management and leasing allows us to exercise greater control of operating and capital expenditures while improving propensity to renew and maximizing re-leasing spreads.
Regulations
Compliance with various governmental regulations has an impact on our business, including our capital expenditures, earnings and competitive position, which can be material. We incur costs to monitor and take actions to comply with governmental regulations that are applicable to our business, which include, among others, federal securities laws and regulations, applicable stock exchange requirements, REIT and other tax laws and regulations, environmental and health and safety laws and regulations, local zoning, usage and other regulations relating to real property, and the Americans with Disabilities Act of 1990 (“ADA”).
Human Capital
As of December 31, 2025, we had 37 employees. We value our employees and their individual and collective contributions to Orion in the furtherance of our corporate, operational, social, environmental and governance initiatives. Our corporate culture is based on treating others the way we would like to be treated and we strive to foster a work environment that is inclusive, fair and engaged.
Available Information
We electronically file Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and all amendments to those reports, and proxy statements, with the SEC. You may access any materials we file with the SEC through the EDGAR database at the SEC’s website at www.sec.gov. In addition, copies of our filings with the SEC may be obtained free of charge from our website at www.onlreit.com. We are providing our website address solely for the information of investors. We do not intend for the information contained on our website to be incorporated into this Annual Report on Form 10-K or other filings with the SEC.
Summary of Risk Factors
The following section sets forth a summary of principal risk factors that we believe are material to our investors, and could adversely affect our business, financial condition, results of operations, our ability to pay distributions and the value of an investment in our common stock. For a more extensive discussion of these factors, as well as other risks related to the Company, see “ 1A. Risk Factors ” contained in this Annual Report on Form 10-K.
• If global market and economic conditions deteriorate, our business, financial condition and results of operations could be materially adversely affected.
• Our strategic review process will be costly and time-consuming and may not result in our identification or completion of a strategic transaction, which could have an adverse effect on our stock price and our business.
• Changes in workplace practices and office space utilization, including remote and hybrid work arrangements, have reduced the demand for office space at our properties and may continue to do so.
• Leases representing approximately 10.2% of our annualized base rent are scheduled to expire in 2026, and we could experience difficulties or delays renewing leases or re-leasing vacant space, which will increase our costs to operate and maintain such properties without receiving income.
• Most of our properties depend upon a single tenant for all or a majority of their rental income; therefore, our financial condition, including our ability to make distributions to stockholders, may be adversely affected by the bankruptcy or insolvency, a downturn in the business, or a lease termination of such a single tenant.
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• We expect to continue to convert certain vacant properties to multi-tenant use, and cannot provide any assurance that the investments we make of time and capital to do so will increase the value of the subject properties.
• Government budgetary pressures and priorities, and trends in government employment and office leasing may adversely impact our business.
• We have made equity and member loan investments in the Arch Street Joint Venture which may not be recoverable.
• We may be unable to successfully execute on our strategy to shift our portfolio concentration over time away from traditional office properties, towards more dedicated use assets.
• Competition for acquisitions may reduce the number of acquisition opportunities available to us and increase the costs of those acquisitions.
• We may suffer adverse effects from acquisitions of commercial real estate properties.
• We face considerable competition in the leasing market and may be unable to renew existing leases or re-let space on terms similar to our existing leases, or we may expend significant capital in our efforts to re-lease space, which may adversely affect our business, financial condition and results of operations.
• Tenant payment defaults may have a material adverse effect on our business, financial condition and results of operations.
• Some of our leases provide tenants with the right to terminate their leases early, which may have a material adverse effect on our business, financial condition and results of operations.
• We have a significant amount of indebtedness and may need to incur more in the future.
• We have existing debt and refinancing risks that could have a material adverse effect on our business, financial condition and results of operations, including the risk that we will be unable to extend or refinance some or all of our debt, or that the lenders will not seek to enforce their remedies due to the existing payment default under the Arch Street Joint Venture mortgage notes.
• Financial covenants could materially adversely affect our ability to conduct our business.
• We depend on external sources of capital that are outside of our control, which may affect our ability to achieve our business strategies.
• Our expenses may remain constant or increase, even if our revenues decrease, which may have a material adverse effect on our business, financial condition and results of operations.
• Real estate property investments are illiquid. We may not be able to dispose of properties when desired or on favorable terms.
• Our assets may be subject to impairment charges.
• Uninsured and underinsured losses may adversely affect our operations.
• The obligations and requirements to which we are subject as a public company are extensive and will increase when we no longer qualify as an “emerging growth company.”
• Our failure to maintain our qualification as a REIT for U.S. federal income tax purposes could have a material adverse effect on us.
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