Shares declined 5.3% as investors reacted negatively to continued occupancy setbacks and a cautious outlook on near-term leasing, offsetting the benefit of a one-time lease termination fee and modest NOI growth. The market appears concerned that the recent vacancies will pressure results in coming quarters despite management’s assurances.
- Q1 net operating income rose 5.4% to $33.8 million; normalized FFO increased to $17.7 million.
- Occupancy fell to 95% due to two unplanned vacancies: a 62,000 sq. ft. tenant early terminated for non-payment (with $1.2 million termination income) and an 88,000 sq. ft. tenant vacating a below-market lease.
- Positive leasing performance included new leases covering 41,000 sq. ft. with average rent lifts of 32%, and renewal of 510,000 sq. ft. YTD at a 7% average increase (26% excluding one long-term reset).
- Management expects short-term downtime from vacancies to offset termination income, maintaining unchanged guidance of mid-single-digit NOI growth and sub-100% AFFO payout ratio for 2026.
- Secured an investment-grade BBB low rating and completed a $500 million inaugural bond offering to reduce financial risk and enhance capital flexibility.
Community Discussion