First Quarter 2026 Financial and Portfolio Update: Key Insights for Investors

Summary of Key Points

• Portfolio maintains full occupancy with stable metrics across all properties.
• Significant leasing activity driven primarily by renewals in the finance and insurance sectors.
• Top 10 tenants contribute over half of gross rental income (GRI), with notable tenant concentration risks.
• Recent divestments of two major properties, Peachtree (Atlanta) and Plaza (Secaucus), have materially impacted portfolio size and cash reserves.
• Leverage remains high, with aggregate leverage at 58% and weighted average interest rate rising to 4.52%.
• Substantial lease expiries are due in 2027 and 2028, with re-leasing risk concentrated in those years.

Portfolio Details

The portfolio, comprising seven properties across key U.S. markets (Los Angeles, Irvine, Jersey City, Washington D.C., Atlanta, Virginia, and Tempe), maintained a 100% committed occupancy rate as of 31 March 2026. The total net lettable area (NLA) stands at 3.53 million sq ft. The weighted average lease expiry (WALE) by NLA is 4.7 years, with 97 tenants diversified across several industry sectors.

Leasing Activity in 1Q 2026

Leasing activity was robust, with 141,211 sq ft of NLA executed during the quarter. Notably, 93.2% of this was due to renewals, indicating strong tenant retention. The finance and insurance sector dominated leasing, accounting for over 90% of new leases. Rent reversion was positive at 57.3% on a gross rent basis, suggesting an uplift in rental rates compared to expiring leases—a potentially positive indicator for future revenue growth.

• Weighted average lease term for new leases: 4.2 months
• Weighted average free rent period: 0.3 months
• Gross rent per sq ft: \$48.23

Top 10 Tenants and Sector Concentration

The portfolio exhibits concentration risk, with the top 10 tenants accounting for 51.1% of GRI. The largest tenant, The William Carter Company, contributes 8.5% of GRI. Other notable tenants include Hyundai Capital America, United Nations Foundation, ACE American Insurance, the US Treasury, and Amazon.

Sectorally, the portfolio is weighted towards finance and insurance (18.7%), legal (14.6%), retail trade (9.7%), and real estate (9.3%). Public administration, administrative support, information, and transport/warehousing make up the remainder, but no other sector exceeds 10%.

Lease Expiry Profile: Potential Re-Leasing Risk

Investors should note a potential re-leasing risk in 2027 and 2028, with 15.9% and 17.9% of NLA due for expiry, respectively. In dollar terms, this represents \$16.22 million (14.3% of total GRI) in 2027 and \$22.71 million (20.1% of total GRI) in 2028. The weighted average GRI per sq ft for expiring leases in 2028 is \$53.94, higher than 2027, indicating a risk of downward rent reversions if market conditions are weak.

Recent Divestments: Impact on Portfolio and Cash Position

Two major divestments were completed in the last 12 months:

• Peachtree (Atlanta): Sold on 27 May 2025, comprising 560,629 sq ft for a gross sales price of \$133.8 million (net proceeds \$123.6 million).
• Plaza (Secaucus): Sold on 25 February 2025, comprising 468,049 sq ft for a gross sales price of \$51.8 million (net proceeds \$40.0 million).

These divestments have materially reduced the portfolio’s total NLA and provided additional liquidity, but may also affect future income streams and scale.

Capital Structure: High Leverage and Refinancing Risk

The portfolio’s aggregate leverage stands at 58%, which is relatively high and may be a concern for investors amid rising interest rates. The weighted average interest rate is 4.52% (potentially 5.18% including the Sponsor-Lender loan exit premium). The average debt maturity is short at 2.1 years, with significant refinancing needs:

• \$35.6 million due in 2026
• \$170.3 million in 2027
• \$216.2 million in 2028
• \$137 million in 2029

Around half (50.1%) of the total debt is hedged, 24.5% is fixed, and 25.4% is floating. The unencumbered gearing ratio is 61.4%, comfortably within the 80% covenant, and the bank interest coverage ratio is 2.0x.

Potential Price-Sensitive Issues for Shareholders

• High Leverage: The elevated leverage level increases exposure to interest rate hikes and refinancing risk. Any credit rating downgrade or increase in borrowing costs could impact distributable income and share price.
• Lease Expiry Risk: A concentration of expiries in 2027-2028 may lead to higher vacancy or lower rental rates if not managed proactively, affecting GRI and portfolio valuation.
• Reduction in Portfolio Scale: The sale of two large properties reduces income diversification and may affect future earnings unless proceeds are redeployed efficiently.
• Positive Rent Reversion: The significant positive rent reversion achieved in 1Q 2026 is a bright spot, supporting valuations and income growth if sustained.

Conclusion

The latest quarterly update reveals a portfolio in transition: while occupancy and tenant retention remain strong, the asset base has contracted due to recent divestments and leverage is elevated. The outlook will depend on re-leasing success for upcoming expiries, interest rate trends, and management’s ability to redeploy capital efficiently. Investors should closely monitor refinancing activities and market leasing conditions in the next 12-24 months as these factors could materially impact share value.

Disclaimer: This article is for informational purposes only and does not constitute investment advice. Investors should conduct their own due diligence and consult professional advisors before making any investment decisions.

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