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Peakstone Realty Trust (PKST)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 revenue was $54.0M, above the Street’s $51.3M consensus; FFO/share of $0.60 beat the $0.54 consensus, while GAAP EPS of $(7.22) missed materially due to a $286.1M non-cash impairment tied to accelerated office dispositions . Revenue consensus: $51.3M*, FFO/share consensus: $0.54*, EPS consensus: $(0.05)*.
  • The portfolio transition accelerated: two IOS acquisitions ($52.4M), a full-site Savannah lease commenced post-quarter, and $182M of office sales in Q2 plus $24M subsequent, reducing office exposure to ~35% of net book value .
  • Leverage improved to 6.4x Net Debt/Adjusted EBITDAre at quarter-end (6.6x pro forma after subsequent activity); liquidity stood at $356M (cash $264M; revolver availability $91M) .
  • Dividend reset: Board declared $0.10 per share for Q3 2025 (vs. $0.225 paid for Q2), explicitly aligning payouts with the industrial cash-flow profile; expect continued acceleration in office dispositions as a near-term narrative driver .

What Went Well and What Went Wrong

What Went Well

  • IOS growth and execution: “We expanded our iOS portfolio with two acquisitions totaling approximately $52,000,000… fully leased an IOS redevelopment property [Savannah]… increased our iOS ABR by over 25% since the beginning of the year.”
  • Balance sheet progress: Net Debt/Adjusted EBITDAre improved to 6.4x at quarter end; CFO noted pro forma 6.6x after post-quarter activity but still below Q1’s 7.0x, with 88% fixed debt and swaps extending rate protection .
  • Industrial same-store strength: Same Store Cash NOI +6.3% YoY overall, with Industrial +9.3% YoY; total Cash NOI of $43.2M .

What Went Wrong

  • GAAP EPS miss driven by impairment: Net loss to common shareholders of $(265.3)M (EPS $(7.22)) due to a $286.1M non-cash impairment for 18 office properties reflecting shorter hold periods and expected sale prices .
  • Sequential softness in core run-rate: Revenue declined QoQ to $54.0M (from $57.0M in Q1), and FFO/share stepped down to $0.60 (from $0.62), reflecting portfolio reshaping and dispositions .
  • Dividend cut to $0.10 (Q3) from $0.225, signaling near-term earnings profile change during the transition; management emphasized alignment with industrial cash flows .

Financial Results

Summary Financials vs prior periods and estimates

MetricQ4 2024Q1 2025Q2 2025
Revenue ($USD)$57.934M $56.971M $54.026M
Revenue Consensus ($USD)$54.679M*$54.518M*$51.299M*
GAAP EPS ($/share)$0.35 $(1.35) $(7.22)
Primary EPS Consensus Mean ($/share)$(0.205)*$(0.085)*$(0.047)*
FFO / share ($/unit)$0.74 $0.62 $0.60
FFO / share Consensus ($/unit)$0.448*$0.594*$0.542*
AFFO / share ($/unit)$0.65 $0.62 $0.61
Adjusted EBITDAre ($USD)$42.607M $41.231M $38.799M

Values marked with * retrieved from S&P Global.

Interpretation:

  • Revenue: beat in Q2 vs consensus (actual $54.0M vs $51.3M*).
  • FFO/share: beat in Q2 (actual $0.60 vs $0.54*).
  • GAAP EPS: large miss in Q2 (actual $(7.22) vs $(0.05)*), driven by non-cash impairment.

Segment revenue and Cash NOI

Segment ($USD)Q4 2024 RevenueQ1 2025 RevenueQ2 2025 Revenue
Industrial (IOS + Traditional)$20.445M $24.033M $24.380M
Office$33.318M $32.938M $29.646M
Other$4.171M — —
Total$57.934M $56.971M $54.026M
Segment ($USD)Q4 2024 Cash NOIQ1 2025 Cash NOIQ2 2025 Cash NOI
Industrial (IOS + Traditional)$15.682M $18.423M $18.271M
Office$29.490M $27.181M $24.925M
Other$2.526M — —
Total$47.698M $45.604M $43.196M

KPIs and balance sheet

KPIQ4 2024Q1 2025Q2 2025
Same Store Cash NOI ($USD)$39.005M $39.001M $35.628M
Same Store Cash NOI YoY (%)+0.4% +4.0% +6.3%
Cash & Equivalents ($USD)$146.5M $204.0M $264.4M
Total Debt ($USD)$1,360.3M $1,360.3M $1,260.3M
Net Debt ($USD)$1,213.8M $1,156.3M $995.9M
Net Debt / Adjusted EBITDAre (x)7.1x 7.0x 6.4x

Industrial portfolio composition (Q2 2025): 70 properties; 100% occupancy (RSF) / 99.6% usable acres; WALT 5.1 years; ABR $74.9M; IOS ABR $24.45M (14.6% of total ABR) .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Dividend per shareQ3 2025$0.225 (Q2 paid July 17, 2025) $0.10 (payable Oct 17, 2025; record Sep 30, 2025) Lowered
Net Debt / Adjusted EBITDArePro forma after Q2—6.6x pro forma (6.4x at Q2 end) Informational update
Office dispositions2H 2025—Pace expected to accelerate; sold $158M in Q2, $24M subsequent; YTD office sales $216M Acceleration signaled
Interest rate swapsJul 1, 2025–Jul 1, 2029$750M swaps matured Jul 1, 2025 (1.97% fixed leg) $550M forward-starting swaps effective Jul 1, 2025 at 3.58% fixed leg Rolled to new fixed rate

Note: No formal quantitative revenue/EPS/FFO guidance ranges were issued; management emphasized strategic transition milestones and portfolio actions .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024, Q1 2025)Current Period (Q2 2025)Trend
IOS expansionAcquired 51 IOS properties for $490M; established IOS platform . Fully leased Everett 37-acre IOS site; +10% QoQ IOS ABR .Two IOS acquisitions ($52.4M); full-site Savannah lease; increased IOS ABR >25% YTD .Accelerating
Office divestituresEliminated Other segment; $317M 2024 dispositions; continued office sales .$158M office sales in Q2; $24M subsequent; $216M YTD .Accelerating
Leverage & liquidityNet Debt/Normalized EBITDAre 7.5x; liquidity $228.5M . Net Debt/Adj EBITDAre 7.0x; liquidity $286M .Net Debt/Adj EBITDAre 6.4x (6.6x pro forma); liquidity $355.8M .Improving
Dividend policy$0.225 dividends maintained in Q4/Q1 .Board set Q3 dividend at $0.10 to align with industrial cash flows .Reset lower during transition
Market competition (IOS)—“The market is active… quite a bit of capital… more debt capital… pricing elevated” .Competitive intensity rising

Management Commentary

  • Strategic focus: “We continue to make strong progress in our transformation to an industrial REIT focused on IOS… industrial assets now representing approximately 65% of the net book value of our real estate assets.”
  • Execution highlights: “We expanded our iOS portfolio with two acquisitions totaling approximately $52,000,000… executed a full-site, two and a half year lease at our property in Savannah… one of the largest iOS leases in the Savannah market year to date.”
  • Balance sheet & dividend: “After giving effect to [new] swaps, our weighted average interest rate… is approximately 5.47%.… the board has approved a dividend of 10¢ per common share for the third quarter… designed to align with the cash flow characteristics of [industrial].”
  • Outlook: “We remain confident in our strategy and our ability to execute… reallocating capital to higher growth iOS opportunities, and strengthening the balance sheet.”

Q&A Highlights

  • Dividend rationale: Management emphasized alignment with post-office, industrial-focused earnings profile, not a one-off decision; intended to provide foundation while scaling IOS .
  • IOS lease roll and renewal: Very low rollover and vacancy (0.4%); one remaining 2025 lease; eight leases expiring in 2026 (~9% of ABR), many with tenant-favorable fixed-rate renewals—expectation of renewals where operations fit .
  • Cap rates and pricing: While not disclosing deal-level cap rates, management noted data is available in materials to infer aggregate returns; office sales tracking within previously discussed goalposts by lease term .
  • Use of disposition proceeds: Balanced approach—reduce leverage below 6x over time while continuing targeted IOS acquisitions; active pipeline enabling selectivity .
  • Impairment drivers: Acceleration of sales and shorter hold periods triggered fair-value reassessments, resulting in the quarter’s non-cash impairment .

Estimates Context

  • Q2 2025: Revenue beat (actual $54.0M vs $51.3M consensus*); FFO/share beat (actual $0.60 vs $0.54 consensus*); GAAP EPS miss (actual $(7.22) vs $(0.05) consensus*) due to non-cash impairment .
  • Coverage remains limited (two to three estimates per metric), implying potential for estimate volatility as the transition progresses*.

Values marked with * retrieved from S&P Global.

Key Takeaways for Investors

  • Near-term: Expect the dividend reset to be a key stock narrative lever; FFO/share beat underscores core cash-flow resilience despite GAAP EPS impairment noise .
  • Transition momentum: Continued acceleration of office dispositions and IOS growth is de-risking the portfolio mix; industrial assets now ~65% of net real estate book value .
  • Balance sheet: Leverage trending down (6.4x at Q2; 6.6x pro forma after subsequent actions) with substantial liquidity—a positive setup for selective external growth while managing risk .
  • Demand backdrop: IOS fundamentals supported by supply constraints and tenant demand; competition and elevated pricing warrant disciplined underwriting and selectivity .
  • Estimate path: Limited Street coverage means quarterly beats/misses can be magnified; as office is monetized, expect models to pivot toward FFO/AFFO metrics rather than GAAP EPS*.
  • Monitoring items: Pace and pricing of office sales, IOS leasing spreads and escalations, Net Debt/Adj EBITDAre trajectory, and capital market conditions (rate path; swaps impact) .
  • Strategic lens: Executing the industrial-first strategy with IOS focus should compress risk and enhance growth optionality; watch for incremental IOS acquisitions and redevelopment lease-ups (e.g., Savannah) translating to ABR and NOI growth .