[Management View]
Realty Income reported total revenue of $37.3 million for Q2 2025, down from $40.1 million YoY, reflecting portfolio size reduction and higher vacancy. Core FFO was $11.5 million or $0.20 per share, versus $14.2 million or $0.25 per share YoY. Adjusted EBITDA was $18 million, compared to $20.5 million YoY. Leasing activity included 639,000 square feet with a 6.4-year weighted average lease term. The company completed asset dispositions totaling 434,000 square feet for $26.9 million. Liquidity stood at $257.7 million, with net debt to annualized adjusted EBITDA at 6.93 times.

[Outlook]
Realty Income raised its 2025 core FFO guidance to $0.67-$0.71 per diluted share from $0.61-$0.70, attributed to one-time items and improved leasing performance. The net debt to adjusted EBITDA guidance was lowered to 7.3-8.3 times from 8.0-8.8 times. The company is in discussions with lenders to extend or refinance $110 million of floating rate credit facility debt maturing in May 2026.

[Financial Performance]
Total revenue decreased by 7% YoY to $37.3 million. Core FFO dropped by 19% YoY to $11.5 million. Adjusted EBITDA fell by 12% YoY to $18 million. Leasing activity showed positive momentum with a 170 basis point increase in the operating property leased rate sequentially.

[Q&A Highlights]
Question 1: Can you provide more details on the leasing activity and the types of properties involved?
Answer: The 639,000 square feet of leasing included new and renewal transactions with a weighted average lease term of 6.4 years. Notable leases included a 15.7-year agreement for 46,000 square feet in Parsippany, NJ, a 5.4-year agreement for 80,000 square feet in Kennesaw, GA, and a 7.6-year agreement for 23,000 square feet in Plano, TX. Additionally, 110,000 square feet of short-term lease extensions were signed at over 6% positive lease spreads.

Question 2: What is driving the increase in capital expenditures and leasing costs?
Answer: CapEx and leasing costs increased to $15.6 million from $6.3 million YoY, driven by accelerated leasing activity. The timing of CapEx is dependent on lease executions and property work completion. More capital is expected to be allocated to CapEx as leases roll and tenants draw upon improvement allowances.

Question 3: How is the company managing its debt and liquidity?
Answer: Realty Income ended the quarter with $257.7 million in liquidity, including $17.7 million in cash and $240 million in available credit facility capacity. The company has $509 million in outstanding debt, with significant maturities in 2026 and 2027. Management is prioritizing discussions with lenders to extend or refinance the $110 million floating rate credit facility debt maturing in May 2026.

Question 4: Can you elaborate on the asset disposition strategy and its impact on the portfolio?
Answer: The company sold four vacant properties totaling 434,000 square feet for $26.9 million. Additional agreements are in place to sell five traditional office properties, three near-term vacant properties, and one stabilized property totaling 540,000 square feet for $57 million. These transactions aim to monetize non-core assets and redeploy capital, improving portfolio quality and durability.

[Sentiment Analysis]
The tone of the management was cautiously optimistic, emphasizing disciplined capital allocation and proactive debt management. Analysts' questions focused on leasing activity, capital expenditures, and debt management, indicating a keen interest in the company's operational and financial strategies.

[Quarterly Comparison]
| Metric | Q2 2025 | Q2 2024 |
|-------------------------------|---------------|---------------|
| Total Revenue | $37.3 million | $40.1 million |
| Core FFO | $11.5 million | $14.2 million |
| Adjusted EBITDA | $18 million | $20.5 million |
| CapEx and Leasing Costs | $15.6 million | $6.3 million |
| Operating Property Leased Rate| 79.1% | 77.4% |
| Weighted Average Lease Term | 5.5 years | 4.2 years |

[Risks and Concerns]
Key risks include elevated vacancy rates, higher interest rates impacting cash flow, and the need to refinance significant debt maturities. The company's ability to maintain liquidity and manage capital expenditures effectively will be crucial in navigating these challenges.

[Final Takeaway]
Realty Income's Q2 2025 performance reflects a strategic focus on leasing momentum and asset dispositions to enhance portfolio quality. While revenue and core FFO declined YoY, the company demonstrated strong leasing activity and proactive debt management. The raised core FFO guidance and lowered net debt to adjusted EBITDA outlook indicate confidence in future performance. However, managing elevated vacancy rates and refinancing upcoming debt maturities remain critical challenges.