Peakstone (PKST) Q2 AFFO Jumps 1,120%

Key Points

• AFFO per share (non-GAAP) reached $0.61, surpassing the analyst estimate of $0.05 for Q2 2025.

• Net loss (GAAP) widened to $(265.3 million), mainly due to a $286.1 million office impairment charge in Q2 2025.

• The quarterly dividend was cut more than half, falling to $0.10 per share for the declared Q3 2025 payout.

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Peakstone Realty Trust (NYSE:PKST), a real estate investment trust specializing in industrial and office properties, reported its second-quarter 2025 results on August 7, 2025. The headline news focused on better-than-expected operational earnings, substantial ongoing repositioning of its property portfolio, and a significant non-cash office-related asset impairment that led to a deep net loss. Adjusted funds from operations (AFFO) per share reached $0.61, far outpacing the analyst estimate of $0.05 (non-GAAP), while GAAP revenue was $54.0 million, compared to the $53.7 million GAAP consensus. Despite operational outperformance, the quarter's net loss (GAAP) ballooned to $(265.3 million) due to a major impairment on office assets. The company continues to advance its strategic transition to industrial focus but faces short-term earnings pressure and reduced dividends.

Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.

Company Overview and Business Focus

Peakstone Realty Trust is a real estate investment trust (REIT) that owns and operates a portfolio of industrial and office properties across the United States.

Over the past year, Peakstone Realty Trust has intensified its pivot away from office properties toward industrial real estate, with an emphasis on the fast-growing Industrial Outdoor Storage (IOS) sector. Portfolio management, tenant quality, and capital allocation remain at the center of its strategy as it works to grow industrial exposure and manage the transition away from offices.

Quarterly Highlights: Operational Progress and Major Developments

The latest quarter saw several notable shifts for the company. AFFO per share (non-GAAP) came in at $0.61, exceeding analyst consensus, indicating underlying operational strength despite overall earnings pressure. GAAP revenue totaled $54.0 million, slightly ahead of estimates, but declined on a year-over-year basis from $56.0 million (GAAP) in Q2 2024 as the company continued selling office properties to accelerate its strategic transition.

The biggest headline was a steep net loss (GAAP) of $(265.3 million), compared to a $(3.8 million) loss (GAAP) for Q2 2024. This was mainly caused by a non-cash impairment of $286.1 million across 18 office properties. Non-cash impairment charges reflect a write-down in property values, often due to management expecting to sell assets for less than their previous book value, and are recognized under GAAP. The impairment signals ongoing challenges for office valuations and underlines the urgency behind management’s accelerated sales plan, with $158 million in office assets sold and another $24 million sold subsequent to the quarter.

Operationally, the portfolio saw growth in Same Store Cash Net Operating Income (non-GAAP), climbing 6.3%. This metric, which tracks income from properties held for over a year, is a key performance indicator for real estate firms, showing core rental growth. By asset type, industrial properties delivered a 9.3% increase in Same Store Cash NOI, while office posted a 4.7% rise in Same Store Cash NOI, showing resilience despite the sector's ongoing issues. IOS properties, a subsegment of the industrial portfolio, held near-full occupancy at 99.6% by usable acres, further supporting the company’s strategic direction.

The company also completed two IOS acquisitions after Q2 2025, totaling $52.4 million in Georgia and Florida, and secured a new lease for an IOS redevelopment in Savannah, Georgia. IOS assets, including properties such as truck yards and equipment storage, continue to attract strong demand.

On the capital side, net debt to adjusted EBITDAre (non-GAAP) improved to 6.4x from 6.6x the prior quarter. Proceeds from office sales contributed to this deleveraging, supporting management’s priority to reduce leverage and maintain healthy liquidity. At quarter-end, cash and equivalents stood at $264.4 million, with total liquidity of $355.8 million. The company funded nearly 88% of its debt at fixed rates via swaps, with a weighted average debt maturity of three years.

Dividend changes were significant this period. The company paid a $0.225 per share dividend in July, but declared a Q3 2025 dividend of $0.10 per share—a reduction of more than 50% from the prior quarter. This adjustment is meant to align payout levels with the evolving cash flow profile of a more industrial-heavy portfolio.

Looking Ahead: Guidance and Investor Focus

Management did not provide formal forward guidance for revenue or AFFO. However, commentary indicates leadership expects the pace of office asset dispositions to accelerate in coming months as it works to further shrink office exposure and grow the IOS footprint.

The company continues to sell office assets and redeploy capital into industrial and IOS segments. Key areas to monitor include the tempo and pricing of office sales, the scaling of IOS acquisitions and redevelopment, as well as the stabilization of per-share earnings and cash flows as the transition matures. The sharply reduced dividend reflects a recalibration to align with industrial cash flows.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.

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