As we look back on the first quarter of 2025, we continue to navigate a market shaped by both headwinds and emerging tailwinds. Realized returns were 11.07% and total returns were 13.67% for the quarter and while the cumulative effects of several years of challenging market conditions are still being felt, we are also seeing encouraging signs of progress across the portfolio and we have been fortunate to capitalize on several opportunities this quarter, including two new acquisitions.  

Here are a few highlights: 

Leasing activity continues to improve. In March, we signed a 60,000 SF lease at Centennial, our largest leasing win of the period. Not only does it fill the largest vacancy in our portfolio, it also repositions the space from back-office call center space to light manufacturing/industrial use, enhancing the property's long-term value and providing meaningful cash flow starting later this year. This lease, in conjunction with other recently signed leases brings the portfolio to roughly 87% leased. 

Tenant turnover remains a challenge. While overall occupancy remains relatively stable, we are experiencing more churn than we would like, along with the associated downtime and re-tenanting costs. These challenges are not unique to us, but what sets us apart is how our team continues to respond. Our asset managers and broker partners continue to find creative solutions to help support the portfolio’s ongoing performance. While these costs and vacancies can weigh on the short-term results, they are part of the process that will ultimately increase the portfolio’s tenant and income profile. On a related note, office leasing conditions nationally have largely stabilized, and our portfolio continues to outperform due to a range of strategic advantages. 

Operating expenses have stabilized. We continue to work diligently to identify opportunities to manage and reduce costs where possible. A recent win on this front: after several years of 20%+ annual increases in insurance premiums, our latest portfolio renewal will result in a premium decrease. 

Asset values have remained resilient, as demonstrated by the recent sale of a net lease property this quarter at a better-than-expected valuation. We will continue to evaluate additional dispositions this year, if pricing and demand remains strong.  

Acquisitions that meet our criteria continue to be difficult, as asset values have not adjusted to the current interest rate environment. We continue to identify compelling situations, whether driven by motivated sellers or where our expertise and partnership allow us to create long-term value. Recent examples include the retail center we acquired in Tucson and a build-to-suit project in Boise this quarter. We also have several properties in the pipeline that could materialize soon, some of which we have been working for months and in some cases years.  

We will expand on these themes throughout this report and during our upcoming call. As always, we are grateful for your continued trust and partnership. We remain focused and determined to outperform during these more challenging conditions, positioning ourselves to fully capitalize on the inevitable upswing on the other side of the cycle.