Good morning everyone. Thank you for joining KORE US REIT Half Year 2026 Financial Results Webcast. My name is Sheryl, and I represent Investor Relations for KORE. Joining me today are our Chief Executive Officer, Mr. Dave Snyder, and our Chief Financial Officer, Ms. Ai Lin See. Before we begin, let me run through some housekeeping matters. For analysts joining us via Microsoft Teams, please keep your microphones muted throughout the presentation. If you would like to ask a question, click on the raise hand button and wait for our team before speaking. For participants on the webcast platform, please type your questions in the chat box provided. Today's session will begin with a summary of key highlights, followed by an overview of our financial performance, portfolio update, and market outlook. We will open the floor for Q&A.
Without further ado, I will now hand the time over to our CEO, Dave.
Thank you, Sheryl. Good morning, everybody. Let me begin with a brief overview of KORE's first half performance. We delivered our strongest first half leasing performance since listing, signing more than 550,000 sq ft of leases, equivalent to 11.5% of portfolio NLA. This reflects KORE's concentration in the right markets, investment in high-quality amenities and space, continued demand for high-quality, amenity-rich office space, and the strength of our tenant relationships. We also advanced targeted asset enhancement and spec suite initiatives across the portfolio, including the successful repositioning of the lobby at 10800 Plaza Buildings, which has supported leasing and generated strong interest in our new spec suite offerings. Financially, KORE delivered stable performance with income available for distribution increasing 2.1% year-over-year to $20.4 million.
Following the completion of the recapitalization plan and the early resumption of distributions, the Board has declared a distribution of $0.004 per unit for the first half of 2026. On the capital management front, we strengthened our liquidity position with a new $40 million committed revolving credit facility. More broadly, recovery momentum in the U.S. office market continues to build, supported by limited new supply and improving supply-demand fundamentals. I will turn it over to Ai Lin to cover our financial highlights.
Thank you, Dave. Slide four is a summary of KORE's financial performance for the first half of 2026. Net property income rose 6.1% year-on-year to $43.1 million. Including non-cash adjustments such as the amortization of straight-line rent, lease incentives, and amortization of leasing commissions, which have no impact on income available for distribution. Adjusted net property income was 10.2% higher year-on-year at $3.6 million. The increase was due to higher one optimization fee income, higher other operating income resulting from the recognition of restoration fee received, and higher cash rental income, partially offset by lower recovery income.
Finance and other trust expenses of $17.5 million for first half 2026 was higher than first half 2025 by 8.6%, mainly due to higher finance costs following the expiration of interest rate swaps, partially offset by lower. Income available for distribution increased 2.1% year-on-year to $20.4 million for first half 2026. The management is pleased to declare a distribution of $0.004 per unit for first half 2026, representing a payout ratio of approximately 21%. Slide five is a snapshot of our balance sheet as at end June 2026. Total assets remained stable at approximately $1.4 billion. NAV also held steady at $0.70 per unit. Slide six outlines our debt-related metrics as at 30th June 2026.
Aggregate leverage stood at 43.3%, improving from 43.7% last quarter. Our all-in average cost of debt was 4.74% per annum or 4.91% per annum including the amortization of upfront debt financing costs. Our interest coverage ratio remains healthy at 2.5 x. Both sensitivity scenarios show the ICR staying well above the regulatory requirement of 1.5 x. The weighted average term to maturity of our debt stands at 1.7 years, and 58.2% of our loans were hedged. A 50 basis change in SOFR translates to an approximately $1.38 million change in income available for distribution per annum. Importantly, we strengthened our liquidity position with a new $40 million committed revolving credit facility and continue to make good progress on our refinancing efforts.
We are currently in active discussions with our financing partners to refinance the majority of our 2027 debt maturing. Moving on to slide seven. Unitholders can expect to receive their first half distributions on 29th September 2026. For the second half 2026, we expect the distribution pattern to remain broadly consistent with the current period, subject to prevailing market and financing conditions as well as interest rate movements. We would like to remind non-U.S. unitholders to ensure that their Form W-8 is valid and up to date to avoid the 30% withholding tax on distributions. I will now pass the time back to Dave to provide updates on KORE's operational performance.
Thank you, Ai Lin. Turning to slide nine. We executed 492,000 sq ft of leases in the second quarter of 2026, representing 10.3% of our NLA. Renewals accounted for 90.6% of the leases signed during the period, significantly reducing near-term lease expiries. The new leases exceeded vacates and contributed to a minor increase in committed portfolio occupancy to 85.3%. Portfolio rent reversion was positive at 1.5% for both the second quarter of 2026 and the first half of 2026, driven primarily by the renewal lease at Bridge Crossing in Nashville, where we secured an early partial renewal of the main tenant.
As the tenant renewed a substantially smaller footprint of 69,000 sq ft, we are actively repositioning the remaining 116,000 sq ft for future lease opportunities and have several quarters to try to find new tenants before the space comes back in Q2 2027. Leasing demand continues to be supported by a diverse mix of industries led by the technology, advertising, media, and information sector, which accounted for 23% of leases signed during the quarter, followed by medical and healthcare at 22%. I'll now walk you through the key occupancy movements across our assets for the quarter on slide 10. At The Plaza Buildings, occupancy improved to 81.4% from 79.6%. Notably, we leased the final spec suite at The Greenhouse in 10900 Plaza Buildings, bringing all six spec suites to full occupancy.
We also secured a 2,200 sq ft lease at The Post, our new full floor of spec suites currently under construction. At Great Hills Plaza, we signed a lease for a 7,200 sq ft spec suite currently under construction, highlighting continued demand for high-quality, move-in-ready space even before project completion. Biltmore Center reported approximately 10,200 sq ft of expansion leases during the quarter, that was offset by the departure of a known vacate of approximately 17,700 sq ft. At Iron Point, we secured a new lease and completed an expansion with an existing tenant, contributing to the increase in occupancy to 82.6%. At the Westpark portfolio, we are actively marketing space that have vacated in the first quarter and are currently in discussions with prospective tenants to backfill a portion of the vacancy. I'm sure we will be announcing some good news at Westpark shortly.
To drive occupancy growth across the portfolio, we continue to execute a focused leasing strategy centered on enhancing asset competitiveness and delivering move-in-ready space solutions to capture tenant demand. First, we are repositioning assets through targeted upgrades and reconfiguration initiatives. A good example is Bridge Crossing, where we are converting the property from basically a single-tenant configuration into a multi-tenant environment, enhancing leasing flexibility and broadening the potential tenant base, which will also reduce tenant concentration risk over time. As part of that process, we will be centralizing and substantially improving the tenant amenities. Across the portfolio, we are also advancing asset enhancements. Current projects include an outdoor amenity refresh of Westech 360, upgraded first-floor furnishings and a fourth-floor renovation at 105 Edgeview, renovations to interior common areas, and expanded outdoor amenities at Iron Point, and a significantly upgraded lobby experience at 1800 West Loop South.
Second, we continue to execute an active spec suite strategy where we see clear demand. Building on the success of our earlier projects, we are currently completing the build-out of The Post, a full spec suite floor at 10800 The Plaza Buildings, planning the conversion of a full floor of spec quality suite into three spec suites at 10900 The Plaza Buildings, and developing two spec suites each at Westech 360 and Great Hills Plaza. Together with our ongoing leasing efforts, these initiatives support our target to end 2026 with occupancy broadly in line with the level achieved at the end of 2025, around 87%, even with the known vacates in the second half of 2026. These initiatives may also help us to replace the known vacates of 204,000 sq ft in 2027, and hopefully lead to increase in occupancy in 2027, even with the headwinds of significant known vacates.
Slide 12 provides a good example of how targeted asset enhancement initiatives can translate into tangible leasing outcomes. At 10800 Plaza Building, we completed the repositioning of the lobby by converting a former bank branch into modern tenant amenity space and additional leasable area. The lobby transformation has significantly enhanced the overall arrival experience, improved the property's appeal, and strengthened its marketability. Importantly, these efforts have already produced positive leasing results. Newly created lobby space has been leased, and as mentioned previously, we also secured one lease for one of the spec suites at The Post on the third floor of the building that is currently under development before June 30th. We leased the second suite in July. We continue to see strong tenant interest in the remaining spec suites under construction. Our spec suite strategy has consistently delivered positive leasing outcomes across the portfolio.
One of the key advantages of this approach is that it requires lower long-term capital expenditures, though the upfront cost is typically higher. It also allows us to respond more quickly to tenant demand and reduces downtime, which results in more rent over time. It can also generate higher rental rates. To date, we've achieved the full lease-up of all completed full spec suite floors across the portfolio. Examples include 1800 West Loop South, where we repositioned underutilized space into a premium market-ready offering; Iron Point, where a major vacancy was successfully converted into a flexible spec suite program; and The Greenhouse at 10900 Plaza Building, where all six spec suites have been leased. Encouraged by these results, we have more than 43,000 sq ft of additional spec suites currently under development and to be delivered by the end of 2026, with approximately 28% already leased ahead of completion.
We'll continue developing additional spec suites in the appropriate locations as we move into 2027 as well. Slide 14 highlights our latest spec suites project, The Post at 10800 Plaza Building. The Post will feature six studio-style spec suites, together with a dedicated amenity hub, including meeting facilities, shared workspaces, and breakout areas exclusively for the use of tenants on that floor. We are targeting completion at the end of the third quarter of 2026, and as mentioned previously, have already secured signed leases for two of the suites before any interior walls have even been constructed. This early leasing momentum gives us confidence that The Post will further support occupancy growth at The Plaza Buildings and will lead to additional spec suites development at the property. KORE's portfolio remains well diversified across geographies and industries.
The majority of our portfolio by NPI is in growing tech hubs such as Bellevue, Redmond, and Austin, as well as Denver, which is a major beneficiary of the expanding aerospace and advanced technologies ecosystem. The table on slide 16 shows our top 10 tenants. You'll notice that Homeland Security has moved up in the ranking this quarter, reflecting additional space taken at 125. Firstly, Comdata's contribution to CRI declined following its partial renewal and footprint reduction at Bridge Crossing that will take effect in Q2 of 2027. Overall, the portfolio continues to benefit from a diversified tenant base with low concentration risk. Our top 10 tenants account for only 27.7% of CRI and 24.6% of NLA, with no single tenant contributing more than 3.8% of cash rental income. That is substantially lower than our competitive set.
Slide 18 reflects the structural trends in the U.S. office market, which are broadly consistent with the recent past, with the same key themes playing out. Supply remains a positive contributor, with limited new development and office conversions helping to support improving market fundamentals. At the same time, demand recovery remains selective, with leasing activity concentrated in higher quality assets with strong amenities in business-friendly markets. Moving on to slide 19. The U.S. office market continues to show signs of gradual recovery, with leasing fundamentals improving and supply pressures easing. Over the past 12 months, net absorption reached its strongest level since 2020, providing further evidence that demand is gradually recovering. On slide 20, we address the recovery in office demand. What we are seeing is a clear shift towards spaces that incorporate individual workspaces, while also including spaces that support collaboration, employee experience, and health and recreation.
According to CBRE's latest global workplace survey, amenity space has increased by over 120% since 2021 and now represents 22% of office space, more than double the 10% share seen in 2021. At the same time, the share of space dedicated to individual workstations has continued to decline, while collaboration and support spaces have increased. This reflects how occupiers are increasingly prioritizing employee experience, team interaction, and workplace utilization when making real estate decisions. These trends reinforce demand for high-quality, amenity-rich office environments, which aligns well with KORE's portfolio and our ongoing asset enhancement strategy. Today, the majority of our properties offer amenities such as tenant lounges, conference facilities, fitness centers, and outdoor collaboration spaces, with many also providing food and beverage options. Next, slide 21 highlights a structural trend that continues to support demand in our markets. Corporate migration to lower cost, business-friendly locations.
Since 2018, more than 700 corporate headquarter relocations have taken place across the U.S., with Texas and other Sun Belt markets among the largest beneficiaries. A recent Fortune 500 example is ExxonMobil, which moved its legal headquarters from New Jersey to Texas in 2026. Given that Exxon was founded in New Jersey more than 140 years ago, the decision underscores the increasing attractiveness of Texas as a corporate hub for major companies. Other examples include Samsung Electronics America relocating its U.S. headquarters to Plano, Texas, part of the Dallas MSA, to support its long-term growth strategy and access the region's deep technology talent pool. Similarly, Public Storage relocated its headquarters from California to Frisco, Texas, also part of the Dallas MSA, attracted by lower operating costs, a favorable tax environment, and strong population growth.
These examples demonstrate that the migration of major corporates toward growth-oriented, lower cost markets remains a powerful and enduring trend. Importantly for KORE, many of our assets are located in markets such as Dallas, Austin, Nashville, and Orlando, which continue to attract corporate expansion, job creation, and investment, providing supportive backdrop for leasing demand over the longer term. Slide 22 addresses concerns around AI and office demand. Based on what we're seeing today, the impact remains broadly positive. AI-related layoffs account for only a small portion of overall workforce reductions, and it remains difficult to distinguish AI-driven job cuts from broader cost optimization initiatives. In fact, AI currently seems to be supporting office demand. In the first quarter of 2026, technology companies accounted for almost 23% of U.S. office leasing activity, the highest among all sectors.
Since 2019, AI companies have leased more than 20 million square feet of office space across San Francisco and Silicon Valley alone. As AI investment shifts from experimentation to large-scale deployment, demand is growing in markets with deep talent pools and innovation tech ecosystems, including Bellevue, Redmond, San Francisco, and Austin. While some tasks may be automated, AI is expected to drive net employment growth of approximately 7% globally by 2030 as job creation more than offsets displacement. Overall, this is likely to reinforce demand for collaboration in high-quality, well-amenitised office space. To conclude, while the U.S. office recovery remains selective, the key demand drivers we discussed today are aligned with KORE's portfolio positioning. Given a high-quality portfolio located in key growth markets benefiting from corporate migration, population growth, and business investment.
Supported by proactive leasing, targeted asset enhancements, and disciplined capital management, KORE has consistently maintained occupancy above major U.S. gateway market averages since IPO. We believe KORE is well-positioned to capture the recovery and office demand while creating long-term value for unitholders. With that, I'll hand it over to Sheryl.
Thanks, Dave. We will now take questions. For analysts who are joining us on Teams, please click on the Raise Hand button if you would like to ask a question, and wait for our cue before you unmute yourself to pose your question. For those joining us online via the webcast platform, please type your questions via the chat box provided. Hi, [Derrick]. You may ask your question.
Good morning, [Derrick].
Hi, Sheryl. Hi, Dave can you hear me?
We can hear you just fine.
Yeah. Okay. Thanks for the presentation and congrats. You're delivering ahead of my estimates, which is a good sign. I wanted to ask a few questions. I hear you talking a lot about the spec suite strategy. I think it's working out. Mainly specifically to The Plaza Buildings. I think it's taken up. Could you give us a sense about the rents that you've been able to achieve there for your spec suites versus typically what you could get for a building? Secondly, does your new tenants who take up the spec suites, how long typically are they away for the property? Yeah, that's my first question.
Well, that sounds like two questions, actually. Let me-
Oh, yeah.
hit the first one first. In terms of the rates that we're getting at Plaza for spec suites, typically our rates at Plaza are asking rates, I guess maybe, somewhere typically around $44 for the portfolio. At the spec suites that we're doing right now, we have actually been able to achieve, I think, probably the highest rents that we've ever had at Plaza buildings. Mind you, that's what we used to call the U.S. Bank building, the 10800 building. We just redid the lobby at, which is the smaller floor plate, historically considered slightly less attractive with fewer amenities. We're fixing that, there's still a lot of amenities at the building. We're getting things like $47 on that for a 2,200-ish square foot lease. We're feeling really good about the rates there. The rates really are not the big factor.
If you figure 2,200 sq ft and say we're $3 above, it's really not going to contribute a ton. The biggest benefits are going to be when we turn that space, we're going to have much less downtime. Typically, if we turn a space, it's not a spec. We're going to have to do a build-out for a tenant. Once you find a tenant, that's probably a six-month build-out. Going without rent for six months can be tough. We find that many of our spec suites we can lease and have anywhere from zero to maybe one month downtime, typically. Sometimes it goes a bit longer. That means, in this case, you're talking about $47 for six months, so half of that amount per foot. That's a huge savings.
Not having to spend as much when we turn the space because we're only doing basically carpet and paint, maybe only paint in some cases if it's a short term. We're saving a ton of money doing it that way. In terms of the leases that we typically sign at Plaza, I'd say normally it's three, four, five years. The spaces that we're signing in these spec suites align with that at somewhere between three and four years for the couple that we just signed for The Post building, which that shorter timeframe also is typical for us with tech tenants, also typical for us in Plaza. That downtime benefit really can make a big difference in a place like that where we tend to have shorter leases as well.
I see. Sorry, I missed what you mentioned. Typically spec suites you get a premium of $3 or $4 per square foot?
I would say we don't have an answer for that. What we've gotten at Plaza right now is a premium of about that, in terms of what we're leasing The Post for right now.
Yeah.
I think in the portfolio, we're going to be working through some of our history so that we can actually provide some information along those lines next quarter. We'll probably provide some more information even when we get to fourth quarter year end. We're going to try to put some numbers around the benefits to that downtime and the rent that we would get there, the cost savings over time from turning the space at lower cost on a go-forward basis. Also in terms of rent rates and the benefit we get there. I think over the next couple of quarters, we're going to be able to start giving pieces of that out. Really help people understand better the significant benefits that we see from spec suites.
Got it. Okay. My second or third question. I'm just curious about your vacancies at the Westpark and Westmoor. Could you give us some color how you see it trending by the end of the year?
Let's go ahead and start with Westpark. I figured, said even in my comment that we expect to have some good news there.
Yeah.
Shortly, which we do. I think we will have a decent amount of leasing at Westpark before the end of the year. When we said that we're hoping to end the year at around that same 87% level that we ended last year, even with giving back all the Meta space, other known vacates, all the things we've dealt with this year. I think that's going to in large part be coming from Westpark. I think that we will see at least a couple of leases there. It may not all be Meta space. We have one other large space that was vacant there, about 32,000 sq ft. We've got three buildings that are occupied, all but a couple, most another.
I think some combination of a couple of those will probably happen this year, and then I would expect that the remainder of that to happen in 2027. As for Westmoor, we've got a little bit of vacancy that just came back on that 17,000 sq ft . We've had a little bit of leasing there. We've got Highr idge, which is the tenant in one of the buildings. They have done a forward renewal, where they're going to be giving back some of the space at maturity, and we have or are about to finish leasing basically all of that space back up. I don't expect that we will actually recognize any impact from the space that they're going to be giving back. I think that's a positive for Westmoor in terms of keeping things strong.
We've had one tenant there that's done some expansions. We've got some other tenants that have been reaching out. One of the fairly significant, it's not one of the two biggest, but one of the fairly significant tenants has been talking to us about renewing a little bit early, things like that. I think we're feeling good. That market is a little tough, we've got one building basically that's vacant out of a six-building portfolio. Nearly vacant. That is the one we're focusing on. We've redone the lobby there, we have been approached at least, by at least one tenant about taking some space there as some expansion space into that building. There has been some amount of touring there.
I don't know exactly the timing, but I do expect to eventually see some space leased at Westmoor that's going to help us, but I think that's more likely going to be 2027. I feel pretty good about leasing some space there in 2027.
Okay. Got it. Sorry. Just one more question. I know [Vijay] is waiting, but I was just curious about your performance. You mentioned about termination income, right? This first half. If you strip it out, how would your NPI look year-on-year?
Hi, [Derrick].
Hi, Ai Lin.
Thanks for asking Ai Lin's question. I appreciate it.
Okay.
We mentioned that there is a one-off termination income as well, r ein statement cost, restoration fee that was all one-off in nature. If we strip that out, adjusted NPI is probably a bit lower, but this is mainly coming from lower recovery because there are some timing in terms of the recoverables, like recoverables of expenses, as well as some higher software expenses this is offset by the higher rental account. In terms of cash rental accounts, they're actually higher.
Okay. Got it. Okay. That's all for me for now. Yeah. Thanks.
Great. Thanks, [Derrick].
Hi, [Vijay]. You want to ask a question?
Good morning, [Vijay].
Hey. Hi. Morning, Dave, Ai Lin, and Sheryl. Congrats on a decent first half considering the volatility in the market. Just a couple of follow-ups, maybe firstly on [Derrick's] question, earlier question of reinstatement and the one-off termination. It was about $2.6 million, if I'm not wrong. I just want to confirm that this amount has also been taken off from the distributions because your flow-through from NPI to distribution seems to be a bit lower.
Vijay, yes, you are right, because it's capital in nature. Yes, it has been deducted from the distribution.
Okay. Can I just confirm the amount? It's $2.2 somewhere around $2+ million, right?
For the restoration fee, it's about $2.3 million.
Okay. Got it. Okay. Since you're on the line, I think maybe one more question on financing cost, maybe the new $40 million loan. Is this an additional facility or is it an existing revolver refinancing? Possibly, what should be the financing cost, especially with the recent interest rate increase in the market you're seeing, and what could be the guidance for 2027 and 2028?
Yes. For the $40 million, it's actually a new loan. It's a new facility. We had a new relationship with a new bank. Yes, this is an additional facility. As for the guidance on the interest rate, assuming the current SOFR, we will probably end the year 2026 at about similarly 5.1%.
Okay. 5.1%. I think it's too early to predict for FY 2027, I guess.
Yeah.
Okay. Back to Dave on some leasing questions. I think probably in terms of leasing, for this Bridge Crossing, is this Comdata that is downsizing? Maybe the reasons why they are downsizing. Is there any other building where you expect occupancy to improve other than as part of probably The Plaza Buildings? What should we expect?
Okay. Let me go ahead and try to take those in a little bit of order. It is Bridge Crossing, or rather it is Comdata at Bridge Crossing. That is where they're going to be downsizing. It really came about, they've got a new CEO who just wants to cut footprint. Basically, they originally came back trying to keep way more of the space, wanted an additional entire floor. They got told no. The people locally there said, "We need this space." The CEO, who's in another market, basically just said, "No." We had fully negotiated it, everything was ready to go. We had signed it and were waiting for their signature. The new CEO came in and just backed off the whole thing. At this point, they're in 69,000 sq ft. They gave back the rest.
The last conversation we've had with our leasing agent, the asset manager, is that they're pretty confident they'll be coming back and asking for some of the space back. We'll see if that happens or not. As for the moment, we feel pretty good about the space. We already had a plan that we were working on and have basically built out now for what we're going to do with the amenities, just with the amount of space we originally thought they were giving back, because we do need to do some work there. It was essentially what had been there previously for a single-tenant use building. We're going to do that work. I think that's going to have some real benefits for us.
In terms of some of the other places and Plaza Building and the like, in our known vacates that are coming up for the rest of this year, we're only really looking at about 28,000 sq ft. That's a mix of the one small other tenant at Bridge, one tenant at Westech 360, one tenant at Bellaire. When we look into 2027, the majority of that is going to be coming out of Bridge Crossing. That's the 200,000 sq ft, 116,000 sq ft of it's at Bridge. We've got some significant piece from one tenant at 10800 Plaza Building, Westmoor Center. The Westmoor Center either is or we expect will be shortly back filled. There's a very small space at 125. It's not going to be The Plaza Buildings.
Plaza Buildings has very little role at all coming up in 2027, so it gives us a really good time to bump up occupancy there with our plan of building out The Post that we're already building for a full-floor spec suite. We are going to go ahead and take the third floor of the 10900 building. That is one of the UiPath floors that came back that is built to the same level or even higher of our spec when we build there. It's fully to the level of what we call tech spec. Exposed ceilings everywhere, polished concrete floors, great build-out. Just all the right spaces and everything else. We're going to split that into three spec suites and see if we can't find some tenants that are in kind of a more typical size for us.
There's going to be some cost, but far less, we expect, than typically doing a spec suite at The Plaza Buildings because we don't have to expose ceilings, polish concrete floors. We're erecting walls and doing things like that, creating a common area corridor. That's going to be a positive, and then, in the not too distant future, I expect we'll do another full floor of spec suites at 10800. We might even start on it before the end of the year, given the leasing's been so strong on The Post. We'll just plan on taking some of those other full floor vacancies we got back that we've been sitting on because they're very high quality. Very nice build quality. The UiPath space and others are full tech spec, amazing space.
We're hoping to find full floor tenants rather than have to do a little bit of work to demise them. The way things are going and with our goal of trying to keep those tenants smaller rather than larger, I think we'll be doing a lot of spec suites through 2027. As we build that out, I think we'll see leasing go just as quickly as it's going into The Post, which means Plaza's going to have, I think, a great year in 2027.
All right. Got it. Just one last question. Is there a revised CapEx guidance for 2026 and 2027? Also are you looking at divestment? Is this still a possibility in this year?
For revised CapEx, there's no change for 2026. We think our budget for the year should work just fine. The $50 million we've talked about is still the same $50 million. Probably do a little bit of retickering of some of that to move a little bit of money out of what would've probably been TIs and move that into spec suites so that we can start early on some of the projects that I was just mentioning. I would say a change overall. We haven't given a guidance number yet for 2027. In terms of divestments, I think we're looking at 2027 as what I've said in the past. 2026, we'd hopefully start to see some pickup, maybe see some banks getting back into the market and hopefully be able to have a chance at divestment in 2027.
Right now with all the things that we're seeing and all the uncertainty in the markets, there may be a little bit of a delay in that. It could be end 2027, something like that, we shall see. We've got Iron Point, Sacramento, that would be on the list for things that we would dispose. 1800 West Loop in Houston is the question mark, and that question mark exists because we haven't seen a lot of rental increase, even though we've seen cost increases for TIs and the like. If we're able to drive some rental increase with some of the work we're going to do at 1800 in the lobby and potentially elsewhere, before the market comes back, we might find that that's a building we keep. We might find that's still a building that we want to go ahead and do.
We shall see. I don't think we'll be seeing a divestment until as early as second half 2027.
Okay, thank you. That's all I have.
All right. Thanks, [Vijay].
Okay. We're going to take questions from the webcast. There's one question from [Esther]. What is the expected payout ratio for FY 2027?
For the payout ratio for 2027, we have not provided any guidance for that, given all the uncertainties in the market for now. Basically, when we look at the payout ratio, we will consider portfolio valuation, the leverage as well as the performance. Given what is happening in the market now, we felt that it's probably a bit too early now to provide a guidance for the 2027 and 2028. As when the time goes, we will provide the guidance when we are able to.
Yeah. I think we can safely say that the goal is to increase the percentage over time. For now, we've done the distribution for the first half, and we would expect that to be the baseline going forward. We expect to see increases over time.
Okay. The question we have is on the Meta space. I think Dave has previously mentioned about some of the updates on Meta space. Last time it was mentioned that you're looking to lease out half of Meta space by Q2 2026. If Dave you would like to comment a bit more on when do you expect the Meta space to be back filled.
I don't think we've ever said we were going to lease out Meta space by Q2 2026, because that would've been an impossibility. I think we said that we were hoping to release some of that space, and if we're fortunate, we'd release two of those spaces of the three before the end of 2026, which remains our target. At this point, and again, I brought up earlier, in response to one of the other questions, we really have four significant spaces at Westmoor portfolio. We have the three buildings from Meta, and we have the significant portion of Building A, about 32,000 sq ft that we already have vacant. Of those four spaces, yeah, I still feel confident we will lease at least two of the four before the end of the year.
If things go well, we might be able to lease part of the third or maybe even all of the third of those spaces.
Thank you. Next question we have, which KORE delivered its strongest first half within the portfolio in Q2? Which markets or assets drove this and is this mainly a timing effect from renewals or target effect of broader improvement in tenant demand?
This was mostly the renewals. It's 90% renewals that we saw for the first half of 2026, which in some ways I imagine some people expected to see a huge bump in occupancy when you see the number of square feet that we renewed. However, if you just look at and focus on what the lease expirations are over the next couple of years that were quite high that I think some people were concerned about, those have been reduced down to numbers that we typically see in any given year. I think it's taken a lot of risk off the table that way. When we look at where we saw a lot of the renewals and where we saw a lot of leasing happening, the biggest piece of it, I guess, was in Bellevue and Redmond, which was about a quarter of that.
Dallas saw another big chunk, as did Denver, with both of them somewhere in a range around 20%. Bridge Crossing and in Houston made up most of the rest, and the other markets were pretty small as a percentage of that. Significant renewals, some new leases, we expect to continue to see some renewals happening throughout the rest of the year. Also hopefully some fairly good sized new leases happening before the end of the year as well.
Thank you. Next question we have. Committed occupancy was 85.3% at the end Q2 below your 87%-88% as at end 2025. Are there targeting occupancies you broadly in mind for year-end? What gives you this confidence that you can achieve this?
That's a great question. I think the confidence that we have is we've got great space. When we look at Westpark, that has been a place where no matter what space we get back, it leases up very quickly. There isn't really a whole lot in a competitive set that can really truly compete with the ability we can give tenants of having a ground floor, with loading docks, space that can be used for lab development, production, whatever it is that they need to do with actual physical products. It can also be used for office space, but that may not always be its highest and best. A second story where they can have all the office with the engineers, with the other folks up top. They've got the ability to have some high clear height in some of that space.
A lot of that first-floor space gets to substantial clear height that you wouldn't typically see in an office building. Essentially a full two stories clear height, and maybe more. 20 sq ft or sorry, height, clear height in some of those spaces. There's just really some great opportunities there. It's in high demand, and we just don't see much that competes. We have always been able to lease that space quickly. That's why we feel pretty confident we're going to have strong leasing at that property. I think the spec suite program that we have has delivered results that have been fantastic every time we've done it.
I think we'll continue to see the benefits of that in Austin where we've got spec suites under construction, Plaza Buildings, where we've got spec suites under construction that are leasing faster than we can even almost start building them, and more spec suites to come. Also some continued demand that we're seeing in some of the other markets that we have. I think getting to that 87% at the beginning of the year felt like it was going to be a big challenge. Having a lot of the renewals done that we've seen over the first half with some of the new leasing that we saw this quarter that offset all the other known vacates that came back and gave us the ability to even grow occupancy slightly, was a big positive.
And I think the momentum from the things that I already talked about is going to get us the rest of the way to that 87% by year-end.
On occupancy, there's also another question. The committed occupancy is 85.3%. What is your current economic occupancy? Where do we hope to end 2026 and 2027 on both the committed and economic occupancy?
I understand where the question comes from, we don't disclose our economic occupancy, that one is not going to get answered. In terms of committed occupancy, we've mentioned we've got 200,000 sq f t of known vacates coming up in 2027. It's not too far off what we had coming up in 2026, when we were sitting in 2025, looking ahead. At this point, we're feeling quite confident that 2026 is going to end right around where 2025 did. I think we're hopeful with the strategies that we have in place and are developing for leasing space. Substantially that's doing some of the remodeling and reworking that we need to do at Bridge Crossing, to make sure we've got all the right amenity space built out there so that we can attract new tenancy. We've got 116 plus the 13 we expect to have as tenants.
Basically about 140,000 sq ft to work with there in a market that is continuing to be one of the strongest markets in the U.S. Nashville has just been going crazy for years at this point, we feel good about the markets that we're in there. We've got a lot of space at Plaza, which is the place where we move the needle the most, because it's got the highest rent in the portfolio. As we lease up space there, it has a disproportionately positive impact on NPI and other things as we lease that space. The plans I mentioned in response to one of the earlier questions about building out more spec floors at Plaza is going to really contribute to that. We've got space at Westmoor, we've got space in Austin.
We've got what I would call opportunity in a number of places. That also does include Iron Point, Sacramento, which is still in the low 80s as well. We've got a lot of levers we can pull, and that we are pulling to make sure we can do that, and we've got a lot of opportunity. So far, we've seen a lot of great results in the first half of 2026, and we expect to keep that momentum going.
I think [Vijay] actually covered a bit on the market that you are seeing, just now in your response. Maybe just to add on, which of KORE's markets are recovering faster, and which do you think will continue to lead in the future?
That's also a very good question. I'm going to just run through them all, I guess, at this point. For Bellevue and Redmond, I'm going to lump those two together. Recovery there is very strong. I would probably say at this point, Bellevue may be back to its old place of being what I would call the strongest market in the U.S. It's one of the few markets where we're seeing some construction happening for office buildings, and those are being developed spec. No tenancy. We've seen eight come out of the ground and be substantially leased, nearly fully leased already. There's been another that's done basically the same thing. There's talk of at least one to two more happening in downtown Bellevue and that for us has been a net positive.
Typically, that may not be the case, but in the case of Bellevue, with construction costs as high as they are, those rent levels at those new buildings are so much higher than ours that it has really given us some of the ability to raise rents that we've seen. I mentioned earlier some of the highest rents we've ever achieved at Plaza Buildings were on those spec suites, and I think that some of that is coming from the fact that these new developments are pointing to maybe even higher dollars per foot higher than our rents. While the quality exterior of those buildings is absolutely nicer than ours, the quality of the interiors We're sitting in the same space. We build out the same level of space as they do, and our amenities are quite nice as well. We feel great there.
Redmond has been very strong. Redmond is the one market where we saw rent increases basically throughout the pandemic and since. That market has never not been strong. If we move down to Sacramento, if I was in downtown Sacramento, like the competitors, I would have to tell you, there's not much leasing going on, and it's not great. In our market, out in Folsom where we are, things are still looking good. We've had good momentum. We just suffered there from having a large group of tenants over the course of 12, 14, 18 months, whatever it was, that vacated for a number of different reasons. A lot of them were in the mortgage industry, other things related to housing, which kind of fell apart during the pandemic. Then there's some others that had other things happen to them.
Since we did the work there and built out our spec building and built out the new amenities, momentum's been great, I think we'll continue to lease there, and that should go well. Denver is a place where we do have questions. We're doing pretty well, once more in terms of maintaining where we're at. The overall market or sub-market that we're in has some struggles. We are seeing a big pickup in the areas due to some of the aerospace technology defense firms and the like and Boulder seems to be doing quite well, which means that we'll likely be more pushed into our sub-market, which is between Boulder and Denver. That may be one of the more troubling locations in terms of where we're focused.
Austin, if again, if I was downtown, you'd have a very different conversation, in our sub-market, we feel really good. We've had great momentum. We're doing quite well there. If we move over to Dallas, we feel really good about both Dallas as a whole and our sub-market in particular. As we move to Houston, I've already talked about the concerns there in terms of being able to raise rents and that being a necessity for that to be a long-term keep in our portfolio. For now, we are seeing some good leasing of the spec suites that we've built. We do have touring going on. I'm hopeful that we'll be having some leasing occur in that building in the not-too-distant future, which should help for overall occupancy and income.
As we move from there, Nashville we've already covered, I think, pretty well the upsides of that market. As we move into Florida and Orlando, that market has been incredibly strong for us. Those buildings, even if we lose tenants, again, we fill them right back up. I think we feel really strong. 95% occupied now, and if there's small dips here and there, we tend to get back up to this level relatively quickly. Our micro market, if you will, in Maitland, has a limited supply of Class A office. We have some of it's not the best. Some of that office has been taken off the market by a firm that has bought some of it and used it for their headquarters, so no longer multi-tenant office. That happened last year.
We could potentially see more of that happen, for now, we feel good about that market and our ability to continue to lease there. Overall, I think we feel quite good. The two places that I would tell you that we're really looking at focusing on would be Denver and Houston. Make sure we're doing the right things with those properties to attract the right tenancies, make sure that we're signing the right leases. Right now, if you think about a place like Houston, for maybe those rents haven't been growing. What that means is we need to sign longer leases there than we do in the rest of the portfolio where we can be profitable with shorter-term leases. That's what we're looking at there.
There are things that we can do to try to make those more profitable, make that work, that is the focus in markets like that and also potentially in Denver as well.
Thank you, Dave. I think we have covered most of the questions on the deck. Are there any more questions from the analysts? If not, we will proceed to end the call. Okay. I think that's all for today's webcast. Thank you everyone for attending, and have a pleasant day ahead.
Thank you all very much. We appreciate your time and interest, and as Sheryl said, have a wonderful day.