Piedmont Office Realty Trust Inc

Good morning, ladies and gentlemen, and welcome to the Piedmont Office Realty Trust Third Quarter 2021 Earnings Call. At this time, all participants are in a listen-only mode, and the floor will be open for your questions and comments following the presentation. It is now my pleasure to turn the floor over to your host, Eddie Gilbert. Sir, the floor is yours.

Thank you, operator, and good morning, everyone. Thank you for joining us today for Piedmont's Third Quarter 2021 Earnings Conference Call. Last night, we filed our 10-Q and an 8-K that includes our earnings release and our unaudited supplemental information for the third quarter that's available on our website at PiedmontREIT.com under the investor relations section. During this call, you'll hear from senior officers at Piedmont, and they may refer to certain non-GAAP financial measures such as FFO, Core FFO, AFFO, and Same Store NOI. The definitions and reconciliations of these non-GAAP measures are contained in the earnings release and in the supplemental financial information. Also on today's call, the company's prepared remarks and answers to your questions will contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements address matters which are subject to risks and uncertainties, and therefore actual results may differ from those we anticipate and discuss today. The risks and uncertainties of these forward-looking statements are discussed in detail in our press release as well as our SEC filings. We encourage everyone to review the more detailed discussion related to risks associated with forward-looking statements in our SEC filings. Examples of forward-looking statements include those related to Piedmont's future revenues and operating income, dividends and financial guidance, future leasing and investment activity, and the impacts on the company's financial and operational results. You should not place any undue reliance on any of these forward-looking statements as these statements speak as of the date they are made. At this time, our President and Chief Executive Officer, Brent Smith, will provide some opening comments and discuss our third quarter results and accomplishments.

Brent? Good morning, everyone, and thank you for joining us on today's call as we review our third quarter financial and operating results. On the call with me this morning, along with Eddie Gilbert, our Executive Vice President of Finance and Treasurer, are George Wells, our Chief Operating Officer, and Bobby Bowers, our Chief Financial Officer, as well as other members of the Senior Management Team. Reflecting upon the third quarter results, this was an outstanding quarter in which we made meaningful progress against several strategic objectives. Financial metrics were strong, with our highest reported quarterly FFO per share since our IPO, as well as a double-digit increase in cash basis, same story in Hawaii, along with a sizable double-digit rent roll-up on both a cruel and a cash basis. Additionally, we were able to complete another significant debt refinancing at extremely attractive spreads. Bobby will touch more on that accomplishment during his comments. Perhaps the accomplishment that we're most pleased with is the return of new tenant leasing activity to pre-pandemic levels, and importantly, Our pipeline for the remainder of the year remains strong, giving us confidence that we'll meet most of our targeted annual leasing goals across our seven markets. Equally significant was a sizable strategic acquisition that was completed subsequent to quarter end, along with several meaningful ESG milestones that were achieved. I'll go into more detail on each of these topics today, but first let me start by providing additional color on our third quarter leasing activity. Leasing activity for the third quarter totaled 509,000 square feet, bringing total year-to-date leasing to just under 1.8 million square feet, significantly exceeding in three quarters what we realized for the whole year in 2020. We project that our 2021 leasing will in fact exceed our average annual results for the four years prior to the COVID pandemic. More importantly, however, is that approximately 43% of our third quarter leasing or 221,000 square feet, was executed for new tenant leases, marking a return to pre-pandemic new leasing levels. This quarter's leasing activity was representative of the mark-to-market opportunity across our portfolio as well, generating rent roll-ups of 10.5% on a cash basis and 16.1% on an accrual basis, along with a weighted average lease term of 6.4 years and with limited levels of committed capital of approximately $5 per square foot per year of term. Leasing volume was robust and well distributed across all our markets, with almost 50 leases executed during the quarter and only one lease accounting for more than 25,000 square feet. The largest lease completed during the third quarter was an exciting and complex transaction with Microsoft at our 515 Whiteside property in the Boston huburb of Burlington. At the surface, it's a 10-year renewal and expansion, totaling approximately 155,000 square feet. However, in conjunction with its pending acquisition of Nuance Communications at our adjacent one Wayside property, Microsoft will soon lease 356,000 square feet at the Wayside campus, with the anticipation of leasing the remaining approximately 120,000 square feet over time. making this a major Siegel tenant campus for the company in the Boston market. Looking forward, I'm encouraged by the continuing momentum in all our prospective tenant pipelines, particularly in our Sunbelt markets of Atlanta, Dallas, and Orlando, where we are witnessing rental rate growth, increased leasing velocity, and confirmation of the population migration trends and major corporate relocations into these areas. Moving to capital markets, As many of you are aware, a purchase and sale agreement was executed a few weeks ago for 999 Peachtree Street in Atlanta. We completed our due diligence for the purchase of this iconic Class A LEED Platinum 28-story, 77% lease building located at the corner of Peachtree and 10th Streets in the heart of Midtown Atlanta. I'm pleased to announce that we closed on this asset purchase this past Friday. The property offers spectacular views of the midtown skyline and nearby Piedmont Park, has superior accessibility to the interstate and the city's rail system MARTA, along with a unique outdoor mini set with close proximity to Georgia Tech and a large technology skilled millennial workforce with more than 30,000 residents within a one mile radius and significantly more walkable multiple family housing under construction nearby. This unmatched pin corner asset with structured parking and a great window line is an ideal strategic acquisition for Piedmont as we establish a material foothold and expand into this high-growth Atlanta sub-market. The acquisition of the 622,000 square feet 999 Petrie Street property at $360 per square foot allows Piedmont to enter this sub-market at a basis of approximately 40% below replacement costs and achieve immediate scale. We plan to revitalize this asset, modernizing the lobby, energizing the outdoor space, creating tenant balcony options, and enhancing existing fitness and conference amenities. We will deliver a differentiated product which provides a premier tenant experience at 999 that we believe will attract both local and relocating tenants to the market. The acquisition will be primarily funded by the 1031 proceeds from the previously announced sale of our 225 and 235 Presidential Way assets in Boston that are scheduled to close early in the first quarter of 2022, along with other anticipated non-core asset sales. Inclusive of our redevelopment efforts, which will be started immediately, our all-in basis will be in the low $400 per square foot and will compete favorably against new products costing $650 per square foot or more with gross rental rates asking over $60 per square foot for that new product. With the completion of the 999 acquisition and present digital way dispositions, our three Sunbelt markets of Atlanta, Dallas, and Orlando are anticipated to provide approximately 55% of our annualized lease revenues. Our goal over the next two to three years is to continue to drive that regional percentage to over 70% of ALR. Finally, Touching on ESG and property operations, in addition to Piedmont being one of only 69 corporations receiving the Energy Star Partner of the Year Award in 2021, we are pleased to announce that our entire 17 million square foot portfolio has submitted for the Well Health Safety Rating from the International Well Building Institute. The Well Health Safety Rating is a relatively new, evidence-based, third-party verified rating for all new and existing building and facility types that focus on operational policies, maintenance protocols, tenant engagement, and emergency plans to prioritize the health and safety of all occupants, including staff, visitors, and stakeholders during the COVID-19 crisis and for longer-term health and safety concerns. Additionally, we continue to be a leader in our industry in BOMA 360 designations, with approximately 90% of our portfolio now achieving this recognition of excellence in buildings, operations, and management. We prioritize our building operational efficiencies, and during the most recent third quarter, our three LEED-certified Dallas Galleria office towers that we acquired just last year were awarded the BOMA 360 designation, along with three other buildings, 5 Wall Street in Boston, and Norman Point One and U.S. Bancorp Center, both in Minneapolis. And all three of these buildings were recognized with awards for being the Outstanding Building of the Year, or TOBE, award recipient in their respective competitive classes, continuing to demonstrate the quality of the Piedmont portfolio. Lastly, I'm extremely pleased to report that Piedmont has awarded scholarships to two minority students, one at Howard University in Washington, D.C., and the other at Morehouse College in Atlanta, Georgia. The scholarships were awarded pursuant to Piedmont's scholarship program, whereby Piedmont has partnered with these two historically black colleges and universities to provide need-based scholastic support to select rising sophomores interested in pursuing a career in the field related to the real estate industry, which we hope will draw much-needed diversity into our industry. The scholarship program also includes opportunities to join Piedmont in summer internship positions and mentoring opportunities. Initiatives like this, as well as other social programs such as Feeding the Homeless and sponsoring education and health programs for families and homeless children are means in which Piedmont looks to give back to the communities in which we operate. These are more important corporate responsibilities to which our industry needs to be more proactively involved and we will continue to pursue. With that, I will turn it over to Bobby to walk you through the financial highlights of the quarter and guidance for the remainder of 2021. Bobby?