Piedmont Office Realty Trust Inc

and amenity-rich working environments will allow us to continue to attract and retain tenants, and our well-capitalized balance sheet provides us with the operating flexibility to successfully navigate these challenging times. With that, I'll turn it over to George, Chris, and Bobby to provide further details on the quarter. George?

Thanks, Brent, and good morning, everyone. Despite the usual summer travel impact, along with the growing macroeconomic uncertainty that Brett alluded to, our operational teams delivered solid third quarter results on many fronts, and leasing momentum remained solid. We're still seeing demand from a broad range of industries, particularly the financial, legal, healthcare, and business services sectors. Workspace utilization in our portfolio continues to increase incrementally, and it's up to 50% in September. And nationally, there is a growing chorus of companies setting the stage for greater in-office participation by removing vaccine mandates, increasing the number of required in-person days, or enhancing the office experience with additional incentives or amenities. We believe our operating strategy of providing a highly amenitized, modern working environment is a critical component in meeting today's corporate flight to quality objectives which is not only appealing to leasing prospects with new space needs, but also to attracting and retaining employees for existing tenants and for drawing employees back into the office. And we believe the merits of this strategy is showing up in our leasing results. Workforce priorities have shifted post-COVID. There's a much higher concern for quality of life, home ownership, work-life balance, and shorter commute times. Our premier assets complement these needs and are located in growth areas, most of which are easily accessible suburban and infield submarkets. This quarter, we completed over 50 transactions for approximately 444,000 square feet of total overall volume. Of this, exactly half, or 25 of these leases, totaling 124,000 square feet, were related to new tenant lease activity and expansions. While the volume of New Deal activity was good, the total square foot lease did not reach the level of the past few quarters. We largely attribute this to the first part of the summer when historically we have seen some slowdown in general business activity due to vacation, travel season, and that smaller businesses continue to make corporate decisions quicker than larger corporations. As Brent already noted, Our pipeline activity is strong, and we anticipate that new leasing in the fourth quarter will be back at pre-pandemic levels. I will note our leasing economics were very favorable, with approximately 33% and 38% roll-up or increase in rents for the quarter on a cash and accrual basis, respectfully. Our weighted average lease term at the end of the third quarter is approximately six years. Our lease percentage at the end of the third quarter was approximately 87%, up 150 basis points from year end, and largely unchanged from the close of the previous quarter. While the majority of new lease activity continues to emanate from our Sunbelt portfolio, where over 70% of our vacancies reside, we are experiencing good leasing activity in all of our select markets. Now I'd like to highlight a few key accomplishments that have occurred in some of our operating markets this quarter. Beginning with Atlanta, our portfolio experienced the most volume of new activity with 10 deals for nearly 35,000 square feet. Atlanta has been Piedmont's most consistent performer for the past four quarters, capturing 43% of all new tenant transactions, and the pipeline continues to be quite robust. In fact, we've already signed six more new deals in October for another 57,000 square feet, including a well-known Atlanta financial services firm, which is relocating their regional headquarters into our LEED Gold 999 Peachtree property from the Buckhead Submarket. I would add that our building was selected by that tenant over a newly completed development in the Midtown Submarket, probably because of its superior location and sustainability designations. Adding to Atlanta's already well-known pro-business reputation was Money Magazine's recent ranking of best places to live in the United States, with Atlanta taking the top spot. We are excited to be growing here with the recent acquisition of our LEED Platinum 1180 Peach Street AA Trophy Tower, in which Chris Comey will touch on in just a moment. Atlanta is our largest market, accounting for 26% of our ALR at the end of September. And the flight to quality is very evident here. And we anticipate continued strong lease production in the quarters ahead. Coming to Dallas, we're happy to announce the extension of the entire Ryan lease and our LEED-certified three-galleria office tower. The economics of this 178,000-square-foot deal were strong with significant rental rate roll-ups on both a cash and accrual basis, no free rent, and no tenant improvement allowances. That extension will expire in phases over the next two to five years. Also noteworthy is the completion of nine new lease deals totaling 32,000 square feet spread amongst the remainder of our Dallas assets. One of those deals was an approximate 9,000 square foot expansion of an existing tenant, evidence businesses in this dynamic market are continuing to grow despite the cloudy economic environment. Our Minneapolis holdings were quite active this quarter with three new tenant transactions for 50,000 square feet, including our largest new tenant leasing deal for this quarter, a headquarter relocation into our lead goal, Preston Ridge Asset for 35,000 square feet. That new user, a financial services firm, will double in size from its existing location. And interestingly, we'll have all staff working in person 100% of the time. Our modernization efforts at Crescent Ridge are paying off, having completed four new lease transactions in the past few quarters and a robust pipeline that should stabilize occupancy there soon. Moving downtown to our lead gold trophy tower, U.S. Bancorp Center, our team there signed a new lease to the White Tablecloth Seafood Restaurant for a 10-year term, adding to our already robust set of on-site amenities. Lease extension conversations are ongoing with our anchor tenant there at U.S. Bank, and we believe negotiations with the bank at this downtown asset and at Meridian Crossing in the suburbs will accelerate the bank once the bank completes its merger with Union Bank anticipated at year end. The PMOP formula continues to demonstrate leasing success, particularly with smaller tenants, the most active customer segment across all of our markets. These tenants are driven to our office projects, citing their ease of accessibility, vast amenity base, unique tenant engagement programming, best-in-class conference facilities, along with a sustainability-minded operator. As noted in a recent CBRE report, owners are witnessing increased demand for LEED-designated assets, which are also generating a meaningful rental premium on average of 4%, with a difference even more substantial in suburban markets. Looking ahead to the remainder of 2022 and into 2023, we remain optimistic about the leasing performance of our portfolio. Tour activity continues to be strong and consistent. We have approximately 2 million square feet of outstanding proposals, which is in line with the past four quarters. With only a few leases expiring for the remainder of the year, we expect positive net space absorption in the fourth quarter, resulting in an anticipated year-end lease percentage around 87%. Additionally, expirations are low next year, with only one lease larger than 100,000 square feet that will not expire until December of 2023. In conclusion, I do want to mention that Piedmont has invested a number of our assets over the last few years, improving amenity offerings and modernizing lobbies and elevators and the like to compete on an attractive basis with any new build. A large portion of this redevelopment has now been completed, and we have no exposure to inflation associated with grant of development, and we will focus on redevelopment, which we believe is a better risk-adjusted return. I'll now turn the call over to Chris Comey to review our third quarter investment activity. Chris?

Thank you, George. As we disclosed on last quarter's call, we entered into a binding contract to purchase 1180 Peachtree Street in the heart of Midtown Atlanta for a purchase price of approximately $465 million, including the assumption of an approximately $200 million, 4.1% fixed rate secured mortgage, which matures in 2028. I'm pleased to report that we have closed on the acquisition of what we believe is the highest quality, most differentiated office setting in Atlanta. At almost 700,000 square feet, 1180 Peachtree is a LEED Platinum Skyline Defining Asset with a weighted average lease term of over seven years and in-place rents at approximately 20% below market rates. The initial accrual basis NOI yield for the transaction is 6.3%. Piedmont is now one of the largest owners in Midtown, accumulating a position of over 1.3 million square feet within just the last 12 months. If you haven't already done so, I'd encourage you to review the materials on our website, which offer more complete details about this acquisition. We anticipate ultimately funding the 1180 acquisition using sale proceeds generated from non-core asset dispositions, And after quarter end, we have agreed to terms for the disposition of our two assets in Cambridge, Massachusetts to two separate buyers. Both groups are nearing completion of their diligence periods. These transactions are on an all-cash basis with no financing contingencies. We anticipate recognizing an approximate nine-digit book gain on a consolidated basis. As for the balance of 2022, given current market conditions and our temporary leverage levels, Our capital markets initiatives will be principally concentrated on evaluating additional dispositions of non-core assets. That said, we will be patient and we will be disciplined, as today's market environment is certainly challenging for both buyers and sellers. With that, I'll turn it over to Bobby to walk you through the financial highlights of the quarter and address guidance for the remainder of 2022. Bobby? Thank you, Chris.