Piedmont Office Realty Trust Inc

Good day, everyone, and welcome to the Piedmont Office Realty Trust, Inc. Second Quarter 2023 Earnings Call. At this time, all participants have been placed on a listen-only mode, and we will open the floor for your questions and comments after 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 afternoon, everyone. We appreciate you joining us today for Piedmont Second Quarter 2023 Earnings Conference Call. On Tuesday morning, we filed our 10-Q, and an hour ago, we filed an 8-K that includes our earnings release and our unaudited supplemental information for the second quarter that's available for your review on our website at piedmontreat.com under the investor relations section. During this call, you'll hear from senior officers at Piedmont. Their prepared remarks, followed by 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 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 of this activity on the company's financial and operational results. You should not place any undue reliance on any of these forward-looking statements, and these statements are based upon the information and estimates we have reviewed as of the date the statements are made. Also on today's call, representatives of the company 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, which are filed earlier this afternoon. At this time, our President and Chief Executive Officer, Brent Smith, will provide an update on our recent refinancing activity and second quarter operating results. Brent?

Thanks, Eddie, and good afternoon, everyone, as we appreciate all of you for accommodating us for the short notice of this moved-up earnings call. Given the refinancing activity that we announced Tuesday, we felt it was important to go ahead and get our full quarterly information into the market so that all of our investors had the benefit of the most recent financial and operational information available. First, I'd like to walk you through a rationale for our recent refinancing activities that we've undertaken and give a brief overview of the quarterly results. Following me as usual, you'll hear from George Wells, our Chief Operating Officer, Chris Colmey, our EVP of Investments, and Bobby Bowers, our Chief Financial Officer. We also have the usual full component of our management team available to answer any questions that you may have. With that, I'll jump right in on the refinancing activity. As we announced Tuesday afternoon, we have closed a $400 million in aggregate principal amount of 9.25% five-year unsecured notes. Concurrent with the issuance of the new bonds, we also made a tender offer at par for any and all of our outstanding $400 million unsecured senior notes that are scheduled to mature during the first quarter of 2024. Although we have no way of knowing exactly how many of our current holders will tender their bonds, And given the current interest rate environment, we are projecting that a majority of the 24 holders will participate in the tender, which will close next week. While the coupon rate on the new debt is certainly a high watermark for Piedmont, it is unfortunately reflective of where the market currently is for commercial office properties. Over the last several months, we've gone through an extensive process of exploring and analyzing our various capital raising alternatives, including a number of potential asset sales, The possibility of placing a mortgage on one or more of our properties, either with a balance sheet lender or utilizing the CMBS market. Issuing in the unsecured market, either through a bank term loan, private placement, or public bond offering. And corporate level structured financing, including convertible debt and preferred equity, among others. At the end of the day, asset sales have been extremely difficult to complete given the lack of asset level financing. and we concluded that whatever modest discount there might be had on a CMBS execution did not justify encumbering more than a half dozen of the assets in our portfolio at low loan-to-value ratios. Finally, the unsecured bond market offered the greatest financing capacity compared to other unsecured alternatives, and maintaining a large unencumbered asset pool is an important consideration for the rating agencies. In addition, A key component of our leasing and capital recycling strategy has been to maintain a flexible balance sheet with ample liquidity, primarily as an unsecured borrower. This has helped the company in many ways, including expediting capital and repositioning programs, allowing greater flexibility to move tenancy throughout the portfolio, and avoiding debt prepayment penalties with property dispositions, among others. More recently, the lack of mortgage debt in our portfolio has been instrumental in driving leasing volumes. Therefore, after considering the continued messaging from the Fed regarding additional interest rate hikes during the latter half of the year and the overall lack of financing opportunities currently available to the office sector generally, we ultimately concluded that accessing the public bond market while the opportunity was available and addressing our largest near-term maturity now was the most prudent course of action for Piedmont. The expectations that rates will come back down over the next several years influenced our decision to go with a shorter five-year tenure for the new notes. Turning to our operating results, the second quarter of 2023 demonstrated Piedmont's continued success despite the challenges facing the broader office sector. Our leasing formula is working, and we continue to be optimistic about the value proposition for our customers and the opportunity to continue our leasing momentum. particularly in today's capital-constrained market. The flight to quality buildings and owner-operators is favoring Piedmont. Quarter after quarter, we continue to demonstrate that well-designed, monetized work environments operated by well-capitalized, service-minded landlords is garnering outsized demand from small and medium-sized businesses, as well as larger non-tech corporate tenants. The flight to quality occurring in the market is playing to Piedmont's strategy, providing premier workspaces at meaningfully lower rental rates versus new construction. In brief, we sustained the leasing momentum from the first quarter, with Piedmont's prospective tenant pipeline remaining robust and meaningful tenant lease volumes achieved. In total, we executed almost 585,000 square feet of leasing and generated an over 14% roll-up in cash rents. Furthermore, we continue to make significant progress towards a renewal of our largest tenants U.S. Bank for the extension of its lease on a substantial majority of its downtown Minneapolis headquarters location. Given we remain in negotiation and documentation stage on the lease, we're limited with the details we can share, but it's a long-term lease under similar terms and metrics we've discussed on prior earnings calls. U.S. Bank's renewal decisions for its IT and data center operations at Meridian Crossings will follow the conclusion of the downtown agreement so there are no incremental information regarding that location to share today. At this time, I will hand the call over to George, who will go over to more details around our operational success during the quarter.