Piedmont Office Realty Trust Inc

Welcome to the Piedmont Office Realty Trust Incorporated third quarter 2023 earnings call. At this time all participants are on a listen only mode and the floor will be open for questions and comments following the presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note, this conference is being recorded. I will now turn the conference over to your host, Laura Moon. Mom, you may begin.

Thank you, operator, and good morning, everyone. We appreciate you joining us today for Piedmont's third quarter 2023 earnings conference call. Last night, we filed our Form 10-Q and an 8-K that includes our earnings release and our unaudited supplemental information for the third quarter that is available for your review on our website at piedmontreat.com under the Investor Relations section. During this call, you will 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 risk 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 financing, 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 were 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 were filed last night. At this time, our President and Chief Executive Officer Brent Smith will provide some opening comments regarding third quarter operating results. Brent?

Thanks, Laura, and good morning, everyone. Before we get into the call, I would be remiss if I did not acknowledge that you all heard a different voice reading the introduction this morning. As most of you know, Eddie Gilbert, our EVP of Finance and Treasurer, and someone we all proudly call a friend and esteemed colleague, has voluntarily resigned from his position at Piedmont. Eddie has been one of our most trusted, dependable, and dedicated teammates for over 16 years, and he made immeasurable contributions towards the advancement of Piedmont. He will be sorely missed by all of us. Eddie will stay on as a consultant for a period of time to ensure a seamless transition. And Laura Moon, our Chief Accounting Officer, and Jennifer Hennison, our VP of Financial Planning and Analysis, will be taking on most of Eddie's responsibilities. Okay, so now on with the quarterly call. I want to thank everyone for joining us today as we review our third quarter results. In addition to Laura on the line with me this morning are George Wells, our Chief Operating Officer, Chris Colmay, our EVP of Investments, and Bobby Bowers, our Chief Financial Officer. We also have the usual full complement of our management team available to answer your questions. I'd like to start with our leasing results, both what was completed during the quarter as well as some significant activity that was completed during October. Total leasing for the third quarter was approximately 302,000 square feet and included roughly 170,000 square feet of new tenant leasing. Our 11th consecutive quarter of new tenant leasing at or above pre-COVID levels, resulting in net absorption during the third quarter. The average size lease executed was approximately 13,000 square feet with a way to average lease term of approximately seven years. and reflected double-digit roll-ups on renewals on both a cash and accrual basis. As anticipated, same-store NOI on a cash and accrual basis continued to strengthen during the third quarter as new leases commencing and or those with expiring abatements began to outweigh expirations that occurred earlier in the year. All in all, it was another solid quarter of leasing, and perhaps the most exciting news occurred just after the end of the quarter. And that is the execution of over 600,000 square feet of leasing thus far in October. The bulk of that leasing related to the renewal of the largest of the upcoming U.S. Bank lease expirations. That being U.S. Bank's renewal of its entire 447,000 square foot headquarters location at our LEED Gold U.S. Bank quarter center asset in downtown Minneapolis. We were very pleased with the outcome with our largest tenant and strategic financial partner. While it was a lengthy process, we were grateful that the bank, which has been an anchor tenant at the building for the past 20 years, has chosen to renew with us for another 10 years. George will give some additional color on this outstanding lease in a moment. In addition to the U.S. bank, the October activity also included a sizable new tenant lease with GE Vernova at Gallery on the Park in Atlanta. Continuing to fill the vacancy of the project and taking the lease percentage at our Gallery at 600 building, from a low of 34% in 2021 to approximately 93% lease today. I want to pause here for a moment and take note for investors that the Atlanta Galleria project is a great example of our strategic operating formula at work. While the buildings were initially 1980 and 1990 vintage assets, we have reimagined, remodeled, and redeveloped the 2.1 million square foot project over the past several years and generated a substantial amount of leasing. At the project, we've experienced approximately 250,000 square feet absorption and rental rate growth of more than 10% in the last 18 months, and now stand at roughly 90% leased. I would add that we have about 200,000 square feet of vacancy remaining at the project with continued strong demand. It's an example of how our amenitized, well-located, high-quality assets continue to lead the respective submarkets and leasing activities. I believe public investors need to understand that the top 5 to 10 office assets in any given submarket continue to perform very well despite the market malaise. Finally, the strong start to the fourth quarter leasing reinforces our optimism to reach our goal of approximately 87% leased at year end and demonstrates the continuing demand for highly amenitized, well-located office space owned by a sustainability-focused and financially stable landlord. Returning to our operating results, we continue to experience growth in property operating income as compared to the prior period. However, that growth was offset by continued elevated interest costs, which Bobby will discuss further. In summary, we continue to be optimistic about our value proposition for our customers and our ability to garner outsized demand from small and medium-sized businesses, as well as larger non-tech corporate tenants. We also continue to be encouraged by large corporations, increasing their return to office stance. We're starting to see many larger, primarily technology-related tenants that initially seized upon the hybrid FlexWorks model now beginning to realize the productivity and collaboration lost outside the office. One of the most notable return to office announcements being made this quarter was by Zoom, in addition to other announcements and comments from Salesforce, Amazon, and Google to bring team members back to the office to collaborate. So while fundamentals will continue to remain challenging in select submarkets, high-quality assets are performing well. The lack of leasing is being witnessed predominantly at lower-quality BNC assets, which are experiencing the majority of the reported vacancies and subleasing availabilities. As JLL recently reported, after analyzing its vast dataset of office buildings, comprising over 2.7 billion rentable square feet across the top 25 MSAs, 50% of the sector's vacancy is concentrated in the bottom 10% of the office stock. I want to say that again. 50% of the sector's vacancy is concentrated in the bottom 10% of the office stock. So while some of Piedmont's assets may incur temporary vacancy if some larger tenants right-size their space, would you not own assets positioned in this lower tier of the market? And after leasing almost 7 million square feet since the pandemic, I believe we've demonstrated an ability to backfill vacancy with new tenants despite this difficult market backdrop. Switching topics, I want to note that we received our new GRESB scores during the quarter. This was only our second submission, and I'm very pleased to report we received the highest sustainability rating of five stars and our second green star rating based on 2022 performance. At this time, I'll hand the call over to George who will go into more details around the corner.