Piedmont Office Realty Trust Inc

the upward trend in leasing volume signals that tenants still have a strong appetite for office space. With the supply pipeline contracting and prime availabilities becoming scarce, more demand continues to chase a rapidly reducing supply landscape. According to JLL, the cycle of footprint reductions is tapering off as today's users of over 25,000 square feet are cutting just 2.2% of their footprint at renewal. Inventory for high-quality space, either new or renovated, is increasingly scarce, and office construction has been reduced by an additional 20% from the second quarter, with new supply not a factor in most of our markets. These market dynamics of limited high-quality supply and growing demand are allowing Piedmont to materially increase rental rates across its portfolio. And with asking rents still ranging from 25 to 40% below the rates required for new construction, we believe existing high quality office has a long, long runway for rental rate growth. Within the Piedmont portfolio, which comprises newly renovated, highly amenitized buildings paired with our hospitality driven service model, we are experiencing multiple tenants competing for full floor spaces. providing the backdrop for Piedmont to increase rental rates at our projects by as much as 20% during the year. By way of example, at our Gallery in the Park project in Atlanta, we executed our first $40 per square foot gross rental rate at the end of 2024. In this quarter, we completed numerous transactions in the mid 40s and have increased rents now to $48 per square foot. Across our portfolio, Our hospitality-driven environments have allowed us to increase rental rates to such an extent that we now estimate that more than half the portfolios in place rents are at least 20% below market. Our strategy to strengthen the Piedmont brand within the community as the landlord of choice is driving more than our fair share of leasing demand, and it's been reflected in our transaction volumes. having now leased over 10% of the portfolio over the last two quarters, more than a third of the portfolio in the last two years, and an astounding 80% of the portfolio since the beginning of 2020, equating to almost 12 million square feet since the pandemic. Delving into the numbers, we are thrilled with our third quarter results, exceeding consensus FFO by 3% and achieving record levels of leasing. Most exciting is that all the leasing the team has accomplished this year is positioning Piedmont for sustainable earnings growth. Our backlog of uncomminced leases has reached almost $40 million on an annualized basis, and substantially all of those leases will commence by the end of 2026. Piedmont executed approximately 724,000 square feet of total leasing during the quarter, including over half a million square feet of new tenant leases, This new tenant leasing represents the largest amount of new tenant leasing we've completed in a single quarter in over a decade and brings our total year-to-date leasing to approximately 1.8 million square feet. Importantly, over 900,000 square feet of our 2025 new leasing relates to currently vacant space. And it's likely this number will reach over 1 million square feet by the end of the year. That level of absorption equates to 10 to 15 cents per share of incremental annualized earnings, an indication of the growth we believe our portfolio is poised to experience. Of note, the three largest leases completed during the third quarter related to our out-of-service Minneapolis portfolio were experiencing incredible demand, as George will talk more about in a moment. Our leasing success during the third quarter pushed our in-service lease percentage up another 50 basis points, quarter over quarter, now to 89.2%, bolstering our confidence in achieving our year-end goal of 89 to 90% leased. While not reflected in our lease percentage, our out-of-service portfolio, again, comprised of two projects in Minneapolis and one in Orlando, has experienced astounding market receptivity, as differentiated, amenitized workplaces continue to garner the majority of leasing in the market. At the end of third quarter, Piedmont's out-of-service portfolio stood at over 50% leased and is approaching 70% leased, including those that are in legal stage today. We couldn't be more excited that the leasing pipeline and continued tenant demand for our buildings positions both the in-service and out-of-service portfolios to achieve 90% leased next year. Furthermore, we anticipate the out-of-service assets will reach stabilization by the end of 2026. In addition to the overall volume, third quarter leasing, as expected, resulted in favorable economics, with rental rates for space vacant less than a year, reflecting almost 9%, and just over 20% roll-ups on a cash and accrual basis, respectively. In fact, as a result of the repositioning of the portfolio, in the past two years, Piedmont's leased over 5 million square feet, with rental rate roll-ups of approximately 9% and 17% on a cash and accrual basis, respectively. Finally, cash basis, same story in OI, also turned positive this quarter, as some previously executed leases began to reach the end of their abatement periods. With over 35 million of annualized revenue currently in abatement and due to start paying cash in 2026, we expect same-store cash metrics to continue to improve. As George will touch on, leasing momentum remains strong, including over 150,000 square feet of leases signed during the month of October and a robust pipeline with approximately 400,000 square feet currently in the legal stage. I cannot emphasize enough that the broader macro factors along with our successful portfolio repositioning and elevated service model has and should continue to drive Piedmont's ability to grow FFO organically. We're still on track to meet or exceed our 2025 financial and operational goals with confidence in our ability to deliver mid-single-digit FFO growth or better in 2026 and 2027. Before I hand the call over to George, I want to mention that we have once again achieved a five-star rating and green star recognition from Gresby, placing us in the top decile of all participating listed U.S. companies for this prestigious recognition. I hope that you'll take a moment to review our recently published corporate responsibility report, highlighting the team's hard work and many accomplishments that went to achieving this record. The report is available on our website under the corporate responsibility section. With that, I will now hand the call over to George, who will go into more details on the leasing pipeline and third quarter operational results.

Thanks, Brent. Strong demand for Piedmont's well-located, hospitality-inspired workplace environments generate exceptional operating results for the third quarter. A record 75 transactions were completed for over 700,000 square feet, well above our historical average for the second quarter in a row. New deal activity surged, accounting for 75% of total volume and topping last quarter's record amount. Like last quarter, large users are driving new deal activity to record-breaking levels, with nine full-floor or larger leases executed this quarter with another six large deals in late stage. Around 50% of new leases signed this quarter will begin recognizing GAAP revenue this year, with the remaining 85% throughout 2026. A weighted average lease term for new deal activities stayed consistent at approximately 10 years. As we've experienced now for five straight quarters, expansions exceeded contractions largely to accommodate customers' organic growth. Atlanta and Dallas were the driving forces behind strong economic success. As Brent mentioned, we posted a 9% and 20% roll-up for the quarter on a cash and accrual basis, respectively. Our overall weighted average starting cash rent of nearly $42 per square foot was essentially unchanged from the previous quarter, though we do anticipate more rental growth as our portfolio crosses into the low 90s lease percentage. Leasing capital spent was $6.76 per square foot, up slightly compared to our trailing 12 months as this quarter's leasing volume was dominated by new tenant activity and where leasing concessions are generally higher than renewals. Net effective rents came in at $21.26 per square foot, reflecting a 2.5% increase from the previous quarter. So lease availability held steady at 5%, with a modest amount expiring over the next four quarters. Atlanta was our most productive market during the third quarter, closing on 27 deals for 250,000 square feet, or a third of the company's overall volume, with new lease transactions accounting for 75% of that amount. Most notable, our local team mitigated a large fourth quarter 2025 expiration at Medici with a 35,000-square-foot headquarter requirement and achieved the highest cash roll-up for the quarter at 30%. Medici is uniquely located within a luxury mixed-use development, catering to wealth managers and ultra-high-net-worth family offices. We anticipate additional cash roll-ups there at 20% or more as another 40,000 square feet is expiring soon and our pipeline remains strong. At 999 Peachtree in Midtown, we continue to experience encouraging activity to backfill Ebershed's remaining 150,000 square foot exploration in May of 2026. We currently have four proposals outstanding, which total 125,000 square feet at significantly higher rental rates. 999 Peachtree has set a new standard for repositioning assets in Midtown Atlanta, and we remain confident in our ability to backfill this known vacancy at very favorable economic terms. Minneapolis once again was our second most active market, capturing eight deals totaling almost 200,000 square feet, the vast majority of which was new deal flow into our redevelopment portfolio. The Piedmont redevelopment strategy underway at Meridian and Excelsior is generating tremendous interest with another 125,000 square feet in the proposal stage. Our team has moved asking rental rates up another 5% from last quarter with rates now in the low 40s, up 15% from pre-redevelopment phase at the beginning of the year and the highest within its submarkets. We continue to be the clear landlord of choice in the Minneapolis suburbs, as many once-competitive surrounding projects are now either dated, uninspiring, or financially impaired. Meanwhile, downtown is experiencing noticeably more foot traffic, as two of Minneapolis' top 10 employers, Target and RBC Wealth Management, recently increased their mandates to four days a week. Deal flow at our U.S. Bank Corp is growing, and we're close to signing a new deal that would backfill one of the three floors being vacated next quarter. Dallas was quite active for us as well with 16 transactions for 156,000 square feet. Most notable was the 56,000 square foot deal with a global data center service provider in one of our 1.5 million square feet Las Colinas portfolio, which has experienced a surge in leasing activity for the year since. moving up from 82% at the beginning of the year to 91% at the end of the third quarter, with another 35,000 square feet of deals close to being signed. Additionally, we're exchanging proposals to renew Epsilon and the subtenants for roughly 50% of its footprint. Our local team has pushed asking rates there up 15% to 20% over the last six months. Overall market conditions in Las Colinas are improving rapidly and led all Dallas submarkets to net absorption for the quarter and year to date. With Wells Fargo's 850,000 square foot new campus in Las Colinas being delivered this quarter and no other development underway, Piedmont is poised to see additional rental growth here over the next several quarters. At 60 Broad, we continue to work with the Department of Citywide Administrative Services regarding New York City's long-term extension for substantially all of its space. Unfortunately, additional delays during the planning process will result in the execution of a potential lease to spill over into early 2026. Coming back to the overall portfolio, we remain bullish about our near-term leasing prospects. Our leasing pipeline remains robust even after two straight quarters of record new leasing activity, and as Brett mentioned earlier, now has over 400,000 square feet in the late stage phase with insurance, legal, accounting, and financial services driving demand for new deals. Outstanding proposals remain steady as well, sitting at 2.4 million square feet for both our operating and and out-of-service portfolios in comparable to last quarter's volume. As I noted on our last call, we have seen a large uptick in full-floor users ranging from 25,000 to 50,000 square feet across a wide range of industries and throughout most of our markets. Considering our leasing momentum and a modest number of expirations in the fourth quarter, we remain comfortable in achieving our lease percentage guidance of 89% to 90% for our operating portfolio. Our redevelopment portfolio, which is on track to meaningfully contribute towards 2026 and 2027 FFO growth, saw its least percentage spike for the second quarter in a row from 31% to 54%. Based on early and late-stage activity, we project this portfolio to reach 60% to 70% by year-end. I'll now turn the call over to Chris Comey for his comments on investment activity.

Chris? Thanks, George. As we have said for several quarters, we remain focused on pruning certain non-core assets throughout our portfolio. We are under contract on two of our land parcels. Both are contingent on time-consuming rezonings, so if these are approved, neither will close in 2025. We are actively marketing another small non-core asset that could potentially close around the end of the year. The rationale for this disposition is entirely consistent with recent sales. There are no assurances that any of these will close, and as is our custom, acquisitions and dispositions are not included in any of our projections. On the acquisitions front, we are certainly seeing elevated interest in the sector among more traditional institutional investors. The debt markets continue to improve, and differentiated office environments have proven their resilience and durability over the past few years. High-quality office is no longer redlined, and liquidity is growing in the sector. Dallas in particular has seen a handful of sizable, fully-priced transactions over the past six months. We remain active in reviewing opportunities in Dallas and elsewhere. We will be disciplined and patient. Rest assured, our team is thinking creatively around compelling opportunities, including evaluating potential transactions alongside institutional capital partners. We do intend to put ourselves in a position to be more active on the transaction front in 2026. With that, I'll pass it over to Sherry to cover our financial results.