Piedmont Office Realty Trust Inc

Greetings and welcome to the Piedmont Realty Trust Incorporated's fourth quarter 2025 earnings conference call. At this time, all participants are on a listen-only mode and a question and answer session will follow the formal presentations. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. And please note, this conference is being recorded. I will now turn the conference over to your host, Ms. Laura Moon, Chief Accounting Officer for Piedmont Realty Trust. Ma'am, the floor is yours.

Thank you, Operator, and good morning, everyone. We appreciate you joining us today for Piedmont's fourth quarter 2025 earnings conference call. Last night, we filed an 8K that includes our earnings release and unaudited supplemental information for the fourth quarter of 2025 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 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 supplemental information as well as our SEC filings. We encourage everyone to review the more detailed discussion related to risk associated with forward-looking statements and our SEC violence. 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 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 Sanctuar NOI. The definitions and reconciliations of these non-GAAP measures are contained in the supplemental financial information, which was filed last night. At this time, our President and Chief Executive Officer, Brent Smith, will provide some opening comments regarding fourth quarter and annual 2025 operating results. Brent?

Thanks, Laura. Good morning, and thank you for joining us today as we review our fourth quarter and annual 2025 results. In addition to Laura, on the line with me this morning are George Wells and Alex Valente, our Chief Operating Officers, Chris Colmey, our EVP of Investments, and Sherry Rexroad, our Chief Financial Officer. We also have the usual full compliment of our management team available to answer your questions. Before I jump into the quarter, I just want to take a minute to reflect on 2025 and Piedmont's leasing accomplishments this past year. Momentum in the national office market clearly shifted in the latter part of 2025 to the point where several independent research reports state we've seen peak vacancy for this cycle. Rising office mandates and attendance have brought large space consumers back into expansion mode with a hyper focus on best in class assets. The number of Fortune 100 companies that require a five day work week in the office has soared to about 55% compared with 5% reported two years ago, according to the latest JLL survey. Piedmont has experienced this large user phenomenon as well, having completed 28 full floor or larger transactions in 2025, compared to an average of nine for the previous four years. Demand also appears to be spreading geographically, According to Cushman and Wakefield, absorption was positive for the year in 50 markets. That's up from 33 markets in 2024 and the highest number of markets with positive absorption for a full year since 2019. On the supply side... Sublet availability has declined from its peak in early 2024, and just 4 million square feet of new office space was delivered in the fourth quarter, the lowest since 2012. In fact, CBRE noted that 2025 was the first year that inventory removals, that being demolitions or conversions, outpaced new completions since they began tracking the market in 1988. So there is virtually no construction underway in our markets, demand continues to be robust, and true trophy assets have little space available. This reduction in supply is beginning to rebalance markets. CBRE noted that even though 2025 net absorption was still meaningfully below the 30-year average, The steep drop-off in new supply more than compensated to drive the first year-over-year decline in vacancy in over five years. These tailwinds translated into a record amount of total leasing volume for Piedmont in 2025. We leased 2.5 million square feet, or approximately 16% of the portfolio, the most leasing we have completed in over a decade. and a million square feet ahead of our original 2025 leasing guidance. In fact, over the last five years, we have leased approximately 75% of the portfolio or about 11.6 million square feet, an incredible accomplishment by the team and a testament to the fact that our Piedmont placemaking strategy is working. Furthermore, Over those five years, the portfolio has generated positive cash, same-store NOI growth each and every year. That is an incredible operational achievement given the challenging office sector. And in 2026, this metric will accelerate as 2025's historic leasing success translates into 2026's meaningful same-store NOI growth. driven by a material increase in commenced occupancy, which Sherry will cover in a moment. Our portfolio of recently renovated, well-located, amenity-rich properties, combined with our hospitality-infused service model, has also allowed us to materially increase rental rates across our portfolio. And with asking rents still ranging from 25% to 40% below rates required for new construction, Piedmont is well positioned for sustainable earnings growth in 2026 and beyond. Turning to fourth quarter results, we completed approximately 679,000 square feet of leasing, almost 70% of which related to new tenants and contributing to a year-end lease percentage of 89.6%, an increase of 120 basis points over the course of 2025. additionally our out-of-service portfolio comprised of two projects in minneapolis and one in orlando with 62 percent least as of the end of the year a phenomenal accomplishment by the team as these projects were essentially vacant at year-end 2024. the majority of leases for these projects will commence during 2026 contributing meaningfully to ffo And we anticipate that they will reach stabilization and rejoin the normal operating portfolio by the end of 2026 or very early 2027. Rates also continued their upward trajectory during the fourth quarter with rental rates on leases executed during the quarter for space that has been vacant less than a year, increasing approximately 12% and 21% on a cash and accrual basis respectively. our backlog of unconvinced leases remains strong, with almost 2 million square feet of leases representing $68 million of future annualized cash rents. Substantially, all of those leases will commence by the end of 2026. As George will touch on, leasing momentum remains strong, including over 200,000 square feet of leases already signed in 2026, and a robust pipeline with over 600,000 square feet currently in the legal stage. Sherry will introduce our 2026 guidance in a moment, but big picture, it is clear that the occupancy trough of Piedmont's portfolio occurred in the fourth quarter of 2025. And we believe the broader macro factors that I discussed along with our successful portfolio repositioning and elevated service model will drive mid-single-digit organic FFO growth in 2026 and 2027. Last point, before I turn it over to George, as we announced last week, Alex Valente has been promoted to Co-Chief Operating Officer and will be working alongside George to lead new operational initiatives across the firm, as well as oversee almost all of our Eastern portfolio. I believe most of you have met Alex at some point during his 20-year career with Piedmont, and I share my enthusiasm and congratulations for his new role. With that, I will now hand the call over to George, who will go into more details on the leasing pipeline and fourth quarter operational results.