Piedmont Office Realty Trust Inc

Good day ladies and gentlemen and welcome to the Piedmont Realty Trust Incorporated first quarter 2026 earnings conference call. At this time all participants are on a listen only mode and a question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please place star zero on your telephone keypad. And please note, this conference is being recorded. I will now turn the conference over to your host, Laura Moon, Chief Accounting Officer with Piedmont Realty Trust. Mom, the floor is yours.

Thank you, Operator, and good morning, everyone. We appreciate you joining us today for Piedmont's first quarter 2026 earnings conference call. Last night, we filed our 10-Q and an 8-K that includes our earnings release and unaudited supplemental information for the first quarter of 2026. Both of these documents are available for your review on our website at piedmontread.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 supplemental information 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 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 Same Store 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 first quarter 2026 operating results. Brent?

Thanks, Laura. Good morning, and thank you for joining us today as we review our first quarter 2026 results. In addition to Laura, on the line with me this morning are George Wells, and Alex Valenti, our Chief Operating Officers, Chris Colmy, our EVP of Investments, and Sherry Rexrode, our Chief Financial Officer. We also have the usual full complement of our management team available to answer your questions. From a macro perspective, the U.S. office market continued to recover in the first quarter of 2026 as supply-demand fundamentals began to stabilize across markets. JLL reports that leasing activity was up 7.6% year over year and net absorption positive for a third consecutive quarter, primarily driven by large occupiers. The demand for office space continues to be very resilient, despite office using employment being down 2% from 2022 levels, according to the Bureau of Labor Statistics. The phenomenon of strong leasing amid a stagnant workforce demonstrates what our customers are telling us. Large businesses are bringing their employees back to a compelling office environment that builds culture, collaboration, and creativity. And we continue to believe that demand for the top quartile of the office market will remain resilient despite the prospect of limited growth in office-using jobs. On the flip side, supply growth remains extremely low compared to historical levels. with total inventory declining by 9 million square feet during the first quarter and the national development pipeline at its lowest level on record. These trends reinforce landlord leverage, particularly in high-quality assets where rents continue to escalate. Vacancy is increasingly concentrated in aging, financially constrained buildings, with 10% of office buildings now comprising more than 60% of national vacancy. Looking ahead, muted job growth and a higher for longer interest rate outlook remain headwinds for longer-term demand growth. However, structural supply contraction combined with limited new development are expected to underpin rate resilience and intensify competition for high-quality office space. Against that backdrop, Piedmont is well-positioned for the next phase of the office cycle for several reasons. First, portfolio quality. We've renovated 90% of the portfolio since 2020, and our many rich, hospitality-driven Piedmont places are leasing at record high rental rates. Second, Piedmont has leased over 80% of the portfolio since the pandemic, meaning our customers have already right-sized their office space for the modern workforce. Third, our service model, recognized in the top five by Kingsley, is keeping our customers happy, generating 60% to 70% renewal rates from existing tenancy. More recently, the portfolio is approaching 90% leased and inclusive of our out-of-service assets has generated more than 480 basis points of absorption in the last 12 months, equating to almost 750,000 square feet of absorption during that time period. Finally, the average tenant size across the approximately 16 million square foot portfolio is 17,000 square feet, which speaks to our customer and industry diversification and provides a mitigate to large corporate downsize. As a result of the leasing success in 2025, Piedmont has a signed but not occupied pipeline of leases equating to over $42 million of annualized rent. The strategic repositioning of the Piedmont portfolio, along with the substantial leasing that we've accomplished over the past 12 months, are translating into higher economic occupancy and mid-single-digit same-store cash and OI growth and meaningful earnings growth. The operational performance of the portfolio has led to an increase in our 2026 outlook. Core FFO by one cent and same store NOI, cash and GAAP by 100 basis points, which Sherry will touch on more in a moment. Also fueling our growth are the leasing spreads we're achieving on second generation space. Regularly double digits on a cash basis and high teens on a GAAP basis, inherently driving cash flow earnings higher as leases expire. And finally, our balance sheet continues to strengthen, driven by the aforementioned leasing uplift in cash flow and EBITDA, along with a unique opportunity to refinance our near-term debt maturities at accretive financing spreads relative to the expiring rates. We believe these factors position Piedmont for consistent annual core FFO per share growth over the next few years. Turning to our quarterly results, We witnessed the continuation of the elevated demand that we've experienced the latter half of 2025 with tour and proposal activity at levels above historical averages. During the quarter we executed over 430,000 square feet of leasing and, most importantly, two thirds was related to new tendency. Our customer pipeline remains robust with over 700,000 square feet of leases, either already executed or in the legal stage thus far in the second quarter. As I noted earlier, strong customer demand driven by the flight to quality is giving Piedmont the opportunity to push rents to record levels across our portfolio. In fact, more than half our portfolio experienced an asking rate increase of 15% or more in 2025. And even more exciting is that our rent still remain 35 to 40% below new construction pricing. So there's little impediment to pushing rental rates further. Despite strong fundamentals for the office sector, the headlines have been filled with a topic of AI and prognostications of what it will mean to the national workforce. We appreciate the concern that AI could impact office using employment growth over time. But what we're seeing today is that robust demand is concentrating in high-quality, well-located, amenitized space. And that's exactly where our portfolio is positioned. Even if some roles are redirected as AI adoption evolves over the coming years, companies will still need collaborative environments to build culture, serve clients, and innovate. So we're simply not seeing any cracks in our customers' demand, and our leasing pipeline remains incredibly robust. Lastly, before I turn it over to George, I wanted to mention that we're also particularly excited about several operational recognitions during the first quarter. Galleria Towers in Dallas won the CoStar Impact Award for Redevelopment of the Year in Dallas-Fort Worth Market. And as I alluded to earlier, Piedmont was recognized as an elite five participant in the annual Kingsley survey for the office sector, which rates landlords on their performance based on tenant feedback. These accolades serve as further evidence that our modern redeveloped amenity rich Piedmont places combined with our hospitality infused service model are recognized by our customers and peers as the premier office experience. With that, I'll hand it over to George for further details on first quarter operational performance.