Peakstone Realty Trust

And welcome to Peekstone Realty Trust fourth quarter 2023 earnings webcast conference call. At this time, all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during this conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Michaela Lynch, Head of Investor Relations. Thank you, Ms. Lynch. You may begin.

Thank you. Good afternoon, and thank you for joining us for Peakstone Realty Trust's fourth quarter 2023 earnings call and webcast. Earlier today, we posted an earnings release, supplemental, and updated investor presentation to the Investors page on our website. at www.pkst.com. Please reach out to our investor relations team at ir.pkst.com with any questions. Please note that the use of forward-looking statements by the company on this webcast. Statements made on this call may include statements which are not historical facts and are considered forward-looking. The company intends for all these forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and are making these statements for purposes of complying with those safe harbor provisions. Furthermore, the forward-looking statements reflect our current views about future events and are subject to numerous known and unknown risks, uncertainties, assumptions, and changes in circumstances that may cause actual results to differ significantly than those expressed in any forward-looking statement and will be affected by a variety of risks and factors that are beyond the company's control, including, without limitation, those contained in our most recent annual report on Form 10-K or quarterly report on Form 10-Q filed with the SEC. We disclaim any obligation to publicly update or revise any forward-looking statement to reflect changes in the underlying assumptions or factors of new information, data or methods, future events or other changes after the date of this call, except as required by applicable law. Additionally, on this call, the company may refer to certain non-GAAP financial measures, such as funds from operations, adjusted funds from operations, EBITDA RE and adjusted EBITDA RE. You can find a tabular reconciliation of these non-GAAP financial measures to the most currently comparable GAAP numbers in the company's filings with the SEC. On the call today are Mike Escalante, CEO and President, and Javier Batar, CFO. With that, I'll hand the call over to Mike. Mike?

Good afternoon, and thank you for joining our call today. Throughout 2023, we continued optimizing our portfolio and balance sheet. Despite challenging market conditions, we made meaningful progress on our strategic disposition program. selling 11 assets for over $336 million in gross proceeds. Through these asset sales, we significantly reduced leverage and began to evolve our portfolio towards our industrial segment. Ongoing proactive engagement with our high-quality tenant base drove significant leasing activity, which virtually eliminated all near-term rollover. I want to spend a few minutes sharing highlights from the quarter and our full year. We ended the year with a portfolio that is 96.4% lease and with a WALT of 6.5 years. During the quarter, we executed four leases totaling over 1 million square feet at weighted average gap and cash releasing spreads of 26% and 9% respectively. Our leasing activity in the fourth quarter included two lease extensions in our industrial segment and two new leases in our office segment. In the industrial segment, Our sole 2024 expiration was Samsonite, which leases the entirety of our Jacksonville, Florida asset, accounting for 8% of segment AVR. This key facility for Samsonite is located proximate to the port of Jacksonville, the primary port of entry for Samsonite's products. During the quarter, Samsonite exercised the first of its two five-year renewal options. The rent for the renewal term is a to-be-negotiated fair market rent with a floor of the expiring rent. As we work through negotiating the fair market rental increase with the tenant, for gap purposes, we've recorded the rent for the extension period equal to the expiring rent, resulting in a 14% gap and 0% cash releasing spread. We will provide additional detail on the fair market rent in the coming quarters. We also completed an early 10-year lease extension with Transline, which leases the entirety of our Whippany, New Jersey property accounting for 2% of segment AVR. This important light manufacturing and assembly facility is used by the tenant to produce actuation solutions for the aerospace industry. The extension includes a rent increase effective June 2026, which is nearly two years earlier than rent was scheduled to increase under the original lease. As of that date, base rent will increase over $5.50 per square foot and escalate 3.5% annually thereafter. resulting in outsized 91% gap and 50% cash releasing spreads. In the office segment at our Largo, Florida property, we completed a new 7.7-year full building lease commencing June 2024 with Spectrum, a subsidiary of Charter Communications. This lease was executed simultaneously with the early termination of the former lease with Paralon which was scheduled to expire in March 2025. We collected a termination fee from Parallon of just under $1 million, which offset 30% of the out-of-pocket costs associated with the new Spectrum lease. The new lease includes 3% annual rent escalation and was executed at a 6% cap and negative 3% cash releasing spread compared to Parallon's expiring rent at termination. We also completed a 9.4 year lease commencing March 2028 with the existing subtenant at our Pima Road asset in Scottsdale, Arizona. This subtenant is expanding on a direct basis concurrently with the expiration of its sublease. The new lease includes 2.4% annual rent escalations and was executed at a 33% gap and 14% cash releasing spread. With these leases now signed, Our only office segment lease expiration in 2024 expires in the fourth quarter, which accounts for only 50 basis points of total portfolio ABR. Turning to dispositions, our experience and industry connections furthered the ongoing successful execution of our strategic disposition program. For the year, we sold 11 properties for gross disposition proceeds of $336 million at an average cash cap rate for the stabilized assets of 7.6%. During the quarter, we sold two office assets for gross disposition proceeds of $27.2 million. First, we sold one office segment property located in Tyler, Texas for total proceeds of $21.4 million, inclusive of the lease termination fee received from the tenant. Our team creatively structured this deal, which required the simultaneous early termination of the existing lease, and a zoning change in order to sell the asset to the new owner-user. We sold a second office property from our other segment, which is located in Houston, Texas, for gross proceeds of approximately $5.8 million. The property was subject to a lease expiring without renewal in January 2024. This property was secured from one of our non-reforce AIG loans and was the first asset we have sold in this loan pool since we documented our agreement with AIG, which is intended to facilitate the dispositions of the mortgage properties under the loans. Subsequent to year end, we sold another office segment property located in Johnson, Iowa, to Corteva, the existing tenant, for gross proceeds of $30 million. At the time of the sale, Corteva's lease had 2.8 years remaining. To further this closing, we issued a one-year note for one half of the purchase price, or $15 million. This asset was classified as held for sale at year end. We had one other segment property classified as held for sale at year end, which relates to a purchase by the existing tenant. This asset is the Hitachi Energy Manufacturing Facility located in Jefferson City, Missouri. During the quarter, the tenant exercised its fixed price purchase option to acquire the property for $26.1 million. The sale is scheduled to close towards the end of the first quarter of 2024. At closing, we will pay off the balance of the secured debt relating to this asset, being approximately $11 million. Overall, I am excited about the momentum our experienced team generated during the first year as a listed company. With that, I will turn the call over to Javier to review our financial results.