Piedmont Office Realty Trust, Inc. Class A Aktie

Hello, and welcome to the Annual Meeting of Stockholders of Piedmont Office Realty Trust, Inc. Please note that today's meeting is being recorded. It is now my pleasure to turn the meeting over to Piedmont's CEO, Brent Smith, be for is yours.

Thank you, operator, and good morning, everyone. At this time, I'd like to call the 2026 Annual Meeting of Stockholders of Piedmont Realty Trust, Inc. to order.

I'm Brent Smith, Chief Executive Officer and Director of Piedmont, and I will preside at this meeting, which is being conducted via live webcast.

Some of the participants in today's meeting include all of Piedmont's directors and various members of Piedmont's management team, including Sherry Rexroad, Corporate Secretary for Piedmont, who will also act as Secretary for this meeting. Cassandra Shedd from our transfer agent, Computershare, who has taken the oath of office to serve as inspector of this election. Her report will be filed with the minutes of this meeting. Keith Townsend of King & Spalding, our external corporate legal counsel; and Molly Cummings, one of our engagement partners with Deloitte & Touche, Piedmont's external audit firm.

I call your attention to the rules of conduct set forth for this meeting. These have been made available to each stockholder in the documents section, which you should see in the lower left corner of your computer screen.

The Secretary has informed me that copies of the notice of the meeting, including the notice of Internet availability of proxy materials and form of proxy were mailed to stockholders on or about April 1, 2026. The record date for the voting of shares at this meeting was March 4, 2026. If you need a copy of the annual report or the proxy statement, the links are provided online under the option documents located on the right side of your computer screen.

The inspector of this election has informed me that as of the close of business on March 4, 2026, and Piedmont had outstanding and entitled to vote, 125,019,003 shares of common stock. Each share is entitled to 1 vote. There are no other securities entitled to vote at this meeting.

I am also informed that the holders of a majority of outstanding shares of the common stock entitled to vote at this meeting are present by proxy. Accordingly, I recognize the presence of a quorum for the purpose of proceeding with the business of the annual meeting and declare that such meeting is duly organized for the transaction of business subject to verification of a quorum after completion of the vote tabulation.

The first proposal on today's agenda is a proposal to elect nine directors to hold office for terms expiring at our next annual meeting. The Board's nominees are myself, Kelly H. Barrett; Glenn G. Cohen; Daneen L. Donnelly; Jeffrey J. Donnelly; Mary M. Hager; Barbara B. Lang; Stephen E. Lewis; and Dale H. Taysom and their name shall be duly placed in nomination. Any other nominations for director were required to have been submitted to Piedmont in accordance with the advanced notice provisions of Piedmont's bylaws.

Having received no other nominations, I declare the nominations are now closed.

The second proposal on today's agenda is a proposal to ratify the appointment of Deloitte & Touche LLP as Piedmont's independent auditor for fiscal year 2026.

The third proposal is to approve on an advisory basis, the compensation of the named executive officers as disclosed in the proxy statement.

And the fourth proposal is to approve the third amended and restated omnibus incentive plan.

Detailed information concerning all of these proposals and the governance of Piedmont is contained in the proxy statement furnished in connection with this meeting.

Our Board of Directors recommends a vote for each of the nominees for election as director, for the ratification of the independent auditor, for the advisory approval of executive compensation and for, the approval of the third amended and restated Omnibus incentive plan.

The poll for the four proposals to be voted upon is now open. If you've already voted by phone, by Internet or by mail ballot, there is no need to vote again unless you desire to change your vote. If you have not voted or wish to change your vote, you may do so now by clicking on the vote option link on the right side of your computer screen. I will now pause for a moment to give our stockholders the opportunity to submit ballots.

[Voting]

Thank you to all our stockholders for voting and attending today's meeting. I now declare the poll closed.

The inspector will tabulate the vote and the final results will be publicly announced as soon as they are available. However, I am informed on a preliminary basis that all proposals have passed.

With no other business before the meeting, I declare this meeting adjourned. We thank everyone for attending, and we are grateful for your interest and support of Piedmont. Have a good day.

This conclude the meeting. You may now disconnect.

Good day, ladies and gentlemen, and welcome to the Piedmont Realty Trust, Inc. First Quarter 2026 Earnings Conference Call.

[Operator Instructions]

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. Ma'am, 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 piedmontreit.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 Valente, our Chief Operating Officers; Chris Kollme, our EVP of Investments; and Sherry Rexroad, 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 amenity-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 rightsized their office space for the modern workforce.

Third, our service model, recognized in the top 5 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 mitigant to large corporate downsizing. 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 NOI growth and meaningful earnings growth.

The operational performance of the portfolio has led to an increase in our 2026 outlook. Core FFO by $0.01 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 and 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 a continuation of the elevated demand that we've experienced in 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, 2/3 was related to new tenancy.

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 rents 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 the 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 5 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. George?

Thanks, Brent. We've been experiencing persistent demand for several quarters now. And once again, the Piedmont platform delivered exceptional operating results for the first quarter. Leasing velocity continued at a strong pace with 50 transactions completed for over 430,000 square feet.

Like last year, new deal activity was a dominant theme accounting for roughly 70% of total volume and a meaningful portion of that volume is expected to translate into 2026 GAAP rent recognition as commencements occur over the balance of the year.

Average new lease size was approximately 11,000 square feet, reflecting a good mix of small, medium and large clients and the weighted average lease term for new transactions was approximately 9 years. Expansions exceeded contractions for the seventh straight quarter and largely to accommodate clients' organic growth.

Our retention rate remained high at approximately 70%. The portfolio continues to post robust leasing economics, delivering 11% and 18% roll-ups this quarter on a cash and accrual basis, respectively.

Our average accrual based roll-up over the last 8 quarters is an impressive 17%. Additionally, the portfolio generated an impressive 11% same-store NOI growth, driven primarily by the burn-off of free rent. As Sherry will discuss in a moment, the strong cash flow growth, along with recent leasing success has helped push earnings and same-store cash NOI outlook for the year higher.

Leasing capital spend was $5.18 per square foot per year, materially lower than our trailing 12-month average of $6.20, driven from modest concessions associated with several renewal and sublet to direct deals.

Additionally, leasing commissions were also lower than historical trend this quarter as a result of greater number of leases that were direct deals without a broker. Net effective rents increased to $22.03 per square foot, up almost 5% from the previous quarter, and we anticipate further rental rate growth supported by strong demand for high-quality space and little to no new development in our submarkets.

These encouraging first quarter metrics signal that Piedmont is off to a strong start for 2026. Next, I'd like to highlight notable market activity and progress on our key expirations. Dallas led all markets during the first quarter, closing on 14 deals for 123,000 square feet with new transactions accounting for a majority of that amount. Also in Dallas, we've agreed to extension terms with Epsilon at our Las Colinas Connection project for roughly half of its current footprint and our pipeline for backfilling the balance of that space is deep and at improving rents.

Atlanta was our second most active market with 12 deals for 88,000 square feet. Our local team signed an 11-year new deal with a global accounting firm to backfill another Eversheds floor at 999 Peachtree in Midtown.

While our supplemental report shows Eversheds having 180,000 square feet expiring this quarter, we have already backfilled roughly half of that space at 40% cash roll-ups and have strong activity for the balance.

At 60 Broad, we announced last quarter that we agreed to terms with the new administration of the City of New York at our 60 Broad Street project for substantially all of that space and that a lease of this size will require other internal city reviews and a public hearing process before the transaction can be fully executed.

The city is steadily progressing to conclude our lease. However, it's likely that the process will not conclude until later this year. Our redevelopment projects posted another strong quarter of deal flow with over 100,000 square feet of new transactions signed, increasing the lease percentage from 62% to 76% at quarter end. Including leases executed in the second quarter or in the legal stage, the out-of-service portfolio is greater than 80% leased.

We anticipate placing 222 Orange Ave back into service in the second quarter, and we continue to be confident that the remainder of the out-of-service portfolio will reach stabilization around the end of the year.

Looking ahead, our leasing pipeline remains robust and now has over 700,000 square feet in the legal stage for the second quarter. Outstanding proposals have jumped from 1.8 million square feet last quarter to 2.4 million.

Our supplemental report shows 9% of leases expiring in 2026 with the vast majority of that occurring in the second quarter and relates to the Eversheds, Epsilon and New York City leases, each of which I just reviewed. Aside from those 3 leases, there are negligible expirations remaining for 2026. As a result, we remain comfortable projecting that we will end the year within our previously released year-end lease percentage guidance of 89.5% to 90.5% for our total portfolio, including both our operating and our out-of-service redevelopment portfolios. I'll now turn the call over to Chris Kollme for his comments on investment activity. Chris?

Thank you, George. Capital markets have shown improving liquidity so far this year as evidenced by the strongest first quarter office sales volume since 2020, and we continue to seek ways to optimize and elevate our portfolio. As I have previously stated, we have 2 land parcels under contract, one of which is in the Las Colinas submarket of Dallas, and that deal went hard this quarter.

The buyer still has several extension options. However, we anticipate this transaction will ultimately close later in 2026 and will generate approximately $12 million in net sale proceeds. The other land parcel is still in the midst of a lengthy rezoning process. So the timing there is much less predictable, and we expect it to close in the first half of 2027.

In addition to the obvious financial benefits of these 2 land sales, we are also excited about the additional retail amenities that these transactions will ultimately provide for our adjacent office projects. We continue to actively evaluate and underwrite potential acquisition opportunities. But over the last couple of years, we have redirected and prioritized our capital towards other accretive uses such as funding our tremendous leasing volume, reinvesting in our core assets and reducing our debt.

We are in the market with some of our other noncore assets. Although it is too early to comment on any specifics, we are optimistic that we will return to a more active capital recycling program later this year. With that, I'll pass it over to Sherry to cover our financial results.

Thank you, Chris. We will be discussing some of this quarter's financial highlights today, but please review the earnings release and accompanying supplemental financial information, which were filed yesterday for more complete details.

Core FFO per diluted share for the first quarter of 2026 was $0.36, in line with consensus and consistent with the first quarter of 2025 as higher economic occupancy and rental rate growth were offset by the sale of 2 projects during the year ended December 31, 2025.

AFFO generated during the first quarter of 2026 was approximately $23.8 million. From a balance sheet perspective, we had approximately $526 million of capacity on the revolver as of quarter end. And as we've highlighted previously, we currently have no final debt maturities until 2028.

We continue to think creatively as we evaluate balance sheet management options to extend and smooth our maturity ladder and continue reducing our interest costs. Our overall weighted average cost of debt continues to decrease. And based on the current forward yield curve, we expect that all of our unsecured debt maturing for the remainder of this decade could be refinanced at lower interest rates and thus be a tailwind to FFO per share growth.

As Brent noted, we are narrowing and increasing our 2026 annual core FFO guidance by $0.01 to a range of $1.49 to $1.54 per diluted share, an increase of over $0.10 per share at the midpoint over 2025 results. We are also increasing our same-store NOI, cash and GAAP guidance range by a full percent from 3% to 6% to 4% to 7%.

Please note that this guidance does not include any speculative acquisitions, dispositions or refinancing activity. We will adjust guidance if and when those types of transactions occur. With that, I will turn the call back over to Brent for closing comments.

Thank you, George, Chris and Sherry. Despite the ongoing noise in the office sector, Piedmont remains focused on leasing our portfolio of recently renovated, well-located hospitality-inspired Piedmont places with the quality space becoming harder to find and the cost of new development at all-time highs, we believe our portfolio offers a cost-efficient alternative to new construction, and we will be able to continue to drive meaningful leasing volume, rental rate increases and same-store NOI growth as 2026 unfolds.

With that, I will now ask the operator to provide our listeners with instructions on how they can submit their questions. Operator?

[Operator Instructions]

Our first question is coming from Anthony Paolone with JPMorgan.

My first question relates to your comment about half the portfolio seeing a -- I think it was a 15% increase or more in rents, and I think it was 2025. I'm just wondering how specific is that to assets versus markets? Like maybe if you can give us a little bit more depth on like where that all occurred or where it didn't perhaps.

Sure, Tony, and thanks for joining us this morning. So as we talked about, we did move rate materially, particularly from an asset perspective over the course of 2025, driven by a lot of absorption that we talked about earlier in the call as well, about 750,000 square feet.

So markets and assets, certainly from a market perspective, the assets around our projects are not necessarily achieving what we are. I'll take the Northwest submarket in Atlanta, for example, our Galleria project there crossed over $40 a foot.

Today, we're asking over $50 a foot, and that all occurred over the course of '25, while the rest of the submarket relatively stayed flat. And I would say Midtown Atlanta, also an example of where we continue to push rates at those meaningful levels.

Frankly, all of Dallas would also incorporate that. Some of our suburban assets in Minneapolis, where we've renovated would also incorporate a really meaningful uptick in rental rates over the course of the year.

And then finally, our downtown Orlando projects as well, would all encompass that. And we're seeing continued activity now in our Northern Virginia submarket, not nearly to that degree, but we're starting to see the same effects in those markets I just mentioned occur there as well.

And it's really related to, again, that high-quality space, that top quartile market, particularly in which we play in, has continued to have meaningful absorption and seeing large blocks of space continue to be pulled off the market, and that has allowed us to continue to meaningfully move rates across those assets, if you look at the supplemental that are 90% plus or more leased.

And then maybe second question, Chris, I think you mentioned being in the market with a few assets for sale. And I know you don't want to give too many specifics, but maybe any sense of order of magnitude dollar-wise that we could see on the disposition side this year?

I'll take that. This is Brent again, Tony. So as you noted, we do -- as Chris noted earlier, we have about $30 million under contract, $12 million is hard and in the held-for-sale bucket, and we do expect those to close in third quarter and the rest will happen in early '27.

As Chris noted, we're marketing one building and evaluating a few others at the moment. And we're looking really to harvest value from stabilized assets and improve the overall quality of our portfolio.

So looking again to always cull that bottom 10% in an efficient manner. So we'd like to monetize and/or dispose of assets, particularly in the district of Houston are ones we've noted, but also looking a little bit to the future, as we've noted, we'd like to monetize our New York asset upon the conclusion of the New York City lease, although that's likely now in early 2027 event.

And given the profile of the assets we do have in the market and what we would recycle, we think we could take those proceeds and put them in likely to initially pay down debt. But on a longer-term basis, we are seeing opportunities in our Sunbelt market that would stabilize would be redeployed on an earnings neutral to accretive basis. But obviously, anything at this point, transaction-wise is likely to occur late in the year, if at all. And there's going to be a limited impact to 2026 earnings if we were to dispose of an asset at this point given where we are in the year.

Our next question is coming from Nick Thillman with Baird.

Maybe, George, just appreciate the commentary on 2026 and the bulk of them discussing those. But as we look at '27, you alluded to 50% to 60% retention. You guys have highlighted the 2 move-outs in Atlanta, but just curious if there's any other notable ones that we should be highlighting. It looks like a decent amount of concentration in Orlando and Minneapolis. So any large tenants to monitor there as well and just expectations on that front?

Sure. Thanks for joining us. I think before I address that, it's really important to understand the momentum that we saw in 2025 continues to roll into 2026, right? I mean the record leasing that we completed was on the backs of early proposals around 2.4 million to almost 3 million square feet.

And though it dropped in the fourth quarter to 1.8 million, we're excited of the fact that it came back to 2.4 million square feet, and that's just providing the tailwinds with these large expirations that are coming up in our submarkets.

You mentioned 2027. Yes, it's true, Broadcom and Fiserv in Atlanta will be vacating in the third quarter of 2027. But what we've seen here is that we're going ahead and put into place the Piedmont strategy has worked so well over the past couple of years, right? I mean these properties are modern, they're well amenitized. And when those large users leave, we're going to have the opportunity to put up a building signage for the next prospect that comes along, right?

These assets are located in Atlanta. We've had a tremendous amount of success here. Central Perimeter is one of those markets that's the most accessible in all of Atlanta. It's got a long track record of expanding large corporate relocations into the submarket. In fact, we had 3 last year with StubHub, TriNet and AIG, and we expect that to continue. Our pipeline right now is about 300,000 square feet to backfill, those 2 large prospects in Central Perimeter.

I think one of the advantages here is that when you look at the supply of large block space for 150,000 square feet or larger, there's only 4 that really we would call the Tier 1, and we own 2 out of 4 those -- 2 of those 4 supply.

So we feel pretty good about that. And if you look at our overall track record in terms of what we've accomplished in Atlanta, we're 94% leased today. And I think it gives us the confidence we can backfill that space in a pretty short order.

Yes. I understood the Atlanta. I just wanted a little bit of clarity on maybe Orlando and Minneapolis, in particular, those are some of the more concentrated ones at 27. I was just curious if there's any other notable like 50,000 square foot tenants that we need to monitor on that side and if you've had discussions on that front?

Sure. We've got one in Minneapolis, a little over 100,000 square feet. It's in a suburb location. We've got some early looks right now. We have 2 or 3 prospects looking for full [ 4 ] more. We've got a great brand in Minneapolis. We've -- I mean what you've seen what we've done in Meridian Crossing right with [indiscernible] 400,000 square feet, and we've got to all of that over the next 15 months or so.

So we're not overly concerned about it. And then going to Orlando, we've got one project that has about 100,000 square feet expiring. We actually have 2 prospects that can backfill all of that space right now. Proposals are outstanding. I think we're getting close to -- getting a handshake on the deal. So we're looking good there.

That's helpful. And then just on the 700,000 square foot pipeline, 300,000 of that is the renewal with New York, but are there any other chunkier ones within that, that's late stage or signed to date?

I'd say -- Nick, this is Brent, and thanks for joining today. I'd say it runs the gamut. It's consistently what we've seen in the past that small users have been there and large users continue to bring their people back and want great space.

Obviously, we have less and less larger blocks. So we're going to continue to see less, probably 100,000 square footers, except for some of the noted backfills that George mentioned really aren't until '27 in the first place.

And so I'd say it's kind of consistently in 50s and 60s and also the 5s to 15s as well across industries. And I think that is what investors should take away from the robust demand we see is not being impeded from an AI perspective at all.

That's helpful. And then, Brent, just maybe conversations with the Board and status on the dividend. I know there's some talk of potentially starting again to declare dividends next year in '27, but is there any update on that front or sentiment there?

Of course, the Board reviews the opportunity to pay dividend really every quarter. But as you noted, we said at this point with the dividend suspended, the Board would not really evaluate that again until 2027.

I would say until we have the need, i.e., positive taxable net income and see our ability to continue to have excess cash flow. Right now, we're putting a lot in the leasing space, which is obviously generating great returns. But until we see both of those, which depends somewhat on leasing velocity and momentum, the Board is not likely to turn on the dividend.

So we will continue to update. Again, probably the first quarter of 2027 will be that opportunity when capital does significantly right now start to wane off and we see excess cash flow. But again, that's up to the Board to evaluate at that point in time.

[Operator Instructions]

Our next question is coming from Dylan Burzinski with Green Street.

Most of mine have been asked, but maybe just sort of looking at portfolio lease percentage and where you guys think that can head over time. Just sort of looking at where you guys -- where you guys were at pre-COVID, call it, in the 91%, low 91% range. Obviously, this year, you guys are guiding to sort of 90% at the midpoint.

I mean, do you think the portfolio is just structurally different today in that not only in terms of the location and the quality but also benefiting from the flight to quality such that lease percentage can get beyond where it has been historically?

Thanks, Dylan. This is Brent, and great question. As you point out, we were about 91% leased pre-pandemic. And of course, that had a shift in the marketplace that was pretty substantial. We've recovered almost all of that back, and we're guiding to 90% leased at the end of this year.

As we look at our own portfolio, we have a substantial number of assets where we push lease percentages that are well into the 90s, sometimes approaching 100%.

So I think to your point, we have seen those assets that perform are generating well in excess of historical 91%, 92% stabilization. And I do believe we can continue to generate roughly 50 to 100 basis points of absorption a year across the portfolio.

And so that's reasonable to assume that we could be in the 91% to 92% leased range in a few years, and potentially drive that higher, particularly at the unique amenitized large-scale projects like both our Galleria project, but even those midsized projects like the Meridian and Minneapolis, which we leased up over about the course of 18 months from 0% leased.

Those environments are proving out that we can take assets to, again, 95% plus, and that will have a meaningful impact on growth in the portfolio longer term.

So I do see, particularly with no construction really coming online to the end of the decade, a good runway push further, but that's just a little too far out to prognosticate. But certainly feel comfortable saying 50 to 100 basis points of absorption over the next few years is achievable.

Okay. Great. That's extremely helpful, Brent. And then I think you mentioned D.C. and Houston being geographies or assets that you guys were looking to monetize. Can we say the same for Minneapolis as some of those assets through stabilization?

I'd say, Dylan, we continue to want to harvest assets that we've created value and are stabilized to redeploy that into accretive opportunities. So regardless of market, I think we take that lens through the portfolio. You know Minneapolis, we do have a couple of assets that have leased up really well there and have long WALTs, 12-year plus weighted lease through those buildings.

We'll let those come online and evaluate the market at that time. Hopefully, it continues to improve. But we have, as you know, created a lot of value with those buildings, and we'll look for ways to either recapitalize or monetize and redeploy those proceeds accretively into another market where we see growth in a similar fashion. So a little too early to tell on Minneapolis, but it's likely that we would reduce our exposure there over time.

As we have no further questions in queue at this time, I'd like to turn the call back over to Mr. Smith for any closing remarks.

I appreciate everyone joining today. I want to take the opportunity to thank my colleagues and fellow Piedmont placemakers for their hard work and efforts over the past really few years that have resulted in the sector-leading growth that we're witnessing this year.

I also want to invite investors to join us at the Wells Fargo Conference next week. If you happen to be attending that and/or in the June NAREIT meeting in New York City, if you want to sit down with management and hear more about the growth story and what's unfolding in the office sector. Thank you, everyone, [indiscernible]. Have a great day.

Thank you. Ladies and gentlemen, this does conclude today's call, and you may disconnect your lines at this time, and we thank you for your participation.

Greetings, and welcome to the Piedmont Realty Trust, Inc. Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] 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 8-K 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 piedmontreit.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 impact 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 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 Kollme, our EVP of Investments; and Sherry Rexroad, our Chief Financial Officer. We also have the usual full complement 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 been -- we've seen peak vacancy for this cycle. Rising office mandates and intended to 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 5-day work week in the office has soared to about 55% compared with 5% reported 2 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 9 for the previous 4 years. Demand also appears to be spreading geographically. According to Cushman & 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 5 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 1 million square feet ahead of our original 2025 leasing guidance. In fact, over the last 5 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 5 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 2 projects in Minneapolis and 1 in Orlando was 62% leased 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 uncommenced 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.

Thanks, Brent. Durable demand for Piedmont's modern, highly amenitized workplace environments generate exceptional operating results for the fourth quarter. Leasing velocity continued at a vigorous pace with 60 transactions completed for nearly 700,000 square feet and very close to record levels, which have experienced over the past 2 quarters. New deal activity was the dominant theme again, accounting for 69% of total volume with 54% of that activity filling current vacancy.

As Brent mentioned, large users are driving new deal activity to record-breaking levels with 10 full floor or larger transactions executed this quarter and another 6 either executed or in the late stage. Nearly 90% of new leases signed will begin recognizing GAAP rent in 2026. It's also gratifying to see food and beverage operators appreciate the vibrancy and foot traffic around our well-located assets and within our hospitality-inspired common areas, which this quarter attracted 2 more F&B deals, further strengthening and differentiating our offerings.

Our weighted average lease term for new deal activity was approximately 9 years and consistent with previous quarters. Longer lease terms are essential for justifying the capital investment and upgrading to today's office suite environment. As we've experienced now for 6 straight quarters, expansions exceeded contractions largely to accommodate customers' organic growth.

Our retention rate remained high at 63%, a positive testament to Piedmont's brand. Impressively, our team retained 4 large subtenants on a direct basis for nearly 100,000 square feet with strong NERs and a significant increase in sublet to direct rents of approximately 35%. Once again, Atlanta and Dallas were the driving forces behind strong lease economics as the portfolio as a whole posted a 12% and 21% roll-up or increase in rents for the quarter on a cash and accrual basis, respectively. Notably, our average accrual base roll-up over the past 8 quarters is an impressive 17%.

Our overall weighted average starting cash rent of $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 spend was $6.12 per square foot, down $0.46 per square foot from our trailing 12 months. Net effective rents came in at around $21 a foot, in line with the previous quarter. Atlanta is our most productive market by far during the fourth quarter, closing on 23 deals for 336,000 square feet or half of the company's overall volume with new leasing transactions accounting for over half of that amount.

At Galleria on the Park, our local team landed a corporate headquarter relocation requirement for 48,000 square feet and 10 years of term. A new run rate high was achieved on this transaction and along with limited vacancy at this project, serve as a catalyst to push asking rents to $48 a square foot, up from $40 a square foot 12 months ago. Also noteworthy was backfilling another floor, the Eversheds lease at 999 Peachtree that expires in the second quarter of 2026. I'd like to point out that over the course of the past year, 999 has captured 9 new deals for 130,000 square feet, consistently achieving some of the highest economics in our portfolio and is now 93% leased. We remain highly optimistic in addressing the last few Evershed's floors given the level of interest we're seeing.

Orlando also stood out this quarter, capturing 10 deals for 125,000 square feet or 18% of company volume. Three more floors were leased at our 222 Orange redevelopment project, boosting lease percentage up from 46% to 77%. Asking rates are now at $42 per square foot versus $37 per square foot from 12 months ago. One of those deals completed there was a headquarters relocation from the Midwest and the other regional office for a global construction company that moved from the suburbs. Both clients highlighted our vibrant environment as a key differentiating factor in their final decisions.

Piedmont's other redevelopment projects, both located in Minneapolis, are also attracting a number of additional new clients. Our out-of-service portfolio, which is 62% leased at year-end, is nearly 80% leased, inclusive of legal stage transactions with a substantial majority commencing by year-end. I'd also like to touch on our 2 largest 2026 expirations. In Dallas, we're making good progress on retaining Epsilon and attracting new clients for almost half of that expiration. Epsilon currently leases the entirety of 1 in our 3-building Las Colinas Connection project, which is currently 99% leased. The project is very visible and accessible at the crossroads of 2 major highways, much like the excellent locational qualities of our Galleria towers.

Although we don't intend to take this asset out of service in order to convert it to a multi-tenant environment, we intend to apply the same proven Piedmont renovation strategy that has worked so well in our other markets. Once construction begins, we typically see a spike in interest and demand. With virtually no large high-quality blocks of competitive space available, we're excited about our near-term leasing prospects and achieving new rental highs in that submarket.

At 60 Broad, we're excited to announce that we've recently affirmed deal terms with the new administration for the City of New York lease. A deal of this size will require other internal city reviews and a public hearing process before the transaction can be fully executed, but we are encouraged by this important step and expect that we will have an executed lease by later this year. The Piedmont formula of attracting and retaining clients worked extremely well in 2025, and we're confident of continued success in 2026.

Our leasing pipeline remains robust even after 3 straight quarters of record new leasing activity and is now nearly 600,000 square feet in the legal stage, including 6 single floor or larger new deals. That said, with very few large blocks of space available, outstanding proposals have declined moderately in total at a combined 1.8 million square feet for our operating and redevelopment portfolios. Though demand is strong, the course of 2026 quarterly net space absorption is dependent on the amount and timing of scheduled expirations.

Our supplemental report shows approximately 9% of the portfolio rolling in 2026. The vast majority of the role relates to the Eversheds, Epsilon and New York City leases that I just reviewed with the second quarter, the most impacted. Aside from these 3 leases, there are negligible expirations remaining for 2026. That said, we are still projecting positive net absorption overall and ending the year around 90% for our total portfolio, including both our in-service and our currently out-of-service redevelopment portfolio.

I'll now turn the call over to Chris Colley for his comments on investment activity. Chris?

Thank you, George. 2025 was a pretty quiet year for Piedmont on the transactions front. The team did close on a small disposition outside of Boston, removing an older slow growth and capital-intensive assets from the portfolio. We will continue to seek ways to optimize and elevate our holdings throughout 2026. As I have mentioned, we have 2 land parcels under contract and both are going through very time-consuming rezoning processes.

So the timing is somewhat at the mercy of the city and county officials. We are expecting to close one in the middle part of this year and the other at the end of 2026 or possibly in the first quarter 2027. If both were to close, they would generate a little over $30 million in gross proceeds and will ultimately provide additional retail amenities for our adjacent office projects. We continue to actively evaluate and underwrite potential acquisition opportunities. We are optimistic that we will return to a more active capital recycling program in 2026.

With that, I'll pass it over to Sherry to cover our financial results.

Thank you, Chris. While we will be discussing some of this quarter's financial highlights today, please review the earnings release and accompanying supplemental financial information, which were filed yesterday for more complete details. Core FFO per diluted share for the fourth quarter of 2025 was $0.35 versus $0.37 per diluted share for the fourth quarter of 2024, with the decrease attributable to the sale of 2 projects during the year ended December 31, 2025, and higher net interest expense as a result of refinancing activity during that same period. These decreases were partially offset by growth in operations due to higher economic occupancy and rental rate growth. AFFO generated during the fourth quarter of 2025 was approximately $18.7 million.

Turning to the balance sheet. We completed some very important refinancing activity during the fourth quarter. We issued $400 million in aggregate principal amount of new bonds and used the net proceeds to repurchase approximately $245 million in principal amount of our 9.25% 2028 bonds. The remaining proceeds from the new issuance were used to pay down the outstanding balance on our revolver.

This refinancing activity, combined with the open market purchases of some of our higher coupon bonds that we completed earlier in the year, will save us approximately $0.04 a year on an annual basis. As a result of this activity, we had approximately $550 million of capacity on the revolver as of year-end. And as we've highlighted previously, we currently have no final debt maturities until 2028.

We continue to think creatively as we evaluate balance sheet management options to extend and smooth our maturity ladder and continue reducing our interest costs. Based on the current forward yield curve, we expect all of our unsecured debt maturing for the remainder of this decade could be refinanced at lower interest rates and thus be a tailwind to FFO per share growth.

At this time, I'd like to introduce our 2026 annual core FFO guidance in the range of $1.47 to $1.53 per diluted share. an increase of $0.08 per share at the midpoint over 2025 results. To summarize, the guidance reflects an increase in property NOI in the range of $0.08 to $0.13 a share and decreased interest expense of $0.01 to $0.02 a share. Note that the $0.04 of interest savings due to the bond refinancing that I previously mentioned is partially offset by the reduction in capitalized interest as our out-of-service portfolio comes online.

In addition, the guidance includes a $0.01 decrease in NOI due to 2025 dispositions and slightly higher G&A and share count. We expect another strong year of leasing activity in the 1.7 million to 2 million square foot range, including, as Brent mentioned, stabilization of our out-of-service portfolio by year-end and resulting in a year-end lease percentage of approximately 89.5% to 90.5% for the entire portfolio and mid-single-digit same-store NOI growth on both a cash and accrual basis.

It is worth noting that our projected commenced/-occupied percentage will increase approximately 400 basis points from 81% at year-end 2025 to 85% at year-end 2026, fueling our earnings growth. Please note that this guidance does not include any speculative acquisitions, dispositions or refinancing activity. We will adjust guidance if and when those types of transactions occur. We have included an annual FFO roll forward and outlined our assumptions in the earnings release section of the supplemental to assist with your modeling and analysis.

And with that, I will turn the call over to Brent for closing comments.

Thank you, George, Chris and Sherry. I am proud of the many accomplishments by the Piedmont team during 2025, and I'm excited to see the hard work of so many start to contribute to FFO growth in 2026. With quality space becoming harder to find and the cost of new development at all-time highs, we believe that our portfolio of recently renovated, well-located hospitality-inspired Piedmont places provides a desirable cost-efficient alternative to new construction and will continue to drive leasing volume and rental rate increases in 2026.

With that, I will now ask the operator to provide our listeners with instructions on how they can submit their questions. Operator?

[Operator Instructions] Our first question is coming from Nick Thillman with Baird.

Congratulations, Alex. Maybe just digging a little bit more on just leasing overall on the 1.7 million to 2 million square feet that's in there. I guess what's embedded in that on renewal versus new leasing? Obviously, the chunkier deals in there, it seems like from a retention standpoint, you're somewhere in between 25% and 80% retention. So maybe thoughts on retention. And then overall, what's embedded there on the new lease assumption as well?

Nick, George here. Thank you for joining us. I mean the quick answer is it's roughly 50-50 between new activity and renewal activity.

I think in regard -- sorry, this is Brent. In regards to retention, as we've noted before, we're going to be retaining New York City for substantially all the space. Evershed is a vacate and Epsilon will renew and we have some additional tenancy that roughly means we'll get about half the space back. If you think about our overall expiries for 2026, it's about 9.5% of the portfolio. And those 3 make up, call it, almost 6% of that. So really, what we're left with is "unknowns", we feel very good about renewal probability. I would say what we've been trending to over the last year, call it, 65% retention would be expected for that remaining portion of the portfolio to give you some perspective around that.

That's very helpful. And then I guess if I look, good momentum overall on the leasing front. Is there somewhat of a cap you guys can do from a lease percentage? I look at some of where the vacancies, but it seems that there's a little bit more structural vacancy. I look at like your D.C. portfolio, for example, is rough 25% of your vacancy in your operating portfolio. How should we think about how far a lease percentage can move with -- given there's still some select pockets of vacancy in some of your weaker markets overall?

Nick, yes, that's a great question and something that we get asked frequently. We have created really unique environments that we believe we can continue to lease up what will be historically challenging space, lower in the building, maybe a few in the parking garage, et cetera. But for instance, our Galleria project, the environment is so unique that we continue to feel that we're going to be able to lease those projects up beyond 95% leased. well into the high 90s. But you do point out that we do have some challenging vacancy elsewhere in the portfolio.

We have a building in Boston that's been a little bit slower for absorption at 25 malls. And D.C. continues to be a challenge in the district. But we are seeing more green shoots in Northern Virginia with good activity there that we think will be an absorption opportunity. And then, of course, our out-of-service portfolio, as we've alluded to, continues to be very well received in the marketplace, and we'll continue to drive absorption there. So if we take that aggregate perspective, we're guiding 89.5% to 90.5% leased this year.

George and I see no reason why we can't take the entire portfolio upwards of 91%, 92% leased, which is where we were prior to the pandemic. And frankly, I'm of the belief that we continue to see the momentum, we could even drive beyond that 92% level in the years ahead. It will take us some time to get there. But our product is uniquely positioned. It's been amenitized. It's well located and its price point is very compelling, and that continues to drive both large and small users of our projects.

I appreciate the commentary, Brent. And then maybe just a final one for Chris on just overall transaction activity, what you guys are targeting for dispose of what type of product you would like to exit in '26 and maybe how the bidder pool on select assets has changed over the last couple of months?

Nick, this is Brent. Chris is a little bit under the weather, so I'm going to pinch hit here on this one. As you know, we do have and have had land parcels in the market that are under contract. Those are continuing to progress well. Otherwise in the disposition bucket, we did note that we had a building in D.C. that we took brought into the market. I would say receptivity was not strong just because I think the challenges of that overall market as a whole. So we're going to continue to hold on to that for the near term.

We do consider our Houston assets noncore, and we'll continue to look to monetize those as well as if we are -- if we conclude the 60 -- sorry, the New York City lease at 60 Broad, that would be a candidate to monetize a part of that asset here towards the end of '26 as well. Again, our guidance does not contemplate any of those potential dispositions, land sales or otherwise, and we'll update accordingly. But we do see that opportunity to rotate some capital in the second half of the year.

[Operator Instructions] Our next question is coming from Dylan Burzinski with Green Street.

Maybe just touching on the demand environment. Obviously, it's very robust across your guys' portfolio. Can you kind of talk about some of the things driving that activity? Just thinking about the job market, things still seem to be a little bit shaky. So just sort of curious what you think is causing this very robust demand environment across your guys' portfolio today?

Dylan George here. Look, I think some of the characteristics that we've seen for the past, I would say, 2 years is certainly intensifying for us in our portfolio. The decision for a lot of these users to come back and upgrade their overall office experience, that seems to be the ones that's driving our large deal flow. Also the conviction around the workplace strategy, right? I think we heard earlier that the number of Fortune 500 companies that are coming back with higher mandates and actually supporting those mandates is causing additional organic growth in our respective submarket.

I would say that when you look at our existing portfolio, the portfolio is quite dynamic. You have a lot of users that continue to expand from a business plan perspective. As I mentioned earlier in this conversation, we had 11 expansions versus 3 contractions, and we're seeing that from a financial services perspective as well as insurance, accountants and law firms just across the board.

I'd add to that. I think as we've talked about, our portfolio is uniquely positioned in that it has been renovated and amenitized and is at a very effective price point for a lot of businesses. So I feel like our addressable market is much wider than those that are just looking for trophy quality space. And that trophy quality space is very full, almost no vacancy.

As we alluded to in our prepared remarks, no development, really, we won't see any new assets until the end of the decade. So we're right in the sweet spot of a lot of demand from both small and big users from across industries. And again, our buildings are also not designed heavily for tech. We've never relied on tech as an incremental lessor absorption in our portfolio. And right now, given the softness in tech expansion and growth, we're not inhibited by that.

And we continue to see all the industries that George alluded to grow and need quality office space, and that's going to help us push rental rates again this year meaningfully across the portfolio, but particularly in our Sunbelt markets.

I guess that's a good segue to my next question. I mean, how much do you think rents can grow across the Sunbelt portfolio over the next, call it, 1, 2 years? Are we talking upwards of potentially 20% rent growth on a cumulative basis? Just sort of curious how we should be thinking about that here given that backdrop you just described.

Yes. No, I think I would highlight a couple of points around our growth. One, as we alluded to, we have still a lot of lease-up and commencement activity in our portfolio to drive earnings growth. We've also got a pretty incredible mark-to-market. Yes, we've continued to push rental rates, in some cases, 20% in 2025 alone. But all those leasing leases we did in '23 and '24, which was over -- approaching almost 4.5 million square feet are at rates that are now 20%, 25% below current signed rents in our projects. So we think there's a meaningful mark-to-market in that Sunboatelt portfolio, particularly of 20% to 40%.

And then just where we see rents going today with new construction cost rents at $70, $80 gross in many of our markets now, and in-place rents at our projects anywhere from $45 to $60 gross, we think there's still a meaningful 25% movement in our own rental rates here over the next year, given it's very tight trophy level and new development continues to increase in cost. So we think those 3 legs really do provide us a unique path for growth between now and the end of the decade from just lease-up, organic mark-to-market and then pushing our own rental rates.

As we have no further questions in the queue at this time, I would like to turn the call back over to Mr. Brent Smith for any closing remarks.

I want to thank everyone who joined us today on the call, but I also particularly want to thank my fellow Piedmont employees for an outstanding 2025 execution and really over the last 5 years to reposition, rebrand and reinvent Piedmont into the machine -- growth machine that it is today. It sets us up for 2026 and beyond.

For those investors who'd like to meet with us and talk with management, we will be at the Citi Group Conference in Hollywood, Florida, March 2 through the 4. And I want to wish everyone a happy Valentine's Day. Actually, Valentine's Day is the week we have the most engagement in our portfolio. We'll show our clients the love, if you will. And I hope everyone has an enjoyable week ahead. Thank you. Have a good day.

Thank you. Ladies and gentlemen, this does conclude today's conference. You may disconnect your lines at this time, and we thank you for your participation.

Thank you, operator, and good morning, everyone. We appreciate you joining us today for Piedmont's third quarter 2025 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 third quarter of 2025 that is available for your review on our website at piedmontreit.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 revenue 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 earnings release and 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 2025 operating results. Brent?

Thanks, Laura. Good morning, and thank you for joining us today as we review our third quarter 2025 results. In addition to Laura, on the line with me this morning are George Wells, our Chief Operating Officer; Chris Kollme, our EVP of Investments; and Sherry Rexroad, our Chief Financial Officer. We also have the usual full complement of our management team available to answer your questions.

After nearly 4 years of steady losses, U.S. office demand turned around in the third quarter. According to CoStar's data, about 12 million more square feet of office space was occupied than returned to landlords in the third quarter, the first positive figure since late 2021. More impressive was that it was also the largest total since the second quarter of 2019. The broader leasing data continues to validate what Piedmont has been experiencing on the ground. Pent-up demand is resulting in record levels of leasing across the Piedmont portfolio. In fact, 5 of our operating markets experienced positive absorption with Washington, D.C. and Boston being the exceptions.

In addition, new tenant leasing velocity has materially strengthened in 2025. The third quarter's total square footage leased on new agreements in the United States, excluding renewals, is estimated to have reached about 105 million square feet and is now within 10% of the 2015 to 2019 national quarterly average of about 115 million square feet. No doubt, after a challenging 4 years, the office sector is turning the corner.

One explanation for this sector shift is a surge in large tenant leasing. The limited availability of large blocks of premium space typically sought by major occupiers and corporate tenants is accelerating the decision-making process. Despite generally slow hiring and an uncertain economic outlook, the upward trend in leasing volume signals that tenants still have a strong appetite for office space. With the supply pipeline contracting and prime availability is 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 have 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 Galleria on 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 portfolio's in-place rents are at least 20% below market.

Our strategy to strengthen the Piedmont brand within the tenant 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 2 quarters, more than 1/3 of the portfolio in the last 2 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 uncommenced leases have 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 0.5 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 $0.10 to $0.15 per share of incremental annualized earnings, an indication of the growth we believe our portfolio is poised to experience.

Of note, the 3 largest leases completed during the third quarter related to our out-of-service Minneapolis portfolio, where we're 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 2 projects in Minneapolis and 1 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 2 years, Piedmont 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-store NOI also turned positive this quarter as some previously executed leases began to reach the end of their abatement period. 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 5-star rating and Green Star recognition from GRESB, 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 generated 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 9 full floor or larger leases executed this quarter with another 6 large deals in late stage.

Around 15% of new leases signed this quarter will begin recognizing GAAP revenue this year with the remaining 85% throughout 2026. Our weighted average lease term for new deal activity stayed consistent at approximately 10 years. As we've experienced now for 5 straight quarters, expansions exceeded contractions largely to accommodate customers' organic growth. Atlanta and Dallas were the driving forces behind strong economics. 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 spend was $6.76 per square foot, up slightly when compared to our trailing 12 months as this quarter's leasing volume was dominated by new tenant activity 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. Sublease availability held steady at 5% with a modest amount expiring over the next 4 quarters. Atlanta was our most productive market during the third quarter, closing on 27 deals for 250,000 square feet or 1/3 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, 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 Eversheds's remaining 150,000 square foot expiration in May of 2026. We currently have 4 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 8 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 competitors surrounding projects are now either dated, uninspiring or financially impaired. Meanwhile, downtown is experiencing noticeably more foot traffic as 2 of Minneapolis' top 10 employers, Target and RBC Wealth Management recently increased their mandates to 4 days a week. Deal flow at our U.S. Bancorp is growing, and we're close to signing a new deal that would backfill 1 of the 3 floors being vacated next quarter.

Dallas is quite active for us as well with 16 transactions for 156,000 square feet. Most notable was a 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 of leasing activity for the year, 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 6 months. Overall market conditions in Las Colinas are improving rapidly and led all Dallas submarkets in 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 2 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 out-of-service portfolios and 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 lease 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 Kollme for his comments on investment activity. Chris?

Thanks, George. As we have said for several quarters, we remain focused on pruning certain noncore assets throughout our portfolio. We are under contract on 2 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 noncore 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 6 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.

Thank you, Chris. While we will be discussing some of this quarter's financial highlights today, please review the earnings release and accompanying supplemental financial information, which were filed yesterday for more complete details. Core FFO per diluted share for the third quarter of 2025 was $0.35 versus $0.36 per diluted share for the third quarter of 2024, with a $0.01 decrease attributable to the sale of 3 projects during the 12 months ended September 30, 2025, and higher net interest expense as a result of refinancing activity completed over the past 12 months. This was offset by growth in operations due to higher economic occupancy and rental rate growth.

As I have mentioned on the last several calls, our lease with Travel and Leisure in Orlando commenced in September and will contribute meaningfully to our fourth quarter results. AFFO generated during the third quarter of 2025 was approximately $26.5 million. It was a relatively quiet quarter from a financing perspective. However, as previously announced, we did amend our revolving credit facility and term loan during the quarter to remove the credit spread adjustment from the SOFR-based interest rates applicable to those 2 facilities, thereby lowering the all-in rate on each facility by 10 basis points.

As we've highlighted before, we currently have no final debt maturities until 2028 and approximately $435 million of availability under our revolving line of credit. We continue to evaluate balance sheet management options, including traditional bonds and hybrid instruments to smooth our maturity ladder and reduce our interest costs. Based on the current forward yield curve, we expect all of our unsecured debt maturing for the remainder of this decade could be refinanced at lower interest rates and thus be a tailwind to FFO per share growth.

To illustrate how powerful this tailwind could be, I'll use the example, if we were to refinance the remaining $532 million of our outstanding 9.25% bonds at current rates, we would generate approximately $21 million of interest savings and be $0.17 accretive to FFO per share. At this time, I'd like to narrow our 2025 annual core FFO guidance from a range of $1.38 to $1.44 to $1.40 to $1.42 per diluted share with no material changes to our previously published assumptions.

Please refer to Page 26 of the supplemental information filed last night for details of major leases that have not yet commenced or currently in abatement. As of September 30, 2025, the company had just under 1 million square feet of executed leases yet to commence and an additional 1.1 million square feet of leases under abatement that combined represent approximately $75 million of future additional annual cash rent, which will fuel the mid-single-digit future earnings growth that Brent mentioned earlier, although it does demand additional capital spend in the short term.

With that, I will turn the call over to Brent for closing comments.

Thank you, George, Chris and Sherry. Our portfolio of recently renovated, well-located hospitality-inspired Piedmont places continue to set the standard for the office market, helping us to drive leasing volumes to all-time highs. On that point, you may recall that we started 2025 with an operational goal to lease a total of 1.4 million to 1.6 million square feet, which was inclusive of approximately 300,000 square foot renewal by the New York City agencies.

Today, we reiterated our revised guidance of 2.2 million to 2.4 million square feet, but note that, that does not anticipate the completion of the New York City lease this year. In effect, we're on pace to lease 1 million more square feet than we anticipated at the start of the year, and much of that leasing was for currently vacant space, an astounding accomplishment I want to commend the Piedmont team for.

With office vacancy declining for the first time in years, quality space is becoming harder to find and new developments are becoming more expensive for occupiers. We believe that the recent investments that we've made in our portfolio, combined with our customer-centric place-making mindset will continue to set us apart in the office sector, enabling us to push rents to all-time highs across the portfolio and generate consistent earnings growth.

We will continue to concentrate our resources on driving lease percentage above 90% and increasing rental rates while opportunistically refinancing above-market rate debt to further drive FFO and cash flow growth.

With that, I will now ask the operator to provide our listeners the instructions on how they can submit their questions. Operator?[ id="-1" name="Operator" /> [Operator Instructions] Our first question is coming from Nick Thillman with Baird.

Maybe for Brent or George, you commented a little bit on just expansion versus contraction. So I just wanted to clarify, is that within the Piedmont portfolio when you're quoting those numbers? And then as you look at the new leasing and the strength there, has that been more new-to-market requirements? Or has that been market share gains in flight to the Piedmont portfolio? Just a little bit of color there would be helpful.

In my prepared remarks, Nick, I was referring that 2.2% with the JLL report noting that large users, 25,000 square feet or greater on the U.S. data set was reducing footprint substantially less. So that's that comment, not specific to our portfolio. But George can talk a little bit more to that. We are seeing more expansions than contractions for sure.

Thank you. It's amazing. It's been 5 quarters in a row we've had expansions. I mean this past quarter, we had 16 expansions versus 2 contractions for a net positive 40,000 square feet. But if you look at the totality for the past 5 quarters, looking at 55 expansions versus 15 for a net of about 120,000, 130,000 square feet. So the dynamics in our portfolio have been quite positive. And in terms of where new leasing activity is coming from, the second part of your question, Nick, I would say that it's mostly intra-market moves in terms of those users wanting to upgrade to higher quality space.

I think the exception to that might be Dallas, where we continue to see a robust inbound activity. Atlanta, a little less so, still up from where we were pre-pandemic, but Texas does seem to have a little bit more inbound and particularly Dallas.

And those larger requirements, the 25,000 to 50,000 square feet, are those -- if you look at what they're currently in place, what's the size change there? Is that a downsize? Or is it keeping the same sort of footprint? Just trying to get a better understanding of kind of larger tenant behavior. We're hearing about slowing hiring. Just -- I guess, how far are we along in the rationalization of just office utilization as you kind of look within the markets for larger usage.

This is George, again. Absolutely. Well, let me first hit this. We had -- last quarter, we had 15 deals that were 25,000 square feet or larger for aggregately about 800,000 square feet. And this quarter, we have in terms of proposals outstanding 18 that are fit that size. So it continues to grow within our overall portfolio.

I would say it's mixed. I mean in a couple of instances, we're hearing about some consolidations. In other words, companies wanting to create a cost to bring their employees back together for increased collaboration. In some other cases, it might be a small deduct, which is they used to justify moving to a higher quality space and paying higher rents.

I think that's one thing we continue to see within the marketplace is the desire to upgrade the quality of your space to bring your people back. And that means having an environment and an offering that is compelling. And that's where our renovations and what we've implemented across the portfolio in terms of our service model, while we're garnering our more than fair share of that leasing.

That's helpful. And Brent, you alluded to this runway you have for occupancy growth and mid-single-digit FFO growth at a steady state over the next 2 years. You guys touched a little bit on some of the larger expirations of the portfolio and the coverage you have there. But maybe anything over 100,000 square feet, you guys touched on the Piper, you touched on the Epsilon, you touched on 999. Anything else that we should be looking at as we kind of look at roll over the next 2 years?

I think from our perspective, the chunky ones, if you will, in 2026 are well known, which does give us the confidence to be able to look into '26, given the prior leasing success, even with those known move-outs to feel confident that there's going to be earnings growth next year. Unfortunately, office REITs were a battleship. It takes a lot to move. But when you do start going, the momentum can carry.

As we look ahead into '27, there are a couple of larger expiries. It's a little early to tell overall. They're in Atlanta, which is also our headquarters location and where we have the most depth in the market. So I feel very good about where we're positioned with those, but it's still 20, 24 months out for those. And so it's going to still take a little bit of time to get clarity, but we think we are well positioned for renewal.

[ id="-1" name="Operator" /> Our next question is coming from Anthony Paolone with JPMorgan.

Brent, just following up on just the conviction level that earnings will grow next year. I know you'll give more specifics when you actually provide guidance. But just wondering, do you think that comes by way of some of the debt refinancing that Sherry talked about potentially existing? Or do you think the core in and of itself can move higher?

Great question, Tony. And I want to clarify that is organic growth only within a static portfolio. It assumes no acquisitions, dispositions or refinancings. As you know, we don't have any debt maturities really for several years until 2028. But as Sherry noted on the call, we do have a pretty large embedded mark-to-market benefit if we were to refinance those bonds, which she outlined in her prepared remarks.

And we will capture that at some point between now and when those mature in '28. But rest assured, from a risk management perspective, the team is very focused on optimizing that transition from high-cost debt to lower cost debt. And what we've laid out in terms of FFO growth, again, is just from organic lease only. The comments that Sheri made is upside on top of what I described as operating growth.

Got it. And then maybe, Sherry, on the debt refinancing, what -- I guess, what are the gating factors to doing something there? Because, I mean, you kind of laid out the spread is pretty clear. Just what would it take to kind of go do something there?

Well, as we've discussed before, there are a variety of ways in which you can refinance the 9.25% bonds that are outstanding. You can do a purchase them in the market, you can do a tender or you can do a make-whole. There's no gating factors related to that, but there are processes in place and there are periods of time where you can or cannot be in the market. And so that's really kind of the variables that we'll be considering as we go forward.

The spread right now between the 9.25% and where we would refinance if we did alongside is about 400 basis points. And that's what's behind the math whenever we said, if you hypothetically could buy back all of them, that you would achieve an interest savings of about $21 million or $0.17 a share.

Got it. Okay. And then just last one, if I could. You kind of talked about being out in the market looking at potential deals out there and the liquidity coming back to office and so forth. I mean what does a typical acquisition that Piedmont might be looking at, at this point look like in terms of cash on cash, type of assets, going in occupancy versus maybe the opportunity? Just kind of what is the type of stuff you're looking at right now?

Great question, Tony. As we continue to canvass the market, not only the existing markets we're in, but as we've talked about in the past, select other Sunbelt markets where we would consider growing if we took a dot off the map elsewhere. We really see 2 buckets of opportunities within those markets. The first would be, I would call, an opportunistic set.

That's the situation where we've talked about in the past of looking for a partner, which we have identified several partners who would be looking for more like 20% IRRs or greater and really probably going in with a lower yield, higher vacancies and a significant amount of capital that needs to go into those. And so that's why we continue to think about a partner in that situation because it would be an earnings drag and an FFO drag and an occupancy drag to bring it in-house initially. But we always have a mindset if we're going to put any capital to work and our time and effort, it would be something we'd want to bring into the REIT over time.

And so those situations, we have looked at a few to swung at buying some debt on some situations didn't work out in that scenario. But we continue to work with those partners. I'd say that bucket right now, kind of comes and goes or off-market deals. But right now, I'd say it's in the $500 million range in terms of opportunity set that we're looking in that bucket. And then the other category would be more on balance sheet, what I would consider more value-add in nature, very similar to what we've done in our Galleria project in Atlanta or 999 in that it's going to be on balance sheet.

It's going to be a little bit lower IRR, probably call it mid-teens. You'd have an opportunity to go in that would probably be really close to where we trade, maybe a little bit below or a little bit above, but with more importantly, the opportunity to grow that yield by, call it, 300 basis points over a couple of years. again, through our leasing model, our service model and leveraging the platform to drive that value.

So they may start with GAAP yields in the 8.5% to 10% range and drive from there and cash might be, let's say, 50 basis points less. But those assets are going to be probably 70-ish percent leased, like I said, and give us a good opportunity to lease up. One thing that we do think is unique about the Piedmont story is while other groups may be chasing particularly private capital, long-term wall, brand-new assets, we do feel like there is a dearth of capital chasing well-located, good bones, but older vintage assets like a Galleria here in Atlanta, where we've had admit success or a 999.

And so those campus, large kind of unique ability to create your own environment interest us and then highly accessible, walkable mixed-use environments also interest us. And there are very good opportunities set around that bucket. I'd say right now, we're looking at roughly $800 million or so that I would characterize as that value-add on balance sheet component.

And unfortunately, right now, given our cost of capital, we're not able to move on those immediately, but we continue to keep them warm and continue to have dialogue so that when we do feel like we have a green light from the market to grow externally, we're prepared to do so in pretty short order.

[ id="-1" name="Operator" /> Our next question is coming from Dylan Burzinski with Green Street.

Most of my initial questions have been asked, but I guess just one quick one. In the past, you guys have sort of talked about taking some noncore assets to market. Just sort of curious where you guys are at in that process and if you're starting to sort of see capital market side of things clear up a little bit as the recovery story in terms of the fundamentals start to pick up here.

Dylan, thanks for joining us today. And in regards to dispositions, it's kind of -- it's tough. It's still challenging, honestly, given the mindset in the office sector that everybody deserves a deal. And if it's not 10 years of WALT and just built the last 4 years, I would say it doesn't price efficiently, which is great if you're buying assets, not optimal if we're trying to sell. But we continue to be focused on pruning, as you noted, the noncore assets that can sell into this market and/or just we don't have conviction that we'll have and be able to drive long-term value.

So we do have an asset in the district that we're in the market with. I would say we continue to feel like the district remains a challenging market that will not likely turn around in D.C. And so we will hopefully execute on that asset and continue to pair back our exposure in the district itself, still very much have conviction in Northern Virginia, and we're seeing good leasing velocity there and uptick in our assets in terms of absorption.

But the other markets that we would consider noncore are those where we have very few assets and we can't seem to grow and/or want to grow. And of course, that would be Houston, which has long-term WALT on one of the assets and then Schlumberger great credit in another. We're going to continue to look to dispose those in '26 as well. They've been in the market, and we'll reintroduce them again, hopefully in a more constructive environment.

But on that environment, it takes leasing really to give investors the conviction to underwrite an asset, vacant space roll in a constructive manner. And so what does give us positive, if you will, hope that we'll be able to execute on some of this in '26 is that we are seeing more leasing in our markets, and that should give a better underwriting conviction in terms of rates and absorption and not just underwriting vacant space stays there forever.

And then finally, we do have our asset in New York City, as we've noted, and that will likely be something we would look to monetize upon a long-term lease at that asset. The overall environment as well as improving, particularly for that asset in the debt capital markets. It would be a chunkier disposition. And so having the ability and you're seeing the strength right now in the secured debt markets will also improve execution, particularly on that New York City asset and when we monetize it.

[ id="-1" name="Operator" /> [Operator Instructions] Our next question is coming from Michael Lewis with Truist Securities.

I'm sorry if I missed this, but did you say why New York City was pushed back again? And with that lease expiration now kind of almost right on top of us, is there any reason for concern there that they might do something surprising, give back space or anything else?

Michael, it's Brent. Thanks for joining us today. Great question. We hadn't touched on it in specifics. And given it's a live transaction, I don't like to get into a lot of detail. But as we've noted on prior calls, and we are still very highly engaged with both DCAS, the Department of Citywide Administrative Services who runs the leasing process for the city. They're working with OMB. And of course, there's also 3 different agencies within that block. So there are a lot of moving pieces and groups that need to weigh in.

As we've noted on prior calls, though, it is a unique envelope that is their own entrance, their own elevator bank, a building within a building, if you would add, you would say. And so the other note would be downtown in Manhattan, there are very now a few large blocks, competitive buildings that we would historically have been competing with. Some of them have been converted to residential as well.

And so we feel like it's, I guess, not as much a concern as they would go elsewhere in lower Manhattan. And then the fact that there's an $8 million holdover penalty on top of their current rental rate that's on an annual basis. But if they do trip over into holdover, we reiterated to them as a public company, we will be upholding that in the pandemic, we were a little bit more immediate on that. Of course, if they renew, we're not going to enforce that. But it is a pretty heavy stick that also goes with the care of a building that really suits the agencies well.

We do recognize there is a new administration coming in. However, given the Department of Homeless and the other agencies there seem to be more geared towards helping the community, we think there is a strong likelihood that they will continue to stay engaged in this location. But at that point, that's all I can share, and we still remain very positive on a renewal sometime in the early part of '26.

No, that's helpful. And as far as the $75 million of cash rent that's kind of pending signed but not paying yet. You give a lot of great detail in the supplemental package, but there's a lot of detail. Could you -- at a high level, how should we think about that $75 million coming online, for example, what percentage of that might be might be paying by the end of the first half of '26 versus the back half? And can you just kind of, at a high level, kind of frame how that will flow through?

So Michael, thanks for your question. And the -- most of it is going to hit in the middle of the year. I recommend about 70% within 2026. And note that those numbers are annualized numbers. So I'm trying to see what other clarity I can give you. Does that help?

Yes. No, yes, that's helpful. And then just my last question.

I might add real quick -- sorry, Michael, I might add, you think about that $75 million, it's really split into 2 buckets, right? There's $40 million of yet to commence. And that's a pretty wide margin historically that we would say that would be 3% of the portfolio. It's now approaching, I think, almost 5% of the portfolio. And so we're expecting a lot of that, if you will, the $40 million commit next year more towards the middle of the year to the end. So we might realize roughly about $26 million of that $40 million within 2026 itself.

On the cash component, which is about $35 million, that's going to lead in on a similar pace as well. So again, $35 million is your annualized number, not all that's going to start paying cash next year. But on that same kind of ratio of about 60% of it, a little bit higher than that, say maybe 70% of it will be realized next year.

Got it. And then lastly for me, this might be beating a dead horse. You talked about all the office leasing demand. Given the jobs numbers, I guess, back when we used to get jobs numbers, but what we know about jobs numbers and then AI, there was a headline recently layoffs now at Amazon. I saw an article that said more layoff announcements this year in any year since 2000. Is some of the leasing velocity, is it just that REITs like yourself, you had more space to fill, and so that helps explain why there's more new leasing volume?

Or it sounds from your comments like it's really a stronger demand, just more space out there looking for a home. Any way to kind of reconcile those 2 things I just said, the jobs and the layoffs and everything that's happening in the broader economy with this -- what feels like a surge in office demand?

Well I'll start with that. Michael, this is George. It's interesting. We keep seeing announcements with layoffs. But as I kind of reconcile that to what we're seeing in our portfolio, we just -- I'm not seeing that affect us yet. And I get back to the comment that I made earlier, people are still looking to upgrade their space because collaboration and innovation just happens a lot quicker when you were working together.

So just to give you some statistics that supports that theme in terms of why we don't see a letdown at all in overall leasing. We talked about overall proposals earlier at 2.4 million square feet overall. That's quite comparable to what we've seen for the past several quarters. But most notable is 2/3 of that is for new space, right? And so that is amazing considering how much new leasing activity we've done for the past 2 quarters that we continue to backfill that pipeline.

And then looking even further out, the tour activity is an interesting early indicator of what's happening for demand in our portfolio. We did hit a low point in July for 34 tours, but that's kind of more seasonal than anything else. It recovered in August to 45 tours. September, 41 tours. And here we are sitting 27 days in October at 43 tours with 4 more days to go. So we're just not seeing it right now.

Getting to your point about Amazon, it is interesting. It's new information we'd like to absorb. But although we have a large hub in Dallas, for them. They lease a tremendous amount of space through WeWork in other submarkets, which are more on the short-term situation. So if I were to guess, I suspect that those short-term contracts in these co-working operations would probably be first to go.

And I'd add on that, Michael, really taken a step back, 2 things I think about our portfolio have linked to our success, and they're not just because we had more space available. The first is we don't lean in or have floor plate and buildings designed heavily for just tech use. It is much more of a professional services, fire, conducive amenity set, finish level, floor plate size, et cetera. And so as tech has pulled back from the -- being kind of the incremental lessor in a lot of markets, our assets have continued to perform because we were never beholden specifically to that group. As George noted, we do have tech in our portfolio, particularly in Dallas and Boston, but it's buildings that fit well for a law firm as well. And so that would be one factor.

I think the other one is if you look at our portfolio and our strategy of having great assets, amenitized location, but we don't cost as much as new construction. So if you're a firm, a national firm or a local kind of regional firm, if you want to create a presence, regional headquarters, et cetera, and you want it to be fabulous space to bring your people back, but you don't want to pay $65 to $80 gross, you come to a Piedmont building. And so we are much more appealing to a larger segment of the market, in my opinion, and I think the data set shows that. And that's why we also have had so much uptick into our assets.

And then you layer on the fact that a lot of landlords are kind of stuck in the capital structure that doesn't allow them to think creatively work with the clients and create the environment in the common areas that are necessary to lease space. So trophy is full and our set of assets are very compelling.

I'll give you one last anecdote. We are working our buildings in Minneapolis at Meridian and having great receptivity in the marketplace. A tenant toured that building before the renovations were completed about 4 months ago. end up going to new construction and entering a lease on that new construction, they did come back to us. We don't have that deal, but they are very compelled now to see the completed product and the fact that, that's a 30%, 40% discount to new construction rents that they are about to enter a lease into. And we'll see if we'll get that 60,000 square foot user.

But I think there's an opportunity to stag that because our environments are so compelling, we can compete with new construction, and we don't have to charge as much. And again, that goes to my point on our ability to push rate across a lot of the portfolio given we've done this investment, and we've got a service level that is truly differentiated, and it's not just that we have more available space.

I can't argue with those leasing results.

[ id="-1" name="Operator" /> As we have no further questions on the lines at this time, I would like to turn the call back over to Mr. Brent Smith for any closing remarks.

Thank you. I appreciate everyone joining us this morning. I do want to remind you of 2 important dates. First, this Friday, Happy Halloween to all those. And then the second is in December, we are going to be at the NAREIT event in Dallas on the 8th. We're going to hold an office tour where we'll be sharing and showing off all the success we've had in our Dallas Galleria project. We'll also have additional brokers and others from the investment community, giving their thoughts and insights on the office sector. So please join us, reach out to either Sherry or Jennifer if you're interested in joining that tour and discussion and dinner. Hope everyone has a great week. Again, thank you again.

[ id="-1" name="Operator" /> Thank you. Ladies and gentlemen, this does conclude today's call. You may disconnect your lines at this time, and have a wonderful day, and we thank you for your participation.

Greetings, and welcome to the Piedmont Realty Trust, Inc. Second Quarter 2025 Earnings Call. [Operator Instructions] Please note, this conference is being recorded.

I will now turn the conference over to your host, Laura Moon, Chief Accounting Officer for Piedmont Realty Trust. Moon, the floor is yours.

Thank you, operator, and good morning, everyone. We appreciate you joining us today for Piedmont's Second Quarter 2025 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 second quarter of 2025 that is available for your review on our website at piedmontreit.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 earnings release and 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 second quarter 2025 operating results. Brent?

Thanks, Laura. Good morning, and thank you for joining us today as we review our second quarter 2025 results. In addition to Laura, on the line with me this morning are George Wells, our Chief Operating Officer; Chris Kollme, our EVP of Investments; and Sherry Rexroad, our Chief Financial Officer. We also have the usual full complement of our management team available to answer your questions.

Before I delve into the quarter, I want to highlight 3 macro trends that bolsters growth for Piedmont in the near term. One, the flight to quality means that demand for the best office buildings is accelerating and Piedmont is well positioned having invested to create a modern work environment at every asset; two, large tenants are making more leasing commitments, driving meaningful absorption at the top end of the market. Three, given the lack of new office construction for the foreseeable future, today's differentiated buildings have a long runway for meaningful rental rate growth.

Now getting back to the quarter. We were very pleased with our leasing success, totaling 712,000 square feet and bringing total year-to-date leasing to over 1 million square feet. Importantly, approximately 2/3 of our Q2 activity related to new tenant leases, marking the most new tenant leasing we've executed in a single quarter since 2018. Further, the new activity included numerous full floor or greater leases, which will meaningfully backfill several blocks of space in the portfolio, including at 3 Galleria tower in Dallas and are currently out of service Minneapolis portfolio as George will talk about more in a moment.

Our leasing success during the second quarter pushed our in-service lease percentage as of the end of the quarter, up 140 basis points year-over-year to 88.7%. The tracking well to our year-end goal of 89% to 90% leased. While not reflected in our lease percentage, our out-of-service portfolio comprised of 2 projects in Minneapolis and 1 in Orlando, is also performing extremely well as differentiated amenitized workplaces continue to garner the majority of leasing in the market.

At the end of the second quarter, the out-of-service portfolio stood at over 30% leased, but is approaching 60% leased based on the activity in July. We anticipate these assets will reach stabilization by the end of next year. In addition to the overall volume, second quarter leasing also resulted in favorable economics with rental rates for space vacant less than a year, reflecting just over 7% and almost 14% roll-ups on a cash and accrual basis, respectively.

As JLL Research noted this quarter, rents for trophy offices and new construction are reaching new highs, asking rents for developments have grown by 27% year-over-year and stand at $92 a square foot, the highest on record by a substantial margin. We believe the underlying effects of high interest rates, cumulative inflation on labor and materials, potential tariff impacts will continue to diminish new office supply and push construction costs higher and by extension, the required rents for new buildings, providing Piedmont with more runway to materially increase our rental rates across the portfolio.

Leasing momentum remains strong, including over 300,000 square feet of leases signed during July, and the pipeline remains robust with another approximately 300,000 square feet currently in late-stage documentation. Demand for our buildings from full floor and larger tenants is particularly evident in Minneapolis and our Sunbelt markets with 10 transactions for a full floor grader increasing our backlog of annual revenue from leases yet to commence or in their free rent period to $71 million, with the gap between lease percentage and economic lease percentage or cash-paying tenants remaining at a historically wide 10%.

We anticipate roughly 80% to 90% of this revenue to commence by the end of 2026. From a macro level, JLL research reports that although overall volume for the second quarter was essentially flat as compared to the first, active space requirements grew 5.8%, reflecting the highest level of demand since 2021, and national occupancy held relatively firm during the second quarter as a modest amount of negative absorption was recorded.

However, in contrast, Piedmont observed positive absorption in 4 of our operating markets. To my point earlier, on construction costs, overall inventory remained flat in the second quarter with only 1 million square feet of new projects breaking ground across the country and projected conversions and demolitions expected to exceed new deliveries this year.

Given all of this activity, we are bullish about our leasing prospects and as I noted before, are increasing our annual leasing guidance for the second time this year to a range of 2.2 million to 2.4 million square feet, which reflects an increase of more than 800,000 square feet compared to our original 2025 guidance that was established at the beginning of the year.

It is important to note, however, that the majority of this new leasing is expected to benefit earnings in 2026 and beyond. Sherry will touch on our bond repurchases that occurred during the quarter in her prepared remarks, but before I hand over the call to George, I want to quickly call your attention to our recent rebranding, including a new website. There are a lot of exciting things happening at Piedmont, and I hope you take a moment to examine for yourself the unique placemaking environments we've cultivated at each of our assets.

With that, I now hand the call over to George, who will go into more details on the leasing pipeline and second quarter operational results.

Thanks, Brent. Our local operational teams were exceptionally productive this summer, capitalizing on elevated demand for Piedmont's well-located hospitality-inspired workplace environments. During the second quarter, we completed 57 leases transactions for 700,000 square feet and well above our historical average. New deal activity accounted for the bulk of that volume reaching 470,000 square feet a regular amount not seen since 2018.

As recently highlighted, we've seen a spike in large users with 7 full floor or larger new deals executed this quarter compared to 1 or 2 per quarter historically. 1/3 of those new leases signed will generate GAAP revenue in the second half of 2025 with the remaining 2/3 positively impacting the first half of 2026.

Our weighted average lease term for new deal activity stayed consistent at 10 years. Expansions exceeded contractions cumulatively over the past 4 quarters. Our trailing 12-month retention rate came in at 78%. As Brent mentioned, lease economics were solid with a 7.3% and 13.6% roll up or increase in rents for the quarter on a cash and accrual basis, respectively.

Atlanta, Dallas and Minneapolis, each contributed meaningfully towards the positive roll-up numbers with an overall weighted average starting cash rent of $43 per square foot. We anticipate further rental rate growth as our portfolio approaches stabilization or crosses into the low 90s. But also from a confluence of 2 market factors. Vacancy at the top end of the market is quite low and rates will justify new construction or reaching new records.

Leasing capital spend was slightly up at $6.73 per square foot per year this quarter when compared to a trailing 12 months, reflecting the fact that our quarterly volume was more heavily weighted towards new leasing this quarter. Net effective rents came in at approximately $20.78 per square foot, and sublet availability continues to hover around 5% with no near-term expirations for those spaces over the next 4 quarters.

Dallas was our most productive market during the quarter, closing on 15 deals for over 200,000 square feet or 1/3 of the company's overall volume with the new transactions accounting for 90% of that volume. Most notable was landing 2 large global companies for a combined 130,000 square feet at 3 Galleria Tower, which now stands at 94% leased and is asking $55 per square foot, the highest rents in its submarket.

Minneapolis was a remarkably close second, capturing 9 deals for 190,000 square feet. In addition to our previously disclosed 84,000 square foot new deal at 9320 Excelsior, our team completed 2 new full or larger headquarter transactions at Meridian. The Piedmont redevelopment strategy underway at Meridian and Excelsior is generating net interest with another 180,000 square feet executed in July or in a legal stage.

Asking rates are now approaching $40 per square foot, up 10% from the pre redevelopment phase from just a couple of months ago and the highest within its submarkets. Orlando was quite active as well with 8 deals for 175,000 square feet. The key story here was retaining 125,000 square feet of 2026 expirations and achieving record high rental rates for both our downtown and suburban assets.

I would like to thank our Orlando team for winning BOMA's renovated Tobi Award at the international level, quite a Herculean feat. Another international bonding in the 250,000 to 500,000 square foot category was awarded to our 25 mall road acid in Boston. Congratulations to both of our teams.

Atlanta receive 19 deals for 110,000 square feet, including new activity in all 3 of our operating submarkets. Central Perimeter fundamentals were our Glenridge Highlands and 1155 assets set are improving as several obsolete office buildings have been demolished. Sublet availability has declined and recent out-of-state corporate relocations like Mercedes, StubHub and TriNet have reinforced the attractiveness of this most centrally located submarket in the city.

Coming back to the overall portfolio and to reiterate what Brent said, we are bullish about our near-term leasing prospects. Our leasing pipeline is strong with over 300,000 square feet in late-stage activity, including several single floor or larger deals and mostly for vacantly current space.

Outstanding proposal stand at a healthy 2.2 million square feet for both our operating and out-of-service portfolios. Our supplemental report shows a manageable 4.2% of our total square footage expiring in 2025. Assuming a stable macro environment, we remain comfortable in achieving our previously released year-end lease percentage guidance of 89% to 90% for our operating portfolio.

Our out-of-service portfolio, which is projected to meaningfully contribute towards 2026 FFO growth, solid lease percentage by 220 basis points in the second quarter and based on what we're seeing in the early and late stage activity, we project this portfolio to reach 80% by year-end.

I'll now turn the call over to Chris Kollme for any comments on investment activity. Chris?

Thanks, George. I'll just provide a brief update. The transactions market continues to be challenging amid ongoing economic uncertainty. Despite the difficult backdrop, we remain in dialogue with potential buyers of select noncore assets and continue to see a modest increase in groups evaluating the office sector for investment.

As we alluded to on last quarter's call, we did dispose of one small noncore project up in suburban Boston during the second quarter, which resulted in gross proceeds of approximately $30 million. This asset located in Boxborough, has been on our disposition list for some time and the decision to sell it is entirely consistent with the portfolio pruning we have completed over the past couple of years. We will continue to do so, and we do have a few other small assets in the market, but it is too early to comment on specifics or speculate on timing.

On the acquisitions front, we remain highly engaged in each of our key markets and continue to think creatively about ways to leverage our operating platform while conserving our capital resources.

With that, I'll pass it over to Sherry to cover our financial results.

Thank you, Chris. While we will be discussing some of this quarter's financial highlights today, please review the earnings release and accompanying supplemental financial information, which were filed yesterday for more complete details.

Core FFO per diluted share for the second quarter of 2025 was $0.36 versus $0.37 per diluted share for the second quarter of 2024, with a $0.01 decrease attributable to higher net interest expense as a result of refinancing activity completed over the past 12 months. Growth in operations due to higher economic occupancy and rental rate growth was offset by the sale of 3 nonstrategic projects and downtime associated with the expiration of certain leases over the last 12 months.

I would reiterate that we anticipate the lease with Travel & Leisure in Orlando will commence in the fourth quarter of this year and provide approximately $5.7 million of additional annualized rent. AFFO generated during the second quarter of 2025 was approximately $16 million.

Turning to the balance sheet. During the second quarter, we utilized the proceeds from the small disposition that Chris mentioned as well as our line of credit to repurchase approximately $68 million of our 9.25% bonds -- as a result of these repurchases, we recognized a $7.5 million loss on early extinguishment of debt, which is included in our second quarter results.

However, the repurchase is expected to result in total interest savings of $7.5 million or $2.5 million on an annual basis over the next 3 years. While this is certainly an opportunistic strategy and highly dependent on market conditions, we will continue to think creatively about ways to refinance these higher interest rate bonds that are currently scheduled to mature in 2028.

As we've highlighted before, we currently have no final debt maturities until 2028 and approximately $450 million of availability under our revolving line of credit. Based on the current forward yield curve, we expect all of our unsecured debt maturing for the remainder of this decade will be refinanced at lower interest rates and thus be a tailwind to our FFO per share growth.

At this time, I'd like to affirm our 2025 annual core FFO guidance in the range of $1.38 to $1.44 per diluted share with no material changes to our previously published assumptions other than the increase to our anticipated annual executed leasing goal to $2.2 million to $2.4 million that Brent mentioned.

Please refer to Page 26 of the supplemental information filed last night for the details of major leases that have not yet commenced or are currently in abatement. As of June 30, 2025, the company had approximately 2 million square feet of executed leases yet to commence or under abatement, representing approximately $71 million of future additional annual cash rent, which consists of $28.6 million of leases yet to commence and $41.9 million of leases and abatement. This future cash flow is evidenced of the leasing success of the team and will fuel future earnings growth, although it does demand additional capital spend in the short term.

Finally, I'd like to draw your attention to Page 25 of the supplemental, which includes new disclosure for the calculation of the portfolio's net effective rents for the previous 5 quarters. I'd highlight that Piedmont's 5-quarter average is a gross rental rate of more than $46 per square foot with a net effective rent after CapEx of $21.83.

We believe the current share price presents a compelling entry point for investors with Piedmont's portfolio trading at roughly a $200 per square foot valuation while generating an implied yield on cost after CapEx of more than 10%.

With that, I will turn the call over to Brent for closing comments.

Thank you, George, Chris and Sherry. We continue to focus on designing, leasing and managing best-in-class work environment and believe that our recent leasing success is a testament to our strategy. The recent investments that we've made in our portfolio combined with our customer-centric place-making mindset continue to set us apart from the office sector.

We will continue to be selective with capital deployment, concentrating our resources on driving lease percentage and increasing rental rates, which we believe will result in FFO and cash flow growth. With that, I will now ask the operator to provide our listeners with instructions on how they can submit their questions.

[Operator Instructions]

Our first question is coming from Nick Thillman with Baird.

Maybe, Brent, just a high level, obviously, good success on the leasing standpoint and just it sounds as though the portfolio is going to start to stabilize here in 2026. And then I think you've outlined the plans to kind of resume a dividend in 2027. But taking a step back, if you look at the portfolio and just kind of how you're positioned in your markets, -- now there's a big push to get 60% of the Sunbelt. Like I guess what are the longer-term goals for exposures within markets? And kind of how do you think this kind of plays out over the next 2 to 3 years?

Thanks. Appreciate it, Nick. So just taking those as you put the question out there, and thank you for joining us this morning. In terms of -- yes, we have had an immense amount of leasing success and both in our in-service and out-of-service portfolios, and we anticipate both of those being approaching 90% leased here at the end of the year for the in-service and right behind it to be out of service probably somewhere around maybe 80% or so. So that success has really been driven by the effort the team has put forth in terms of creating the right environment, investing in the assets and elevating our service -- and that has been also aided by the fact that large tenants are back in the market.

So as we think about stabilization, I think we would agree with you that 26 is a period in which we really will be turning our attention to growth and looking to continue to drive occupancy above 90% at that point. The dividend, as we've talked about, likely doesn't come back on until 2027. And -- but in the meantime, we'll continue to fund very accretive leasing capital, which is generating returns of over 25%.

And we're seeing growth in all of our markets actually in terms of leasing velocity and absorption Sunbelt, obviously, performing extremely strong, but still seeing really good velocity and rental rate growth in Minneapolis in Northern Virginia now. New York has continued to perform strong.

I'd say really the district Boston are only 2 markets that continue to lag what is a very strong portfolio overall. And we will continue to reposition and prune the portfolio with noncore assets and land sales or near term and really try to continue to drive our exposure to the Sunbelt which stands at about 70% today, upwards of 80%. And Obviously, there's a couple of transactions in the north that we've talked about, that would help aid that. Minneapolis is a market we've looked at Boston and then we may continue to evaluate monetizing our New York asset.

But overall, you will continue to see us focus on the Sunbelt markets and likely to prove modestly near term and continue to rotate...

No, that's very helpful. And then maybe, George, just wanted to touch on some of the larger pending vacancies and kind of the activity you're seeing -- and then also the progress on the New York City lease as well. So maybe -- you have the piper space in the U.S. building in Minneapolis, the city in New York and then also maybe talk about the Upsilon building in Dallas and kind of activity there. I guess we can make it the last one, too, as well on 99 space as well. But those 4 spaces in particular.

Certainly. Nick, I would say that when you look at our overall pipeline and where that activity is coming from, that's where we feel pretty confident about backfilling some of those large blocks of space. I mean overall, right now, we've got about -- in the early stage, we've got about 2.2 million square feet of outstanding proposals. 65% is for new activity.

And when you look at that activity, 55% of that for new space is actually going into Atlanta. And that kind of addresses one of the large expirations that we have in early 2020 space, which is ever said. So we've got about 9 deals today for that particular project, which was back to all of that.

Now we're not suggesting that everyone in the deals were chasing me back right away. But the fact of the matter is we're getting a lot of good -- a lot of deal flow through that particular project. And the nice part about it is that the roll-ups are going to be pretty strong once we have a chance to ink those transactions that we're chasing.

Heading to Dallas, I mentioned Eversense, expiring again in the second quarter 2 -- that's gaining about 20% of our overall new deal activity there. So it's quite active. We've got about 2, 3 deals for about 50,000 to 75,000 square feet -- and again, once we execute on those transactions, we'll see some roll-ups there in that particular project for around 15%.

Starting to up there, George, they touched a low not ever set related to Dallas Excuse me, Go ahead both in -- but coming closer to the Piper. We -- in Minneapolis, we're getting about 10% of a rollout new activity into Minneapolis. There's just a lot of excitement there with all the things we're doing with our renovations.

So Piper does have about 120,000 square feet expiring at the end of the fourth quarter at our downtown assets, but we've got some good news. We hope we can announce here in the next few weeks to backoabout 30% of that. And we have other deal activity there as well. So we're pretty pleased with that. But kind of pulling back a little bit, one of the other factors I want to mention is that the size of the transactions that we're seeing continue to be many full for larger deals. In fact, we've got about 50 of those proposals outstanding for about 25,000 square feet or more, which aggregates about 800,000 square feet.

So it's just that kind of activity that gives us the confidence to see the momentum go beyond the third -- the second and third quarter of this year.

And I would add to that, too, in terms of the Piper space. That building is coming -- renovation is completing this month which is really exciting are the best asset in terms of amenities in downtown Minneapolis and only getting better. And then to pick up where to left off of New York City, we are expecting and wrapping up at least towards the end of the year as we continue to share and would expect that again to be a renewal for substantially all the space and long term in nature.

So we'll provide more details as that likely gets closer to execution again. potentially around the time of the third quarter's earnings call, but more likely towards the end of the year from a timing perspective.

Very comprehensive and very helpful.

Our next question is coming from Ray Zhong with JPMorgan.

I have two questions. First 1 on the guidance, you guys opportunistically bought back some debt -- and it seems like the core is running stronger than expected. We've revised up on the leasing side. Just curious what -- were there any offsets that we should be thinking about in terms of the guidance, like because at the bottom line, it was not revised up. So any thoughts there would be helpful or maybe just conservatism.

Right. And thanks for being on the call. I appreciate your question. On the debt buyback, as we noted in the press release, it's about $0.02 per year on an annualized basis accretiveness. That is offset primarily by the assets now, which is about 2x as well. In regards to the leasing strength, most of that will translate into growth in 2026 and beyond. -- new leases that we signed today aren't really going to hit our income statement until 2026.

And I would just add to that, too, we have seen, as noted, we continue to increase our guidance for lease percentage, 800,000 square feet for the year, and that has been driven a lot by large tenant activity in our out-of-service portfolio as well. So that's something to note. It doesn't get captured immediately in the guidance per se, but setting up additional growth in 2016.

That's very helpful. And my second question is then on capital allocation. You guys mentioned as you soon to wrap up the New York City lease that's on the deck to be and not want to tap in terms of source of funding. Maybe first, can you give us some insights on how you think about the buyer group and potential outcomes dependent on that in terms of pricing? And then on the redeployment side, how should we think about it core value add or I don't know when you consider debt -- any color on those and maybe targeted cap rates or IRR? Any color on that side would be helpful as well. So the yes.

Yes, Ray, we continue to execute on leasing across the portfolio and really see activity come back into all our markets. It is starting to improve the overall sales and transaction market just giving investors the mindset to not assume that vacant space will remain vacant forever. And so we're starting to see solidification, if that's learned for pricing in the market, particularly for more core quality assets, we're not seeing that kind of uplift, if you will, in other parts of the value-add and opportunistic spectrum.

But certainly, capital has started to come back in the market like New York we're seeing it in Dallas and continued to kind of solidify of high-quality asset valuations. And I think that also then gives us some expectation that we continue to be patient, the overall sales market will continue to strengthen in our favor. As we think about near-term dispositions, that's really focused on some select noncore assets and land, looking to dispose of that operators of other users, properly retail and resi to augment our existing office that's adjacent to our land.

So we almost feel like we're getting paid to amenitize -- that will be expected dispositions, maybe 1 of those parcels this year, another larger pro next year. And then we think about continuing to rotate capital, we will be focused on dispositions in our northern markets. into the Sunbelt markets. That can expand to wide range of cap rates.

Our Boston asset, which we just disposed of within a low double-digit cap rate -- but I would anticipate most of everything else in the portfolio, given that was our lowest quality asset with price well tied to that. And frankly, most of our assets should probably price somewhere towards an 8 cap or better. So I think that would give some indication as to what the average cap rate of the portfolio might be.

Now we have some buildings in the North that we've talked about disposing of or monetizing and potentially looking at cashing in, if you will, a stake in the asset, and we'll continue to evaluate those. Probably pricing we can still be in that 8 to 9 captive code. Right now, buyers we're seeing in the market for core assets. We're starting to see some core buyers come back into the market. certainly high net worth family offices, and we are seeing a little bit of institutional capital, particularly in again, stronger markets like New York that has come back and continue to give us the belief that both financial buyers and real estate minded buyers would be interested in that market at the right time when we look to monetize that asset.

So hopefully, that gives you some sense of the dispositions. In terms of redeployment of that capital, -- right now, we continue to look at primarily what I would consider core plus less value add that were to go on the balance sheet. Unfortunately, today, we don't have a cost of capital that really affords us to execute on that right now.

But we do also continue to look at more distressed opportunistic deals through a JV partnership structure, which would take advantage of that strength to be, frankly, something that we wouldn't want to put on the balance sheet day 1 given it's likely to have a lot of capital needs and/or vacancy as well. But it would be something that we'd eventually want to bring into the portfolio, and that would generate returns, call it, levered or greater.

And in terms of what we were looking at on balance sheet, again, we don't have a cost of capital to go after that, but probably something that would look like going in cap rates in the 8 to 9 ZIP code on a cash basis, better on a GAAP basis, a modest role profile, but an opportunity for us to do what we do best, which is to improve high-quality older vintage assets into modern and high-performing office.

[Operator Instructions]

Our next question is coming from Dylan Burzinski with Green Street.

Brent, I think you mentioned in your prepared remarks that 80% -- 80% to 90% of the lease percentage gap should commence by year-end '26. Are you able to share sort of what that looks like on a weighted average basis? Is most of that likely to commence in the first half of the year? Or is this all sort of back-end weighted?

Dylan, it's Brett. Thanks for grabbing joining the call today. In terms of your question, the -- exactly as we've described, we'll have at least 80%, 90% of that embedded $71 million, commencing by the end of next year. There is a good chunk that's going to start in the first quarter actually -- or call a little bit in the fourth quarter and a good chunk in the fourth quarter of next year, call it, maybe 40% or so between the fourth quarter of this year and the fourth quarter really and in the first quarter of next year.

Then right now, there's a little bit of a pause, and then we'll pick back up with a good bit of it also coming back in towards the end of the third and the fourth quarters as well. So it's like a smile, if you will. We're still more front-end and back-end weighted with a little bit of a lull in the middle.

Great. That's helpful color. And then maybe if you can just provide details on what you think is sort of driving this reinvigoration of leasing activity, particularly amongst some of the larger tenants that you mentioned in your markets? And then I guess -- is this sort of net new demand within those markets? Or is this sort of means to go shares where the tenant is moving out of an older -- or looking to move out an older building and upgrade their physical space with a property that Piedmont owns?

Dylan, this is George. It's -- when we look at the demand characteristics, we see that coming from 6 or 7 different areas. I mean, first of all, one of the largest users that we were able to sign this quarter who had actually billing sinus and has a building slightly refreshed decided to move to upgrade the overall office experience because of the renovation that we were pursuing in Minneapolis is bringing a broader range of amenities and nicer finishes to bring more of a hospitality field.

So upgrading office experience is the first one. We're seeing a lot of continued RTO mandates being reinforced and being expanded. As I mentioned in my prerecorded remarks, we had net 26 expansions for 80,000 square feet. Let me build that up a little bit more, like see 39 expansions versus 13 contraction. So that's is really helpful. Larger users are gaining greater conviction in terms of the workplace strategy. I think a lot of it probably has a lot to do with we've experimented with this rate work environment for a long time, and I think there's been a more bias to go back to the office.

And I also think the balance between employers and employees is beginning to tip back into the favor of the employer. I would say office conversions and demolitions -- there are certain heating up that's speeding up, and that's allowing us to take a look at those users that have to be kicked out of those particular projects. We've seen that in Atlanta as well as New York, and we're starting to see that in NOVA as well. And then it transitions a special servicer, right? We had a large user that we done lean in Minneapolis, who is in a park, very nice part of a lot of amenities, but the capital structure was pretty broken and then you want to live through that transition to a special servicer.

So when you put all that together, that's what's allowing us to continue to see the momentum, and we continue to be open mind in terms of landing large deals for longer-term leases. I'd also -- we continue to see really small tenants have continually it in the market, but large tens they put that safety on pause, really try to figure out the environment. And now as we've seen them come back in the market, it has created a little bit of pick up of demand because 5 or 10 assets, there's not a lot of large blocks that are 50,000 square feet or greater in those buildings.

And so I think user groups, particularly large users that have impending expirations. -- now they need to go to make a decision. And if they want quality space sooner rather than later. And that has also put I think a little bit more emphasis to the decision-making for large users. I would continue to say that overall, the portfolio, we did 700,000 square feet of leasing this quarter. Roughly $470,000 of that was new -- and what was interesting about that is predominantly new, but a lot of that was for cost for unoccupied space. 25% was actually for occupied, but the remaining of that $470 million was split between the out-of-service portfolio and the operational portfolio.

So we continue to see a lot of leasing in all of our areas of the business, not all of it shows up in the same reporting mechanism. But I think that just overlays the reason why we haven't changed our lease percentage guidance for 2025, just by all this leasing because it is going into some buckets that are not necessarily captured in that in-service number.

In terms of the final point is this net new demand, I would say, overall, it's mostly in market Dallas is the 1 market where we continue to see, and we've talked about it on our prior call, Atlanta has still some, but Dallas continues the momentum really over the last 3 years in terms of inbound migration. -- both from larger users but even smaller ancillary companies. And we've been the beneficiaries of that primarily in that market. Otherwise, this is us just continuing to capture more than our fair share of the overall market because of the quality of our assets, the service and the environments we're creating.

Thank you. Ladies and gentlemen, as we have reached the end of our question-and-answer session. I would like to turn the call back over to Mr. Smith for any closing remarks.

I want to thank everyone for joining us today. Hopefully, it's come through that we are extremely positive and excited about our track record of being an operational growth more recently, but really consistently post the pandemic. And I think it's really starting to show through in terms of the quality assets and the positioning of our platform for future growth. I'd encourage investors if you're still trying to understand the Piedmont story and our success and around what makes up our secret sauce come to Atlanta in some time with management, we can show you $1.4 billion of assets in about 2 hours.

And if you've got other time, we'd love to host you in Dallas or Minneapolis or any market that you happen to be traveling to I'd also encourage investors will be at NAREIT in Dallas in December. I know that's a ways out, but we will be having a tour of our Galleria Dallas asset on that event. And if you're interested in joining, please let's share for note.

Again, thanks, everyone, for joining. Have a good week.

Thank you, ladies and gentlemen. This concludes today's conference, and you may disconnect your lines at this time, and we thank you for your participation.