Earnings call transcript: Piedmont Office Realty Trust Q3 2025 misses EPS forecast

Piedmont Office Realty Trust, a real estate investment trust (REIT) with a market capitalization of $1.07 billion, reported its Q3 2025 earnings, revealing an earnings per share (EPS) of -$0.11, falling short of the forecasted -$0.04. Despite this, the company posted a revenue of $139.16 million, surpassing expectations of $124.03 million by 12.2%. According to InvestingPro analysis, the company has maintained dividend payments for 16 consecutive years, though analysts don’t anticipate profitability this year. The mixed results led to a modest stock price increase of 0.82%, closing at $8.53, reflecting cautious investor sentiment.

Key Takeaways

• EPS of -$0.11 missed the forecast of -$0.04.
• Revenue of $139.16 million exceeded expectations by 12.2%.
• Stock price rose by 0.82% post-earnings announcement.
• Office space demand showed signs of recovery with positive absorption.
• Future growth expected from new leasing and renovation efforts.

Company Performance

Piedmont Office Realty Trust experienced a challenging quarter with EPS missing projections, yet it managed to achieve a significant revenue beat. The company has been focusing on repositioning its portfolio with renovations and a hospitality-driven service model, which has started to yield positive results. The office space market showed signs of recovery with the first positive absorption in years, adding optimism for future growth.

Financial Highlights

• Revenue: $139.16 million, up from the forecast of $124.03 million.
• Earnings per share: -$0.11, below the forecast of -$0.04.
• Core FFO per diluted share: $0.35, a slight decrease from $0.36 in Q3 2024.
• FFO generated: $26.5 million in Q3 2025.

Earnings vs. Forecast

Piedmont’s EPS of -$0.11 represented a significant miss compared to the forecasted -$0.04, marking a 175% negative surprise. However, the company delivered a robust revenue performance, exceeding expectations by 12.2%, signaling strong operational execution despite EPS challenges.

Market Reaction

The stock price of Piedmont Office Realty Trust increased by 0.82% following the earnings announcement, closing at $8.53. This movement reflects investor confidence in the company’s revenue growth and future leasing potential, despite the EPS miss. The stock remains within its 52-week range, with a high of $10.72 and a low of $5.46.

Outlook & Guidance

Piedmont has narrowed its 2025 annual core FFO guidance to $1.40-$1.42 per diluted share. The company anticipates mid-single-digit FFO growth in 2026-2027, driven by increased leasing activities and ongoing renovations. Aiming for an 89-90% lease percentage by year-end, Piedmont expects approximately $75 million in future annual cash rent from executed leases.

Executive Commentary

CEO Brent Smith highlighted the turnaround in U.S. office demand, stating, "After nearly four years of steady losses, U.S. office demand turned around in the third quarter." COO George Wells emphasized the importance of collaboration, noting, "People are still looking to upgrade their space because collaboration and innovation just happens a lot quicker when you’re working together."

Risks and Challenges

• Market volatility could impact leasing rates and occupancy.
• Potential refinancing challenges amidst fluctuating interest rates.
• Continued competition from new office constructions with lower asking rents.
• Economic uncertainties affecting tenant demand and leasing activities.

Q&A

During the earnings call, analysts inquired about potential debt refinancing opportunities and acquisition strategies. Concerns about layoffs and office demand were addressed, with management expressing confidence in leasing momentum across various markets.

The earnings call provided a mixed outlook for Piedmont Office Realty Trust, with positive revenue performance and strategic initiatives offering hope for future growth despite current EPS challenges.

Full transcript - Piedmont Offic A (PDM) Q3 2025:

Operator: Meetings and welcome to the Piedmont Office Realty Trust Incorporated Third Quarter 2025 Earnings Conference Call. At this time, all participants are on a listen-only mode, and a question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to your host, Laura Moon, Chief Accounting Officer with Piedmont Office Realty Trust. Laura, the floor is yours.

Laura Moon, Chief Accounting Officer, Piedmont Office Realty Trust: Thank you, Operator, and good morning, everyone. We appreciate you joining us today for Piedmont Office Realty Trust’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 Office Realty Trust. 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’d 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 Office Realty Trust’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?

Brent Smith, President and Chief Executive Officer, Piedmont Office Realty Trust: 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 Coleman, 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 four 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 Office Realty Trust has been experiencing on the ground.

Pin-up demand is resulting in record levels of leasing across the Piedmont Office Realty Trust portfolio. In fact, five 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 four 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 availabilities becoming scarce, more demand continues to chase a rapidly reducing supply landscape. According to JLL, the cycle of footprint reductions is tapering off as today’s users of over 25,000 square feet are cutting just 2.2% of their footprint at renewal. Inventory for high-quality space, either new or renovated, is increasingly scarce, and office construction has been reduced by an additional 20% from the second quarter, with new supply not a factor in most of our markets. These market dynamics of limited high-quality supply and growing demand are allowing Piedmont to materially increase rental rates across its portfolio.

With asking rents still ranging from 25% to 40% below the rates required for new construction, we believe existing high-quality office has a long, long runway for rental rate growth. Within the Piedmont portfolio, which comprises newly renovated, highly amenitized buildings paired with our hospitality-driven service model, we are experiencing multiple tenants competing for full-floor spaces, providing the backdrop for Piedmont to increase rental rates at our projects by as much as 20% during the year. By way of example, at our Gallery in the Park project in Atlanta, we executed our first $40 per square foot gross rental rate at the end of 2024, and 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 two quarters, more than a third of the portfolio in the last two years, and an astounding 80% of the portfolio since the beginning of 2020, equating to almost 12 million square feet since the pandemic. Delving into the numbers, we are thrilled with our third quarter results, exceeding consensus FFO by 3% and achieving record levels of leasing.

Most exciting is that all the leasing the team has accomplished this year is positioning Piedmont for sustainable earnings growth. Our backlog of uncommenced leases has reached almost $40 million on an annualized basis, and substantially all of those leases will commence by the end of 2026. Piedmont executed approximately 724,000 square feet of total leasing during the quarter, including over half a million square feet of new tenant leases. This new tenant leasing represents the largest amount of new tenant leasing we’ve completed in a single quarter in over a decade and brings our total year-to-date leasing to approximately 1.8 million square feet. Importantly, over 900,000 square feet of our 2025 new leasing relates to currently vacant space, and it’s likely this number will reach over 1 million square feet by the end of the year.

That level of absorption equates to $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 three 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 two projects in Minneapolis and one in Orlando, has experienced astounding market receptivity as differentiated amenitized workplaces continue to garner the majority of leasing in the market.

At the end of the third quarter, Piedmont Office Realty Trust’s out-of-service portfolio stood at over 50% leased and is approaching 70% leased, including those that are in legal stage today. We couldn’t be more excited that the leasing pipeline and continued tenant demand for our buildings positions both the in-service and out-of-service portfolios to achieve 90% leased next year. Furthermore, we anticipate the out-of-service assets will reach stabilization by the end of 2026. In addition to the overall volume, third quarter leasing, as expected, resulted in favorable economics, with rental rates for space vacant less than a year reflecting almost 9% and just over 20% roll-ups on a cash and accrual basis, respectively.

In fact, as a result of the repositioning of the portfolio in the past two years, Piedmont Office Realty Trust’s leased over 5 million square feet, with rental rate roll-ups of approximately 9% and 17% on a cash and accrual basis, respectively. Finally, cash basis Same-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, have and should continue to drive Piedmont Office Realty Trust’s ability to grow FFO organically. We’re still on track to meet or exceed our 2025 financial and operational goals with confidence in our ability to deliver mid-single-digit FFO growth, or better, in 2026 and 2027. Before I hand the call over to George, I want to mention that we have once again achieved a five-star rating and Green Star recognition from 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.

George Wells, Chief Operating Officer, Piedmont Office Realty Trust: 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 nine full-floor or larger leases executed this quarter, with another six 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. A weighted average lease term for new deal activity stayed consistent at approximately 10 years. As we’ve experienced now for five straight quarters, expansions exceeded contractions largely to accommodate customers’ organic growth. Atlanta and Dallas were the driving forces behind strong 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 90% lease percentage. Leasing capital spent 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. Lease availability held steady at 5%, with a modest amount expiring over the next four quarters.

Atlanta was our most productive market during the third quarter, closing on 27 deals for 250,000 square feet, or a third of the company’s overall volume, with new lease transactions accounting for 75% of that amount. Most notable, our local team mitigated large fourth quarter 2025 expiration at Medichi, with a 35,000 square foot headquarter requirement, and achieved the highest cash roll-up for the quarter at 30%. Medichi 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 Lubbershed’s remaining 150,000 square foot expiration in May of 2026. We currently have four proposals outstanding, which total 125,000 square feet at significantly higher rental rates.

999 Peachtree has set a new standard for repositioning assets in Midtown Atlanta, and we remain confident in our ability to backfill this known vacancy at very favorable economic terms. Minneapolis, once again, was our second most active market, capturing eight deals totaling almost 200,000 square feet, the vast majority of which was new deal flow into our redevelopment portfolio. The Piedmont redevelopment strategy underway at Meridian and Excelsior is generating tremendous interest, with another 125,000 square feet in the proposal stage. Our team has moved asking rental rates up another 5% from last quarter, with rates now in the low $40s, up 15% from pre-redevelopment phase at the beginning of the year, and the highest within its submarkets. We continue to be the clear landlord of choice in the Minneapolis suburbs, as many once competitive surrounding projects are now either dated, uninspiring, or financially impaired.

Meanwhile, downtown is experiencing noticeably more foot traffic, as two of Minneapolis’s top 10 employers, Target and RBC Wealth Management, recently increased their mandates to four days a week. Deal flow at our U.S. Bank core is growing, and we’re close to signing a new deal that would backfill one of the three floors being vacated next quarter. Dallas was quite active for us as well, with 16 transactions for 156,000 square feet. Most notable was the 56,000 square foot deal with a global data center service provider in one of our 1.5 million square feet Las Colinas portfolio, which has experienced a surge in leasing activity for the year, moving up from 83% at the beginning of the year to 91% at the end of the third quarter, with another 35,000 square feet of deals close to being signed.

Additionally, we’re exchanging proposals to renew Epsilon and the subtenants for roughly 50% of its footprint. Our local team has pushed asking rates there up 15% to 20% over the last six months. Overall market conditions in Las Colinas are improving rapidly and led all Dallas submarkets to net absorption for the quarter and year to date, with Wells Fargo’s 850,000 square foot new campus in Las Colinas being delivered this quarter and no other development underway. Piedmont is poised to see additional rental growth here over the next several quarters. At 60 Broad, we continue to work with the Department of Citywide Administrative Services regarding New York City’s long-term extension for substantially all of its space. Unfortunately, additional delays during the planning process will result in the execution of a potential lease to spill over into early 2026.

Coming back to the overall portfolio, we remain bullish about our near-term leasing prospects. Our leasing pipeline remains robust even after two straight quarters of record new leasing activity, and as Brent 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 Coleman for his comments on investment activity. Chris?

Chris Coleman, EVP of Investments, Piedmont Office Realty Trust: Thanks, George. As we have said for several quarters, we remain focused on pruning certain non-core assets throughout our portfolio. We are under contract on two of our land parcels. Both are contingent on time-consuming rezonings, so if these are approved, neither will close in 2025. We are actively marketing another small non-core asset that could potentially close around the end of the year. The rationale for this disposition is entirely consistent with recent sales. There are no assurances that any of these will close, and as is our custom, acquisitions and dispositions are not included in any of our projections. On the acquisitions front, we are certainly seeing elevated interest in the sector among more traditional institutional investors. The debt markets continue to improve, and differentiated office environments have proven their resilience and durability over the past few years.

High-quality office is no longer redlined, and liquidity is growing in the sector. Dallas, in particular, has seen a handful of sizable, fully priced transactions over the past six months. We remain active in reviewing opportunities in Dallas and elsewhere. We will be disciplined and patient. Rest assured, our team is thinking creatively around compelling opportunities, including evaluating potential transactions alongside institutional capital partners. We do intend to put ourselves in a position to be more active on the transaction front in 2026. With that, I’ll pass it over to Sherry to cover our financial results.

Sherry Rexroad, Chief Financial Officer, Piedmont Office Realty Trust: 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 the $0.01 decrease attributable to the sale of three 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. FFO 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 two 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 are currently in abatement.

As of September 30, 2025, the company had just under one 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.

Brent Smith, President and Chief Executive Officer, Piedmont Office Realty Trust: 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 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 to 2.4 million square feet, but note 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 placemaking 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 with instructions on how they can submit their questions. Operator?

Operator: Thank you. Ladies and gentlemen, at this time, we’ll be conducting our question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Thank you. Our first question is coming from Nick Thillman with Baird. Your line is live.

Hey, good morning. Maybe for Brent or George, you commented a little bit on just expansion versus contractions. I just wanted to clarify, is that within the Piedmont portfolio when you’re quoting those numbers? 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 and flight to the Piedmont portfolio? Just to pop a little bit of color there would be helpful. Thank you.

Brent Smith, President and Chief Executive Officer, Piedmont Office Realty Trust: In my prepared remarks, good morning, Nick. I was referring to that 2.2% with the JLL report noting that large users, 25,000 square feet or greater on the U.S. dataset, was reducing footprint substantially less. 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 five quarters in a row we’ve had expansions. This past quarter, we had 16 expansions versus two contractions for a net positive of 40,000 square feet. If you look at it in totality for the past five quarters, looking at 55 expansions versus 15 for a net of about 120,000 to 130,000 square feet. The dynamics in our portfolio have been quite positive. 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.

Those larger requirements with 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 a larger tenant behavior. We’re hearing about slowing hiring. I guess, how far are we along on the rationalization of just office utilization, as you kind of look within the markets?

For larger users.

I think towards the end, absolutely. Let me first hit this. Last quarter, we had 15 deals that were 25,000 square feet or larger for aggregately about 800,000 square feet. This quarter, we have in terms of proposals outstanding, 18 that are that size. It continues to grow within our overall portfolio. I would say it’s mixed. In a couple of instances, we’re hearing about some consolidations. In other words, companies wanting to create a hub to bring their employees back together for increased collaboration. In some other cases, it might be a small deduct, which they use 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. That means having an environment and an offering that is compelling. 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 lease.

Oh, that’s helpful. Brent, you alluded to this runway you have for occupancy growth and mid-single-digit FFO growth at a steady state over the next two years. You guys touched a little bit on some of the larger expirations of the portfolio and the coverage you have there. 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 rollover the next two years?

I think, you know, 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, you know, office REITs are a battleship. It takes a lot to move, but when you do start going, the momentum can carry. As we look ahead into 2027, there are a couple of larger expires. 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. I feel very good about where we’re positioned with those, but it’s still, you know, 24 months out for those.

It’s going to still take a little bit of time to get clarity, but we think we are well positioned for renewal.

That’s it for me. Thank you.

Operator: Thank you. Our next question is coming from Anthony Paulone with JP Morgan. Your line is live.

Yeah, thanks. Good morning. Brent, just following up on 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?

Brent Smith, President and Chief Executive Officer, Piedmont Office Realty Trust: Great question, Tony. 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. As Sherry noted on the call, we do have a pretty large embedded, marked market benefit if we were to refinance those bonds, which she outlined in her prepared remarks. We will capture that at some point between now and when those mature in 2028. Rest assured, from a risk management perspective, the team is very focused on optimizing that transition from high-cost debt to lower-cost debt. What we’ve laid out in terms of FFO growth, again, is just from organic lease only. The comments that Sherry made is upside on top of what I described as operating growth.

Got it. Thanks for that. Sherry, on the debt refinancing, what are the gating factors to doing something there? I mean, you kind of laid out the spreads pretty clear. What would it take to go do something there?

As we’ve discussed before, you know, there are a variety of ways in which you can refinance the 9.25% bonds that are outstanding. You can 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. That’s really, you know, 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 a long five is about 400 basis points. That’s what’s behind the math. Whenever we said, you know, 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. 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 Office Realty Trust might be looking at at this point look like, you know, in terms of cash on cash, you know, type of asset, you know, 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 canvas 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 two 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. 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.

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. In those situations, we have looked at a few, took a swing at buying some debt on some situations, didn’t work out in that scenario. We continue to work with those partners. I’d say that bucket right now, and it 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 sets that we’re looking in that bucket. 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 at our Gallery in the Park project here 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 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. 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. Those assets are going to be probably 70% lease, like I said, and give us a good opportunity to lease up.

You know, one thing that we do think is unique about the Piedmont Office Realty Trust 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 Gallery in the Park here in Atlanta where we’ve had immense success or a 999. Those campus, large, kind of unique ability to create your own environment interests us, and then highly accessible, walkable mixed-use environments also interest us. There are very good opportunities around that bucket. I’d say that right now we’re looking at roughly $800 million or so that I would characterize as that value-add on balance sheet component.

Okay.

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.

Okay, thanks for all the color.

Operator: Thank you. Our next question is coming from Dylan Burzinski with Green Street. Your line is live.

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

Brent Smith, President and Chief Executive Officer, Piedmont Office Realty Trust: Dylan, thanks for joining us today. In regards to disposition, it’s tough. It’s still challenging, honestly, given the mindset in the office sector that everybody deserves a deal. If it’s not 10 years of walls and just built the last four 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. We continue to be focused on pruning, as you noted, the non-core 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. 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 Washington, D.C., and we will hopefully execute on that asset and continue to pare back our exposure in the district itself. We 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. The other markets we would consider non-core are those where we have very few assets and we can’t seem to grow and/or want to grow. Of course, that would be Houston, which has long-term walls on one of the assets, and then Schlumberger, great credit, and another. We’re going to continue to look to dispose of those in 2026 as well. They’ve been in the market, and we’ll reintroduce them again, hopefully in a more constructive environment.

In that environment, it takes leasing really to give investors the conviction to underwrite an asset vacant space role in a constructive manner. What does give us positive hope that we’ll be able to execute on some of this in 2026 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. 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 is improving, particularly a note for that asset in the debt capital markets.

It would be a chunkier disposition, and having the ability, and you’re seeing the strength right now in the secure debt markets, will also improve execution, particularly on that New York City asset if and when we monetize it.

Great, Brent. Thanks for that call. I really appreciate it.

Operator: Thank you. As a reminder, ladies and gentlemen, if you do have any questions or comments, you may press star one on your telephone keypad. Our next question is coming from Michael Lewis with Truist Securities. Your line is live.

Thank you. I’m sorry if I missed this, but did you say why New York City was pushed back again? 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, you know, give back space or anything else?

Brent Smith, President and Chief Executive Officer, Piedmont Office Realty Trust: Michael, Brent, thanks for joining us today. Great question. We hadn’t touched on any specifics, and given it’s a live transaction, I don’t like to get into a lot of detail. As we’ve noted on prior calls, 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. There are also three 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, 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.

The other note would be, downtown in Manhattan, there are not very many large blocks, competitive buildings that we would historically have been competing with, and some of them have been converted to residential as well. We feel like it’s, I guess, not as much a concern that they would go elsewhere in lower Manhattan. The fact that there’s an $8 million holdover penalty on top of their current rental rate, that’s on an annual basis. If they do trip over into holdover, we’ve reiterated to them as a public company, we will be upholding that. In the pandemic, we were a little bit more lenient on that. Of course, if they renew, we’re not going to enforce that. It is a pretty heavy stick, that also goes with the carrot 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. At that point, that’s all I can share, and we still remain very positive on a renewal sometime in the early part of 2026.

No, that’s helpful. Thanks. As far as the $75 million of cash rent that’s kind of pending sign, 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 % of that might be paying by the end of the first half of 2026 versus the back half? Could you just, at a high level, frame how that will flow through?

Michael, thanks for your question. If most of it is going to hit in the middle of the year, I’d recommend about 70% within 2026. Note that those numbers are annualized numbers. I’m trying to think what other clarity I can give you. Does that help?

Yeah, that’s helpful, and then just my last question.

I might add real quick. Sorry, Michael. I might add, you know, you think about that $75 million, it’s really split into two buckets, right? There’s $40 million of yet to commence, and that’s, you know, a pretty wide margin historically that we would say that’d be 3% of the portfolio. It’s now, approaching, I think, almost 5% of the portfolio, and we’re expecting a lot of that, if you will, the $40 million to commence next year, more towards the middle of the year than the end. 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 bleed in on a similar pace as well. 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.

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

I’ll start with that. Good morning, Michael. This is George. You know, it’s interesting. We keep seeing announcements with layoffs, but as I kind of reconcile that to what we’re seeing in our portfolio, I’m not seeing that effect just yet. 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’re working together. Just to give you some statistics that support 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 two-thirds of that is for new space, right?

That is amazing considering how much new leasing activity we’ve done for the past two quarters that we continue to backfill that pipeline. Looking even further out, 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 was kind of more seasonal than anything else. It recovered in August to 45 tours, in September 41 tours, and here we are spending 27 days in October to 43 tours with four more days to go. 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. Although we have a large hub in Dallas for them, they lease a tremendous amount of space through WeWork and other submarkets, which are more on the short-term situation.

If I were to guess, I suspect that those shorter-term contracts in these coworking operations would probably be first to go. I’d add on that, Michael, really taking a step back. Two things I think about our portfolio have lent 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 plates and building design heavily for just tech use. It is much more of a professional services, FIRE, conducive amenity set, finish level, floor plate size, etc. As tech has pulled back from 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.

It’s at, you know, buildings that fit well for a law firm as well. That would be one factor. I think the other one is you look at our portfolio and our strategy of having great assets, amenitized location, but we don’t cost as much as new construction. If you’re a firm that’s a national firm or a local kind of regional firm and you want to create a presence, regional headquarters, etc., 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. We are much more appealing to a larger segment of the market, in my opinion, and I think the data set shows that. That’s why we also have had so much uptick into our assets.

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 and the common areas that are necessary to lease space. Trophy’s full, and our set of assets are very compelling. I’ll give you one last anecdote. We are working on our buildings in Minneapolis at Meridian, and having great receptivity in the marketplace. A tenant toured that building before the renovations were completed about four months ago, ended up going to new construction and entering a lease on that new construction. They’ve since 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% to 40% discount to new construction rents that they are about to enter a lease into.

We’ll see if we’ll get that 60,000 square foot user, but I think there’s an opportunity to snag that because our environments are so compelling, we can compete for new construction, and we don’t have to charge as much. That goes to my point on our ability to push rates 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.

Thank you for that. Can’t argue with those leasing results. Thanks.

Operator: Thank you. 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.

Brent Smith, President and Chief Executive Officer, Piedmont Office Realty Trust: Thank you. I appreciate everyone joining us this morning. I do want to remind you of two important dates. First, this Friday, Happy Halloween to all those. 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. 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. 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.

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. We thank you for your participation.

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