Piedmont Office Realty Trust, Inc. Q2 FY2025 earnings call

• Macro trends: Flight to quality, large tenants making leasing commitments, lack of new office construction driving rental rate growth for Piedmont's differentiated buildings.
• Leasing success: Q2 2025 leasing totaled 712,000 sq ft, YTD over 1 million sq ft; ~2/3 new tenant leases; in-service lease percentage up to 88.7% Y/Y. Out-of-service portfolio over 30% leased by end of Q2, approaching 60% leased in July. Rental rates for vacant <1 year space had 7%+ cash and 14%+ accrual roll-ups.
• Market performance: Dallas was most productive market (15 deals >200,000 sq ft); Minneapolis had 9 deals for 190,000 sq ft; Orlando had 8 deals for 175,000 sq ft; Atlanta had 19 deals for 110,000 sq ft.
• Investment activity: Disposed of a small noncore project in suburban Boston for $30 million; ongoing dialogue with potential buyers of select noncore assets; highly engaged in acquisitions in key markets.
• Financial results: Core FFO per diluted share $0.36 in Q2 2025 vs $0.37 in Q2 2024; AFFO ~$16 million; bond repurchases and interest savings discussed.

Leasing was a key segment performance. In Q2 2025, Piedmont totaled 712,000 square feet of leasing, with year-to-date leasing over 1 million square feet. Approximately 2/3 of Q2 activity was new tenant leases. Leasing success pushed in-service lease percentage to 88.7% year-over-year. Out-of-service portfolio had over 30% leased by end of Q2 and approaching 60% leased in July. Rental rates for space vacant less than a year had 7%+ roll-ups on cash and 14%+ on accrual. Dallas was most productive market with 15 deals over 200,000 square feet. Minneapolis had 9 deals for 190,000 square feet. Orlando had 8 deals for 175,000 square feet. Atlanta had 19 deals for 110,000 square feet. Investment activity included disposal of a small noncore project in suburban Boston for $30 million, and ongoing dialogue with potential buyers of select noncore assets. Financial metrics: Core FFO per diluted share for Q2 2025 was $0.36 vs $0.37 in Q2 2024, affected by higher net interest expense. AFFO generated was approximately $16 million. Bond repurchases of $68 million of 9.25% bonds resulted in $7.5 million loss on early extinguishment, but expected $7.5 million interest savings over 3 years.

• Increased leasing guidance to 2.2 million to 2.4 million square feet, an increase of over 800,000 sq ft from original 2025 guidance. Most new leasing expected to benefit earnings in 2026 and beyond.
• Affirmed 2025 annual core FFO guidance in range of $1.38 to $1.44 per diluted share with no material changes to previously published assumptions other than the increased leasing goal.
• Bond repurchases expected to result in total interest savings of $7.5 million or $2.5 million annually over next 3 years.

• Forward-looking statements subject to risks and uncertainties, including those related to future revenues, operating income, dividends, financial guidance, financing, leasing, investment activity, and impacts on financial and operational results.
• Market uncertainties affecting investment activity and potential impacts on asset valuations and dispositions.
• Debt refinancing risks given current interest rate environment and scheduled debt maturities.

Q: Nick Thillman asked about longer-term goals for market exposures and progress on New York City lease.

A: Brent Smith said they aim to increase Sunbelt exposure to 80%, will prune noncore assets, and expect to wrap up a New York City lease towards end of year, likely a renewal for substantially all space long term. George Wells added on pending vacancies and activity, mentioning strong pipeline and backfilling of large blocks of space.

Q: Ray Zhong asked about guidance offsets and capital allocation.

A: Sherry Rexroad said debt buyback accretiveness is offset by asset sale, and most leasing strength will translate into growth in 2026 and beyond. Brent Smith added that increased leasing guidance is driven by large tenant activity in out-of-service portfolio. On capital allocation, Christopher Brent Smith discussed dispositions in noncore assets and land, redeployment towards core plus and JV partnerships for distressed deals.

Q: Dylan Burzinski asked about guidance on lease commencement and driving leasing activity.

A: Brent Smith said 80%-90% of embedded $71 million in leases will commence by end of 2026, with a mix of front-end and back-end weighted commencement. George Wells discussed driving leasing activity from upgrading office experience, RTO mandates, larger users gaining conviction, office conversions/demolitions, and transition to special servicer.