Peakstone Realty Trust Q1 FY2025 earnings call

• Strategic transition to industrial REIT with iOS subsector as cornerstone. - Increased industrial segment ABR by $2,400,000 QoQ due to 10% rise in AVR from iOS properties. - Closed $144,000,000 of office asset sales YTD. - Fully leased largest iOS redevelopment property in Everett, WA, adding ~$1,700,000 in incremental ABR with 8% annual rent escalations. - Industrial segment ABR was 41% of total ABR at quarter end and 43% pro forma post office dispositions.

Industrial segment ABR increased by $2,400,000 quarter over quarter, driven by a 10% rise in AVR from iOS properties. Industrial segment ABR represented 41% of total ABR at quarter end and 43% pro forma after office dispositions. Year to date, $144,000,000 of office asset sales have been closed. The largest iOS redevelopment property in Everett, Washington was fully leased, contributing ~$1,700,000 in incremental ABR with 8% annual rent escalations.

• Continue divesting office assets to reallocate capital to iOS growth opportunities. - Target to reduce leverage to the six times range or below. - Expect sustainable growth and enhanced shareholder value through strategic shifts and capital reallocation.

• Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially. - Capital markets environment may evolve, which could impact office disposition pace and leverage reduction. - Differences between expected and actual performance in iOS growth and office asset sales.

Q: Could you help think about the ABR opportunity at the remaining five IOS sites and ranges in rent per acre?

A: Difficult to provide exact guidance due to variety of locations, but spend has been lower than originally anticipated and there's considerable activity underway with fingers crossed for forthcoming announcements.

Q: Comment on additional acquisition opportunities and liquidity?

A: Balancing act between growth and maintaining leverage, pipeline is full with good activity in individual deals and portfolios, and there's liquidity to pursue risk-adjusted return compelling opportunities.

Q: What's the target leverage and timeline to bring it down?

A: Target is to be in the six times range or below, and the company has shown ability to adjust leverage through capital recycling and balance sheet rejiggering, having clipped to ~6 to 6.1 debt to EBITDA in a previous quarter.

Q: What determines the pace of office dispositions?

A: Case-by-case basis, maximizing shareholder value, seeing strong interest from investors and existing tenant base, and considering corporates' favorable cost of capital on debt side relative to real estate investment side.

Q: Characteristics of office properties trading at 7.5 to 12.5 cap rate range and tenant demand in IOS?

A: Lower end vs higher end generally around five years duration, range is reference to marketplace and Peakstone's portfolio; tenant demand in IOS has not really changed from when properties were taken over, with interest from tenants willing to take properties as is or nearly as is, and active discussions with various tenants.