Peakstone Realty Trust Q3 FY2025 earnings call

• Strategic transformation to an industrial-only REIT focused on the industrial outdoor storage (IOS) sector, with IOS now generating over 60% of ABR.
• Strengthened balance sheet by reducing debt by approximately $450 million and improving total leverage to 5.4x pro forma.
• Completed sale of 12 office properties totaling approximately $363 million, with expectation to complete majority of remaining office sales by end of year.
• IOS portfolio had strong leasing results with new leases, renewals, and modifications; 100% leased operating portfolio with re-leasing spreads; and executed full site lease in Savannah, Georgia for IOS redevelopment portfolio.
• Acquired 3 IOS properties during the quarter: Atlanta property for ~$42M, Port Charlotte property for ~$10.4M, and Fort Pierce property for $5.3M.
• Sold 3 traditional Industrial properties for ~$72M as part of portfolio optimization, with focus on enhancing traditional industrial portfolio quality.

The company's Industrial portfolio generates more than 60% of its ABR. In the third quarter, the Industrial portfolio saw progress with IOS leasing and acquisitions. The traditional Industrial portfolio had 3 properties sold for approximately $72 million. For the office segment, as of October 31, 12 office properties totaling approximately $363 million were sold, leaving 12 remaining office properties. The IOS portfolio had strong leasing activity, with new leases, renewals, and modifications generating over $1 million of incremental IOS ABR, and the IOS operating portfolio was 100% leased with weighted average re-leasing spreads of 116% on a cash basis and 120% on a GAAP basis. Three IOS properties were acquired during the quarter for a total of approximately $58 million.

• Plan to use proceeds from remaining office sales (ranging from $300M to $350M) to pay down $250M to $300M of debt.
• Continue disciplined approach to managing growth and balance sheet, with current debt ratio below long-term targets.
• No guidance provided on sustainable same-store NOI growth currently, but transparent with metrics and information in filings.

• Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially.
• Potential increased competition for IOS assets.
• Dependence on successful completion of office dispositions and targeted IOS acquisitions to execute strategy.

Q: When should we expect an acceleration in IOS acquisitions?

A: Disciplined management of growth and balance sheet, with flexible balance sheet and reduced debt ratio providing leeway, but no straight line in acquisition timing.

Q: Have you seen any increased competition for the IOS assets?

A: Not necessarily increased competition, but more acceptance, with flexible balance sheet and national platform allowing disciplined approach.

Q: What do you see as a sustainable same-store NOI growth for the portfolio and when could you start guiding around that?

A: No guidance provided currently, but transparent with metrics and information in filings.

Q: How confident are you guys in achieving the pricing range for office sale proceeds?

A: Feeling good about it as virtually every asset is engaged at this point