Greetings and welcome to the Piedmont First Quarter 2019 Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] Please note this conference is being recorded. I will now turn the conference over to your host today, Robert Bowers, CFO of Piedmont. Please proceed.

Thank you, operator. Good morning and welcome to Piedmont’s first quarter 2019 conference call. Last night, we published our Form 10-Q and filed an 8-K containing our quarterly earnings release and unaudited supplemental information. These items are available for your review on our website under the Investor Relations section. On today’s call, the company’s prepared remarks and answers to your questions will contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements address matters, which are subject to risks and uncertainties that may cause actual results to differ from those we anticipate and discuss today. Examples of forward-looking statements include those related to Piedmont Office Realty Trust’s future revenues, operating income, dividends and financial guidance, as well as future leasing and investment activity. You should not place any undue reliance on any of these forward-looking statements as these statements speak only as of the date they are made. We encourage all of our listeners to review the more detailed discussion related to risks associated with forward-looking statements contained in the company’s filings with the SEC. In addition, during this call, we will refer to non-GAAP financial measures such as FFO, core FFO, AFFO and same-store NOI. The definitions and reconciliations of our non-GAAP measures are contained in the supplemental financial information available on the company’s website. Our senior management team is available today to address any questions that you may have. I’ll review some of the quarterly financial results after Don Miller, our Chief Executive Officer and Brent Smith, our President and Chief Investment Officer, will discuss the first quarter’s accomplishments. Don?

Thank you, Bobby. Good morning, everyone and thank you for joining us on today’s call. As most of you know, on March 19th, Piedmont announced that I will be retiring as of June 30th. Brent Smith will be taking my place as CEO as of that date. This has resulted from a long, well-thought out succession plan that I’ve been working on with the Board for many years. We are very pleased this has gone so smoothly, and I’m excited to watch what Brent, Bobby and the rest of Piedmont team will do to take the firm to yet another level. I will however, be very sorry not to see many of you before I move along at the end of June, but I’ll always continue to be reachable. I’m glad to be able to step down while the economy, markets and company, are all performing at a high level. We’ve been very fortunate to be among the top performers in the office REIT universe on a five year total return basis, while we’ve been repositioning the portfolio from 24 markets to eight focused office markets since our IPO. I’m confident that Brent and the rest of the Piedmont leadership team will build on those successes. The first quarter continued to run our strong financial results, and Bobby will discuss in greater detail. We earned $0.45 in core FFO per share in line with consensus estimates, despite some large offsetting items. Our mark-to-market lease economics and CapEx per square foot per year of lease term, are both among the best numbers we’ve ever achieved. And our occupancy remained stable at 93.3% with a very good pipeline of additional lease prospects heading into the middle of the year. We also made tangible progress on New York State renewal about which Brent…

Thank you, Don. Before discussing the New York State lease, I feel it’d be appropriate to update everyone on our capital markets activity for the quarter. As we previously announced, we were successful in completing the sale of One Independence Square, a 334,000 square foot office building in the Southwest submarket of Washington, DC. The sale furthers our goal of concentrating our Washington DC portfolio in two target submarkets, in the CBD and in the Rosslyn-Ballston Corridor of Northern Virginia. The sale of One Inde [ph] leaves just one building 400 Virginia outside of those two defined submarkets. The sale price of $170 million translate into giving up approximately a low 5%s FFO yield to Piedmont and furthers our strategy of recycling capital into our strategic submarkets, all while enhancing the growth of the company’s income stream. In fact, if you look at our $1 billion worth of dispositions since 2014, the subsequent REITs and in the subsequent recycled acquisitions, we’ve averaged a 7.5% FFO yield on acquisitions and a 6% FFO yield on dispositions at roughly the same occupancy, all while further concentrating high-quality assets in existing submarkets like Atlanta, Burlington and Boston, downtown Orlando and Minneapolis among some others. And all of this is furthering our local submarket dominance and expertise. Let me take a moment to stress the high-quality nature of the replacement assets. There may be a misconception that buying at higher cap rates implies a decrease in quality. To the contrary, we’re buying assets of equal or greater quality and those assets are located in our strategic submarkets. The difference in cap rates is largely the result of selling well-leased, stabilized and fully-valued assets and redeploying the proceeds to the assets that have something that needs to be fixed, giving us both, value and income…

Thanks, Brent. While I’ll discuss some of our financial highlights for the quarter, I encourage you to please review the earnings release and supplemental financial information which were filed last night for more complete details. For the first quarter of 2019, we reported $0.45 per diluted share for both FFO and core FFO, which was up $0.04 per share over FFO and up $0.02 per share over core FFO for the same period a year ago. The increase is primarily attributable to rental rate growth and higher occupancy across the portfolio, as well as fewer common shares outstanding as a result of our stock repurchase program. We acquired 728,000 shares during the first quarter at an average price of $17.14 per share, bringing the lifetime share repurchase activity to nearly 49 million shares at an average repurchase price of $17.70 per share. We anticipate we will prudently take advantage of this program when dramatic differences in our share price and our underlying NAV exist. If we do so, we’ll utilize proceeds from the sales of non-strategic assets and not increase leverage. As of quarter-end, we have $74 million of board approved capacity remaining under this program. AFFO was approximately $52 million for the first quarter, which is double our current $26 million quarterly dividend level. Same-store NOI was up approximately 3.7% on a cash basis for the first quarter and up 3.1% on an accrual basis. These metrics included net termination fee paid during the quarter. While such fees may cause volatility between quarters, this is a recurring income source for Piedmont as we received between $2 million and $3 million of net termination fee income in each of the last five years. From our reported core FFO perspective, this termination fee income does not impact the comparability of our…

[Operator Instructions] Our first question comes from Barry Oxford with D.A, Davidson. Proceed with your question.

Great, thanks guys. Brent, you did a good job on the New York State lease and explaining that. Is there any more color on the city and would we might see the same sort of thing happen with the City as far as maybe move into a short-term, because they need extra time to kind of get their ducks in a row, or would you anticipate signing a full leaf right off the bat?

Hi, Barry, thanks for joining the call today and appreciate your time. I wanted – in regards to the New York City, there is still about a year out. So I think it was a bit premature to really have a lot of insight into the pace of our negotiations. I would say that we did engage the New York State two years prior to their expiration and we had the same approach with the City, so we’re about halfway through that process. And really now, I guess the main ingredient is between here and the end of the actual lease and expiration, which again is in April of 2020. It’s always a little, I guess, the answer is, it’s difficult to say. I think we continue obviously to push and use that ending and expiry is a means to try to drive them to execute, obviously sooner. With the State, we had the unique situation where the paperwork and just the number of agencies that are coming in and out of the building are complicated. So we were able to get that four month extension and get a – basically maintain the higher cash rate that we’re receiving today. But that obviously means that the GAAP income from that long-term lease has been delayed slightly.

Right, right. Great. And then switching gears, Brent, real quick. I really will site [ph] the acquisition that you talked about, 100 in the Galleria in Atlanta. When you’re looking at your strategic pipeline, are there more properties like that in there, and if so, maybe – obviously you can’t tell us the property, so maybe you could point to the cities that we might see some acquisition activity?

So we’re really excited about Galleria 100. And really the strategy behind that again, focusing on where large corporates want to be pro-business environment, walkable amenities and also getting scale, which certainly Galleria 100 helps us to continue to drive scale in that northwest submarket of Atlanta, we do have and continue to see a number of compelling properties that we think are big discounts to replacement cost that are well located and have a growing kind of urban infill amenity base around it that we can still stabilize in very mature assets and then redeploy those accretively into quality assets that we can then further drive both NAV and cash flow growth. Galleria 100 are perfect example of that and we’re still seeing more opportunities in our pipeline in Atlanta, Boston, Dallas, Minneapolis as well. And we – we’re very enthused by some of those opportunities that we see. But of course, everything – it’s not done until it’s done, and in fact, Galleria 100 itself is not done. We do anticipate though to close on that in mid-May. But we do have as well in terms of growth within the portfolio, not only on an acquisitions basis in that accretion, but development opportunities as well and I think those two opportunities really reside mainly in Lake Mary right now, and then also near our headquarters here in Atlanta in the Central Perimeter. And we continue to see interest although it’s early in both of those locations from tenancy.

Great. Thanks so much guys. And I’ll leave the floor.

Thank you. Our next question comes from Dave Rodgers with Baird. Please proceed with your question.

Yes, good morning. Don, just wanted to say, we don’t see any congratulations and good luck and the recent trackers, it’s been really good to see. So, wanted to leave you with that. Wanted to turn to – Brent in terms of asset sales, while these comments have suggested that you would continue to be a net seller this year, can you talk about kind of what’s in the market, what might be up next and how you’re thinking about that?

Yes, Dave. Appreciate again, the time today and you during the call. We continue to really focus on our I call them paving [ph] properties, but the non-core assets in Philly, in Houston, although I think probably Philly is a little bit more near term, executable in Houston given we still need to get some of the tenancy transition into the building and that opportunity, but those are probably top of the list in terms of putting them into the market and then we being able to redeploy those proceeds into our eight core markets. But then we – as with One Inde, we continue to evaluate those assets that are very well leased, have good credit tenancy and long-term weighted average lease terms that might be to a point where we again, maximize value under our ownership and we would sell those. But nothing is specifically at that point on at the moment.

Okay, great. That’s helpful. And then DC is obviously – continues to be kind of the lower occupancy component of the portfolio and the biggest opportunity. Can you dive a little bit more either Brent or Bob into the leasing activity that you’re seeing there? Any kind of hope to pick up activity in some of the vacancies especially in the RB corridor?

Yes, Dave as usual – by the way, thank you very much for the comments and I’m sorry [indiscernible] NAREIT but like I said if anybody wants to pick a phone, my number won’t be changing. But I’m going to throw it to Bob for the Washington comments. I think he is obviously much more qualified to do so than anybody here in Atlanta.

Yes, I think that in the metro area, really the drivers of growth these days are co-working and technology and kind of the negatives are law firms and GSAs. So the way that plays out is in the district, you’re kind of at a neutral spot where you get some gains and you get some law firms as you get these consolidations. In Virginia, you really are seeing net growth. You don’t have the GSA consolidating the law firm effect and it’s definitely where more of it – positive impacts are being seen. The obvious one at the moment is Crystal City, and the way that really helps us is they have been the low cost provider for the past five years of office space and that’s completely changed. Their rents are going up, the occupancy is going up, so that really has been dialed out. So I think that will really help anywhere in Arlington and other markets, too, but particularly on the RB corridor getting rid of the low-cost offering that they had at Crystal City.

And Dave the only thing I’d add to that is, we like to remind everybody that we have virtually no rollover for the next five years in Washington DC. And so, although we are continuing to sort of whack away getting the occupancy up in that market, we don’t have anything going out of the back door anytime soon. So everything that Bob’s able to accomplish is good net pickup for us. So that’s the best news out of DC for us.

Okay, great. Appreciate the color. Thanks guys.

[Operator Instructions] Our next question comes from Patrice Chen with JPMorgan. Please proceed with your question.

Hey guys. So regarding the $2 million in property management fee from construction work that you guys did around in assets, do you see this as like something that has become more prevalent in the business or is it more just like a one-time thing for the year? Thanks.

Well it was $1.5 million. This is Bobby, Patrice. Thanks for the question. And it is sporadic. So I wouldn’t model that in and say an ongoing recurring item.

Gotcha. Thanks.

There are no further questions in queue at this time. I would like to turn the call back over to Mr. Don Miller for closing comments.

Thank you, operator. I think as we sometimes do, we end up getting call time, same time there is another call and sometimes those calls are more intriguing than ours, so there are probably fewer questions than we would normally expect. But obviously, we had another great quarter. I’m going to be really not to be participating in these quarterly calls going forward, but I’m sure the group will do a great job for you, and I look forward to get snap with everybody else as we move forward.

Thank you. This does concludes today’s teleconference. You may disconnect your lines at this time and have a great day.