Greetings, and welcome to the Piedmont Realty Trust, Inc. Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] And please note, this conference is being recorded. I will now turn the conference over to your host, Ms. Laura Moon, Chief Accounting Officer for Piedmont Realty Trust. Ma'am, the floor is yours.

Thank you, operator, and good morning, everyone. We appreciate you joining us today for Piedmont's Fourth Quarter 2025 Earnings Conference Call. Last night, we filed an 8-K that includes our earnings release and unaudited supplemental information for the fourth 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. 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 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's future revenues and operating income, dividends and financial guidance, future financing, leasing and investment activity and the impact 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 supplemental financial information, which was filed last night. At this time, our President and Chief Executive Officer, Brent Smith, will provide some opening comments regarding fourth quarter and annual 2025 operating results. Brent?

Thanks, Laura. Good morning, and thank you for joining us today as we review our fourth quarter and annual 2025 results. In addition to Laura, on the line with me this morning are George Wells and Alex Valente our Chief Operating Officers; Chris Kollme, 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. Before I jump into the quarter, I just want to take a minute to reflect on 2025 and Piedmont's leasing accomplishments this past year. Momentum in the national office market clearly shifted in the latter part of 2025 to the point where several independent research reports state we've been -- we've seen peak vacancy for this cycle. Rising office mandates and intended to brought large space consumers back into expansion mode with a hyper focus on best-in-class assets. The number of Fortune 100 companies that require a 5-day work week in the office has soared to about 55% compared with 5% reported 2 years ago, according to the latest JLL survey. Piedmont has experienced this large user phenomenon as well, having completed 28 full floor or larger transactions in 2025 compared to an average of 9 for the previous 4 years. Demand also appears to be spreading geographically. According to Cushman & Wakefield, absorption was positive for the year in 50 markets, that's up from 33 markets in 2024 and the highest number of markets with positive absorption for a full year since 2019. On the supply side, sublet availability has declined from its peak in early 2024 and just 4 million square feet of new office space was delivered in the fourth quarter, the lowest since 2012. In fact, CBRE noted that 2025 was the first year that…

Thanks, Brent. Durable demand for Piedmont's modern, highly amenitized workplace environments generate exceptional operating results for the fourth quarter. Leasing velocity continued at a vigorous pace with 60 transactions completed for nearly 700,000 square feet and very close to record levels, which have experienced over the past 2 quarters. New deal activity was the dominant theme again, accounting for 69% of total volume with 54% of that activity filling current vacancy. As Brent mentioned, large users are driving new deal activity to record-breaking levels with 10 full floor or larger transactions executed this quarter and another 6 either executed or in the late stage. Nearly 90% of new leases signed will begin recognizing GAAP rent in 2026. It's also gratifying to see food and beverage operators appreciate the vibrancy and foot traffic around our well-located assets and within our hospitality-inspired common areas, which this quarter attracted 2 more F&B deals, further strengthening and differentiating our offerings. Our weighted average lease term for new deal activity was approximately 9 years and consistent with previous quarters. Longer lease terms are essential for justifying the capital investment and upgrading to today's office suite environment. As we've experienced now for 6 straight quarters, expansions exceeded contractions largely to accommodate customers' organic growth. Our retention rate remained high at 63%, a positive testament to Piedmont's brand. Impressively, our team retained 4 large subtenants on a direct basis for nearly 100,000 square feet with strong NERs and a significant increase in sublet to direct rents of approximately 35%. Once again, Atlanta and Dallas were the driving forces behind strong lease economics as the portfolio as a whole posted a 12% and 21% roll-up or increase in rents for the quarter on a cash and accrual basis, respectively. Notably, our average accrual base roll-up over the past…

Thank you, George. 2025 was a pretty quiet year for Piedmont on the transactions front. The team did close on a small disposition outside of Boston, removing an older slow growth and capital-intensive assets from the portfolio. We will continue to seek ways to optimize and elevate our holdings throughout 2026. As I have mentioned, we have 2 land parcels under contract and both are going through very time-consuming rezoning processes. So the timing is somewhat at the mercy of the city and county officials. We are expecting to close one in the middle part of this year and the other at the end of 2026 or possibly in the first quarter 2027. If both were to close, they would generate a little over $30 million in gross proceeds and will ultimately provide additional retail amenities for our adjacent office projects. We continue to actively evaluate and underwrite potential acquisition opportunities. We are optimistic that we will return to a more active capital recycling program in 2026. With that, I'll pass it over to Sherry to cover our financial results.

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 fourth quarter of 2025 was $0.35 versus $0.37 per diluted share for the fourth quarter of 2024, with the decrease attributable to the sale of 2 projects during the year ended December 31, 2025, and higher net interest expense as a result of refinancing activity during that same period. These decreases were partially offset by growth in operations due to higher economic occupancy and rental rate growth. AFFO generated during the fourth quarter of 2025 was approximately $18.7 million. Turning to the balance sheet. We completed some very important refinancing activity during the fourth quarter. We issued $400 million in aggregate principal amount of new bonds and used the net proceeds to repurchase approximately $245 million in principal amount of our 9.25% 2028 bonds. The remaining proceeds from the new issuance were used to pay down the outstanding balance on our revolver. This refinancing activity, combined with the open market purchases of some of our higher coupon bonds that we completed earlier in the year, will save us approximately $0.04 a year on an annual basis. As a result of this activity, we had approximately $550 million of capacity on the revolver as of year-end. And as we've highlighted previously, we currently have no final debt maturities until 2028. We continue to think creatively as we evaluate balance sheet management options to extend and smooth our maturity ladder and continue reducing 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…

Thank you, George, Chris and Sherry. I am proud of the many accomplishments by the Piedmont team during 2025, and I'm excited to see the hard work of so many start to contribute to FFO growth in 2026. With quality space becoming harder to find and the cost of new development at all-time highs, we believe that our portfolio of recently renovated, well-located hospitality-inspired Piedmont places provides a desirable cost-efficient alternative to new construction and will continue to drive leasing volume and rental rate increases in 2026. With that, I will now ask the operator to provide our listeners with instructions on how they can submit their questions. Operator?

[Operator Instructions] Our first question is coming from Nick Thillman with Baird.

Congratulations, Alex. Maybe just digging a little bit more on just leasing overall on the 1.7 million to 2 million square feet that's in there. I guess what's embedded in that on renewal versus new leasing? Obviously, the chunkier deals in there, it seems like from a retention standpoint, you're somewhere in between 25% and 80% retention. So maybe thoughts on retention. And then overall, what's embedded there on the new lease assumption as well?

Nick, George here. Thank you for joining us. I mean the quick answer is it's roughly 50-50 between new activity and renewal activity.

I think in regard -- sorry, this is Brent. In regards to retention, as we've noted before, we're going to be retaining New York City for substantially all the space. Evershed is a vacate and Epsilon will renew and we have some additional tenancy that roughly means we'll get about half the space back. If you think about our overall expiries for 2026, it's about 9.5% of the portfolio. And those 3 make up, call it, almost 6% of that. So really, what we're left with is "unknowns", we feel very good about renewal probability. I would say what we've been trending to over the last year, call it, 65% retention would be expected for that remaining portion of the portfolio to give you some perspective around that.

That's very helpful. And then I guess if I look, good momentum overall on the leasing front. Is there somewhat of a cap you guys can do from a lease percentage? I look at some of where the vacancies, but it seems that there's a little bit more structural vacancy. I look at like your D.C. portfolio, for example, is rough 25% of your vacancy in your operating portfolio. How should we think about how far a lease percentage can move with -- given there's still some select pockets of vacancy in some of your weaker markets overall?

Nick, yes, that's a great question and something that we get asked frequently. We have created really unique environments that we believe we can continue to lease up what will be historically challenging space, lower in the building, maybe a few in the parking garage, et cetera. But for instance, our Galleria project, the environment is so unique that we continue to feel that we're going to be able to lease those projects up beyond 95% leased. well into the high 90s. But you do point out that we do have some challenging vacancy elsewhere in the portfolio. We have a building in Boston that's been a little bit slower for absorption at 25 malls. And D.C. continues to be a challenge in the district. But we are seeing more green shoots in Northern Virginia with good activity there that we think will be an absorption opportunity. And then, of course, our out-of-service portfolio, as we've alluded to, continues to be very well received in the marketplace, and we'll continue to drive absorption there. So if we take that aggregate perspective, we're guiding 89.5% to 90.5% leased this year. George and I see no reason why we can't take the entire portfolio upwards of 91%, 92% leased, which is where we were prior to the pandemic. And frankly, I'm of the belief that we continue to see the momentum, we could even drive beyond that 92% level in the years ahead. It will take us some time to get there. But our product is uniquely positioned. It's been amenitized. It's well located and its price point is very compelling, and that continues to drive both large and small users of our projects.

I appreciate the commentary, Brent. And then maybe just a final one for Chris on just overall transaction activity, what you guys are targeting for dispose of what type of product you would like to exit in '26 and maybe how the bidder pool on select assets has changed over the last couple of months?

Nick, this is Brent. Chris is a little bit under the weather, so I'm going to pinch hit here on this one. As you know, we do have and have had land parcels in the market that are under contract. Those are continuing to progress well. Otherwise in the disposition bucket, we did note that we had a building in D.C. that we took brought into the market. I would say receptivity was not strong just because I think the challenges of that overall market as a whole. So we're going to continue to hold on to that for the near term. We do consider our Houston assets noncore, and we'll continue to look to monetize those as well as if we are -- if we conclude the 60 -- sorry, the New York City lease at 60 Broad, that would be a candidate to monetize a part of that asset here towards the end of '26 as well. Again, our guidance does not contemplate any of those potential dispositions, land sales or otherwise, and we'll update accordingly. But we do see that opportunity to rotate some capital in the second half of the year.

[Operator Instructions] Our next question is coming from Dylan Burzinski with Green Street.

Maybe just touching on the demand environment. Obviously, it's very robust across your guys' portfolio. Can you kind of talk about some of the things driving that activity? Just thinking about the job market, things still seem to be a little bit shaky. So just sort of curious what you think is causing this very robust demand environment across your guys' portfolio today?

Dylan George here. Look, I think some of the characteristics that we've seen for the past, I would say, 2 years is certainly intensifying for us in our portfolio. The decision for a lot of these users to come back and upgrade their overall office experience, that seems to be the ones that's driving our large deal flow. Also the conviction around the workplace strategy, right? I think we heard earlier that the number of Fortune 500 companies that are coming back with higher mandates and actually supporting those mandates is causing additional organic growth in our respective submarket. I would say that when you look at our existing portfolio, the portfolio is quite dynamic. You have a lot of users that continue to expand from a business plan perspective. As I mentioned earlier in this conversation, we had 11 expansions versus 3 contractions, and we're seeing that from a financial services perspective as well as insurance, accountants and law firms just across the board.

I'd add to that. I think as we've talked about, our portfolio is uniquely positioned in that it has been renovated and amenitized and is at a very effective price point for a lot of businesses. So I feel like our addressable market is much wider than those that are just looking for trophy quality space. And that trophy quality space is very full, almost no vacancy. As we alluded to in our prepared remarks, no development, really, we won't see any new assets until the end of the decade. So we're right in the sweet spot of a lot of demand from both small and big users from across industries. And again, our buildings are also not designed heavily for tech. We've never relied on tech as an incremental lessor absorption in our portfolio. And right now, given the softness in tech expansion and growth, we're not inhibited by that. And we continue to see all the industries that George alluded to grow and need quality office space, and that's going to help us push rental rates again this year meaningfully across the portfolio, but particularly in our Sunbelt markets.

I guess that's a good segue to my next question. I mean, how much do you think rents can grow across the Sunbelt portfolio over the next, call it, 1, 2 years? Are we talking upwards of potentially 20% rent growth on a cumulative basis? Just sort of curious how we should be thinking about that here given that backdrop you just described.

Yes. No, I think I would highlight a couple of points around our growth. One, as we alluded to, we have still a lot of lease-up and commencement activity in our portfolio to drive earnings growth. We've also got a pretty incredible mark-to-market. Yes, we've continued to push rental rates, in some cases, 20% in 2025 alone. But all those leasing leases we did in '23 and '24, which was over -- approaching almost 4.5 million square feet are at rates that are now 20%, 25% below current signed rents in our projects. So we think there's a meaningful mark-to-market in that Sunboatelt portfolio, particularly of 20% to 40%. And then just where we see rents going today with new construction cost rents at $70, $80 gross in many of our markets now, and in-place rents at our projects anywhere from $45 to $60 gross, we think there's still a meaningful 25% movement in our own rental rates here over the next year, given it's very tight trophy level and new development continues to increase in cost. So we think those 3 legs really do provide us a unique path for growth between now and the end of the decade from just lease-up, organic mark-to-market and then pushing our own rental rates.

As we have no further questions in the queue at this time, I would like to turn the call back over to Mr. Brent Smith for any closing remarks.

I want to thank everyone who joined us today on the call, but I also particularly want to thank my fellow Piedmont employees for an outstanding 2025 execution and really over the last 5 years to reposition, rebrand and reinvent Piedmont into the machine -- growth machine that it is today. It sets us up for 2026 and beyond. For those investors who'd like to meet with us and talk with management, we will be at the Citi Group Conference in Hollywood, Florida, March 2 through the 4. And I want to wish everyone a happy Valentine's Day. Actually, Valentine's Day is the week we have the most engagement in our portfolio. We'll show our clients the love, if you will. And I hope everyone has an enjoyable week ahead. Thank you. Have a good day.

Thank you. Ladies and gentlemen, this does conclude today's conference. You may disconnect your lines at this time, and we thank you for your participation.