Greetings, and welcome to the Peakstone Realty Trust Second Quarter 2023 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to Investor Relations to begin.

Thank you. Good morning, everyone, and welcome to Peakstone Realty Trust Second Quarter 2023 Earnings Call and Webcast. Earlier today, we posted an earnings release, supplemental and updated investor presentation to the Investors page on our website at www.pkst.com. Please note the use of forward-looking statements by the company on this webcast. Statements made on this call may include statements which are not historical facts and are considered forward-looking. The company intends for all these forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and are making these statements for purposes of combining with those safe harbor provisions. Furthermore, the forward-looking statements reflect our current views about future events and are subject to numerous known and unknown risks, uncertainties, assumptions and changes in circumstances that may cause actual results to differ significantly than those expressed in any forward-looking statements and will be affected by a variety of risks and factors that are beyond the company's control, including, without limitation, those contained in our most recent annual report on Form 10-K or quarterly report on Form 10-Q filed with the SEC. We disclaim any obligation to publicly update or revise forward-looking statements to reflect changes in underlying assumptions or factors of new information, data or methods, future events or other changes after the date of this call, except as required by applicable late. Additionally, on this call, the company may refer to certain non-GAAP financial measures such as funds from operations, adjusted funds from operations, EBITDA, EBITDAre, and adjusted EBITDAre. You can find a tabular reconciliation of these non-GAAP financial measures to the most currently comparable GAAP numbers in the company's filings with the SEC. On the call today are Michael Escalante, Chief Executive Officer; and Javier Bitar, Chief Financial Officer. With that, I'll hand the call over to Mike.

Thank you, and welcome to Peakstone Realty Trust Second Quarter 2023 Earnings Call and Webcast. I'll begin by providing an overview of our key achievements during and subsequent to the second quarter. Javier will then follow with a review of our financial results and our balance sheet. And finally, I'll return with closing comments as we look to the future. We had a very active quarter. We listed our shares on the NYSE and redeemed our preferred shares and made meaningful progress in executing our disposition and deleveraging strategy. However, our financial results for the quarter were impacted by noncash charges, primarily related to office asset impairments and nonrecurring expenses related to the listing. Overall, our high-quality, newer-vintage industrial and office portfolio continues to deliver consistent [ REIT ] performance. At the end of the quarter, our wholly-owned portfolio consisted of 73 properties, totaling approximately 18.2 million square feet with annualized base rents or ABR of approximately $202 million. 63% of our tenants, their guarantors or non-guarantor or parent entities as applicable, have an investment-grade rating. The portfolio had a weighted average lease term of 6.5 years and was 96% leased, up from 95.3% last quarter. During the quarter, we strengthened our balance sheet by continuing to successfully execute our business plan. As previously disclosed, we used cash on hand to redeem our $125 million Series A Preferred Shares at par. These shares were issued to and held by a third-party international investor. The redemption generates annual savings of approximately $10 million in preferred distributions. We sold 5 office properties for gross proceeds totaling $131 million, bringing the year-to-date gross disposition proceeds to approximately $300 million at an average cash cap rate of 7.6% for the stabilized assets. Following the redemption and the property sales this quarter, leverage for our…

Thanks, Mike. In the second quarter, total revenue was $62.5 million, and total NOI was $49.6 million. The change compared to the same quarter in the prior year was primarily due to the disposition of 48 properties in 2022, and 8 properties in the first half of 2023. Net loss attributable to common shareholders was approximately $416.5 million or $11.59 per share, primarily attributable to the following: noncash real estate impairments of $397.4 million resulting from changes related to anticipated hold periods, estimated selling prices and potential vacancies that impacted the recoverability of 8 other segment assets and 8 office segment assets. We had nonrecurring expenses of $28.3 million, consisting of $21.3 million for transaction expenses related to listing of the company's shares on the New York Stock Exchange, approximately $5 million in a noncash charge to write off deferred costs from the initial issuance of our now redeemed preferred shares and $2 million relating to employee severance. And we also had a $17.5 million debt loss from investment in our joint venture, primarily due to interest expense, depreciation and amortization. We anticipate the JV will continue to have similar quarterly net losses for the remainder of the year. FFO was negative approximately $10.7 million or a negative $0.27 per share on a fully diluted basis. Please note that excluding the $28.3 million of nonrecurring expenses, FFO for the second quarter would have been approximately $17.6 million or $0.45 per basic and diluted share. AFFO was approximately $28.7 million or $0.73 per share on a fully diluted basis and same-store cash NOI was approximately $48 million, which represents a 2.5% increase on an annual basis after excluding a onetime termination fee received in the same quarter of the prior year. Moving on to our balance sheet. As of June 30,…

Thanks, Javier. Our cycle-tested team's experience and the quality of our assets continue to be positive differentiators as we continue to operate our portfolio, execute on property sales and reduce our leverage. Looking forward, we will continue to focus on strengthening our balance sheet with the goal to achieve an investment-grade rating and a more favorable cost of capital as soon as we can. We are close to achieving the upper end of our deleveraging goal, and we are optimistic about the pace at which we will hit that target. We continue to have a positive outlook on the industrial market. As I mentioned previously, our team continues to assess investment opportunities in the industrial sector. We remain committed to a disciplined capital allocation strategy and when appropriate, we intend to accretively deploy capital to lean into industrial and further shift our portfolio composition over time. Despite some varying degrees of volatility in the capital markets and macroeconomic environment, we believe our stable, high-quality portfolio is resilient and positions us well to execute on our strategy to maximize value for our shareholders. Please reach out to our Investor Relations team at ir@pkst.com with any questions or visit the Investors section of our website at pkst.com. We'll now turn it over to the operator to take a few questions from analysts. Operator?

[Operator Instructions] And our first question comes from the line of Joshua Dennerlein with Bank of America.

Just curious on asset sales. I guess, what else are you marketing today? And then what's just the general appetite out there for office -- setting -- and when we last met, you were talking mostly office...

Yes, Josh, thanks for joining us. So we're active in the marketplace. We're not really giving you guidance as you well know. We're pretty early in our life cycle at the moment. And given the uncertainty of timing and the quantity of sales, we're going to look to provide guidance at a later date. But as you know, we did execute on $131 million worth of sales this last quarter, roughly $300 million in total. And when you look at all that, I think we've been pretty surprised by our ability to access the market at pricing levels that are attractive to us in terms of clearing the marketplace. So I think the one key element that is difficult out there is buyer financing, the debt side of the equation. And we've been making sure that as we process the -- as we process our buyers, if you will, we're very keen on understanding exactly how debt financing is going to play a part in the transaction. Many of our buyers have been very, very local sharpshooters and they have long-standing aligned relationships with local community and regional banks. So that has worked in our favor. So I don't know if -- I guess I would tell you, it's a lot of diligence on our part and a lot of handholding and we've been able to execute today at a pretty good pace there.

Okay. Appreciate that color. And then just thinking about the portfolio, so you have 12% of the leases expiring next year. Just or 12% of the portfolio expiring next year. Just kind of curious how those conversations are going with tenants, any known move-outs at this point?

Yes.it's- I think as we kind of hit that directly in our commentary. You might have missed it. But we don't really -- so we look at it on a segment-by-segment basis, right? I think the one key piece that we talked about openly was the Samsonite transaction, which is 8.5% of our Industrial segment exposure through 2024. And what we told you there is that we are in active discussion with that tenant. And I think we're very excited about what's going on in the Jacksonville industrial market overall. On the office segment, we only have 3.8% or just under 4% expiring through 2025. And I think the leasing pipeline for office properties has been picking up. We mentioned the notion of green shoots. And so we're pretty happy about that. And really where our exposure is that you're referring to is in our Other segment as we've mentioned in the past. We have a lot of transparency and clarity as to that rollover, you'll see it in, I guess, in our supplement, specifically as where that's called out. And I think we're actively engaged in discussions with a fair number of those tenants. No promises there. But we're actively moving to see what we can do in that regard.

And our final question comes from the line of Anthony Hau with Truist Securities.

Just want to follow up on Josh's question about the leasing pipeline for the Other segment, particularly the KBR building in Huntsville and Westgate II. It would be great if you can provide some color on those 2 pieces?

We're generally not providing specific property guidance. We did do it for Samsonite just because of the size and the percentage of the ABR there. I'll just say that we're actively engaged in as many places as we possibly can be. And we just really don't go into that level of detail on every property in our portfolio. So sorry, Anthony, on that one.

No worries. How is the workspace JV portfolio performing? And also when does that reach for financing cost burn off?

Anthony, yes, on the JV, we had a loss there. Most of that loss is related to the amortization of financing and depreciation. Within the financing costs, we have about $21.8 million of amortization in the quarter, and that will likely continue through the end of the year. As you may have noted in our Q, we are on a 1 quarter lag with the reporting of the JV. So the initial financing that was put in place to acquire that portfolio occurred in September of last year. So -- and those costs were incurred upfront. So over the next 12 months from September to September, you'd see that amortization occur. For us, that would occur in the fourth quarter. So what we've said in our prepared remarks is that you should expect to see a similar amount of amortization flowing through the end of the year.

Okay. And how does the portfolio like performing like in terms of like occupancy or like lease spreads or like NOI growth.

I think the only thing that I would just tell you is that we're continuing to produce positive cash flow out of that portfolio along the lines of what we anticipated. The positive cash flow, of course, does not flow through to us because contractually, we agreed with the lender that we would continue to add to reserves as a result of that cash flow. I don't know if there's anything else you wanted to add on that?

Yes. No, I think that's all we can provide.

Okay. And my last question is, can you talk a little bit more about the assets get sold in the quarter, like maybe in terms of like pricing or maybe overall interest in those assets. I noticed that the ones from the office portfolio were all 100% leased and all had maybe 9 to 10 years lease term, whereas the ones you sold in the other segment are vacant.

Yes. So you're looking for a little bit a little more information on the property sales and sales.

Yes. Yes.

Unfortunately, our communication is a little bit scratchy on this end. So relative to the second quarter, we've only really provided information on a -- really on a more global basis. What you -- I think you correctly pointed out that the office assets were generally of a longer term WALT. And in the other 2 cases relative to the Other portfolio, they were vacant assets. I think that's probably the best I can give you. We've got more detail in the queue specifically.

Yes, you'll note in the queue, there's a table that gives you asset by asset information on the sales proceeds for each one of those. We've added that to for -- Note 3 of the Q.

Does that answer your question, Anthony?

Yes, it does. I didn't really to see, but thanks for pointing that out.

Yes.

This concludes the question-and-answer session. I'd like to turn the call back to Mr. Escalante for closing remarks.

Thank you, operator. I appreciate everyone joining us today and for your time. And we will look forward to updating you on our progress to achieving our goals during our next quarterly webcast, roughly 3 months from now. So again, thank you for your time. Appreciate it. And...

Thank you.

Bye-bye.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.