Piedmont PDM Q4 2025 Earnings Call Transcript

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DATE

Thursday, February 12, 2026 at 9 a.m. ET

CALL PARTICIPANTS

• President and Chief Executive Officer — Christopher Brent Smith
• Chief Operating Officer — George M. Wells
• Co-Chief Operating Officer — Alex Valente
• Executive Vice President, Investments — Christopher A. Kollme
• Chief Financial Officer — Sherry L. Rexroad
• Senior Vice President, Investor Relations — Laura Moon

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TAKEAWAYS

• Leasing Volume -- 2,500,000 square feet leased during 2025, representing approximately 16% of the portfolio and exceeding original annual guidance by 1,000,000 square feet.
• Portfolio Lease Percentage -- Year-end lease percentage reached 89.6%, up 120 basis points over the course of 2025.
• Core FFO per Diluted Share -- $0.35 for 2025, compared to $0.37 for 2024; decrease driven by asset dispositions and higher net interest expense, partially offset by improved occupancy and rental rate growth.
• AFFO -- Approximately $18,700,000 generated during 2025.
• Rental Rate Growth -- Executed leases for space vacant less than a year in Q4 showed approximately 12% cash and approximately 21% accrual basis increases; past eight quarters’ accrual-based roll-up averaged 17%.
• Weighted Average Lease Term -- New leasing activity averaged approximately nine years, supporting investment in upgraded office space environments.
• Retention Rate -- 63% tenant retention for the period.
• Out-of-Service Portfolio -- 62% leased at year-end 2025 (covering projects in Minneapolis and Orlando), with stabilization and portfolio reintegration targeted by end of 2026 or early 2027.
• Uncommenced Lease Backlog -- Nearly 2,000,000 square feet, representing $68,000,000 in future annualized cash rent, with commencement projected by end of 2026.
• 2026 Core FFO Guidance -- $1.47–$1.53 per diluted share, with the midpoint representing an $0.08 per share increase on 2025 actuals; includes projected property NOI growth of $0.08–$0.13 per share and $0.01–$0.02 per share reduction in net interest expense.
• Projected Occupancy Uplift -- Management guides to a 400-basis-point increase in commenced/occupied percentage, from 81% at year-end 2025 to 85% expected at year-end 2026.
• 2026 Leasing Activity Outlook -- Anticipated annual leasing activity of 1,700,000 to 2,000,000 square feet and year-end portfolio lease percentage of 89.5%–90.5%.
• Balance Sheet and Financing -- $400,000,000 of new bond issuance in Q4 2025, used to repurchase $245,000,000 of 9.25% 2028 bonds and repay revolver balances, resulting in $550,000,000 in revolver capacity and no final debt maturities until 2028.
• Interest Savings -- Refinancing actions will generate annual savings of $0.04 per share, partially offset by lower capitalized interest as properties return to service.
• Leasing Economics -- Net effective rents for new leases were ~$21 per square foot; average starting cash rent was $42 per square foot, flat sequentially versus previous quarter.
• Capital Expenditures for Leasing -- $6.12 per square foot in Q4, a $0.46 per square foot reduction compared to the trailing twelve months.
• Geographic Performance -- Atlanta closed 336,000 square feet across 23 deals, half of company volume; Orlando leased three additional floors at 222 Orange, raising lease percentage from 46% to 77%.
• Major 2026 Lease Expirations -- Approximately 9% of the portfolio set to roll, with the majority related to Eversheds, Epsilon, and City of New York leases, especially impacting Q2.
• Transaction Activity -- One Boston-area disposition completed in 2025; two land parcels currently under contract could generate over $30,000,000 in gross proceeds if closed per timeline.
• Guidance Assumptions -- 2026 Core FFO guidance excludes the impact of future acquisitions, dispositions, or refinancing; updates will be issued upon such events.

SUMMARY

Management highlighted a substantial shift in national office market dynamics, citing data that points to peak vacancy and increased office demand among large users. Executives stated that portfolio renovation and amenity upgrades have facilitated material rental rate increases and improved competitive positioning. The company's refinancing activities extended maturities, significantly boosted liquidity, and reduced interest costs, while near-term debt risk was addressed by pushing maturities to 2028. Mid-single-digit same-store NOI growth and substantial occupancy gains are expected in 2026, reflecting positive leasing momentum and the re-entry of out-of-service assets. Guidance for 2026 projects a notable increase in FFO per share based on organic portfolio performance, with additional upside possible from capital recycling activities not yet factored into outlooks.

• Management attributed much of the leasing surge to renewed office mandates among Fortune 100 companies, with “about 55%” requiring five-day workplace attendance.
• Executives underscored that current asking rents remain “25% to 40% below rates required for new construction.”
• Brent Smith stated, “Our supplemental report shows approximately 9% of the portfolio rolling in 2026,” with Q2 most impacted by large expirations.
• $0.04 per share in annual interest expense savings from recent refinancing is “partially offset by the reduction in capitalized interest as our out-of-service portfolio comes online.”
• Two land parcels under contract could generate “a little over $30,000,000 in gross proceeds,” pending rezoning and municipal processes.
• Executives indicated that “acquisition opportunities” are under review and that 2026 could see resumed capital recycling activity.
• Brent Smith emphasized confidence in achieving a portfolio in the medium term, with potential to “drive beyond that 92% level in the years ahead.”
• Management stressed that the 2026 guidance “does not include any acquisitions, dispositions, or refinancing activity. We will adjust guidance if and when those types of transactions occur.”

INDUSTRY GLOSSARY

• Core FFO: Funds from operations excluding certain items deemed non-core; widely used REIT earnings metric for operational performance.
• AFFO: Adjusted Funds from Operations; FFO less normalized capital expenditures and straight-lining adjustments, representing cash flow available for distribution.
• Accrual Basis Roll-Up: The percentage increase in rent per square foot on new leases compared to expiring leases, calculated on a GAAP (accrual) basis.
• Net Effective Rent (NER): The average annual base rent received over a lease term, adjusted for tenant incentives and rent-free periods.
• Mark-to-Market: The difference between contracted in-place rents and current market rent levels, indicating embedded rental growth in the portfolio.

Full Conference Call Transcript

Laura Moon: Thank you, Operator, and good morning, everyone. We appreciate you joining us today for Piedmont Office Realty Trust, Inc.'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 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 Office Realty Trust, Inc. 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 Office Realty Trust, Inc.'s future revenues and operating income, dividends and financial guidance, future financing, leasing and investment activity, and the impacts 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, Christopher Brent Smith, will provide some opening comments regarding fourth quarter and annual 2025 operating results. Brent?

Christopher Brent Smith: Thanks, Laura. Good morning.

Brent Smith: 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 M. Wells and Alex Valende, our Chief Operating Officers, Christopher A. Kollme, our EVP of Investments and Sherry L. 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 wanted to take a minute to reflect on 2025 and Piedmont Office Realty Trust, Inc.'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 have seen peak vacancy for this cycle. Rising office mandates and attendance have 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 five-day work week in the office has soared to about 55% compared with 5% reported two years ago, according to the latest JLL survey. Piedmont Office Realty Trust, Inc. has experienced this large user phenomenon as well, having completed 28 full-floor larger transactions in 2025, compared to an average of nine for the previous four years.

Demand also appears to be spreading geographically. According to Cushman & Wakefield, absorption was positive for the year in 50 markets. That is 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 4,000,000 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 inventory removals, that being demolitions or conversion, outpaced new completions since they began tracking the market in 1988. So there is virtually no construction underway in our markets.

Demand continues to be robust, and true trophy assets have little space available. This reduction in supply is beginning to rebalance markets. CBRE noted that even though 2025 net absorption was still meaningfully below the 30-year average, the steep drop-off in new supply more than compensated to drive the first year-over-year decline in vacancy in over five years. These tailwinds translated into a record amount of total leasing volume for Piedmont Office Realty Trust, Inc. in 2025. We leased 2,500,000 square feet or approximately 16% of the portfolio, the most leasing we have completed in over a decade, and 1,000,000 square feet ahead of our original 2025 leasing guidance.

In fact, over the last five years, we have leased approximately 75% of the portfolio or about 11,600,000 square feet. An incredible accomplishment by the team and a testament to the fact that our Piedmont place-making strategy is working. Furthermore, over those five years, the portfolio has generated positive cash same-store NOI growth each and every year. That is an incredible operational achievement given the challenging office sector. And in 2026, this metric will accelerate as our historic leasing success translates into meaningful same-store NOI growth, driven by a material increase in commenced occupancy, which Sherry will cover in a moment.

Our portfolio of recently renovated, well-located amenity-rich properties combined with our hospitality-infused service model, has also allowed us to materially increase rental rates across our portfolio. And with asking rents still ranging from 25% to 40% below rates required for new construction, Piedmont Office Realty Trust, Inc. is well positioned for sustainable earnings growth in 2026 and beyond. Turning to fourth quarter results, we completed approximately 679,000 square feet of leases, almost 70% of which related to new tenants, and contributing to a year-end lease percentage of 89.6%, an increase of 120 basis points over the course of 2025.

Additionally, our out-of-service portfolio comprised of two projects in Minneapolis and one in Orlando was 62% leased as of the end of the year. A phenomenal accomplishment by the team as these projects were essentially vacant at year-end 2024. The majority of leases for these projects will commence during 2026, contributing meaningfully to FFO, and we anticipate that they will reach stabilization and rejoin the normal operating portfolio by the end of 2026 or very early 2027. Rates also continued their upward trajectory during the fourth quarter, with rental rates on leases executed during the quarter for space that has been vacant less than a year, increasing approximately 12% and 21% on a cash and accrual basis, respectively.

Our backlog of uncommenced leases remains strong, with almost 2,000,000 square feet of leases representing $68,000,000 of future annualized cash rents. Substantially all of those leases will commence by the end of 2026. As George will touch on, leasing momentum remains strong, including over 200,000 square feet of leases already signed in 2026, and a robust pipeline with over 600,000 square feet currently in the legal stage.

Sherry will introduce our 2026 guidance in a moment, but big picture, it is clear that the occupancy trough of Piedmont Office Realty Trust, Inc.'s portfolio occurred in 2025, and we believe the broader macro factors that I discussed along with our successful portfolio repositioning and elevated service model will drive mid-single-digit organic FFO growth in 2026 and 2027. Last point before I turn it over to George is we announced last week Alex Valente has been promoted to Co-Chief Operating Officer and will be working alongside George to lead new operations initiatives across the firm as well as oversee almost all of our Eastern portfolio.

I believe most of you have met Alex at some point during his 20-year career with Piedmont Office Realty Trust, Inc., and I share my enthusiasm and congratulations for his new role. With that, I will now hand the call over to George, who will go into more details on the leasing pipeline and fourth quarter operational results. Thanks, Brent. Durable demand for Piedmont Office Realty Trust, Inc.'s modern highly amenitized workplace environments generated 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 we have experienced over the past two 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 six either executed or in the late stage. Nearly 90% of new leases signed will begin recognizing GAAP rent in 2026. It is 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 two more F&B deals further strengthening and differentiating our offerings.

Our weighted average lease term for new deal activity was approximately nine years, and consistent with previous quarters. Longer lease terms are essential for justifying the capital investment in upgrading to today’s office suite environment. As we have experienced now for six straight quarters, expansions exceeded contractions largely to accommodate customers' organic growth. Our retention rate remained high at 63%, a positive testament to Piedmont Office Realty Trust, Inc.'s brand. Impressively, our team retained four 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-based roll-up over the past eight quarters is an impressive 17%. Our overall weighted average starting cash rent of $42 per square foot was essentially unchanged from the previous quarter. We do anticipate more rental growth as our portfolio crosses into the low 90s lease percentage. Leasing capital spend was $6.12 per square foot, down $0.46 per square foot from our trailing twelve months.

Net effective rents came in at around $21 a foot, in line with the previous quarter. Atlanta was our most productive market by far during the fourth quarter, closing on 23 deals for 336,000 square feet or half of the company's overall volume with new leasing transactions accounting for over half of that amount. At Galleria on the Park, our local team landed a corporate headquarter relocation requirement for 48,000 square feet and ten years of term. A new run-rate high was achieved on this transaction and along with limited vacancy at this project, served as a catalyst to push asking rents to $48 per square foot up from $40 per square foot twelve months ago.

Also noteworthy was backfilling another floor, the Eversheds lease at 999 Peachtree that expires in 2026. I would like to point out that over the course of the past year, 999 has captured nine new deals for 130,000 square feet, consistently achieving some of the highest economics in our portfolio and is now 93% leased. We remain highly optimistic in addressing the last few Eversheds floors given the level of interest we are seeing. Orlando also stood out this quarter, capturing 10 deals for 125,000 square feet or 18% of company volume. Three more floors were leased at our 222 Orange redevelopment, boosting lease percentage up from 46% to 77%.

Asking rates are now at $40.20 per square foot versus $37 per square foot from twelve months ago. One of those deals completed there was a headquarters relocation from the Midwest and the other, a regional office for a global construction company that moved from the suburbs. Both clients highlighted our vibrant environment as the key differentiating factor in their final decisions. Piedmont Office Realty Trust, Inc.'s other redevelopment projects both located in Minneapolis are also attracting a number of additional new clients. Our out-of-service portfolio, which is 62% leased at year end, is nearly 80% leased inclusive of legal-stage transactions with a substantial majority commencing by year end.

I would also like to touch on our two largest 2026 expirations. In Dallas, we are making good progress on retaining the Epsilon and attracting new clients for almost half of that expiration. Epsilon currently leases the entirety of one in our three-building Las Colinas Connection project, which is currently 99% leased. The project is very visible and accessible at the crossroads of two major highways, much like the excellent locational qualities of our Galleria Towers. Although we do not intend to take this asset out of service in order to convert it to a multitenant environment, we intend to apply the same proven Piedmont Office Realty Trust, Inc. renovation strategy that has worked so well in our other markets.

Once construction begins, we typically see a spike in interest and demand. With virtually no large, high-quality blocks of competitive space available, we are excited about our near-term leasing prospects and achieving new rental highs in that submarket. At 60 Broad, we are excited to announce that we have recently affirmed deal terms with the new administration for the City of New York lease. A deal of this size will require other internal city reviews and a public hearing process before the transaction can be fully executed, but we are encouraged by this important split and expect we will have an executed lease by later this year.

The Piedmont Office Realty Trust, Inc. formula of attracting and retaining clients worked extremely well in 2025, and we are confident of continued success in 2026. Our leasing pipeline remains robust even after three straight quarters of record new leasing activity and is now nearly 600,000 square feet in the legal stage including six single-floor or larger new deals. That said, with very few large blocks of space available, outstanding proposals have declined moderately in total at a combined 1,800,000 square feet for operating and redevelopment portfolios. Though demand is strong, the course of 2026 quarterly net space is dependent on the amount and timing of scheduled expirations. Our supplemental report shows approximately 9% of the portfolio rolling in 2026.

The vast majority of the roll relates to the Eversheds, Epsilon, and New York City leases that I just reviewed, with the second quarter the most impacted. Aside from these three leases, there are negligible expirations remaining for 2026. That said, we are still projecting positive net absorption overall, ending the year around 90% for our total portfolio, including both our in-service and our currently out-of-service redevelopment portfolio. I will now turn the call over to Christopher A. Kollme for his comments on investment activity.

Laura Moon: Chris?

Christopher Brent Smith: Thank you, George. 2025 was a pretty quiet year for

Christopher A. Kollme: Piedmont Office Realty Trust, Inc. on the transactions front. The team did close on a small disposition outside of Boston, removing an older, slow-growth, and capital-intensive asset from the portfolio. We will continue to seek ways to optimize and elevate our holdings throughout 2026. As I have mentioned, we have two 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 $30,000,000 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 will pass it over to Sherry to cover our financial results.

Laura Moon: Thank you, Chris. While we will be discussing some of this quarter's financial highlights today,

Sherry L. Rexroad: please review the earnings release and accompanying supplemental financial information which were filed yesterday for more complete details. Core FFO per diluted share for 2025 was $0.35 versus $0.37 per diluted share for 2024, with the decrease attributable to the sale of two projects during the year ended 12/31/2025 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 2025 was approximately $18,700,000. Turning to the balance sheet, we completed some very important refinancing activity during the fourth quarter.

We issued $400,000,000 in aggregate principal amount of new bonds and used the net proceeds to repurchase approximately $245,000,000 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. 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 $550,000,000 of capacity on the revolver as of year end. And as we have 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 interest rates and thus be a tailwind to FFO per share growth. At this time, I would like to introduce our 2026 annual Core FFO guidance in the range of $1.47 to $1.53 per diluted share, an increase of $0.08 per share at the midpoint over 2025 results.

To summarize, the guidance reflects an increase in property NOI in the range of $0.08 to $0.13 a share, decreased interest expense of $0.01 to $0.02 a share. Note that the $0.04 of interest savings due to the bond refinancing that I previously mentioned is partially offset by the reduction in capitalized interest as our out-of-service portfolio comes online. In addition, the guidance includes a $0.01 decrease in NOI due to 2025 dispositions, and slightly higher G&A and share count.

We expect another strong year of leasing activity in the 1,700,000 to 2,000,000 square foot range, including, as Brent mentioned, stabilization of our out-of-service portfolio by year end and resulting in a year-end lease percentage of approximately 89.5% to 90.5% for the entire portfolio, and mid-single-digit same-store NOI growth on both the cash and accrual basis. It is worth noting that our projected commenced/occupied percentage will increase approximately 400 basis points from 81% at year end 2025 to 85% at year end 2026, fueling our earnings growth. Please note that this guidance does not include any acquisitions, dispositions, or refinancing activity. We will adjust guidance if and when those types of transactions occur.

We have included an annual FFO roll-forward and outlined our assumptions in the earnings release section of the supplemental to assist with your modeling and analysis. And with that, I will turn the call over to Brent for closing comments.

Brent Smith: Thank you, George, Chris, and Sherry. I am proud of the many accomplishments by the Piedmont Office Realty Trust, Inc. team during 2025, and I am 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: Thank you. Ladies and gentlemen, at this time, we will be conducting our question-and-answer session. To ask a question, please press 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue, and you may press 2 if you wish to remove your question from the queue. It may be necessary to pick up your handset before pressing the star key. One moment, please, while we poll for questions.

Laura Moon: Thank you.

Operator: Our first question is coming from Nicholas Patrick Thillman with Baird. Your line is live.

Brent Smith: Hey. Good morning, and congratulations, Alex. Maybe just digging a little bit more on just leasing overall

Nicholas Patrick Thillman: on the 1,700,000 to 2,000,000 square feet that is in there. I guess what is embedded in that on renewal, new leasing, obviously, the chunkier deals in there, it seems like from a retention standpoint, you are somewhere in between 25%–80% retention. So maybe thoughts on retention and then overall what is embedded there on the new lease assumption as well?

Brent Smith: Good morning, Nick. George here. Thank you for joining us. I mean, the quick answer is it is roughly 50-50 between new activity and renewal activity. I think in regard—sorry. This is Brent. Good morning, Nick. In regards to retention, as we have noted before, we are going to be retaining New York City for substantially all the space. Eversheds is a vacate. And Epsilon will renew, and we have some additional tenancy to roughly mean we will get about half the space back. Think about our overall expiries for 2026, it is about 9.5% of the portfolio. And those three make up, call it, almost 6% of that. So really what we are left with is, quote unquote, unknowns.

We feel very good about renewal probabilities. I would say, you know, we have been trending to, over the last year, call it, 60%–65% of retention would be expected for that remaining portion of the portfolio. To give you some perspective around that?

Nicholas Patrick Thillman: That is 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—so it seems that there is a little bit more structural vacancy. I look at, like, your DC portfolio, for example, is around 25% of your vacancy in your operating portfolio. How should we think about how a lease percentage can move given there is still some select pockets that they could see and then some of your weaker markets overall?

Brent Smith: Nick, yeah. That is 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 above the parking garage, etcetera. But in our, for instance, our Galleria project, the environment is so unique that we continue to feel that we are 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 vacant deals for the portfolio. We have a building in Boston that has been a little bit slower for absorption at 25 Mall.

And DC 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 have alluded to, continues to be very well received in the marketplace and will continue to drive absorption there. So if we take that aggregate perspective, we are guiding 89.5% to 90.5% leased this year. George and I see no reason why we cannot take the entire portfolio upwards of 91%, 92% leased, which is where we were prior to the pandemic.

And frankly, I am of the belief that if 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.

Brent Smith: But our product is uniquely positioned, been amenitized, well located, and its price point is very compelling. And that continues to drive both large and small users to our project.

Nicholas Patrick Thillman: Well, I appreciate the commentary, Brent. And then maybe just the final one for Chris on just overall transaction activity. What you guys are targeting for disposition of what type of product you would like exit in 2026 and maybe how the bidder pool on select assets has changed over the last couple of months.

Brent Smith: Nick, yeah, this is Brent. Chris is a little bit under the weather, so I am 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. Other than—on the disposition bucket, we did note we had a building in DC that we took and 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 are going to continue to hold on to that for the near term.

We do consider our Houston assets noncore, and we will continue to look to monetize those, as well as if we conclude the New York City lease—60 Broad—that would be a candidate to monetize a part of that asset here towards the back half of the year as well. Again, our guidance does not contemplate any of those potential dispositions, land sales or otherwise, and we will update accordingly. But we do see that opportunity to rotate some capital in the second half of the year.

Nicholas Patrick Thillman: Very helpful. That is it for me. Thank you all.

Operator: Thank you. Our next question is coming from Dylan Robert Burzinski with Green Street. Your line is live. Hi, guys. Thanks for taking the question. Maybe just touching on the demand environment. Obviously, it is very robust across your 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 portfolio?

Christopher A. Kollme: Today?

Brent Smith: Good morning, Dylan. George here. Look. I think some of the characteristics that we have seen for the past—I would say—two 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 one that is driving our large deal flow. Also, the conviction around the workplace strategy. Right? I think we have heard it earlier that the number of Fortune 500 companies that are coming back with higher mandates or actually supporting those mandates is causing additional organic growth in our respective submarket.

I would say that, you know, 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 per three contractions, and we are seeing it from a financial services perspective as well as insurance, accountants, and law firms just across the board. I would add, too, to that, I think as we have talked about, our portfolio is uniquely positioned in that it has been renovated, amenitized, and is in 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 will not see any new assets until the end of the decade. So we are 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 have never relied on tech as an incremental lessor to provide a portion of our portfolio, and right now, given the softness in tech expansion and growth, we are not inhibited by that.

And we continue to see all those industries mature to grow and need quality office space, and that is going to help us push rental rates again this year meaningfully across the portfolio, but particularly in our Sunbelt markets.

Operator: I guess that is a good segue to my next question. I mean, how much do you think

Christopher A. Kollme: rents can grow across the Summit portfolio over the next, call it, one, two years? Are we talking

Nicholas Patrick Thillman: you know, upwards of

Christopher A. Kollme: essentially 20% rent growth on a cumulative basis? Just sort of curious how we should be thinking about that, given that backdrop you just described.

Brent Smith: Yeah. No. And I think, you know, 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 have also got a pretty incredible mark-to-market. Yes, we have continued to push rental rates, in some cases, 20% in 2025 alone. But all of those leases we did in 2023 and 2024, which was approaching almost 4,500,000 square feet, are at rates that are now 20%–25% below current signed rents in our projects, so we think there is a meaningful mark-to-market in that Sunbelt, particularly at 20% to 40%.

And then just where we see rents going today with new construction costs—rents at $70–$80 gross in many of our markets now—and in-place rents in our projects anywhere from $45 to $60 gross, we think there is still a meaningful 25% movement in our own rental rates here over the next year, given it is very tight at the trophy level and new development continues to increase in cost. So we think those three 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.

Operator: That is helpful. Ditto. Thanks so much, Brent.

Laura Moon: Thank you.

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

Nicholas Patrick Thillman: I want to thank

Brent Smith: everyone who joined us today on the call. But I also particularly want to thank my fellow Piedmont Office Realty Trust, Inc. employees for an outstanding 2025 execution and really over the last five years to reposition, rebrand, and reinvent Piedmont Office Realty Trust, Inc. into the machine, the road machine that it is today. It sets us up for 2026 and beyond. For those investors who would like to meet with us and talk with management, we will be at the Citigroup Conference in Hollywood, Florida, March 2 through 4. And I want to wish everyone a Happy Valentine’s Day. Actually, Valentine’s Day is the week we have the most engagement on portfolio.

We will show our clients the love, if you will. I hope everyone has an enjoyable week ahead. Thank you, and have a good day.

Operator: 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.

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