Piedmont Realty Trust, Inc. Q4 FY2024 earnings call

• In 2024, Piedmont achieved significant leasing success with 2.4 million square feet of total leasing, the most since 2015, and cash basis same-story NOI grew by 2.6%.
• Over 1 million square feet of 2024 leasing was new tenant leases, resulting in a year-end lease percentage of 88.4%. Leases executed in 2024 had strong rental rate growth (approx. 12% cash basis, almost 20% accrual basis).
• National office transactional activity improved 29% year-over-year. Piedmont completed a $400 million bond offering in June with an improved credit spread. It also disposed of two properties generating approximately $77 million of gross proceeds.
• Core FFO per diluted share for 2024 was $1.49. Fourth quarter AFFO was approximately $28 million. Year-end liquidity included full capacity on the $600 million revolving line of credit and approx. $110 million in cash and cash equivalents. The $200 million syndicated bank term facility was amended to increase capacity by $125 million and extend the final maturity to 2028.

In 2024, Piedmont completed 2.4 million square feet of total leasing, the highest annual leasing since 2015. Cash basis same-story NOI grew by 2.6%. In the fourth quarter, 45 lease transactions totaling 433,000 square feet were completed. Dallas was the most active segment, closing 16 deals for 225,000 square feet (52% of the company’s overall volume). The lease percentage ended at 88.4%. For the quarter, lease economics were strong with an 11.5% cash basis and 14.7% accrual basis roll-up in rents.

• 2025 core FFO guidance is in the range of $1.38 to $1.44 per diluted share.
• Anticipates executed leasing for 2025 to be approximately 1.4 million to 1.6 million square feet, resulting in a year-end leased percentage for the in-service portfolio of approximately 89% to 90%.
• Same-store NOI is expected to be flat to a 3% increase on both cash and accrual basis.
• Net interest expense is projected to be approximately $127 million to $129 million. General and administrative expense is estimated at approximately $30 million to $32 million.
• Quarterly results are expected to improve in the second half of 2025 as the backlog of newly executed leases commences.

• Uncertainties in the office market such as economic uncertainty.
• Potential impacts of federal government policy changes on corporate decision-making.
• Differences in sub-market performance across the portfolio, with some sub-markets being more sluggish than others.

Q: Anthony Paolone with JPMorgan asked about the leasing pipeline.

A: George Wells responded that in 2024 Piedmont completed 2.4 million square feet of leasing, and for 2025, the new deal projection is around 800,000 square feet after adjusting for a large deal from 2024. The pipeline has 300,000 square feet in late-stage activity, and there is 2.6 million square feet in proposals. Activity is seen from insurance, law, accounting, engineering firms, and some technology sector.

Q: Nick Thillman with Baird inquired about the leasing percentage and new leasing.

A: Brent Smith and George Wells responded that the 2025 lease percentage is expected to be 89% - 90%, including expected renewals in New York City, and they feel confident about backfilling known vacates.

Q: Dylan Burzinski with Green Street asked about net effective rent growth and 2026 prospects.

A: Brent Smith responded that Sunbelt markets have a great runway for net effective rent growth, while Suburban Boston and Minneapolis are more sluggish but still have positive growth, and 2026 is expected to see continued growth with backfilled vacates and improved occupancy.