Piedmont Office Realty Trust, Inc. (NYSE:PDM) Q2 2025 Earnings Call Transcript

Piedmont Office Realty Trust, Inc. (NYSE:PDM) Q2 2025 Earnings Call Transcript July 29, 2025

Operator: Greetings, and welcome to the Piedmont Realty Trust, Inc. Second Quarter 2025 Earnings Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to your host, Laura Moon, Chief Accounting Officer for Piedmont Realty Trust. Moon, the floor is yours.

Laura P. Moon: Thank you, operator, and good morning, everyone. We appreciate you joining us today for Piedmont’s Second Quarter 2025 Earnings Conference Call. Last night, we filed our 10-Q and an 8-K that includes our earnings release and unaudited supplemental information for the second 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 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 of 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 earnings release and supplemental financial information, which were filed last night. At this time, our President and Chief Executive Officer, Brent Smith, will provide some opening comments regarding second quarter 2025 operating results. Brent?

Christopher Brent Smith: Thanks, Laura. Good morning, and thank you for joining us today as we review our second quarter 2025 results. In addition to Laura, on the line with me this morning are George Wells, our Chief Operating Officer; 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 delve into the quarter, I want to highlight 3 macro trends that bolsters growth for Piedmont in the near term. One, the flight to quality means that demand for the best office buildings is accelerating and Piedmont is well positioned having invested to create a modern work environment at every asset; two, large tenants are making more leasing commitments, driving meaningful absorption at the top end of the market.

Three, given the lack of new office construction for the foreseeable future, today’s differentiated buildings have a long runway for meaningful rental rate growth. Now getting back to the quarter. We were very pleased with our leasing success, totaling 712,000 square feet and bringing total year- to-date leasing to over 1 million square feet. Importantly, approximately 2/3 of our Q2 activity related to new tenant leases, marking the most new tenant leasing we’ve executed in a single quarter since 2018. Further, the new activity included numerous full floor or greater leases, which will meaningfully backfill several blocks of space in the portfolio, including at 3 Galleria tower in Dallas and are currently out of service Minneapolis portfolio as George will talk about more in a moment.

Our leasing success during the second quarter pushed our in-service lease percentage as of the end of the quarter, up 140 basis points year-over-year to 88.7%. Tracking well to our year-end goal of 89% to 90% leased. While not reflected in our lease percentage, our out-of-service portfolio comprised of two projects in Minneapolis and one in Orlando, is also performing extremely well as differentiated amenitized workplaces continue to garner the majority of leasing in the market. At the end of the second quarter, the out-of-service portfolio stood at over 30% leased, but is approaching 60% leased based on the activity in July. We anticipate these assets will reach stabilization by the end of next year. In addition to the overall volume, second quarter leasing also resulted in favorable economics with rental rates for space vacant less than a year, reflecting just over 7% and almost 14% roll-ups on a cash and accrual basis, respectively.

As JLL Research noted this quarter, rents for trophy offices and new construction are reaching new highs. Asking rents for developments have grown by 27% year-over-year and stand at $92 a square foot, the highest on record by a substantial margin. We believe the underlying effects of high interest rates, cumulative inflation on labor and materials, potential tariff impacts will continue to diminish new office supply and push construction costs higher and by extension, the required rents for new buildings, providing Piedmont with more runway to materially increase our rental rates across the portfolio. Leasing momentum remains strong, including over 300,000 square feet of leases signed during July and the pipeline remains robust with another approximately 300,000 square feet currently in late-stage documentation.

Demand for our buildings from full floor and larger tenants is particularly evident in Minneapolis and our Sunbelt markets with 10 transactions for a full floor grader increasing our backlog of annual revenue from leases yet to commence or in their free rent period to $71 million, with the gap between lease percentage and economic lease percentage or cash-paying tenants remaining at a historically wide 10%. We anticipate roughly 80% to 90% of this revenue to commence by the end of 2026. From a macro level, JLL research reports that although overall volume for the second quarter was essentially flat as compared to the first, active space requirements grew 5.8%, reflecting the highest level of demand since 2021, and national occupancy held relatively firm during the second quarter as a modest amount of negative absorption was recorded.

However, in contrast, Piedmont observed positive absorption in four of our operating markets. To my point earlier, on construction costs, overall inventory remained flat in the second quarter with only 1 million square feet of new projects breaking ground across the country and projected conversions and demolitions expected to exceed new deliveries this year. Given all of this activity, we are bullish about our leasing prospects and as I noted before, are increasing our annual leasing guidance for the second time this year to a range of 2.2 million to 2.4 million square feet, which reflects an increase of more than 800,000 square feet compared to our original 2025 guidance that was established at the beginning of the year. It is important to note, however, that the majority of this new leasing is expected to benefit earnings in 2026 and beyond.

Sherry will touch on our bond repurchases that occurred during the quarter in her prepared remarks, but before I hand over the call to George, I want to quickly call your attention to our recent rebranding, including a new website. There are a lot of exciting things happening at Piedmont, and I hope you take a moment to examine for yourself the unique placemaking environments we’ve cultivated at each of our assets. With that, I now hand the call over to George, who will go into more details on the leasing pipeline and second quarter operational results.

George M. Wells: Thanks, Brent. Our local operational teams were exceptionally productive this summer, capitalizing on elevated demand for Piedmont’s well-located hospitality-inspired workplace environments. During the second quarter, we completed 57 lease transactions for 700,000 square feet and well above our historical average. New deal activity accounted for the bulk of that volume reaching 470,000 square feet a regular amount not seen since 2018. As recently highlighted, we’ve seen a spike in large users with 7 full floor or larger new deals executed this quarter compared to 1 or 2 per quarter historically. A 1/3 of those new leases signed will generate GAAP revenue in the second half of 2025 with the remaining 2/3 positively impacting the first half of 2026.

Our weighted average lease term for new deal activity stayed consistent at 10 years. Expansions exceeded contractions cumulatively over the past 4 quarters. Our trailing 12-month retention rate came in at 78%. As Brent mentioned, lease economics were solid with a 7.3% and 13.6% roll up or increase in rents for the quarter on a cash and accrual basis, respectively. Atlanta, Dallas and Minneapolis, each contributed meaningfully towards the positive roll-up numbers with an overall weighted average starting cash rent of $43 per square foot. We anticipate further rental rate growth as our portfolio approaches rent stabilization or crosses into the low 90s but also from a confluence of two market factors. Vacancy at the top end of the market is quite low and rates will justify new construction or reaching new records.

Leasing capital spend was slightly up at $6.73 per square foot per year this quarter when compared to a trailing 12 months, reflecting the fact that our quarterly volume was more heavily weighted towards new leasing this quarter. Net effective rents came in at approximately $20.78 per square foot, and sublet availability continues to hover around 5% with no near-term expirations for those spaces over the next 4 quarters. Dallas was our most productive market during the quarter, closing on 15 deals for over 200,000 square feet or 1/3 of the company’s overall volume with the new transactions accounting for 90% of that volume. Most notable was landing two large global companies for a combined 130,000 square feet at 3 Galleria Tower, which now stands at 94% leased and is asking $55 per square foot, the highest rents in its submarket.

Minneapolis was a remarkably close second, capturing 9 deals for 190,000 square feet. In addition to our previously disclosed 84,000 square foot new deal at 9320 Excelsior, our team completed 2 new full or larger headquarter transactions at Meridian. The Piedmont redevelopment strategy underway at Meridian and Excelsior is generating net interest with another 180,000 square feet executed in July or in a legal stage. Asking rates are now approaching $40 per square foot, up 10% from the pre-redevelopment phase from just a couple of months ago and the highest within its submarkets. Orlando was quite active as well with 8 deals for 175,000 square feet. The key story here was retaining 125,000 square feet of 2026 expirations and achieving record high rental rates for both our downtown and suburban assets.

I would like to thank our Orlando team for winning BOMA’s renovated TOBY Award at the international level, quite a Herculean feat. Another international bonding in the 250,000 to 500,000 square foot category was awarded to our 25 Mall Road asset in Boston. Congratulations to both of our teams. Atlanta racked up 19 deals for 110,000 square feet, including new activity in all 3 of our operating submarkets. Central Perimeter fundamentals were our Glenridge Highlands and 1155 assets set are improving as several obsolete office buildings have been demolished. Sublet availability has declined and recent out-of-state corporate relocations like Mercedes, StubHub and TriNet have reinforced the attractiveness of this most centrally located submarket in the city.

Coming back to the overall portfolio and to reiterate what Brent said, we are bullish about our near-term leasing prospects. Our leasing pipeline is strong with over 300,000 square feet in late-stage activity, including several single floor or larger deals and mostly for vacantly current space. Outstanding proposal stand at a healthy 2.2 million square feet for both our operating and out-of-service portfolios. Our supplemental report shows a manageable 4.2% of our total square footage expiring in 2025. Assuming a stable macro environment, we remain comfortable in achieving our previously released year-end lease percentage guidance of 89% to 90% for our operating portfolio. Our out-of-service portfolio, which is projected to meaningfully contribute towards 2026 FFO growth, solid lease percentage by 220 basis points in the second quarter and based on what we’re seeing in the early and late stage activity, we project this portfolio to reach 80% by year-end.

I’ll now turn the call over to Chris Kollme for any comments on investment activity. Chris?

Christopher A. Kollme: Thanks, George. I’ll just provide a brief update. The transactions market continues to be challenging amid ongoing economic uncertainty. Despite the difficult backdrop, we remain in dialogue with potential buyers of select noncore assets and continue to see a modest increase in groups evaluating the office sector for investment. As we alluded to on last quarter’s call, we did dispose of one small noncore project up in suburban Boston during the second quarter, which resulted in gross proceeds of approximately $30 million. This asset located in Boxborough, has been on our disposition list for some time and the decision to sell it is entirely consistent with the portfolio pruning we have completed over the past couple of years.

We will continue to do so, and we do have a few other small assets in the market, but it is too early to comment on specifics or speculate on timing. On the acquisitions front, we remain highly engaged in each of our key markets and continue to think creatively about ways to leverage our operating platform while conserving our capital resources. With that, I’ll pass it over to Sherry to cover our financial results.

Sherry L. Rexroad: 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 second quarter of 2025 was $0.36 versus $0.37 per diluted share for the second quarter of 2024, with a $0.01 decrease attributable to higher net interest expense as a result of refinancing activity completed over the past 12 months. Growth in operations due to higher economic occupancy and rental rate growth was offset by the sale of three nonstrategic projects and downtime associated with the expiration of certain leases over the last 12 months.

I would reiterate that we anticipate the lease with Travel & Leisure in Orlando will commence in the fourth quarter of this year and provide approximately $5.7 million of additional annualized rent. AFFO generated during the second quarter of 2025 was approximately $16 million. Turning to the balance sheet. During the second quarter, we utilized the proceeds from the small disposition that Chris mentioned as well as our line of credit to repurchase approximately $68 million of our 9.25% bonds. As a result of these repurchases, we recognized a $7.5 million loss on early extinguishment of debt, which is included in our second quarter results. However, the repurchase is expected to result in total interest savings of $7.5 million or $2.5 million on an annual basis over the next 3 years.

While this is certainly an opportunistic strategy and highly dependent on market conditions, we will continue to think creatively about ways to refinance these higher interest rate bonds that are currently scheduled to mature in 2028. As we’ve highlighted before, we currently have no final debt maturities until 2028 and approximately $450 million of availability under our revolving line of credit. Based on the current forward yield curve, we expect all of our unsecured debt maturing for the remainder of this decade will be refinanced at lower interest rates and thus be a tailwind to our FFO per share growth. At this time, I’d like to affirm our 2025 annual core FFO guidance in the range of $1.38 to $1.44 per diluted share with no material changes to our previously published assumptions other than the increase to our anticipated annual executed leasing goal to $2.2 million to $2.4 million that Brent mentioned.

Please refer to Page 26 of the supplemental information filed last night for the details of major leases that have not yet commenced or are currently in abatement. As of June 30, 2025, the company had approximately 2 million square feet of executed leases yet to commence or under abatement, representing approximately $71 million of future additional annual cash rent, which consists of $28.6 million of leases yet to commence and $41.9 million of leases and abatement. This future cash flow is evidenced of the leasing success of the team and will fuel future earnings growth, although it does demand additional capital spend in the short term. Finally, I’d like to draw your attention to Page 25 of the supplemental, which includes new disclosure for the calculation of the portfolio’s net effective rents for the previous 5 quarters.

I’d highlight that Piedmont’s 5-quarter average is a gross rental rate of more than $46 per square foot with a net effective rent after CapEx of $21.83. We believe the current share price presents a compelling entry point for investors with Piedmont’s portfolio trading at roughly a $200 per square foot valuation while generating an implied yield on cost after CapEx of more than 10%. With that, I will turn the call over to Brent for closing comments.

Christopher Brent Smith: Thank you, George, Chris and Sherry. We continue to focus on designing, leasing and managing best-in-class work environment and believe that our recent leasing success is a testament to our strategy. The recent investments that we’ve made in our portfolio combined with our customer-centric place-making mindset continue to set us apart from the office sector. We will continue to be selective with capital deployment, concentrating our resources on driving lease percentage and increasing rental rates, which we believe will result in FFO and cash flow growth. With that, I will now ask the operator to provide our listeners with instructions on how they can submit their questions.

Q&A Session

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

Nicholas Patrick Thillman: Maybe, Brent, just high level, obviously, good success from a leasing standpoint. And just — it sounds as though the portfolio is going to start to stabilize here in 2026. And then I think you’ve outlined the plans to kind of resume a dividend in 2027. But taking a step back, as you look at the portfolio and just kind of how you’re positioned in your markets, I know there’s a big push to get to 60% of the Sunbelt. Like I guess, what are the longer-term goals for exposures within markets? And kind of how do you think this kind of plays out over the next 2 to 3 years?

Christopher Brent Smith: Thanks. I appreciate it, Nick. Sorry I just taking notes as you put the question out there. And thank you for joining us this morning. In terms of — yes, we have had an immense amount of leasing success and both in our in-service and out-of-service portfolios, and we anticipate both of those being approaching 90% leased here at the end of the year for the in-service and right behind is the out of service, which will probably be somewhere around maybe 80% or so. So that success has really been driven by the effort the teams put forth in terms of creating the right environment, investing in the assets and elevating our service. And that has been also aided by the fact that large tenants are back in the market.

So as we think about stabilization, I think we would agree with you that ’26 is a period in which we really will be turning our attention to growth and looking to continue to drive occupancy above 90% at that point. The dividend, as we’ve talked about, likely doesn’t come back on until 2027. But in the meantime, we’ll continue to fund very accretive leasing capital, which is generating returns of over 25%. And we’re seeing growth in all of our markets actually in terms of leasing velocity and absorption. Sunbelt, obviously performing extremely strong, but still seeing really good velocity and rental rate growth in Minneapolis and Northern Virginia now. New York has continued to perform strong. I’d say really the district in Boston are only two markets that continue to lag what is a very strong portfolio overall.

And we will continue to reposition and prune the portfolio with noncore assets and land sales more near term. And really try to continue to drive our exposure to the Sunbelt, which stands at about 70% today, upwards of 80%. Obviously, there’s a couple of transactions in the north that we’ve talked about that would help aid that. Minneapolis is a market we’ve looked at Boston, and then we may continue to evaluate monetizing our New York asset. But overall, you will continue to see us focus on the Sunbelt market and likely to prune modestly near term and continue to rotate the Sunbelt.

Nicholas Patrick Thillman: No, that’s very helpful. And then maybe, George, just wanted to touch on some of the larger pending vacancies and kind of the activity you’re seeing and then also the progress on the New York City lease as well. So maybe you have the Piper space in the U.S. building in Minneapolis, the City of New York and then also maybe talk about the Upsilon building in Dallas and kind of activity there. I guess we could make it the last one, two, as well on 999 Peachtree Street space as well, but those 4 spaces in particular.

George M. Wells: Certainly Nick, I would say that when you look at our overall pipeline and where that activity is coming from, that’s where we feel pretty confident about backfilling some of those large blocks of space. I mean overall, right now, we’ve got about — in the early stage, we’ve got about 2.2 million square feet of outstanding proposals, 65% is for new activity. And when you look at that activity, 55% of that for new space is actually going into Atlanta. And that kind of addresses one of the large expirations that we have in early 2026, which is Eversheds. So we’ve got about 9 deals today for that particular project, which would backfill all of that. Now we’re not suggesting that every one of the deals we’re chasing will backfill the right away, but the fact of the matter is we’re getting a lot of — a lot of deal flow in that particular project.

And the nice part about it is that the roll-ups are going to be pretty strong once we have a chance to ink those transactions that we’re chasing. Heading to Dallas, I mentioned Eversheds expanding again in the second quarter of 2026. That’s gaining about 20% of our overall new deal activity there. So it’s quite active. We’ve got about 2, 3 deals for about 50,000 to 75,000 square feet. And again, once we execute on those transactions, we’ll see some roll-ups there in that particular project for around 15%.

Christopher Brent Smith: Sorry to interrupt there, George. [indiscernible] Epsilon, not Eversheds related to Dallas. Excuse me. Thank you. Go ahead both in 2026.

George M. Wells: But coming closer to Piper, we — in Minneapolis, we’re getting about 10% of our roll-up new activity into Minneapolis. There’s just a lot of excitement up there with all the things we’re doing with our renovations. So Piper does have about 120,000 square feet expiring at the end of the fourth quarter at our downtown asset, but we’ve got some good news. We hope we can announce here the next few weeks to backfill about 30% of that. And we have other deal activity there as well. So we’re pretty pleased with that. But kind of pulling back a little bit, one of the other factors I want to mention is that the size of transactions that we’re seeing continue to be many full floor larger deals. In fact, we’ve got about 15 of those proposals outstanding for about 25,000 square feet or more, which aggregates to about 800,000 square feet.

So it’s just that kind of activity that gives us the confidence to see the momentum go beyond the second and third quarter of this year.

Christopher Brent Smith: And I would add to that, too, in terms of the Piper space, that building is coming — renovation is completing this month which is really exciting, already the best asset in terms of amenities in downtown Minneapolis and only getting better. And then to pick up, we’re towards left off in New York City. We are expecting and wrapping up a lease towards the end of the year as we continue to share and would expect that again to be a renewal for substantially all the space and a long term in nature. So we’ll provide more details as that likely gets closer to execution again, potentially around the time of the third quarter’s earnings call, but more likely towards the end of the year from a timing perspective.

Operator: Our next question is coming from Ray Zhong with JPMorgan.

Zhuorui Zhong: I have two questions. First one on the guidance. You guys opportunistically bought back some debt and it seems like the core is running stronger than expected. We’ve revised up on the leasing side. Just curious what were there any offsets that we should be thinking about in terms of the guidance, like because at bottom line, it was not revised up. So any thoughts there would be helpful or maybe just conservatism?

Sherry L. Rexroad: Ray, thanks you for being on the call. I appreciate your question. On the debt buyback, as we noted in the press release, it’s about $0.02 per year on an annualized basis of accretiveness. That is offset primarily by the asset sale, which is about $0.02 as well. In regards to the leasing strength, most of that will translate into growth in 2026 and beyond. The new leases that we signed today aren’t really going to hit our income statement until 2026.

Christopher Brent Smith: And I would just add to that, too, we have seen, as noted, we continue to increase our guidance for lease percentage, 800,000 square feet for the year, and that has been driven a lot by large tenant activity in our out-of-service portfolio as well. So that’s something to note. It doesn’t get captured immediately in the guidance per se, but setting up again for additional growth in ’26.

Zhuorui Zhong: And my second question is then on capital allocation. You guys mentioned as you soon to wrap up the New York City lease, that’s on the deck to be another one to tap in terms of source of funding. Maybe first, can you give us some insights on how you think about the buyer group and potential outcomes dependent on that in terms of pricing? And then on the redeployment side, how should we think about it core value add or I don’t know, we will consider debt. Any color on those and maybe targeted cap rates or IRR? Any color on that side would be helpful as well.

Christopher Brent Smith: Yes, Ray, as we continue to execute on leasing across the portfolio and really see activity come back in all our markets, it is starting to improve the overall sales and transactions market, just giving investors the mindset to not assume that vacant space will remain vacant forever. And so we’re starting to see solidification, if that’s a word for pricing in the market, particularly for more core quality assets. We’re not seeing that kind of uplift, if you will, in other parts of the value-add and opportunistic spectrum. But certainly, capital started to come back into markets like New York, we’re seeing it in Dallas and continued kind of solidifying of high-quality asset valuations. And I think that also then gives us some expectation that if we continue to be patient, the overall sales market will continue to strengthen in our favor.

As we think about near-term dispositions, that’s really focused on some select noncore assets and land, looking to dispose of that operators of other uses, primarily retail and resi to augment our existing office that’s adjacent to our land. So we almost feel like we’re getting paid to amenitize. That will be expected dispositions, maybe one of those parcels this year, another larger parcel next year. And as we think about continuing to rotate capital, we will be focused on dispositions in our northern markets into the Sunbelt markets. That can span a wide range of cap rates in our Boston asset, which we just disposed of was in a low double-digit cap rate. But I would anticipate most of everything else in the portfolio, given that was our lowest quality asset, would price well tied to that.

And frankly, most of our assets should probably price somewhere towards an 8 cap or better. So I think that would give some indication as to what the average cap rate in the portfolio might be. Now we have some buildings in the north that we’ve talked about disposing of or monetizing and potentially looking at cashing in, if you will, a stake in the asset. And we’ll continue to evaluate those. Probably pricing we can still be in that 8 to 9 cap ZIP code. Right now, buyers we’re seeing in the market for core assets. We’re starting to see some foreign buyers come back into the market. Certainly, high net worth family offices have been in the market for some time. And we are seeing a little bit of institutional capital, particularly in, again, stronger markets like New York that have come back and continue to give us the belief that both financial buyers and real estate-minded buyers would be interested in that market at the right time when we look to monetize that asset.

So hopefully, that gives you some sense of the dispositions. In terms of redeployment of that capital, right now, we continue to look at primarily what I would consider core plus, less value add if it were to go on the balance sheet. Unfortunately, today, we don’t have a cost of capital that really affords us to execute on that right now. But we do also continue to look at more distressed opportunistic deals through a JV partnership structure, which would take advantage of that [indiscernible], something that we wouldn’t want to put on the balance sheet day 1, given it’s likely to have a lot of capital needs and/or vacancy as well. But it would be something that we’d eventually want to bring into the portfolio. And that would generate returns, call it, 18% IRRs levered or greater.

And in terms of what we were looking at on balance sheet, again, we don’t have a cost of capital to go after that, but probably something that would look like going in cap rates in the 8 to 9 ZIP code on a cash basis, better on a GAAP basis, a modest role profile, but an opportunity for us to do what we do best, which is to improve high-quality older vintage assets into modern, high- performing office buildings.

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

Dylan Robert Burzinski: Brent, I think you mentioned in your prepared remarks that 80% — 80% to 90% of the lease percentage gap should commence by year- end ’26. Are you able to share sort of what that looks like on a weighted average basis? Is most of that likely to commence in the first half of the year? Or is this all sort of back-end weighted?

Christopher Brent Smith: Dylan, it’s Brent. Thanks for grabbing or joining the call today. In terms of your question, the exactly as we’ve described, we’ll have at least 80%, 90% of that embedded $71 million commencing by the end of next year. There is a good chunk that’s going to start in the first quarter actually of — or call it, a little bit in the fourth quarter and a good chunk in the fourth quarter of next year, call it, maybe 40% or so between the fourth quarter of this year, the end of the fourth quarter really and then the first quarter next year. Then right now, there’s a little bit of a pause, and then we’ll pick back up with a good bit of it also coming back in towards the end of the third and the fourth quarters as well. So it’s almost like, I don’t know, like a smile, if you will, where it’s a little bit more front-end and back-end weighted with a little bit of a lull in the middle.

Dylan Robert Burzinski: Great. That’s helpful color. And then maybe if you can just provide details on what you think is sort of driving this reinvigoration of leasing activity, particularly amongst some of the larger tenants that you mentioned in your markets? And then I guess — is this sort of net new demand within those markets? Or is this sort of means to go shares where the tenant is moving out of an older — or looking to move out an older building and upgrade their physical space with a property that Piedmont owns?

George M. Wells: Dylan, this is George. It’s — when we look at the demand characteristics, we see that coming from 6 or 7 different areas. I mean, first of all, one of the largest users that we were able to sign this quarter who had actually building signage and had the building slightly refreshed decided to move to upgrade their overall office experience because the renovation that we were pursuing in Minneapolis is bringing a broader range of amenities and nicer finishes and bringing more of a hospitality. So upgrading the office experience is the first one. We’re seeing a lot of continued RTO mandates being reinforced and being expanded. As I mentioned in my prerecorded remarks, we had a net 26 expansions for 80,000 square feet, but let me blow that up a little bit more.

It was actually 39 expansions versus 13 contractions. So that’s been really helpful. Larger users are gaining greater conviction in terms of the workplace strategy. I think a lot of that probably has a lot to do with — we’ve experimented with this hybrid work environment for a long time. And I think there’s been more bias to come back to the office. And I also think the balance between employers and employees is beginning to tip back into the favor of the employer. I would say office conversions and demolitions, those are certainly heating up and speeding up, and that’s allowing us to take a look at those users that have to be kicked out of those particular projects. We’ve seen that in Atlanta as well as New York, and we’re starting to see that in Nova as well.

And then the transition to a special servicer, right? We had a large user that we signed lease again in Minneapolis, who was in a park, very nice park with a lot of amenities, but the capital structure was pretty broken. And they didn’t want to live through that transition to a special servicer. So when you put all that together, that’s what’s allowing us to continue to see the momentum, and we continue to be open-minded in terms of landing large deals for longer-term leases. I’d also add, we continue to see really small tenants have continually been in the market, but large tenants, they put that space on pause really trying to figure out the environment. And now as we’ve seen them come back into the market, it has created a little bit of a pickup of demand because those best buildings we’ve talked about, that’s 5 or 10 assets, there’s not a lot of large blocks that are 50,000 square feet or greater in those buildings.

And so I think user groups, particularly large users that have impending expirations, know they need to go to make a decision and if they want quality space sooner rather than later. And that has also put, I think, a little bit more emphasis to the decision-making for large users. I would continue to say that overall, the portfolio, we did 700,000 square feet of leasing this quarter, roughly 470,000 of that was new. And what was interesting about that is predominant new, but a lot of that was for, let me call it for unoccupied space, 25% was actually for occupied, but the remaining of that 470,000 was split between the out-of-service portfolio and the operational portfolio. So we’ve continued to see a lot of leasing in all of our areas of the business, not all of it shows up in the same reporting mechanism.

But I think that just overlays the reason why we haven’t changed our lease percentage guidance for 2025 despite all this leasing because it is going into some buckets that are not necessarily captured in that in-service number. In terms of the final point on is this net new demand, I would say, overall, it’s mostly in market. Dallas is the one market where we continue to see, and we’ve talked about on our prior earnings call, Atlanta has still some, but Dallas continues the momentum really over the last 3 years in terms of inbound migration, both from larger users, but even smaller ancillary companies, and we’ve been the beneficiaries of that primarily in that market. Otherwise, this is us just continuing to capture more than our fair share of the overall market because of the quality of our assets, the service and the environments we’re creating.

Operator: Thank you. Ladies and gentlemen, as we have reached the end of our question-and-answer session, I would like to turn the call back over to Mr. Smith for any closing remarks.

Christopher Brent Smith: I want to thank everyone for joining us today. Hopefully, it’s come through that we are extremely positive and excited about our track record of leasing and operational growth more recently, but really consistently post the pandemic. And I think it’s really starting to show through in terms of the quality of assets and the positioning of our platform for future growth. I’d encourage investors if you’re still trying to understand the Piedmont story and our success and what makes up our secret sauce, come to Atlanta, spend some time with management, we can show you $1.4 billion of assets in about 2 hours. And if you’ve got other time, we’d love to host you in Dallas or Minneapolis or any market that you happen to be traveling to.

I’d also encourage investors we’ll be at NAREIT in Dallas in December. I know that’s a ways out, but we will be having a tour of our Galleria Dallas asset on that event. And if you’re interested in joining, please let Sherry or Jennifer know. Again, thanks, everyone, for joining. Have a good week.

Operator: Thank you, ladies and gentlemen. This concludes today’s conference, and you may disconnect your lines at this time, and we thank you for your participation.