Piedmont Realty Trust Q2 Earnings Call Highlights

Key Points

• Piedmont raised its 2026 outlook for the second consecutive quarter, increasing Core FFO guidance to $1.50–$1.55 per share and same-store cash and GAAP NOI growth guidance to 5%–8%. Second-quarter Core FFO rose to $0.38 per share, while same-store cash NOI increased 9%.
• Leasing momentum remained strong, with 460,000 square feet signed at a 14% cash rent increase and more than 32% on an accrual basis. Portfolio economic occupancy exceeded 80%, and signed but uncommenced leases represent roughly 570 basis points of future occupancy gains.
• Piedmont strengthened its balance sheet by refinancing and expanding a term loan to $400 million through 2031, leaving its $600 million credit line fully available. Management is prioritizing debt reduction and selective acquisitions, while dividend restoration is unlikely to be considered before 2027.

Piedmont Realty Trust NYSE: PDM raised its 2026 outlook for a second consecutive quarter after reporting higher leasing activity, rental rates and same-store cash net operating income in the second quarter.

Core funds from operations totaled $0.38 per diluted share, exceeding consensus by $0.01 and rising $0.02 from the prior-year quarter, according to Chief Financial Officer Sherry Rexroad. The company attributed the year-over-year gain primarily to higher rental rates and economic occupancy, partly offset by the sale of one project during the preceding 12 months. Second-quarter adjusted funds from operations were approximately $31 million.

The office landlord increased its full-year Core FFO guidance to $1.50 to $1.55 per diluted share. The midpoint represents an increase of $0.025 per share from its original 2026 outlook and implies earnings growth of more than 8%, Rexroad said. Piedmont also raised its guidance range for cash and GAAP same-store NOI growth to 5% to 8%, a 200-basis-point increase from its original forecast.

Leasing Activity and Rent Growth

President and Chief Executive Officer Brent Smith said Piedmont signed 460,000 square feet of leases during the quarter, including rent increases of 14% on a cash basis and more than 32% on an accrual basis. Over the last four quarters, cash rental-rate growth has averaged 12%, he said.

Co-Chief Operating Officer George Wells said the company completed 42 transactions totaling about 460,000 square feet, with new business accounting for slightly more than half of the volume. The average new lease was approximately 11,000 square feet and carried a weighted average term of about 11 years.

For the ninth consecutive quarter, expansions exceeded contractions, Wells said. The company completed nine expansions totaling 22,000 square feet and reported no contractions during the period.

• Weighted average starting cash rent rose 5% sequentially to $43.79 per square foot.
• Leasing capital spending was $5.83 per square foot per year, compared with a trailing-12-month average of $5.97.
• Net effective rent increased to $25.56 per square foot, more than 20% above the prior trailing-12-month average.
• Second-quarter same-store cash NOI growth was 9%, while first-half cash same-store NOI growth was 10%.

Smith said Piedmont has renovated 90% of its portfolio since 2020 and that its properties are leasing at record-high rental rates. He added that the company’s rents remain 35% to 40% below new-construction pricing, which he said provides room for additional increases.

Economic occupancy in the in-service portfolio exceeded 80%, while the broader portfolio was approaching 90% leased as of June 30. Piedmont had executed leases not yet commenced representing about $39 million in annualized cash rents, equivalent to roughly 570 basis points of occupancy that is expected to flow into earnings over the coming quarters.

Market-Level Leasing

Wells highlighted leasing activity in Northern Virginia, Atlanta and Dallas. In Northern Virginia’s RB Corridor, Piedmont signed its largest new lease of the quarter: a 12-year, 73,000-square-foot agreement with a defense contractor at 4250 North Fairfax. The lease is expected to begin once the space is built, with annualized net effective rent of $27 per square foot.

Atlanta was Piedmont’s most active market, with 11 deals covering 130,000 square feet. The company signed a 57,000-square-foot, 15-year lease at 1155 Perimeter Center West that preemptively backfilled a large portion of Broadcom’s space.

In Dallas, the company completed eight deals totaling 107,000 square feet. An 11-year extension with Epsilon drove much of that volume and produced a 42% cash rent roll-up, Wells said. Piedmont has raised asking net rent at Galleria Towers to $50 per square foot, up 40% from two years earlier when renovations were completed.

At 60 Broad in New York, Piedmont said the city is progressing through internal reviews and a public-hearing process required for a renewal covering substantially all of the space. Smith said the transaction is now expected to be completed in the fourth quarter. The company said the holdover status is not expected to materially affect 2026 earnings.

Piedmont’s redevelopment portfolio was 83% leased at quarter-end, up from 76% in the prior quarter. The company returned 222 Orange Avenue to service and expects the remaining out-of-service portfolio to stabilize around the end of 2026.

Balance Sheet and Capital Allocation

Piedmont refinanced a term loan scheduled to mature in January 2027. The company increased the principal balance to $400 million from $325 million, extended maturity to May 2031 and reduced the spread by 15 basis points. Net proceeds from the increased borrowing were used to repay the balance on its credit line, leaving the company with its full $600 million line capacity and approximately $17 million in cash as of June 30.

Rexroad said Piedmont has no debt maturities until 2028 and its weighted average cost of debt declined to 5.5%. She expects net debt to EBITDA to fall below 7 times by year-end as leases commence, with an intermediate goal of roughly 6.5 times in the 2027-to-2028 period and a longer-term target closer to 6 times.

Smith said the company’s near-term capital allocation priority is debt reduction, including potential repurchases of its 9.25% bonds. He said stock repurchases are not currently a priority and that the company sees more attractive opportunities in acquisitions and debt reduction. The board would likely evaluate restoring the dividend no earlier than 2027, he added.

Investment Activity and Outlook

Executive Vice President of Investments Chris Kollme said the office transaction market is improving, although institutional buyers remain limited and many deals are being awarded to local operators, family offices and private capital. Piedmont is targeting opportunities in existing markets that are accretive to earnings and support its growth strategy.

The company’s Royal Lane land parcel in Dallas remains under contract and is expected to generate approximately $12 million in net proceeds if it closes in the third quarter. A separate Orlando land sale is progressing through rezoning and is expected to close around mid-2027.

Piedmont continues to evaluate sales of mature or non-core properties and said it intends to prioritize high-return leasing capital, balance-sheet flexibility and acquisitions that improve portfolio quality. Smith said the company is particularly focused on Dallas and Northern Virginia and is seeking well-located, older properties that are generally 70% to 80% leased and can be repositioned through Piedmont’s operating strategy.

Looking ahead, Wells said the company had more than 700,000 square feet in the legal stage for the third quarter and approximately 2 million square feet of outstanding proposals. Piedmont expects total 2026 leasing volume to reach the high end of its previously issued range, or about 2 million square feet.

About Piedmont Realty Trust (NYSE:PDM)

Piedmont Realty Trust is a real estate investment trust (REIT) headquartered in Atlanta, Georgia, that focuses on the ownership, acquisition and management of office properties. The company's portfolio comprises a mix of multi-tenant and single-tenant buildings, with a particular emphasis on small- to mid-size office campuses and urban infill properties. Piedmont Realty Trust structures its leases and property services to support a diversified base of tenants, including professional services firms, government agencies and technology companies.

The company's operating model combines property management, leasing and strategic capital allocation to enhance asset value and drive income stability.

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