Skip to content
    PDM
    Earnings call· Jun 2026(Q2 FY26)

    Piedmont Realty Trust Q2 FY26 earnings call PDM

    Jul 29, 2026 Source

    Executive summary

    Piedmont Realty Trust, Inc. Q2 FY26 — Strong Operational Performance and Raised Outlook

    Piedmont Realty Trust delivered a strong quarter, driven by robust leasing activity and significant rental rate growth across its high-quality office portfolio. The company raised its full-year FFO and same-store NOI guidance, reflecting improved operating metrics and a tightening market for premium office space. Management is focused on converting the substantial leasing pipeline into cash flow, optimizing the portfolio, and deleveraging the balance sheet, with a long-term target to reduce net debt-to-EBITDA to 6x.

    Highlights

    5

    • Core FFO per diluted share was $0.38, beating consensus by $0.01 and up $0.02 YoY.

    • Signed 460,000 square feet of leasing with cash rental rate increases of 14% and accrual increases of 32%.

    • Achieved 9% same-store cash NOI growth.

    • Economic occupancy reached over 80% for the in-service portfolio.

    • Successfully refinanced a term loan, increasing principal to $400 million and extending maturity to May 2031.

    Concerns

    3

    • The New York City lease renewal process for 60 Broad is delayed and not expected to conclude until Q4 FY26.

    • The Orlando land parcel disposition is delayed, now expected to close mid-2027 due to rezoning.

    • Excess cash flow for the year is expected to be "choppy" due to ongoing construction spend.

    Guidance & targets

    8
    CategoryTargetConfidence
    Annual Core FFO per diluted share
    $1.50 to $1.55
    high materiality
    High
    Annual Same-store NOI (cash and GAAP)
    5% to 8%
    high materiality
    High
    Net Debt-to-EBITDA ratio
    below 7x
    medium materiality
    High
    Net Debt-to-EBITDA ratio
    closer to 6.5x
    medium materiality
    Medium
    Net Debt-to-EBITDA ratio
    closer to 6x
    medium materiality
    Low
    Leased-to-commenced occupancy spread
    approximately 400 basis points
    low materiality
    High
    Overall lease volume
    high end of range or 2 million square feet
    low materiality
    Medium
    Out-of-service portfolio stabilization
    around the end of 2026
    low materiality
    High

    Segment performance

    3
    SegmentRevenueYoYQoQMargin
    Northern Virginia
    Experiencing an uptick in demand, particularly from the defense sector. Assets are well-located, highly amenitized, walkable, and adjacent to metro rail stations.
    73,000 sq ft new deal with defense contractor at 4250 North Fairfax12-year lease term for defense contractor dealAnnualized NER of $27 per sq ft for defense contractor deal80% leased portfolioProjecting strong net positive occupancy and FFO growth over the near term
    		————
    Atlanta
    Most active market with deals across Central Perimeter, Cumberland, and Midtown submarkets. Strong customer interest in remaining Central Perimeter space.
    11 deals for 130,000 sq ftMajority new business57,000 sq ft 15-year new lease at 1155 Perimeter Center West (preemptively backfilling Broadcom space)
    		————
    Dallas
    Strong deal flow driven by Epsilon extension. Dallas Maverick's planned multibillion-dollar arena development near Galleria project expected to elevate desirability and drive future earnings growth for Galleria Towers.
    8 deals for 107,000 sq ftEpsilon's 11-year extension yielded 42% cash roll-upGalleria Towers asking net rent $50 per sq ftGalleria Towers asking net rent up 40% from 2 years agoGalleria Towers is a 1.4 million sq ft asset
    		————

    Operational metrics

    47
    Core FFO per diluted share
    $0.38up $0.02 YoY
    Q2 FY26

    Beat consensus by $0.01.

    AFFO
    $31 million
    Q2 FY26

    Management notes this does not deduct all CapEx, so actual free cash flow is lower.

    Weighted average cost of debt
    5.5%decreasing
    Q2 FY26

    Overall weighted average cost of debt continues to decrease.

    Leasing volume
    460,000
    Q2 FY26

    42 transactions completed.

    Cash rental rate increase (on leasing)
    14%
    Q2 FY26

    For space vacated 1 year or less.

    Accrual rental rate increase (on leasing)
    32%
    Q2 FY26

    For space vacated 1 year or less.

    Average rental rate increase (cash basis)
    12%
    LTM

    Representative of rental mark-to-market and embedded growth.

    Average net effective rent after CapEx
    $25up >20% over prior 12-month average
    Q2 FY26

    Highest quarterly average in company's history, reaching mid-20s per sq ft.

    Rents vs new construction pricing
    35% to 40% below
    Q2 FY26

    Provides further runway to increase rental rates.

    Portfolio leased since pandemic
    over 80%
    since pandemic

    Vast majority of customers have rightsized and upgraded office space.

    Average tenant size
    just under 17,000
    Q2 FY26
    Client retention ratios
    above 60% to 70% historical average
    future

    Anticipate early renewal discussions to accelerate, bolstering retention.

    Earnings growth rate (Core FFO)
    over 8%vs original 2026 guidance midpoint
    FY26
    New business activity (leasing)
    slightly more than half
    Q2 FY26

    Expected to translate into 2027 GAAP rent recognition.

    Average new deal size
    approximately 11,000
    Q2 FY26

    Good mix of small, medium, and large clients.

    Weighted average lease term for new transactions
    approximately 11
    Q2 FY26

    Reflecting continued customer commitment to high-quality workplace environments.

    Expansions vs contractions
    exceeded
    9 consecutive quarters

    9 expansions for 22,000 sq ft with no contractions in Q2.

    Weighted average starting cash rent
    $43.79up 5% from $41.59 last quarter
    Q2 FY26
    Leasing capital spend
    $5.83in line with LTM average of $5.97
    Q2 FY26
    Net effective rents (NERs)
    $25.56up over 20% from prior 12-month average
    Q2 FY26
    Annualized NER (defense contractor deal)
    $27
    Q2 FY26
    Cash roll-up (Epsilon extension)
    42%
    Q2 FY26
    Asking net rent (Galleria Towers)
    $50up 40% from 2 years ago
    Q2 FY26
    Out-of-service lease percentage
    83%up from 76%
    Q2 FY26
    Leasing pipeline (legal stage)
    over 700,00,0
    Q3 FY26

    For Q3.

    Outstanding proposals
    approximately 2 millionholding steady
    Q2 FY26
    Operating portfolio expiring H2 FY26
    927,000
    H2 FY26
    Typical run rate of new transactions
    175,000
    per quarter

    Assumed for achieving guidance.

    Net sale proceeds (Royal Lane land parcel)
    $12 million
    Q3 FY26

    Expected from disposition.

    Term loan principal increase
    $400 millionfrom $325 million
    Q2 FY26
    Term loan spread tightening
    15
    Q2 FY26
    Available line of credit capacity
    $600 million
    Q2 FY26

    Full capacity available.

    Cash available
    $17 million
    Q2 FY26
    Debt maturities
    none until 2028
    future
    Maturity ladder
    roughly 20%
    2028 to 2033

    Very smooth.

    Portfolio size
    16 million
    Q2 FY26
    Gross asset value per square foot
    $220
    Q2 FY26

    Based on stock price and net effective rents of $25 per sq ft.

    Asset size (Galleria Towers Dallas)
    1.4 million
    Q2 FY26
    Historical capital recycling volume (pre-pandemic)
    $300 million to $400 million
    pre-pandemic annually
    FAD per share
    $0.24
    Q2 FY26
    Historical FAD per share low
    $0.13
    since Q4 2013
    Target acquisition going-in yield
    8.5% to 9.5%
    future

    For value-add acquisitions.

    Target acquisition stabilized yield
    well north of 10.5% into the 11s
    future

    Yield on cost.

    Target acquisition occupancy
    70% to 80%
    future
    Disposition cap rate range
    8% to 10%
    Q2 FY26

    For mature and/or non-core assets.

    Bond repurchase interest rate
    9.25%
    current

    Current rate on bonds targeted for repurchase.

    Refinance interest rate (hypothetical)
    around 6%
    current

    Hypothetical rate if 9.25% bonds were refinanced today.

    Industry KPIs

    5
    MetricValueDetails
    Occupancy rateover 80%%
    Same store noi growth9%%
    Leasing bookings volume signed460,000sq ft
    Ffo core ffo normalized ffo per share$0.38USD
    Lease renewal spread re leasing recapture14%%

    Orderbook & backlog

    3
    Executed pipeline of leases not commenced$39 millionJune 30

    Equivalent of 570 basis points of occupancy; will flow into earnings over next several quarters.

    Leasing pipeline in legal stageover 700,000 sq ftQ3 FY26

    For Q3; weighted towards renewals due to NYC lease, but otherwise balanced new/renewals.

    Outstanding proposalsapproximately 2 million sq ftQ2 FY26

    holding steady

    Deals & partnerships

    1
    LendersRefinanced existing term loan, increasing principal and extending maturity.$400 millionto May 2031

    Used net proceeds to pay off outstanding balance under line of credit, restoring full $600M capacity.

    Capital programs

    2
    Royal Lane Land Parcel Redevelopmentunder contract (disposition)

    Benefit: 20,000 sq ft of retail directly adjacent to Connection Drive assets

    Disposition expected to close Q3 FY26, generating $12M net sale proceeds. Planned development will benefit adjacent assets.

    Orlando Land Parcel Redevelopmentmoving forward (disposition)

    Benefit: Mixed-use project containing multifamily, over 40,000 sq ft of retail space, and several restaurants

    Disposition expected to close mid-2027 due to rezoning. Redevelopment will benefit adjacent TownPark assets in Lake Mary.

    Risks & headwinds

    3
    Delay in execution of New York City lease renewal for 60 Broad.Q4 FY26

    Not expected to be wrapped up until Q4 FY26.

    Mitigation: City is steadily progressing; deal terms remain as discussed; holdover penalties not expected to materially influence 2026 earnings.

    Delay in closing of Orlando land parcel disposition due to rezoning process.Mid-2027

    Likely mid-2027 closing.

    Mitigation: Process continues to move forward, albeit slowly; land will be redeveloped into mixed-use project benefiting adjacent assets.

    Excess cash flow expected to be choppy due to ongoing construction spend.Remainder of the year (FY26)

    May not achieve same $30 million AFFO level after CapEx every quarter.

    Mitigation: Capital is being spent on construction across the portfolio, which will lead to future earnings and cash flow growth.

    What to watch in Q3 FY26

    5

    60 Broad NYC lease execution

    Q4 FY26
    CurrentIn holdover, documentation progressing
    TargetFully executed lease

    Why it matters

    Secures a major tenant and stabilizes revenue for a significant asset.

    The city is steadily progressing to conclude the lease renewal. However, it is likely the process will not be wrapped up until the fourth quarter.

    Q&A highlights

    8

    What is driving the continued acceleration in demand for office space despite macro uncertainty?

    Management attributes strong demand to employers seeking vibrant, collaborative environments, with expansions exceeding contractions. They note that AI is not cannibalizing jobs but helping companies grow, and Piedmont's portfolio caters to professional and financial services, which are seeing job growth, unlike tech.

    “the leasing engine really continues to fire on all cylinders... employers are looking for space, want to move into a more compelling and vibrant environment.”

    asked by Dylan Burzinski · answered by George Wells

    2 min read5 chapters

    Detailed Narrative

    01

    Market Dynamics and Pricing Power

    The U.S. office market is experiencing a shift from excess space to constrained supply, particularly for high-quality, amenitized assets. This scarcity, coupled with recovering demand, is driving higher occupancy and accelerating rent growth. Piedmont has capitalized on this by increasing asking rates across a substantial portion of its portfolio by over 15% in the past 12-18 months, leading to record-high net effective rents.

    02

    Portfolio Repositioning and Quality

    Piedmont has renovated 90% of its portfolio since 2020, creating amenity-rich, hospitality-driven "Piedmont places" that are recognized as top-tier assets. This is evidenced by the company being ranked a top 5 national office platform by Kingsley and winning multiple BOMA Outstanding Building of the Year Awards. The portfolio's quality and service offering are key drivers of tenant demand and retention.

    03

    Tenant Behavior and Early Renewals

    Tenants with lease expirations several years out are proactively seeking renewals, recognizing the tightening market for premium office space. This trend is expected to bolster client retention ratios above the historical 60%-70% average and allow for reduced free rent and tenant capital concessions, as retaining existing customers is a cost-effective strategy.

    04

    Investment Thesis and Competitive Advantage

    Piedmont's investment thesis centers on increasing demand for differentiated office products amidst shrinking supply. The company benefits from return-to-office mandates, near-zero new construction, and financially constrained competitors. Its portfolio is uniquely positioned to generate strong earnings and cash flow growth, with significant embedded rental rate growth and opportunities for accretive debt refinancings.

    05

    Capital Allocation Priorities

    The company's capital allocation strategy prioritizes paying down debt, particularly 9.25% bonds, to reduce its net debt-to-EBITDA ratio. While stock buybacks are not a current priority, the company sees opportunities for accretive acquisitions in its target markets (Dallas, Northern Virginia) that align with its strategy of acquiring well-located, slightly older vintage assets at attractive yields and enhancing their value through its operational expertise.

    AI-generated summary of the company’s earnings call. Not investment advice.