Beyond the sub-7x Net Debt-to-EBITDA target for year-end, what are the longer-term leverage goals?

Sherry Rexroad stated an intermediate-term target of closer to 6.5x in the 2027-2028 timeframe, and a longer-term target of closer to 6x. “So getting below 7 should happen by the end of this year. And then in the intermediate term, we'd like to get closer to the 6.5 range, and in the longer term, closer to 6.”

How competitive is the Northern Virginia market for deals, and will the activity persist?

Brent Smith noted an uptick in transactional activity, particularly for professional services and defense contractors. He believes activity will persist due to less available space, increased defense funding, and the submarket's appeal to the millennial workforce, with few landlords having the capital to create unique spaces. “What we continue to see in that market are a couple of factors which give us the belief that we can continue to execute uniquely in the market.”

What kind of acquisition opportunities is Piedmont seeing and what do those deals look like?

Piedmont is looking for off-market transactions in Dallas and Northern Virginia, focusing on well-located, slightly older vintage assets (70-80% leased) that can be enhanced through their program. They target going-in yields of 8.5-9.5%, stabilizing well north of 10.5-11%. They seek assets with long-term, durable occupancy. “We continue to focus on assets that are great bones, slightly older vintage, but are really well located.”

PDM

Piedmont Realty Trust (PDM) Q2 FY26 earnings call: guidance and Q&A

Earnings call· Jun 2026 (Q2 FY26)· Real Estate· Jul 29, 2026

Source: earnings call transcript

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

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

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

Category	Target	Timeline	Confidence
Annual Core FFO per diluted share	$1.50 to $1.55 high materiality	FY26	High
Annual Same-store NOI (cash and GAAP)	5% to 8% high materiality	FY26	High
Net Debt-to-EBITDA ratio	below 7x medium materiality	by year-end 2026 · FY26	High
Net Debt-to-EBITDA ratio	closer to 6.5x medium materiality	2027 to 2028 time frame	Medium
Net Debt-to-EBITDA ratio	closer to 6x medium materiality	longer term	Low
Leased-to-commenced occupancy spread	approximately 400 basis points low materiality	by year-end · FY26	High
Overall lease volume	high end of range or 2 million square feet low materiality	FY26	Medium
Out-of-service portfolio stabilization	around the end of 2026 low materiality	FY26	High

Segment performance

Segment	Revenue	YoY	QoQ	Margin
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	—	—	—	—

Orderbook & backlog

Executed pipeline of leases not commenced $39 million June 30

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

Leasing pipeline in legal stage over 700,000 sq ft Q3 FY26

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

Outstanding proposals approximately 2 million sq ft Q2 FY26

holding steady

Deals & partnerships

Lenders Refinanced existing term loan, increasing principal and extending maturity. $400 million to May 2031

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

Capital programs

Royal Lane Land Parcel Redevelopment under 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 Redevelopment moving 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

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

60 Broad NYC lease execution

Q4 FY26

Current In holdover, documentation progressing

Target Fully 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.

Find out whether PDM delivers this. Inve re-checks your case every morning.

Q&A highlights

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 read 5 chapters

Detailed narrative

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.

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.

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.

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.

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.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.