Greetings, and welcome to the Peakstone Realty Trust Third Quarter 2023 Earnings Webcast and Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the call over to the Investor Relations team. Thank you. Please go ahead.

Thank you. Good afternoon, everyone, and welcome to Peakstone Realty Trust's Third Quarter 2023 Earnings Call and Webcast. Earlier today, we posted an earnings release, supplemental and updated investor presentation on the Investors page on our website at www.pkst.com. Please note the use of forward-looking statements by the company on this webcast. Statements made on this call may include statements which are not historical facts and are considered forward-looking. The company intends for all these forward-looking statements be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and are making these statements for purposes of complying with those safe harbor provisions. Furthermore, the forward-looking statements reflect our current views about future events and are subject to numerous known and unknown risks, uncertainties, assumptions and changes in circumstances that may cause actual results to differ significantly than those expressed in any forward-looking statements and will be affected by a variety of risks and factors that are beyond the company's control, including, without limitation, those contained in our most recent annual report on Form 10-K or quarterly report on Form 10-Q filed with the SEC. We disclaim any obligation to publicly update or revise forward-looking statements to reflect changes in underlying assumptions or factors of new information, data or methods, future events or other changes after the date of this call, except as required by applicable law. Additionally, on this call, the company may refer to certain non-GAAP financial measures such as funds from operations, adjusted funds from operations, EBITDAre and adjusted EBITDAre. You can find a tabular reconciliation of these non-GAAP financial measures to the most currently comparable GAAP numbers in the company's filings with the SEC. On the call today are Mike Escalante, Chief Executive Officer; and Javier Bitar, Chief Financial Officer. With that, I'll hand the call over to Mike. Mike?

Thank you, and welcome to Peakstone Realty Trust's Third Quarter 2023 Earnings Call and Webcast. I'll begin by providing an overview of our key achievements during the third quarter. Javier will follow with a review of our financial results and our balance sheet. And finally, I'll return with closing comments and some general commentary on the market as we look to the future. Overall, our high-quality, newer-vintage industrial and office portfolio continues to deliver consistent performance. At the end of the quarter, our wholly owned portfolio consisted of 73 properties, totaling approximately 18.1 million square feet with an annualized base rent or ABR of approximately $203 million. It is worth noting that 60.1% of our tenants, their guarantors or nonguarantor parent entities, as applicable, have an investment-grade rating. At quarter end, we had total liquidity of approximately $517 million, affording us maximum flexibility to prudently allocate capital for uses aligned with our go-forward strategy. Leverage for our consolidated portfolio improved to 6.4x. This result is an improvement of 0.2 turns from the second quarter and importantly, an improvement of 1.3 turns since the start of the year. We are pleased that we continue to move closer to our near-term leverage target of 6x through strategic asset sales and free cash flow generation. Our consolidated portfolio was 96.4% leased, up from 96.0% last quarter and had a remaining weighted average lease term of 6.3 years. During the quarter, we improved the asset composition of our Other segment by executing lease renewals totaling approximately 117,000 square feet and selling one vacant office property for gross disposition proceeds of $8.3 million. This activity brings year-to-date gross disposition proceeds to approximately $309 million at an average cash cap rate of 7.6% for the stabilized assets. Using cash on hand, we paid off our Samsonite…

Thanks, Mike. In the quarter, total revenue was $61.7 million and NOI was $48.4 million. Net loss attributable to common shareholders was approximately $127.6 million or negative $3.55 per share, inclusive of the $129.3 million noncash impairment to our investment in the joint venture. FFO was negative $110.2 million or negative $2.79 per share on a fully diluted basis, which includes OP units outstanding, also impacted by the $129.3 million noncash impairment of our interest in the office JV. Excluding this impairment, FFO for the quarter would have been approximately $19.1 million or $0.48 per share on a fully diluted basis. AFFO was approximately $30.7 million or $0.78 per share on a fully diluted basis and same-store cash NOI was approximately $48.1 million, which represents a 3% increase compared to the third quarter last year. Moving on to our balance sheet. As of September 30, 2023, we have $364 million in cash and $152 million of available capacity on our revolving credit facility, an increase over the prior quarter for total liquidity of approximately $517 million. A significant portion of our cash is in money market accounts earning interest in the 5% range. And the $118 million increase in available revolver capacity compared to the prior quarter was primarily due to the addition of 6 properties to the borrowing base of our credit facility. In regard to our consolidated debt, we had approximately $1.45 billion outstanding with $950 million on our credit facility and the balance consisting of secured debt. Inclusive of cash, net debt was approximately $1.08 billion. Weighted average term to maturity was nearly 3 years, assuming all available extensions are exercised. Approximately 86% of our total consolidated debt has fixed rates inclusive of our interest rate swaps, limiting our near-term exposure to interest rate volatility. The interest…

Thanks, Javier. The consistent cash flow generated by our high-quality assets and the collective expertise of our team continue to be positive differentiators as we execute our business strategy in this market environment. Looking forward, we are focused on optimizing our portfolio composition and strengthening our balance sheet. For some office market color, we're encouraged by continued upticks in daily tenant utilization and an increase in RFPs from prospective tenants touring our available space. We believe this positive activity is driven by several factors, including reprioritization of in-office work, company's willingness to make decisions about longer-term occupancy and, of course, the quality and location of our assets. Our longer-term outlook on the industrial market remains positive. Given the low vacancy rates in our markets, we anticipate existing inventory will benefit from the continued steep decline in construction starts. Our portfolio is well positioned to capture past and future rent growth and benefit from the steady tenant demand in our port-oriented market. Although the continued uncertainty around interest rates and decline in capital availability are having an impact on capital markets, these factors also present the potential for attractive future external growth opportunities. Our team is continually assessing accretive investment options, and we remain committed to a disciplined capital allocation strategy. When appropriate, we intend to deploy capital, further shift our portfolio composition towards our Industrial segment. Despite the current macroeconomic climate, we believe our stable, high-quality portfolio is resilient and positions us well to navigate risks and maximize value for our shareholders. Please reach out to our Investor Relations team at ir@pkst.com with any questions or visit the Investors section of our website at pkst.com. We'll now turn it over to the operator to take a few questions from analysts. Operator?

[Operator Instructions] The first question we have comes from Josh Dennerlein from Bank of America.

Appreciate all the color. Just looking over the top, focused on the lease expiration schedule, just could you go over what's up for renewal in 2024? And then just kind of any outcomes you're expecting? Are there any known move-outs?

Yes, Josh. Thanks for joining. So we really haven't given a lot of detail other than sort of the rough numbers. Most of our rollover, as you know, is coming in the Other segment, and most of that rollover is attached to the AIG portfolio. So when you look at 2024, on the Industrial side, we have the Samsonite transaction or lease that expires in November 2024. And as we indicated, we're in active discussions with that tenant. And we're hoping to be able to talk to you a little more fully next quarter about that.

Okay. Appreciate that. And then just maybe thinking about the comments you made about capital recycling and rotating more into industrial. Just what's kind of the appetite to just put more office assets up? And then, yes, how should we kind of think about like the timing to get more industrial heavy?

I think fundamentally, we're still looking at, I guess, a relatively active disposition program. We're being impacted, obviously, by the capital markets in terms of what buyers are able to get in the way of financing. I think we've been fairly successful given the 7.6% cap rate on the stabilized assets we've been able to get out of. And actually looking at the -- I think there's 4 other -- 4 assets that we sold vacant in our Other category as well. So we're clearly moving away from office net-net on those transactions and looking to pay down our debt. So there's not a lot of guidance that we're going to give you in terms of our go-forward activity other than to say to you, it's interesting to be active in the market and looking behind -- from behind the scenes at what is becoming available due to the constraints that are happening in the debt markets.

[Operator Instructions] The next question we have comes from Anthony Hau of Truist Securities.

You guys provided pretty positive commentary on the office fundamental, right, such as higher RFP and et cetera. But you guys also rolled off the JV portfolio. Was this something specific to your JV portfolio that is different from your Office segment? Like is it because of capital structure, JV portfolio -- is that why you guys [ were off ]? Or it's because from the markets they're in?

I think the -- thanks, again, Anthony, for joining and your question. I think the key element there is that the 2 portfolios are pretty significantly different. I think you're probably trying to look through to our Office portfolio and see if there's anything that pops up in that regard. We've got a lot more duration. I think we -- in terms of what we've got in our WALT for that -- for our portion of the portfolio. And I think what really sticks out is the context of what's going to happen relative to the increased future loan extension risk that is only 10 months away relative to the JV portfolio. That was really the demonstrative differential piece.

Let me add to that, Anthony. This is Javier. The other thing to focus on, if you look at our queue is the leverage level as well, right? This portfolio, it's just based on the balance sheet. We're not taking a look of value. The balance sheet shows an 80-plus percent leverage level there. That's quite different than where we are in terms of overall leverage.

But in terms of fundamental for that portfolio, is it also declining pretty rapidly as well?

Yes, I think you have to remember, when we did the transaction over a year ago, we did so because we had very low WALT and I think that's continued to be in place. And a significant amount of capital expenditures relative to the age of the assets and where they stood in their marketplace. So demonstrative differential between our office portfolio and that portfolio.

Got you. And just one last question. What's the plan for the KBR building after they move out next year?

So we're still continuing to evaluate what we're going to do there. As we've told you in the past, every single asset really takes a unique approach, but we're assessing that transaction on a go-forward basis.

And if, let's say, KBR moves out and also -- I think it's Westwood, also moves out next year, does that trigger a technical default for your AIG loan?

No, Anthony, we're -- what it triggers is and what we're in currently as a cash flow sweep to build up reserves for future TI and leasing commissions.

Thank you. Ladies and gentlemen, that was our final question for today's conference. I would now like to turn the floor back over to Mike Escalante for closing comments. Please go ahead, sir.

Thank you, everyone, for joining us today. It's our pleasure to serve you and appreciate the questions from the analysts, and we look forward to a productive fourth quarter and a bright 2024. So thank you for your time today.

Thank you, sir. Ladies and gentlemen, that then concludes today's conference. Thank you for joining us. You may now disconnect your lines.