Greetings, and welcome to the Peakstone Realty Trust Second Quarter 2025 Earnings Conference Call and Webcast. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Steve Swett, Investor Relations. Thank you. You may begin.

Good afternoon, and thank you for joining us for Peakstone Realty Trust's Second Quarter 2025 Earnings Call and Webcast. Earlier today, we posted an earnings release, supplemental and updated investor presentation to the Investor Relations page on our website at www.pkst.com. Please reach out to our Investor Relations team at ir@pkst.com with any questions. The company will be making forward-looking statements, which include any statements that are not historical facts on today's webcast. Such forward-looking statements are based on expectations that involve risks and uncertainties that could cause actual results to differ materially. For a further discussion of risks related to our business, please see our annual report on Form 10-K and subsequent filings with the SEC. This call, the company may refer to certain non-GAAP financial measures, such as funds from operations, core 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 earnings release and filings with the SEC. On the call today are Mike Escalante, CEO and President; and Javier Bitar, CFO. With that, I'll hand the call over to Mike.

Good afternoon. Thank you for joining our call today. We continue to advance our strategic transformation into an industrial REIT. Growth in the industrial outdoor storage or IOS subsector remains central to this strategy. Our focus is on scaling our IOS platform through acquisitions and leasing, divesting our remaining office assets and reducing leverage. During and subsequent to quarter end, we made meaningful progress across each of these focus areas. Let me start with the recent activity across our IOS platform, where we continue to drive both external and internal growth. We expanded our IOS portfolio with 2 acquisitions totaling approximately $52 million. First, we acquired a 27 usable acre property in an infill submarket of Atlanta for approximately $42 million. This site is located along one of Atlanta's most active and established industrial corridors and features upgraded yard space and a combination of renovated and newly constructed buildings to support yard operations. It is fully leased to 2 tenants, each having long-term contracts in the logistics or municipal services sectors. On a combined basis, the leases have a weighted average term of 5 years and include 3.8% average annual rent escalations. Second, we acquired a 9.2 usable acre property in Port Charlotte, Florida, for approximately $10.4 million. The property is located within the growth corridor stretching from Tampa through Fort Myers, an area experiencing strong economic and demographic momentum. It is fully leased to 3 tenants, including a national equipment rental company as the anchor. On a combined basis, the leases have a weighted average term of 6.8 years and include 3% average annual escalations. In addition to acquisitions, we continue to demonstrate execution across our IOS redevelopment program. Shortly after quarter end, we completed the redevelopment of another IOS property. We executed a full site 2.5-year lease at…

Thanks, Mike. To begin, I'll cover several key financial highlights for the quarter ended June 30 before turning to a few pro forma metrics that reflect activity completed after quarter end. For the quarter ended June 30, total revenue was approximately $54 million and cash NOI was approximately $43 million. Net loss attributable to common shareholders was approximately $265 million or $7.22 per share, inclusive of noncash impairments of approximately $286 million recorded during the quarter. As Mike explained, the vast majority of these noncash impairments related to 18 Office segment properties. FFO was approximately $23.9 million or $0.60 per share on a fully diluted basis. Core FFO was approximately $23.8 million or $0.60 per share on a fully diluted basis and AFFO was approximately $24.3 million or $0.61 per share on a fully diluted basis. Same-store cash NOI increased 9.3% in our Industrial segment and 4.7% in our Office segment or an overall increase of 6.3% compared to the same quarter last year. Moving on to our balance sheet. At quarter end, total liquidity was approximately $356 million, consisting of cash and available revolver capacity. Our cash balance, excluding restricted cash, was approximately $264 million and available revolver capacity was approximately $92 million. We had approximately $1.26 billion of total debt outstanding, including $900 million of unsecured debt on our credit facility with the remainder in nonrecourse secured mortgage debt. After deducting cash, our net debt was approximately $1 billion. As of quarter end, 88% of our debt was fixed, including the effect of $750 million of interest rate swaps that matured on July 1. Next, I'd like to mention the impact of certain post-quarter activity. As we've previously disclosed, our forward starting floating to fixed interest rate swaps totaling $550 million took effect on July 1, converting SOFR on our unsecured debt to a fixed rate of 3.58%. These swaps will mature on July 1, 2029. After giving effect to these swaps, our weighted average interest rate on all debt, both secured and unsecured, is approximately 5.47%. Also, following the post-quarter leasing acquisition and disposition activity that Mike described, our net debt to adjusted EBITDAre increased modestly from 6.4x at quarter end to 6.6x on a pro forma basis, but remains below our first quarter level of 7x. We remain focused on reducing leverage over time and expect to continue making progress as we execute on our plan. In light of the continued execution of our Office dispositions and the resulting evolution of our earnings profile, the Board has approved a dividend of $0.10 per common share for the third quarter. This dividend is payable on October 17 to holders of record as of September 30. The updated dividend level reflects the ongoing transition of our portfolio to an exclusively industrial strategy and is designed to align with the cash flow characteristics of that portfolio. It also provides a foundation as we continue to scale the IOS platform. With that, I'll turn the call back over to Mike.

Thanks, Javier. As we look ahead, we remain confident in our strategy and our ability to execute. We're reshaping the portfolio with intention, simplifying the platform, reallocating capital to higher-growth IOS opportunities and strengthening the balance sheet. We believe this positions the company to maximize value for its shareholders. With that, we'll now open the call for questions. Operator?

[Operator Instructions] The first question we have is from Jana Galan of Bank of America.

Just wanted to get a little bit more color on the Board's thinking around the dividend. And when you kind of mentioned align with the cash flow characteristics of industrial outdoor storage, can you just help us better understand what that means? And maybe at what scale would they go back to something of more of like a stabilized AFFO payout ratio or something of the sort?

I think it's much more straightforward than I think that your question implies. I mean we're basically just looking forward to a post- Office environment and looking at our Industrial segment overall, which includes traditional and IOS. So looking at how that's been established is really in keeping with the fact that we've made an announcement that we're accelerating our shift to an industrial REIT and monetizing fully the Office segment.

And I guess maybe just on the -- looking at the 2026 lease expiration schedule and just if you could help us understand more a little bit about like IOS, when do those kind of renewal discussions begin. What historically has kind of been the renewal percentage for this product type? Any color there?

Yes, no worries. So the great news is that we've had very little rollover. We have very little vacancy in the operating portfolio. I think it's 0.4%. It's 2 of 12 acres in our Philadelphia location, and we're involved in doing a minor redo at that site and have interest in that particular property as well. If you look forward, we only have one more lease that expires in 2025. And we think that the tenant in that location is interested in staying as well for a -- at least for an abbreviated period. They're trying to figure out their long-term needs. And then looking forward to 2026, we have 8 leases that expire, and it's about 9% of our ABR. And I think the majority of those leases have fixed rate renewals at tenant-favorable rates. So our expectation in that situation is based on their operations, to the extent that they're happy with the location, we anticipate that they would more than likely be incentivized to renew.

The next question we have is from Michael Goldsmith of UBS.

Can you provide the cap rates of where you've been buying the IOS during the quarter and where you've been selling the office?

Yes. So we don't provide them on an individual basis. But on an aggregated basis, you have in our -- what you call it, in our IP excuse me, the data to be able to calculate that if you want to on an aggregated basis. We've -- so that's relative to the acquisitions. And then relative to our office, we've identified again on an aggregate basis and an individual property-by-property basis in our IP and in our supplement, the very specific properties that were sold. So you can sort of piece that all together relative to the aggregate numbers that we give you. And we just haven't done that on an individual basis. But I think last quarter, we gave you some guidelines relative to the makeup of leases that are less than 5 years in terms of what those sales will look like. And then we also gave you some direction on leases that had more than 5 years, and we've been sitting right in between the goalposts that we provided you in that instance.

And as we think about, right, like you've got continued visibility into selling down the Office. So how are you thinking about the -- using those proceeds? And you've gotten the leverage down to about 6.5x, and I know you kind of want to get it a little bit lower. So can you just kind of outline how you're thinking about using that for either paying down debt or acquiring and just kind of a framework as you continue to evolve the portfolio?

Yes, Michael, I think we've been very consistent in how we've approached that. It's a very balanced approach for us. As you can see, we were able to do some acquisitions after the quarter. So in our past, we've been very direct in saying that we're looking to get to below 6x debt to EBITDA. And in this instance, last quarter, we were at 7. If you look how we ended the quarter, I think we were at 6.4. And then we popped back up to 6.6 as a result of our acquisitions. I think in those numbers, you'll find somewhat of a microcosm of everything that we're trying to accomplish by balancing a further reduction in our leverage and by the same time, show that we are active in the acquisition market and looking at continuing to do that. We do have an active pipeline. I would say that we have a greater pipeline than the -- which allows us to be -- a significant pipeline, which allows us to be picky, if you will.

One last one for me. We've heard throughout triple-net reporting season about how there's been increased competition for deals. Recognizing you've been buying out of the IOS space, so I was curious if you've seen competition evolve or pick up in any way within the space that you've now been acquiring.

Yes. I mean, yes, the market is active. I mean there's quite a bit of capital that is increasingly being raised for IOS. I think it's largely with private entities, by and large. I think there's actually more debt capital that is coming in the market. It's not cheap still, so it keeps pricing sort of elevated. I think we have a construct that allows us to be much more fluid than I think our private competitors in that regard. So yes, I would say the market is definitely active. But we -- by virtue of our experience, our long time frame of being in the marketplace overall, our specific IOS contacts and the fact that we have a pretty fairly national portfolio, we get a lot of play from many people who are interested in discussing dispositions with us.

The next question we have is from Anthony Hau of Truist Securities.

Just curious like what specific variables changed that triggered the $206 million (sic) [ $286 million ] impairment this quarter? Was it really -- was it driven by actual bids coming below the book value? Or is it third-party appraisal or just market comps?

I'll let Javier take the shot at that one, and I'll fill in behind him.

Anthony. Yes. No, I think it's really driven by the acceleration of our sales and really taking a shorter hold period and really looking at our controls and accounting processes with respect to that. So as you -- from a GAAP standpoint, when you look at the acceleration of sales, you've got to look at the fair value calculation at the time. So that's really what drove the acceleration of these impairments.

Okay. Got you. And I think you guys mentioned that expectation of acceleration in office disposition. Can you elaborate on what's driving the confidence? Is it improved buyer demand, better pricing picture or something else?

No. I mean we've been hinting to the fact that we're leaning towards industrial. We've said that we're going to be recycling capital. We've come out very front forward-facing today and highlighted the fact that we're going to accelerate our shift to industrial REIT. I think this is just a continuing evolution of our transition. And I think the market generally is impatient with transitions. And so we believe that the faster we can get to the other side and start showing growth and specifically the embedded growth in our portfolio on the IOS side from the fact that we're -- we've got increasing escalations built in. We've got a mark-to-market, and then we've got the redevelopment portion of our portfolio that's starting to complete and open itself up for leasing. We've shown that we've been successful already in bringing some of those into the operating portfolio, and then lastly, the piece that we're doing relative to the acquisition. So all of that would sort of go to waste if it was sitting around, mired in the office side of the results. So we're trying to get to the other side as quickly as we can so that the market can look at us more on a go-forward basis.

Fair enough. Yes, that makes sense. And last question for me. Can you share about what's currently in your IOS pipeline in terms of volume, maybe geography or even deal stages?

Yes, we're not going to -- we're not at that stage. I mean we're operating typically right now in a market that we're competing with private buyers. And so in that sense, we would be giving away the secret recipe. So I'll just tell you that we are -- our pipeline is sufficient, and it is -- we've got a great opportunity to look at a variety of things in terms of making out a portfolio. I mean I think we're going to be -- you know the market fundamentals are going to drive what we're looking at. We continue to look at markets with persistent supply constraints, strong demand, growth from tenants, rent growth potentials. We're looking for zoning compatibility for the uses relative to our physical characteristics. We're looking for properties that provide us adaptable improvements that we can have tenants that use small building and support their yard operations. And then we're looking across -- to maintain our tenant industry diversification, and we're looking to expand our relationship with our existing tenants. So we're going to do core infill, growth corridors, strategic growth in MSAs where certain of our tenants have a desire to grow, things of that nature. So all of that's playing into how we're picking our spots, if you will. And again, I think I said it earlier, when you look at what we own and leveraging off of that portfolio and platform and the relationships that we have as a result of that reach, is really what's going to allow us to continue to drive this business forward and really accelerate growth as well.

At this time, we have no further questions, and I would like to turn the floor back over to management for any closing remarks.

Thank you, operator. I want to thank everybody, the analysts and investors as well for joining us today. We appreciate your support, and we continue to work our tails off on behalf of the shareholders and really looking to maximize value. And we think we've got a great, great foundation to move forward in that regard. Thank you again.

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