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DATE
Wednesday, November 5, 2025 at 5 p.m. ET
CALL PARTICIPANTS
Chief Executive Officer — Michael Escalante
Chief Financial Officer — Javier Bitar
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TAKEAWAYS
Industrial Portfolio ABR Contribution -- As of October 31, 2025, over 60% of annualized base rent (ABR) derives from industrial assets, following strategic office property sales.
Industrial Outdoor Storage (iOS) Leasing -- The iOS operating portfolio reached 100% leased, supported by weighted average releasing spreads of 116% on a cash basis.
Incremental iOS ABR -- New leases, renewals, and modifications generated over $1 million of additional iOS annualized base rent.
Notable Lease Transactions -- In Houston, a full-site lease replacement produced releasing spreads of 9% on a cash basis and 7% on GAAP, with annual escalations of 3.5%.
Norcross, GA Leasing -- Proactive tenant renewal and a new lease achieved a cash releasing spread of 239%, with weighted average annual escalations of 3.3%.
iOS Redevelopment Activity -- In Savannah, a full-site lease commenced, delivering over $500,000 incremental ABR and 4% annual rent escalations.
iOS Acquisitions -- Acquired three iOS properties for $58 million: Atlanta ($42 million, 27 acres, 100% leased), Port Charlotte ($10.4 million, 9.2 acres, 100% leased), and Fort Pierce ($5.3 million, 2.5 acres, 10-year lease with 2.5% annual escalations).
Traditional Industrial Asset Sales -- Sold three assets (Baltimore, Detroit, Cleveland) for $72 million at a 6.9% cap rate.
Total Revenue -- $25.8 million from continuing operations; excludes $25.2 million from discontinued office operations.
Net Income -- $3.5 million net income attributable to common shareholders
FFO, Core FFO, and AFFO -- Funds from operations (FFO, non-GAAP) of $18.3 million ($0.46 per share), Core FFO of $19.1 million ($0.48 per share)
Same-Store Cash NOI Growth -- Same-store cash NOI increased 3.7% compared to the same quarter last year.
Liquidity Position -- $438 million total liquidity at quarter-end and $112 million in revolver capacity at quarter-end.
Debt Reduction -- Outstanding debt reduced by approximately $450 million on a pro forma basis, with net debt at $725 million at quarter-end; pro forma net debt after additional repayments is $615 million.
Leverage Ratio -- Net debt to adjusted EBITDAre is 5.4 times on a pro forma basis, below the stated target of six times.
Interest Rate Hedging -- 76% of debt fixed; floating-to-fixed swaps totaling $550 million set the fixed rate on unsecured debt at 3.58% through July 1, 2029; The blended weighted-average interest rate is approximately 5.46%.
Office Portfolio Dispositions -- 12 office properties sold (valued at $363 million) with 12 office assets remaining; majority of remaining sales expected to close by year-end.
Guidance Policy -- Management declined to provide forward guidance due to ongoing portfolio transitions.
Dividend -- $0.10 per share paid for the quarter; The next dividend of $0.10 per share for Q4 is approved for payment on January 19 to holders as of December 31.
SUMMARY
Peakstone Realty Trust (PKST +1.92%) completed substantial balance sheet deleveraging and furthered its industrial outdoor storage (iOS) sector transition, with industrial assets now generating the majority of annualized base rent. Asset sales and targeted acquisitions materially shifted the portfolio composition. Management reiterated office dispositions are proceeding as planned, with nearly all remaining assets actively marketed or under control, and intends to use most of the expected sale proceeds to further reduce debt.
CEO Escalante stated that strengthening liquidity, disciplined office divestitures, and proactive iOS leasing underpin confidence in the ongoing transformation strategy.
Management attributed growing iOS leasing spreads and high occupancy to sustained supply constraints and tenant demand in key U.S. markets.
Pro forma financial metrics show the company’s net debt/adjusted EBITDAre is now below long-term targets, with room for incremental iOS investment using existing liquidity.
CFO Bitar confirmed the majority of proceeds from remaining office asset sales are earmarked for further debt paydown, with approximately $250–$300 million targeted for this purpose.
INDUSTRY GLOSSARY
iOS (Industrial Outdoor Storage): Real estate properties consisting of outdoor sites used for storage, parking, and related industrial purposes, typically leased to logistics, transportation, or construction tenants.
ABR (Annualized Base Rent): The total current base rent for all leased properties, multiplied by twelve to reflect a yearly amount, excluding percentage rents, expense reimbursements, or other non-base items.
NOI (Net Operating Income): Income from property operations after deducting property-level expenses, but before corporate overhead, interest, and depreciation.
FFO (Funds From Operations): A standard REIT performance metric that adds depreciation and amortization to earnings, and subtracts gains on property sales, reflecting core operating results.
AFFO (Adjusted Funds From Operations): FFO adjusted for recurring capital expenditures, straight-line rent adjustments, and other non-cash or non-recurring items, providing a better measure of cash generation.
Core FFO: FFO further adjusted to exclude nonrecurring or non-cash items, such as acquisition costs, promoting comparability across periods.
Leasing Spread: The percentage change in rent between expiring and newly signed leases for the same space, indicating embedded rent growth.
Cap Rate: The ratio of net operating income to the purchase or sale price of a property, commonly used to assess valuation in real estate transactions.
Wall: Weighted average lease length remaining; period until expiration averaged across all leases, weighted by rentable area or income.
TI (Tenant Improvements): Capital expenditures made by landlords or reimbursed to tenants to outfit or upgrade rented spaces.
EBITDAre: A REIT industry-specific version of EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization), adjusted for real estate-specific items, such as gains/losses on sales and impairment charges.
Pro Forma: Accounting or financial figures adjusted to reflect transactions or events that occurred after the reporting period, providing a normalized perspective.
Full Conference Call Transcript
Michael Escalante: Good afternoon, and thank you for joining our call today. Our strategic transformation into an industrial-only REIT focused on growth in the industrial outdoor storage sector continues to advance. As of October 31, our industrial portfolio generates more than 60% of our ABR. Through disciplined office sales, strong iOS leasing, and targeted iOS acquisitions, we have strengthened our balance sheet, reducing debt by approximately $450 million, improving total leverage to 5.4 times on a pro forma basis. With solid liquidity and a growing iOS investment pipeline, we remain confident in our strategy and our ability to continue creating value for shareholders. During and after the third quarter, we continued making progress on our office dispositions.
As of October 31, we've sold 12 office properties, totaling approximately $363 million, leaving just 12 remaining office properties in our portfolio. Buyer interest, including from existing tenants, has been strong, and we expect to complete the sale of a majority of these properties by the end of this year, with a few transactions potentially closing in 2026. Let me now turn to our iOS portfolio, where market fundamentals remain solid, characterized by strong tenant demand and persistent supply constraints. These dynamics continue to keep vacancies low and support healthy rent growth. Against that backdrop, we continue to deliver strong results across both our iOS operating and redevelopment portfolios.
During the quarter, we executed new leases, renewals, and proactive lease modifications across our iOS portfolio, generating more than $1 million of incremental iOS ABR. These transactions brought the iOS operating portfolio to 100% leased and overall achieved weighted average releasing spreads of 116% on a cash basis and 120% on a GAAP basis. Let me provide more detail on the transactions that drove these results. In Philadelphia, we signed a new eight-year lease for 1.6 usable acres that is expected to commence in 2026 following the completion of landlord improvements. The lease includes 7.7% average annual rent escalations and filled what had been our only vacancy in the iOS operating portfolio.
In Houston, we executed a new 5.1-year full-site lease for 10 usable acres. The prior lease was set to expire in 2028 and included a below-market fixed-rate renewal option. To capture embedded value, we proactively terminated that lease and simultaneously replaced it with a new lease at releasing spreads of 9% on a cash basis and 7% on a GAAP basis. The new lease includes 3.5% annual rent escalations. And in Norcross, Georgia, we proactively downsized the existing tenant, renewing them for two years and simultaneously signing a new two-year lease for the remaining acreage, keeping the 8.7 usable acres fully leased.
Together, these transactions produce strong releasing spreads of 239% on a cash basis and 251% on a GAAP basis with weighted average annual escalations of 3.3%. In our iOS redevelopment portfolio, we executed a full-site lease at our property in Savannah, Georgia, which commenced in July. The lease, which delivers over $500,000 of incremental ABR with 4% annual rent escalations, was previously disclosed. Overall, this performance highlights our ability to drive internal growth and capture the mark-to-market opportunity within our iOS portfolio. We intend to build on this progress as we advance our strategy. Turning now to acquisitions, let me briefly describe the three iOS properties we acquired this quarter for a total of approximately $58 million.
The Atlanta property is a 27 usable acre site acquired for approximately $42 million. At closing, it was 100% leased by two tenants with a five-year vault and 3.8% weighted average annual rent escalations. The Port Charlotte property is a 9.2 usable acre site acquired for approximately $10.4 million. At closing, it was 100% leased by three tenants, with a 6.8-year wall and a 3% weighted average annual rent escalations. Both of these latter acquisitions were previously disclosed. Our third acquisition was a 2.5 usable acre site in Fort Pierce along Florida's East Coast. We acquired the property for $5.3 million. It includes upgraded yard space and a newly renovated building that supports yard operations.
The site is fully leased by a single tenant that utilizes it to store and distribute HVAC and plumbing supplies. The lease has a remaining term of approximately ten years and includes 2.5% annual rent escalations. Now turning to our traditional industrial portfolio. This quarter, as part of our ongoing portfolio optimization, we sold three properties for approximately $72 million. These assets, two flex properties and one manufacturing facility, are located in Baltimore, Detroit, and Cleveland markets, and were sold at a combined cap rate of 6.9%. Each asset was sold to a long-term net lease-focused buyer. These transactions reflect our continued effort to enhance the overall quality of our traditional industrial portfolio.
We remain disciplined and opportunistic in managing these assets consistent with our approach across all of our real estate. Going forward, we do not anticipate broad sales activity within our traditional industrial portfolio. And with that, I'll turn the call over to Javier Bitar to walk through our financial results and capital markets activity. Javier?
Javier Bitar: Thanks, Mike. To begin, I'd like to explain a nuance to our reporting this quarter. The 16 remaining office properties we owned as of September 30, all of which were classified as held for sale, and 11 of the office properties we sold prior to that date were classified as discontinued operations. As a result, these assets and related results are reported separately on our financial statements for all periods presented. Now I'll cover several key financial highlights for the quarter before turning to a few pro forma metrics that reflect activity completed after quarter-end. For the quarter, total revenue was approximately $25.8 million from continuing operations, which excludes revenue from office discontinued operations of approximately $25.2 million.
Net income attributable to common shareholders was approximately $3.5 million or 9¢ per share. FFO was approximately $18.3 million or $0.46 per share on a fully diluted basis. Core FFO was approximately $19.1 million or 48¢ per share, on a fully diluted basis. AFFO was approximately $18.6 million or $0.47 per share on a fully diluted basis, and same-store cash NOI increased 3.7% compared to the same quarter last year. Moving on to our balance sheet. At quarter-end, total liquidity was approximately $438 million consisting of cash and available revolver capacity. Our cash balance, excluding restricted cash, was approximately $326 million, and available revolver capacity was $112 million.
We have approximately $1.05 billion of total debt outstanding, consisting of $800 million of unsecured debt on our credit facility and the remainder being nonrecourse secured mortgage debt. After deducting cash, our net debt was approximately $725 million. As of quarter-end, 76% of our debt was fixed, the effect of our forward-starting floating-to-fixed interest rate swaps, totaling $550 million, which converts SOFR on our unsecured debt to a fixed rate of 3.58%. These swaps took effect July 1 and will remain in place through July 1, 2029, unless we choose to terminate them in connection with future debt paydowns. After giving effect to these swaps, our weighted average interest rate for all debt, both secured and unsecured, was approximately 5.46%.
Next, I'd like to mention the impact of certain post-quarter activity. Subsequent to quarter-end, we utilized proceeds from office dispositions to pay down an additional $240 million on our unsecured credit facility. On a pro forma basis, after giving effect to this paydown and other post-quarter activity, our total debt outstanding is $811 million, our net debt is $615 million, our total liquidity is $420 million, and our net debt to adjusted EBITDAre ratio is approximately 5.4 times, which is below our target level of six times. Additionally, we want to provide some clarity around the timing, amount, and use of proceeds from our remaining office sales.
As Mike mentioned, we expect to complete a majority of these sales by the end of this year, with a few transactions potentially closing in 2026. Total proceeds from these transactions are expected to range from $300 to $350 million, and we intend to further strengthen our balance sheet by using approximately $250 to $300 million of those proceeds to pay down debt. Finally, for the third quarter, as previously announced, we paid a dividend of 10¢ per common share on October 17. The board of trustees also approved a fourth-quarter dividend in the amount of $0.10 per common share, that is payable on January 19, to shareholders of record on December 31.
With that, I'll turn the call back over to Mike.
Michael Escalante: Thanks, Javier. This quarter marks another milestone for Peakstone Realty Trust. With industrial assets now generating 60% of our ABR, our strategy remains focused on growth in the iOS sector supported by strong supply and demand fundamentals. Our iOS market insight, tenant relationships, and execution capabilities position us to capture opportunity, drive growth, and create value for our shareholders. With that, we'll now open the call for questions. Operator?
Operator: We will now begin the question and answer session. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw a question, please press star then 2. Our first question here will come from Dan Buterin with Bank of America. Please go ahead.
Dan Buterin: Hi, guys. Thanks for taking my question. From the prepared remarks, it sounds like you will pay down an additional $250 to $300 million of debt. When should we expect an acceleration in iOS acquisitions, or are current levels a good run rate for that?
Michael Escalante: Yeah. So Dan, thanks for joining the call. I think that the reality of what we have right now is, as you can tell and mentioned, we've got ample liquidity, and our debt ratios are below long-term targets. So we'll continue to be disciplined in our management of our growth and the strengthening of our balance sheet. As you know, there's not a straight line in the way we've conducted that, but if you look all the way back to the first quarter of this year, we were as high as 7.0 times.
So we're pretty pleased with the fact that we've been able to reduce it down to a 5.4% ratio, which gives us a little bit of leeway there.
Dan Buterin: Got it. Thank you. And congrats on bringing down your leverage below your goal here. I guess, just going back to the acquisitions, have you seen any increased competition for the iOS assets? If so, are you seeing the same private buyers or maybe even REIT players potentially?
Michael Escalante: Yeah. I don't know that I would call it increased competition. I just think there's more acceptance. And I think the other way to look at it is that the lender community has been more accepting. I mentioned that last quarter as well. That seems to be perpetuating itself.
Dan Buterin: Got it. Thank you very much.
Michael Escalante: Sure.
Operator: Our next question will come from Michael Goldsmith with UBS. Please go ahead.
Michael Goldsmith: Good afternoon. Thanks a lot for taking my question. Another quarter of strong same-store NOI growth. As you implement your optimization, what do you see as a sustainable same-store NOI growth for the portfolio? And when do you think you could do you have enough visibility where you could start guiding around that? Thanks.
Michael Escalante: Yeah. Michael, I appreciate that you're looking for that information. As you know, our business has been undergoing significant change, and we are not providing guidance at this time. But I think we do provide a fair amount of information. We're very transparent, and so I think we provide you a fair amount of metrics. If you look across our supplement and our IP, we try to get you as much information as we can provide in that regard. We laid out in our IP the growth that we have seen, and I think you've got the tools, in essence, to sort of put that together.
Michael Goldsmith: Got it. Thanks for that. And you know, another quarter of solid leasing, with some nice lease spreads and strong escalations. But it also looks like you have to put a little bit of money in, whether when the property was under redevelopment or another required a little bit of landlord work. So I'm just trying to understand the tenant improvement dollars or just to think about the return on the money that you're putting in and then in turn the lease terms that you get out of that.
Michael Escalante: Yeah. I think honestly, we've been surprised at how little money we've had to spend outside of our redevelopment opportunities and even inside of our redevelopment opportunities. So thus far, we've been able to achieve in some of our leases a fair number of deals with frankly no TI and very little downtime. So all said and done, the attributes that people have been mentioning about iOS, in our opinion, are frankly meeting the test of time, and certainly, that's proven out with our ability to operate the portfolio over the course of really a full year now.
And so overall, I would tell you that we're quite happy with what we've been able to achieve all the way across the board in terms of upticks in rents, lack of downtime, the interest in our sites, and what we've been able to do on a proactive management basis. I could probably go on and on about that, but for now, I'll just leave it at that.
Michael Goldsmith: Thank you very much. Good luck in the fourth quarter.
Michael Escalante: Thanks a lot, Michael.
Operator: And again, if you have a question, you may press star then 1 to join the queue. Our next question will come from Anthony Hau with Truist. Please go ahead.
Anthony Hau: Hey, Mike. Hey, guys. Congrats on the quarter. Mike, I might have misheard this earlier, but I think you mentioned that you guys have around $300 million to $350 million from office sales to pay down the debt. Is that additional $300 million of asset sales in the fourth quarter? Is that what you guys are gauging?
Michael Escalante: Yeah. So, yes. You heard that. That's the net proceeds from the remaining 12 assets that we're selling. Yeah. In the range of $300 to $350 million, Anthony. And with that, we said we would plan to pay down debt by somewhere in the range of $250 to $300 million. So that is future sales.
Anthony Hau: Okay. So that's on top of the $160 million you guys already announced, right?
Michael Escalante: That's correct. Yes.
Anthony Hau: Okay. So how confident are you guys in achieving that pricing range? Are there any active LIs or notable tenant interest that's supporting that valuation?
Michael Escalante: Yeah. We're feeling pretty good about that, Anthony. Virtually every asset is engaged at this point in time. And then I think officially under control, we'd say that half of them are officially under control. But all of them are engaged.
Anthony Hau: Okay. Thank you so much.
Michael Escalante: You're welcome. Thank you.
Operator: And this will conclude our question and answer session. I'd like to turn the conference back over to management for any closing remarks.
Michael Escalante: Thank you very much. Appreciate all your time today. It's a very exciting quarter for us to be able to tell you and regale you with all of our successes across the board. Really disciplined office sales, strong execution across our iOS leasing, and the ability to put some targeted acquisitions to work in the iOS subsector. So all of that for us has really rewarded the investors with great third-quarter results. So thank you, and we're looking forward to our future.
Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.