Document


 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
Form 8-K
 
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
Date of Report (Date of earliest event reported):  August 2, 2017
 
Piedmont Office Realty Trust, Inc.
(Exact name of registrant as specified in its charter)
 
Commission File Number:  001-34626
 
Maryland
 
58-2328421
(State or other jurisdiction of
 
(IRS Employer
incorporation)
 
Identification No.)

11695 Johns Creek Parkway
Suite 350
Johns Creek, GA 30097-1523
(Address of principal executive offices, including zip code)
 
770-418-8800
(Registrant's telephone number, including area code)
 
(Former name or former address, if changed since last report)
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
[  ]   Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

[  ]   Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

[  ]   Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

[  ]   Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.o
 





Item 2.02 Results of Operations and Financial Condition

On August 2, 2017, Piedmont Office Realty Trust, Inc. (the “Registrant”) issued a press release announcing its financial results for the second quarter 2017, and published supplemental information for the second quarter 2017 to its website. The press release and the supplemental information are attached hereto as Exhibit 99.1 and 99.2, respectively, and are incorporated herein by reference. Pursuant to the rules and regulations of the Securities and Exchange Commission, such exhibits and the information set forth therein are deemed to have been furnished and shall not be deemed to be “filed” under the Securities Exchange Act of 1934.


Item 9.01 Financial Statements and Exhibits

(d) Exhibits:

Exhibit No.
 
Description
99.1
 
Press release dated August 2, 2017.
 
 
 
99.2
 
Piedmont Office Realty Trust, Inc. Quarterly Supplemental Information for the Second Quarter 2017.









SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Current Report on Form 8-K to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
 
 
 
 
Piedmont Office Realty Trust, Inc.
 
 
 
 
 
(Registrant)
 
 
 
 
 
 
Dated:
August 2, 2017
 
By:
 
/s/    Robert E. Bowers
 
 
 
 
 
Robert E. Bowers
 
 
 
 
 
Chief Financial Officer and Executive Vice President

 





EXHIBIT INDEX


Exhibit No.
 
Description
99.1
 
Press release dated August 2, 2017.
 
 
 
99.2
 
Piedmont Office Realty Trust, Inc. Quarterly Supplemental Information for the Second Quarter 2017.




Exhibit


EXHIBIT 99.1
http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=11726424&doc=12

Piedmont Office Realty Trust Reports Second Quarter 2017 Results
ATLANTA, August 2, 2017 --Piedmont Office Realty Trust, Inc. ("Piedmont" or the "Company") (NYSE:PDM), an owner of Class A office properties in select sub-markets located primarily within eight major Eastern U.S. office markets, today announced its results for the quarter ended June 30, 2017.

Highlights for the Three Months Ended June 30, 2017:

Reported Net Income Applicable to Common Stockholders of $0.16 per diluted share;
Achieved Core Funds From Operations ("Core FFO") of $0.46 per diluted share as compared with $0.40 for the quarter ended June 30, 2016;
Reported a 9.2% increase in Same Store NOI- Cash Basis;
Completed approximately 362,000 square feet of leasing during the second quarter, of which over half related to new leases;
Sold Sarasota Commerce Center II for $23.5 million, marking the Company's exit from the Sarasota, FL market; and
Entered into a binding contract to sell 8560 Upland Drive, the Company's last asset located in the Denver, CO market.
Additionally, subsequent to quarter end, Piedmont successfully completed the sale of Two Independence Square, an approximately 606,000 square foot office building located in Washington, D.C., for approximately $360 million, or $593 per square foot.

Donald A. Miller, CFA, President and Chief Executive Officer, commented, "We delivered solid financial results this quarter, and just after quarter end we closed on the sale of Two Independence Square which was an important disposition for the Company. It was our largest non-strategic asset in Washington, D.C. and the sale captured significant value for our stockholders. Although leasing has been sluggish in the first half of 2017, our forward leasing pipeline provides optimism headed into the second half of the year.”

Results for the Quarter ended June 30, 2017

Piedmont recognized net income applicable to common stockholders for the three months ended June 30, 2017 of $23.7 million, or $0.16 per diluted share, as compared with $72.3 million, or $0.50 per diluted share, for the three months ended June 30, 2016. The prior quarter included approximately $73.8 million, or $0.51 per diluted share attributable to gains on sales of real estate assets, whereas the current quarter included approximately $6.5 million, or $0.04 of such gains.

Funds From Operations ("FFO"), which removes the impact of the gains on sales mentioned above, as well as depreciation and amortization, and Core FFO, which further removes the impact of acquisition expenses, were both $0.46 per diluted share for the three months ended June 30, 2017, as compared with





$0.40 per diluted share for the three months ended June 30, 2016, with the increase primarily due to new leases commencing and net acquisition transactional activity over the last twelve months.

Revenues and property operating costs for the three months ended June 30, 2017 also increased due to net transactional activity and new leases commencing over the last twelve months. Revenues and property operating costs for the three months ended June 30, 2017 were $148.7 million and $55.8 million, respectively, compared to $135.3 million and $52.3 million, respectively, for the same period a year ago.

General and administrative expense was $8.0 million for the three months ended June 30, 2017, compared to $8.3 million for the same period in 2016, primarily as a result of decreased accruals for potential stock-based compensation expense during the current period. Interest expense increased $2.0 million for the three months ended June 30, 2017, as compared to the three months ended June 30, 2016, primarily due to a net increase in the average debt outstanding during the current quarter.

Leasing Update

The Company's leasing volume for the quarter ended June 30, 2017 totaled approximately 362,000 square feet, with approximately half of that volume related to new leases. Our most productive market during the second quarter was Dallas, TX where we completed almost 100,000 square feet of leases highlighted by the following:

Caris Life Sciences, LLC signed a 27,000 square foot, 10+ year new lease at 750 West John Carpenter Freeway;
Covey Park Energy signed a 19,000 square foot, 5-year lease expansion and short-term extension at One Lincoln Park; and
Veterans United Home Loans executed an almost 19,000 square foot, 5+ year lease renewal and expansion at Las Colinas Corporate Center II.

Other leasing highlights for the second quarter of 2017 included: NAI Brannen Goddard completed a 28,000 square foot, 5-year lease renewal at Glenridge Highlands One in Atlanta, GA; The General Services Administration (GSA) signed a 21,000 square foot, 5-year lease renewal at 400 Virginia Avenue in Washington, D.C; and R-T Specialty, LLC signed an 11,000 square foot, 11+ year lease expansion at 500 West Monroe Street in Chicago, IL.

The Company's leased percentage was 91.0%, and weighted average lease term was approximately 6.7 years as of June 30, 2017, both comparable with the first quarter of 2017. Same Store NOI increased 9.2% and 7.9% on a cash and accrual basis, respectively, compared to the second quarter of the prior year, primarily reflecting expiration of abatement periods and the commencement of leases over the last twelve months. Details outlining Piedmont's significant upcoming lease expirations, the status of current leasing activity, and a schedule of significant near-term abatement periods can be found in the Company's quarterly supplemental information package available at www.piedmontreit.com.

Transactional Activity

During the second quarter, Piedmont disposed of Sarasota Commerce Center II for $23.5 million, or $158 per square foot, marking Piedmont's exit from the Sarasota, FL office market, and entered into a binding contract to sell 8560 Upland Drive, Piedmont's last asset in the Denver, CO market and last asset held through an unconsolidated joint venture. The Upland Drive sale subsequently closed on July 27, 2017.





Additionally, subsequent to quarter end, the Company successfully completed the sale of one of its largest non-strategic properties, Two Independence Square, located at 300 E Street, S.W. in Washington D.C for approximately $360 million, or $593 per square foot. The 606,000 square foot, 9-story, office building is 100% leased and has served as the headquarters for the National Aeronautics and Space Administration (NASA) since its construction. Subsequent to quarter end, net sales proceeds were used to pay off the balance outstanding on the Company's $500 million line of credit and a $140 million maturing mortgage.

Third Quarter 2017 Dividend Declaration

On August 1, 2017, the board of directors of Piedmont declared dividends for the third quarter of 2017 in the amount of $0.21 per share on its common stock to stockholders of record as of the close of business on August 25, 2017, payable on September 15, 2017.

Guidance for 2017

Based on the consummation of the sale of Two Independence Square and management's expectations for the remainder of the year, the Company is narrowing its previously issued guidance for full-year 2017 as follows:
(in millions, except per share data)
 
Low
 
High
Net Income
 
$172
-
$178
Add:
 


 

         Depreciation
 
121

 
126
         Amortization
 
73

 
78
Less: Gain on Sale of Real Estate Assets
 
(115
)
-
(123)
NAREIT FFO and Core FFO applicable to Common Stock
 
251

 
259
NAREIT FFO and Core FFO per diluted share
 
$1.72
-
$1.78

These estimates reflect management's view of current market conditions and incorporate certain economic and operational assumptions and projections. Actual results could differ materially from these estimates based on a variety of factors, including major acquisitions and dispositions, as well as those factors discussed under "Forward Looking Statements" below.

Note that individual quarters may fluctuate on both a cash basis and an accrual basis due to lease commencements and expirations, abatement periods, the timing of repairs and maintenance, capital expenditures, capital markets activities, seasonal general and administrative expenses, and one-time revenue or expense events. In addition, the Company's guidance is based on information available to management as of the date of this release.

Non-GAAP Financial Measures

To supplement the presentation of the Company’s financial results prepared in accordance with U.S. generally accepted accounting principles ("GAAP"), this release and the accompanying quarterly supplemental information as of and for the period ended June 30, 2017 contain certain financial measures that are not prepared in accordance with GAAP, including FFO, Core FFO, AFFO, Same Store NOI (cash basis), Property NOI (cash basis) and Core EBITDA. Definitions and reconciliations of each of these non-GAAP measures to their most comparable GAAP metrics are included below and in the accompanying quarterly supplemental information.





Each of the non-GAAP measures included in this release and the accompanying quarterly supplemental financial information has limitations as an analytical tool and should not be considered in isolation or as a substitute for an analysis of the Company’s results calculated in accordance with GAAP. In addition, because not all companies use identical calculations, the Company’s presentation of non-GAAP measures in this release and the accompanying quarterly supplemental information may not be comparable to similarly titled measures disclosed by other companies, including other REITs. The Company may also change the calculation of any of the non-GAAP measures included in this news release and the accompanying supplemental financial information from time to time in light of its then existing operations to include other adjustments that may affect its operations.

Conference Call Information

Piedmont has scheduled a conference call and an audio web cast for Thursday, August 3, 2017 at 10:00 A.M. Eastern daylight time. The live audio web cast of the call may be accessed on the Company's website at www.piedmontreit.com in the Investor Relations section. Dial-in numbers are (877) 407-0778 for participants in the United States and Canada and (201) 689-8565 for international participants. A replay of the conference call will be available through 10 A.M. EDT on August 17, 2017, and may be accessed by dialing (877) 481-4010 for participants in the United States and Canada and (919) 882-2331 for international participants, followed by conference identification code 16154. A web cast replay will also be available after the conference call in the Investor Relations section of the Company's website. During the audio web cast and conference call, the Company's management team will review second quarter 2017 performance, discuss recent events, and conduct a question-and-answer period.

Supplemental Information

Quarterly supplemental information as of and for the period ended June 30, 2017 can be accessed on the Company`s website under the Investor Relations section at www.piedmontreit.com.

About Piedmont Office Realty Trust

Piedmont Office Realty Trust, Inc. (NYSE: PDM) is an owner, manager, developer, and operator of high-quality, Class A office properties in select submarkets located primarily within eight major U.S. office markets. Its geographically-diversified, over $5 billion portfolio is comprised of approximately 20 million square feet. The Company is a fully-integrated, self-managed real estate investment trust (REIT) with local management offices in each of its major markets and is investment-grade rated by Standard & Poor’s (BBB) and Moody’s (Baa2). For more information, see www.piedmontreit.com.

Forward Looking Statements

Certain statements contained in this press release constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). The Company intends for all such forward-looking statements to be covered by the safe-harbor provisions for forward-looking statements contained in Section 27A of the Securities Act and Section 21E of the Exchange Act, as applicable. Such information is subject to certain risks and uncertainties, as well as known and unknown risks, which could cause actual results to differ materially from those projected or anticipated. Therefore, such statements are not intended to be a guarantee of the Company`s performance in future periods. Such forward-looking statements can generally be identified by our use of forward-looking terminology such as





"may," "will," "expect," "intend," "anticipate," "believe," "continue" or similar words or phrases that are predictions of future events or trends and which do not relate solely to historical matters. Examples of such statements in this press release include the Company's optimism regarding it's leasing pipeline and whether the pipeline will result in increased leasing volume during the second half of the year and the Company's estimated range of Net Income, Depreciation, Amortization, Gain on Sale of Real Estate Assets, NAREIT FFO/Core FFO and NAREIT FFO/Core FFO per diluted share for the year ending December 31, 2017.

The following are some of the factors that could cause the Company`s actual results and its expectations to differ materially from those described in the Company`s forward-looking statements: Economic, regulatory, and/or socio-economic changes (including accounting standards) that impact the real estate market generally, or that could affect patterns of use of commercial office space; the impact of competition on our efforts to renew existing leases or re-let space on terms similar to existing leases; changes in the economies and other conditions affecting the office sector in general and the specific markets in which we operate, particularly in Washington, D.C., the New York metropolitan area, and Chicago where we have high concentrations of our Annualized Lease Revenue; lease terminations or lease defaults, particularly by one of our large lead tenants; the effect on us of adverse market and economic conditions, including any resulting impairment charges on both our long-lived assets or goodwill; the success of our real estate strategies and investment objectives, including our ability to identify and consummate suitable acquisitions and divestitures; the illiquidity of real estate investments, including the resulting impediment on our ability to quickly respond to adverse changes in the performance of our properties; the risks and uncertainties associated with our acquisition of properties, many of which risks and uncertainties may not be known at the time of acquisition; development and construction delays and resultant increased costs and risks; our real estate development strategies may not be successful; future acts of terrorism in any of the major metropolitan areas in which we own properties, or future cybersecurity attacks against us or any of our tenants; costs of complying with governmental laws and regulations; additional risks and costs associated with directly managing properties occupied by government tenants; the effect of future offerings of debt or equity securities or changes in market interest rates on the value of our common stock; uncertainties associated with environmental and other regulatory matters; potential changes in political environment and reduction in federal and/or state funding of our governmental tenants; any change in the financial condition of any of our large lead tenants; the effect of any litigation to which we are, or may become, subject; changes in tax laws impacting REITs and real estate in general, as well as our ability to continue to qualify as a REIT under the Internal Revenue Code of 1986 (the “Code”); the future effectiveness of our internal controls and procedures; and other factors, including the risk factors discussed under Item 1A. of Piedmont’s Amended Annual Report on Form 10-K/A for the year ended December 31, 2016.

Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. The Company cannot guarantee the accuracy of any such forward-looking statements contained in this press release, and the Company does not intend to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.






Research Analysts/ Institutional Investors Contact:
Eddie Guilbert
770-418-8592
research.analysts@piedmontreit.com

Shareholder Services/Transfer Agent Services Contact:
Computershare, Inc.
866-354-3485
investor.services@piedmontreit.com





Piedmont Office Realty Trust, Inc.
 
 
 
 
 
Consolidated Balance Sheets
 
 
 
 
 
 
 
June 30, 2017
 
December 31, 2016
 
 
 
(unaudited)
 
 
 
Assets:
 
 
 
 
 
Real estate assets, at cost:
 
 
 
 
 
Land
 
$
614,934

 
$
617,138

 
Buildings and improvements
 
3,639,291

 
3,610,360

 
Buildings and improvements, accumulated depreciation
 
(896,964
)
 
(856,254
)
 
Intangible lease assets
 
179,540

 
208,847

 
Intangible lease assets, accumulated amortization
 
(94,551
)
 
(109,152
)
 
Construction in progress
 
15,651

 
34,814

 
Real estate assets held for sale, gross
 
314,258

 
314,258

 
Real estate assets held for sale, accumulated depreciation and amortization
 
(89,187
)
 
(88,319
)
 
Total real estate assets
 
3,682,972

 
3,731,692

 
Investments in and amounts due from unconsolidated joint ventures
 
7,762

 
7,360

 
Cash and cash equivalents
 
9,596

 
6,992

 
Tenant receivables, net of allowance for doubtful accounts
 
24,269

 
26,494

 
Straight line rent receivables
 
177,463

 
163,789

 
Restricted cash and escrows
 
1,290

 
1,212

 
Prepaid expenses and other assets
 
29,454

 
23,201

 
Goodwill
 
98,918

 
98,918

 
Deferred lease costs, less accumulated amortization
 
278,366

 
298,695

 
Other assets held for sale, net
 
10,222

 
9,815

 
Total assets
 
$
4,320,312

 
$
4,368,168

 
Liabilities:
 
 
 
 
 
Unsecured debt, net of discount and unamortized debt issuance costs
 
$
1,720,986

 
$
1,687,731

 
Secured debt, net of premiums and unamortized debt issuance costs
 
332,196

 
332,744

 
Accounts payable, accrued expenses, dividends payable, and accrued capital expenditures
 
111,011

 
165,410

 
Deferred income
 
27,416

 
28,406

 
Intangible lease liabilities, less accumulated amortization
 
43,328

 
48,005

 
Interest rate swaps
 
5,061

 
8,169

 
Total liabilities
 
2,239,998

 
2,270,465

 
Stockholders' equity :
 
 
 
 
 
Common stock
 
1,455

 
1,452

 
Additional paid in capital
 
3,675,562

 
3,673,128

 
Cumulative distributions in excess of earnings
 
(1,603,119
)
 
(1,580,863
)
 
Other comprehensive income
 
4,547

 
2,104

 
Piedmont stockholders' equity
 
2,078,445

 
2,095,821

 
Non-controlling interest
 
1,869

 
1,882

 
Total stockholders' equity
 
2,080,314

 
2,097,703

 
Total liabilities and stockholders' equity
 
$
4,320,312

 
$
4,368,168

 
 
 
 
 
 
 
Number of shares of common stock outstanding as of end of period
 
145,490

 
145,235

 







Piedmont Office Realty Trust, Inc.
 
 
 
 
 
 
 
Consolidated Statements of Income
 
 
 
 
 
 
 
Unaudited (in thousands, except for per share data)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Six Months Ended
 
6/30/2017
 
6/30/2016
 
6/30/2017
 
6/30/2016
Revenues:
 
 
 
 
 
 
 
Rental income
$
124,248

 
$
111,767

 
$
247,698

 
$
226,505

Tenant reimbursements
24,044

 
23,086

 
48,544

 
45,837

Property management fee revenue
387

 
454

 
900

 
977

Total revenues
148,679

 
135,307

 
297,142

 
273,319

Expenses:
 
 
 
 
 
 
 
Property operating costs
55,779

 
52,292

 
111,163

 
106,571

Depreciation
30,059

 
31,556

 
60,827

 
63,338

Amortization
19,314

 
17,402

 
39,729

 
35,208

Impairment loss on real estate assets

 
10,950

 

 
10,950

General and administrative
8,036

 
8,316

 
16,632

 
16,089

Total operating expenses
113,188

 
120,516

 
228,351

 
232,156

Real estate operating income
35,491

 
14,791

 
68,791

 
41,163

Other income (expense):
 
 
 
 
 
 
 
Interest expense
(18,421
)
 
(16,413
)
 
(36,478
)
 
(32,798
)
Other income/(expense)
38

 
(41
)
 
(62
)
 
253

Equity in income of unconsolidated joint ventures
107

 
110

 
118

 
225

Total other expense
(18,276
)
 
(16,344
)
 
(36,422
)
 
(32,320
)
Income/(loss) from continuing operations
17,215

 
(1,553
)
 
32,369

 
8,843

Discontinued operations:
 
 
 
 
 
 
 
Operating loss

 
(1
)
 

 
(1
)
Loss from discontinued operations

 
(1
)
 

 
(1
)
Gain on sale of real estate assets
6,492

 
73,835

 
6,439

 
73,815

Net income
23,707

 
72,281

 
38,808

 
82,657

Less: Net loss/(income) applicable to noncontrolling interest
3

 
(3
)
 
6

 
(7
)
Net income applicable to Piedmont
$
23,710

 
$
72,278

 
$
38,814

 
$
82,650

Weighted average common shares outstanding - diluted*
145,813

 
145,699

 
145,780

 
145,765

Per Share Information -- diluted:
 
 
 
 
 
 
 
Net income applicable to common stockholders
$
0.16

 
$
0.50

 
$
0.27

 
$
0.57

 
 
 
 
 
 
 
 
*Number of shares of common stock outstanding as of end of period
145,490

 
145,230

 
145,490

 
145,230







Piedmont Office Realty Trust, Inc.
 
 
 
 
 
 
 
Funds From Operations, Core Funds From Operations and Adjusted Funds From Operations
 
 
Unaudited (in thousands, except for per share data)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Six Months Ended
 
6/30/2017
 
6/30/2016
 
6/30/2017
 
6/30/2016
GAAP net income applicable to common stock
$
23,710

 
$
72,278

 
$
38,814

 
$
82,650

Depreciation of real estate assets(1) (2)
29,932

 
31,442

 
60,561

 
63,081

Amortization of lease-related costs(1)
19,315

 
17,418

 
39,721

 
35,240

Impairment loss on real estate assets

 
10,950

 

 
10,950

Gain on sale of real estate assets (1)
(6,492
)
 
(73,835
)
 
(6,439
)
 
(73,815
)
NAREIT Funds From Operations applicable to common stock*
66,465

 
58,253

 
132,657

 
118,106

Acquisition costs

 
5

 
6

 
17

Core Funds From Operations applicable to common stock*
66,465

 
58,258

 
132,663

 
118,123

Amortization of debt issuance costs, fair market adjustments on notes payable, and discount on Unsecured Senior Notes
628

 
643

 
1,258

 
1,290

Depreciation of non real estate assets
184

 
175

 
379

 
379

Straight-line effects of lease revenue (1)
(6,634
)
 
(3,127
)
 
(12,337
)
 
(10,975
)
Stock-based and other non-cash compensation
911

 
1,477

 
2,952

 
3,405

Net effect of amortization of below-market in-place lease intangibles (1)
(1,611
)
 
(1,290
)
 
(3,170
)
 
(2,528
)
Acquisition costs

 
(5
)
 
(6
)
 
(17
)
Non-incremental capital expenditures (3)
(9,073
)
 
(6,455
)
 
(16,745
)
 
(16,451
)
Adjusted funds from operations applicable to common stock*
$
50,870

 
$
49,676

 
$
104,994

 
$
93,226

Weighted average common shares outstanding - diluted**
145,813

 
145,699

 
145,780

 
145,765

Funds from operations per share (diluted)
$
0.46

 
$
0.40

 
$
0.91

 
$
0.81

Core funds from operations per share (diluted)
$
0.46

 
$
0.40

 
$
0.91

 
$
0.81

 
 
 
 
 
 
 
 
**Number of shares of common stock outstanding as of end of period
145,490

 
145,230

 
145,490

 
145,230


(1) Includes adjustments for consolidated properties and for our proportionate share of amounts attributable to unconsolidated joint ventures.
(2) Excludes depreciation of non real estate assets.
(3) Capital expenditures of a recurring nature related to tenant improvements and leasing commissions that do not incrementally enhance the underlying assets' income generating capacity. Tenant improvements, leasing commissions, building capital and deferred lease incentives incurred to lease space that was vacant at acquisition, leasing costs for spaces vacant for greater than one year, leasing costs for spaces at newly acquired properties for which in-place leases expire shortly after acquisition, improvements associated with the expansion of a building and renovations that change the underlying classification of a building are excluded from this measure.






*Definitions:
 
Funds From Operations ("FFO"): The Company calculates FFO in accordance with the current National Association of Real Estate Investment Trusts (“NAREIT”) definition. NAREIT currently defines FFO as net income (computed in accordance with GAAP), excluding gains or losses from sales of property and impairment losses, adding back depreciation and amortization on real estate assets, and after the same adjustments for unconsolidated partnerships and joint ventures. These adjustments can vary among owners of identical assets in similar conditions based on historical cost accounting and useful-life estimates. FFO is a non-GAAP financial measure and should not be viewed as an alternative to net income calculated in accordance with GAAP as a measurement of the Company’s operating performance. The Company believes that FFO is helpful to investors as a supplemental performance measure because it excludes the effects of depreciation, amortization and gains or losses from sales of real estate, all of which are based on historical costs, which implicitly assumes that the value of real estate diminishes predictably over time. The Company also believes that FFO can help facilitate comparisons of operating performance between periods and with other REITs. However, other REITs may not define FFO in accordance with the NAREIT definition, or may interpret the current NAREIT definition differently than the Company; therefore, the Company’s computation of FFO may not be comparable to that of such other REITs.
 
Core Funds From Operations ("Core FFO"): The Company calculates Core FFO by starting with FFO, as defined by NAREIT, and adjusting for gains or losses on the extinguishment of swaps and/or debt, acquisition-related expenses and any significant non-recurring items. Core FFO is a non-GAAP financial measure and should not be viewed as an alternative to net income calculated in accordance with GAAP as a measurement of the Company’s operating performance. The Company believes that Core FFO is helpful to investors as a supplemental performance measure because it excludes the effects of certain items which can create significant earnings volatility, but which do not directly relate to the Company’s core business operations. As a result, the Company believes that Core FFO can help facilitate comparisons of operating performance between periods and provides a more meaningful predictor of future earnings potential. Other REITs may not define Core FFO in the same manner as the Company; therefore, the Company’s computation of Core FFO may not be comparable to that of other REITs.
 
Adjusted Funds From Operations ("AFFO"): The Company calculates AFFO by starting with Core FFO and adjusting for non-incremental capital expenditures and acquisition-related costs and then adding back non-cash items including: non-real estate depreciation, straight-lined rents and fair value lease adjustments, non-cash components of interest expense and compensation expense, and by making similar adjustments for unconsolidated partnerships and joint ventures. AFFO is a non-GAAP financial measure and should not be viewed as an alternative to net income calculated in accordance with GAAP as a measurement of the Company’s operating performance. The Company believes that AFFO is helpful to investors as a meaningful supplemental comparative performance measure of our ability to make incremental capital investments. Other REITs may not define AFFO in the same manner as the Company; therefore, the Company’s computation of AFFO may not be comparable to that of other REITs.
 






Piedmont Office Realty Trust, Inc.
 
 
 
 
 
 
 
Core EBITDA, Property Net Operating Income (Cash and Accrual), Same Store Net Operating Income (Cash and Accrual)
 
 
 
Unaudited (in thousands)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash Basis
 
Accrual Basis
 
Three Months Ended
 
Three Months Ended
 
6/30/2017
 
6/30/2016
 
6/30/2017
 
6/30/2016
 
 
 
 
 
 
 
 
GAAP net income applicable to common stock
$
23,710

 
$
72,278

 
$
23,710

 
$
72,278

Net (income)/loss applicable to noncontrolling interest
(3
)
 
3

 
(3
)
 
3

Interest expense
18,421

 
16,413

 
18,421

 
16,413

Depreciation (1)
30,116

 
31,617

 
30,116

 
31,617

Amortization (1)
19,315

 
17,418

 
19,315

 
17,418

Acquisition costs

 
5

 

 
5

Impairment loss on real estate assets

 
10,950

 

 
10,950

Recoveries from casualty events
(26
)
 

 
(26
)
 

Gain on sale of real estate assets (1)
(6,492
)
 
(73,835
)
 
(6,492
)
 
(73,835
)
Core EBITDA*
85,041

 
74,849

 
85,041

 
74,849

General & administrative expenses (1)
8,059

 
8,351

 
8,059

 
8,351

Management fee revenue
(168
)
 
(224
)
 
(168
)
 
(224
)
Other income (1)
(12
)
 
543

 
(12
)
 
543

Straight line effects of lease revenue (1)
(6,634
)
 
(3,127
)
 

 
 
Amortization of lease-related intangibles (1)
(1,611
)
 
(1,290
)
 
 
 
 
Property NOI*
84,675

 
79,102

 
92,920

 
83,519

   Net operating income from:
 
 


 
 
 
 
Acquisitions
(3,317
)
 

 
(7,061
)
 

Dispositions
(128
)
 
(4,412
)
 
(81
)
 
(4,528
)
Other investments (2)
384

 
52

 
(657
)
 
(118
)
Same Store NOI *
$
81,614

 
$
74,742

 
$
85,121

 
$
78,873

Change period over period in Same Store NOI
9.2
%
 
N/A

 
7.9
%
 
N/A

 
 
 
 
 
 
 
 






Piedmont Office Realty Trust, Inc.
 
 
 
 
 
 
 
Core EBITDA, Property Net Operating Income (Cash and Accrual), Same Store Net Operating Income (Cash and Accrual)
 
 
 
Unaudited (in thousands)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash Basis
 
Accrual Basis
 
Six Months Ended
 
Six Months Ended
 
6/30/2017
 
6/30/2016
 
6/30/2017
 
6/30/2016
 
 
 
 
 
 
 
 
GAAP net income applicable to common stock
$
38,814

 
$
82,650

 
$
38,814

 
$
82,650

Net (income)/loss applicable to noncontrolling interest
(6
)
 
7

 
(6
)
 
7

Interest expense
36,478

 
32,798

 
36,478

 
32,798

Depreciation (1)
60,940

 
63,460

 
60,940

 
63,460

Amortization (1)
39,721

 
35,240

 
39,721

 
35,240

Acquisition costs
6

 
17

 
6

 
17

Impairment loss on real estate assets

 
10,950

 

 
10,950

Loss from casualty events
32

 

 
32

 

Gain on sale of real estate assets (1)
(6,439
)
 
(73,815
)
 
(6,439
)
 
(73,815
)
Core EBITDA*
169,546

 
151,307

 
169,546

 
151,307

General & administrative expenses (1)
16,660

 
16,128

 
16,660

 
16,128

Management fee revenue
(484
)
 
(515
)
 
(484
)
 
(515
)
Other income (1)
25

 
236

 
25

 
236

Straight line effects of lease revenue (1)
(12,337
)
 
(10,975
)
 

 

Amortization of lease-related intangibles (1)
(3,170
)
 
(2,528
)
 

 

Property NOI*
170,240

 
153,653

 
185,747

 
167,156

   Net operating income from:
 
 
 
 
 
 
 
Acquisitions
(8,084
)
 

 
(14,115
)
 

Dispositions
(764
)
 
(10,052
)
 
(662
)
 
(10,660
)
Other investments(2)
664

 
(19
)
 
(1,043
)
 
(212
)
Same Store NOI *
$
162,056

 
$
143,582

 
$
169,927

 
$
156,284

Change period over period in Same Store NOI
12.9
%
 
N/A

 
8.7
%
 
N/A


(1) Includes amounts attributable to consolidated properties and our proportionate share of amounts attributable to unconsolidated joint ventures.
(2)Other investments consist of our investments in unconsolidated joint ventures, active redevelopment and development projects, land, and recently completed redevelopment and development projects for which some portion of operating expenses were capitalized during the current or prior reporting periods. The operating results from 3100 Clarendon Boulevard in Arlington, Virginia, Enclave Place in Houston, Texas, and 500 TownPark in Lake Mary, Florida, are included in this line item.

*Definitions:

Core EBITDA: The Company calculates Core EBITDA as net income (computed in accordance with GAAP) before interest, taxes, depreciation and amortization and incrementally removing any impairment losses, gains or losses from sales of property and other significant infrequent items that create volatility within our earnings and make it difficult to determine the earnings generated by our core ongoing business. Core EBITDA is a non-GAAP financial measure and should not be viewed as an alternative to net income calculated in accordance with GAAP as a measurement of the Company’s operating performance. The Company believes that Core EBITDA is helpful to investors as a supplemental performance measure because it provides a metric for understanding the performance of the Company’s results from ongoing operations without taking into account the effects of non-cash expenses (such as depreciation and amortization), as well as items that are not part of normal day-to-day operations of the Company’s business. Other REITs may not define Core EBITDA in the same manner as the Company; therefore, the Company’s computation of Core EBITDA may not be comparable to that of other REITs.
 
Property Net Operating Income ("Property NOI"): The Company calculates Property NOI by starting with Core EBITDA and adjusting for general and administrative expense, income associated with property management performed by Piedmont for other organizations and other income or expense





items for the Company, such as interest income from loan investments or costs from the pursuit of non-consummated transactions. The Company may present this measure on an accrual basis or a cash basis. When presented on a cash basis, the effects of straight lined rents and fair value lease revenue are also eliminated. Property NOI is a non-GAAP financial measure and should not be viewed as an alternative to net income calculated in accordance with GAAP as a measurement of the Company’s operating performance. The Company believes that Property NOI is helpful to investors as a supplemental comparative performance measure of income generated by its properties alone without the administrative overhead of the Company. Other REITs may not define Property NOI in the same manner as the Company; therefore, the Company’s computation of Property NOI may not be comparable to that of other REITs.

Same Store Net Operating Income ("Same Store NOI"): The Company calculates Same Store NOI as Property NOI attributable to the properties for which the following criteria were met during the entire span of the current and prior year reporting periods: i) they were owned, ii) they were not under development / redevelopment, and iii) none of the operating expenses for which were capitalized. Same Store NOI also excludes amounts attributable to unconsolidated joint venture and land assets. The Company may present this measure on an accrual basis or a cash basis. When presented on a cash basis, the effects of straight lined rents and fair value lease revenue are also eliminated. Same Store NOI is a non-GAAP financial measure and should not be viewed as an alternative to net income calculated in accordance with GAAP as a measurement of the Company’s operating performance. The Company believes that Same Store NOI is helpful to investors as a supplemental comparative performance measure of the income generated from the same group of properties from one period to the next. Other REITs may not define Same Store NOI in the same manner as the Company; therefore, the Company’s computation of Same Store NOI may not be comparable to that of other REITs.


Exhibit



EXHIBIT 99.2




http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=11726424&doc=4



Quarterly Supplemental Information
June 30, 2017










Corporate Headquarters
Institutional Analyst Contact
Investor Relations
11695 Johns Creek Parkway, Suite 350
Telephone: 770.418.8592
Telephone: 866.354.3485
Johns Creek, GA 30097
research.analysts@piedmontreit.com
investor.services@piedmontreit.com
Telephone: 770.418.8800
 
www.piedmontreit.com




Piedmont Office Realty Trust, Inc.
Quarterly Supplemental Information
Index

 
Page
 
 
Page
 
 
 
 
 
Introduction
 
 
Other Investments
 
Corporate Data
 
Other Investments Detail
Investor Information
 
Supporting Information
 
Financial Highlights
 
Definitions
Financials
 
 
Research Coverage
Balance Sheets
 
Non-GAAP Reconciliations & Other Detail
Income Statements
 
Property Detail - In-Service Portfolio
Key Performance Indicators
 
Company Metrics After Two Independence Square Sale
Funds From Operations / Adjusted Funds From Operations
 
Risks, Uncertainties and Limitations
Same Store Analysis
 
 
 
Capitalization Analysis
 
 
 
Debt Summary
 
 
 
Debt Detail
 
 
 
Debt Covenant & Ratio Analysis
 
 
 
Operational & Portfolio Information - Office Investments
 
 
 
 
Tenant Diversification
 
 
 
Tenant Credit Rating & Lease Distribution Information
 
 
 
Leased Percentage Information
 
 
 
Rental Rate Roll Up / Roll Down Analysis
 
 
 
Lease Expiration Schedule
 
 
 
Quarterly Lease Expirations
 
 
 
Annual Lease Expirations
 
 
 
Capital Expenditures & Commitments
 
 
 
Contractual Tenant Improvements & Leasing Commissions
 
 
 
Geographic Diversification
 
 
 
Geographic Diversification by Location Type
 
 
 
Industry Diversification
 
 
 
Property Investment Activity
 
 
 
Notice to Readers:
Please refer to page 49 for a discussion of important risks related to the business of Piedmont Office Realty Trust, Inc., as well as an investment in its securities, including risks that could cause actual results and events to differ materially from results and events referred to in the forward-looking information. Considering these risks, uncertainties, assumptions, and limitations, the forward-looking statements about leasing, financial operations, leasing prospects, etc. contained in this quarterly supplemental information report might not occur.
Certain prior period amounts have been reclassified to conform to the current period financial statement presentation. In addition, many of the schedules herein contain rounding to the nearest thousands or millions and, therefore, the schedules may not total due to this rounding convention. The Company has restated certain GAAP basis data included herein for prior periods to reflect an accounting treatment change which allocates a portion of recorded goodwill to each asset disposition that occurred between December 1, 2010 and September 30, 2016 in accordance with Accounting Standard Codification 350 (ASC 350; relating to business combinations). During that particular period of time, building dispositions were considered dispositions of businesses according to ASC 350, and, therefore, a portion of the Company's total goodwill has been allocated to the sale of each business. This change has no impact on net income reported for 2017. Furthermore, these non-cash adjustments do not impact current nor previously reported non-GAAP measures, including FFO, Core FFO, AFFO, and Same Store NOI, nor do they affect the Company's financial guidance for 2017.
To supplement the presentation of the Company’s financial results prepared in accordance with U.S. generally accepted accounting principles (GAAP), this report contains certain financial measures that are not prepared in accordance with GAAP, including FFO, Core FFO, AFFO, Same Store NOI, Property NOI and Core EBITDA. Definitions and reconciliations of these non-GAAP measures to their most comparable GAAP metrics are included beginning on page 39. Each of the non-GAAP measures included in this report has limitations as an analytical tool and should not be considered in isolation or as a substitute for an analysis of the Company’s results calculated in accordance with GAAP. In addition, because not all companies use identical calculations, the Company’s presentation of non-GAAP measures in this report may not be comparable to similarly titled measures disclosed by other companies, including other REITs. The Company may also change the calculation of any of the non-GAAP measures included in this report from time to time in light of its then existing operations to include other adjustments that may affect its operations.





Piedmont Office Realty Trust, Inc.
Corporate Data


Piedmont Office Realty Trust, Inc. (also referred to herein as "Piedmont" or the "Company") (NYSE: PDM) is an owner, manager, developer, and operator of high-quality, Class A office properties in select sub-markets located primarily within eight major U.S. office markets. Its geographically-diversified, over $5 billion portfolio is comprised of approximately 20 million square feet. The Company is a fully-integrated, self-managed real estate investment trust ("REIT") with local management offices in each of its major markets and is investment-grade rated by Standard & Poor’s and Moody’s. Piedmont is headquartered in Atlanta, GA.

This data supplements the information provided in our reports filed with the Securities and Exchange Commission and should be reviewed in conjunction with such filings.

 
As of
With Pro Forma Adjustments for
As of
 
June 30, 2017
the Sale of Two Independence Square

December 31, 2016
Number of consolidated office properties (1)
67
 
65
Rentable square footage (in thousands) (1)
19,450
 
18,885
Percent leased (2)
91.0
%
 
91.9
%
Capitalization (in thousands):
 
 
 
Total debt - principal amount outstanding (excludes premiums, discounts, and deferred financing costs)
$2,061,132
 
$2,029,582
Equity market capitalization (3)
$3,066,926
 
$3,036,870
Total market capitalization (3)
$5,128,058
 
$5,066,452
Total debt / Total market capitalization (3)
40.2
%
approximately 36% (4)
40.1
%
Average net debt to Core EBITDA
6.0 x

mid 5x's (estimated) (4)
6.4 x

Total debt / Total gross assets
38.2
%
approximately 34% (4)
37.4
%
Common stock data:
 
 
 
High closing price during quarter
$22.47
 
$21.53
Low closing price during quarter
$20.68
 
$18.62
Closing price of common stock at period end
$21.08
 
$20.91
Weighted average fully diluted shares outstanding during quarter (in thousands)
145,813
 
145,764
Shares of common stock issued and outstanding at period end (in thousands)
145,490
 
145,235
Annual dividend per share (5)
$0.84
 
$0.84
Rating / Outlook
 
 
 
Standard & Poor's
BBB / Stable

 
BBB / Stable

Moody's
Baa2 / Stable

 
Baa2 / Stable

Employees
138
 
137
(1)
As of June 30, 2017, our consolidated office portfolio consisted of 67 properties, exclusive of our equity interest in one property owned through an unconsolidated joint venture. As of December 31, 2016, our consolidated office portfolio excluded two properties under development, one property that was out of service for redevelopment, and one unconsolidated joint venture property. The development and redevelopment properties were placed in service on January 1, 2017. There were no acquisitions or dispositions of office properties completed during the first quarter of 2017. During the second quarter of 2017, we sold Sarasota Commerce Center II, a 149,000 square foot office building located in Sarasota, FL.
(2)
Calculated as square footage associated with commenced leases plus square footage associated with executed but uncommenced leases for vacant spaces, divided by total rentable square footage, all as of the relevant date, expressed as a percentage. This measure is presented for our consolidated office properties and excludes unconsolidated joint venture properties. This measure presented as of December 31, 2016, has been restated to include two development properties and one re-development property that were placed into service effective January 1, 2017. The development properties that were placed in service are Enclave Place, a 300,900 square foot office property located in Houston, TX, and 500 TownPark, a 134,400 square foot office property located in Lake Mary, FL; the re-development property that was placed in service is 3100 Clarendon Boulevard, a 260,900 square foot office property located in Arlington, VA. Please refer to page 27 for additional analyses regarding Piedmont's leased percentage.
(3)
Reflects common stock closing price as of the end of the reporting period.
(4)
On July 5, 2017, Piedmont completed the sale of Two Independence Square located in Washington, DC. Figure represents the impact on this measure on a pro forma basis of the sale of Two Independence Square. Please refer to page 48 for additional details regarding the sale of Two Independence Square and its impact on various metrics for the Company.
(5)
Total of the per share dividends declared over the prior four quarters.

3



Piedmont Office Realty Trust, Inc.
Investor Information

Corporate
11695 Johns Creek Parkway, Suite 350
Johns Creek, Georgia 30097
770.418.8800
www.piedmontreit.com
Executive Management
 
 
 
 
Donald A. Miller, CFA
Robert E. Bowers
C. Brent Smith
Edward H. Guilbert, III
Chief Executive Officer, President
Chief Financial Officer and Executive
Chief Investment Officer and Executive
Senior Vice President, Finance and
and Director
Vice President
Vice President, Northeast Region
Treasurer - Investor Relations Contact
 
 
 
 
 
 
 
 
Christopher A. Kollme
Laura P. Moon
Joseph H. Pangburn
Thomas R. Prescott
Executive Vice President,
Chief Accounting Officer and
Executive Vice President,
Executive Vice President,
Finance & Strategy
Senior Vice President
Southwest Region
Midwest Region
 
 
 
 
 
 
 
 
Carroll A. Reddic, IV
George Wells
Robert K. Wiberg
 
Executive Vice President,
Executive Vice President,
Executive Vice President,
 
Real Estate Operations and Assistant
Southeast Region
Mid-Atlantic Region and
 
Secretary
 
Head of Development
 
 
 
 
 
Board of Directors
 
 
 
 
Frank C. McDowell
Dale H. Taysom
Kelly H. Barrett
Wesley E. Cantrell
Director, Chairman of the
Director and Vice Chairman of the
Director
Director and Chairman of
Board of Directors and Chairman
Board of Directors
 
Governance Committee
of Compensation Committee
 
 
 
 
 
 
 
Barbara B. Lang
Donald A. Miller, CFA
Raymond G. Milnes, Jr.
Jeffery L. Swope
Director
Chief Executive Officer, President
Director and Chairman of
Director and Chairman of
 
and Director
Audit Committee
Capital Committee
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Transfer Agent
Corporate Counsel
 
 
Computershare
King & Spalding
P.O. Box 30170
1180 Peachtree Street, NE
College Station, TX 77842-3170
Atlanta, GA 30309
Phone: 866.354.3485
Phone: 404.572.4600


4



Piedmont Office Realty Trust, Inc.
Financial Highlights
As of June 30, 2017


Financial Results (1) 

Net income attributable to Piedmont for the quarter ended June 30, 2017 was $23.7 million, or $0.16 per share (diluted), compared to $72.3 million, or $0.50 per share (diluted), for the same quarter in 2016. Net income attributable to Piedmont for the six months ended June 30, 2017 was $38.8 million, or $0.27 per share (diluted), compared to $82.7 million, or $0.57 per share (diluted) for the same period in 2016. The decrease in net income attributable to Piedmont during the three months and the six months ended June 30, 2017 when compared to the same periods in 2016 was principally due to the net effect of gains and losses related to disposition transactions recorded during the respective periods. The larger amount of gains on the sale of real estate in 2016 was attributable to the sale of three Southern California assets for which the Company recorded gains of approximately $73.8 million during the second quarter of 2016.

Funds from operations (FFO) for the quarter ended June 30, 2017 was $66.5 million, or $0.46 per share (diluted), compared to $58.3 million, or $0.40 per share (diluted), for the same quarter in 2016. FFO for the six months ended June 30, 2017 was $132.7 million, or $0.91 per share (diluted), compared to $118.1 million, or $0.81 per share (diluted), for the same period in 2016. The increase in FFO for the three months and the six months ended June 30, 2017 when compared to the same periods in 2016 was primarily due to an increase in average occupancy largely attributable to the commencement of a portion of the 2.8 million square feet of leases executed since the beginning of 2016, along with a larger amount of FFO contributed from properties acquired since the beginning of 2016 when compared to that given up from assets sold during the same time period.

Core funds from operations (Core FFO) for the quarter ended June 30, 2017 was $66.5 million, or $0.46 per share (diluted), compared to $58.3 million, or $0.40 per share (diluted), for the same quarter in 2016. Core FFO for the six months ended June 30, 2017 was $132.7 million, or $0.91 per share (diluted), compared to $118.1 million, or $0.81 per share (diluted), for the same period in 2016. Core FFO is defined as FFO with incremental adjustments for certain non-recurring items such as net insurance recoveries or losses, acquisition-related expenses(2) and other significant non-recurring items. The increase in Core FFO for the three months and the six months ended June 30, 2017 as compared to the same periods in 2016 was primarily attributable to the items described above for changes in FFO.

Adjusted funds from operations (AFFO) for the quarter ended June 30, 2017 was $50.9 million, compared to $49.7 million for the same quarter in 2016. AFFO for the six months ended June 30, 2017 was $105.0 million, compared to $93.2 million for the same period in 2016. The increase in AFFO for the three months and the six months ended June 30, 2017 as compared to the same periods in 2016 was primarily due to the items described above for changes in FFO and Core FFO, partially offset by the deduction of a greater amount of straight line rent adjustments and, for the three months ended June 30, 2017, an increase in non-incremental capital expenditures.

Operations and Leasing

On a square footage leased basis, our total in-service office portfolio was 91.0% leased as of June 30, 2017, as compared to 91.5% in the prior quarter and 91.4% a year earlier. On a same store basis, the office portfolio leased percentage increased to 93.4% as of June 30, 2017 from 92.9% a year earlier. Please refer to page 27 for additional leased percentage information.

The weighted average remaining lease term of our portfolio was 6.7 years(3) as of June 30, 2017 as compared to 6.9 years at December 31, 2016.

During the three months ended June 30, 2017, the Company completed 361,922 square feet of total leasing. Of the total leasing activity during the quarter, we signed new tenant leases for 191,486 square feet and renewal leases for 170,436 square feet. During the six months ended June 30, 2017, we completed 755,588 square feet of leasing for our consolidated office properties, consisting of 344,577 square feet of new tenant leases and 411,011 square feet of renewal leases. The average committed tenant improvement cost per square foot per year of lease term for new tenant leases signed at our consolidated office properties during the six months ended June 30, 2017 was $4.50 and the same measure for renewal leases was $2.02, resulting in a weighted average of $3.53 for all leasing activity completed during the period (see page 33).

(1)
FFO, Core FFO and AFFO are supplemental non-GAAP financial measures. See page 39 for definitions of these non-GAAP financial measures, and pages 15 and 41 for reconciliations of FFO, Core FFO and AFFO to Net Income.
(2)
Piedmont early adopted the revised FASB standard on the accounting treatment of Business Combinations, which results in certain real asset transactions falling outside the scope of the standard. The result is that, in many cases, acquisition costs will be capitalized, and, therefore, will not be included in net income. In such cases, there will be no add-back of acquisition expenses to Core FFO. This revised standard is applied to transactions occurring after October 1, 2016.
(3)
Remaining lease term (after taking into account leases for vacant spaces which had been executed but not commenced as of June 30, 2017) is weighted based on Annualized Lease Revenue, as defined on page 39.

5




During the three months ended June 30, 2017, we executed nine leases greater than 10,000 square feet with lengths of term of more than one year at our consolidated office properties. Information on those leases is set forth below.
Tenant
Property
Property Location
Square Feet
Leased
Expiration
Year
Lease Type
CSAA Insurance Services, Inc.
Desert Canyon 300
Phoenix, AZ
51,862
2018
New
NAI Brannen Goddard, LLC
Glenridge Highlands One
Atlanta, GA
28,392
2023
Renewal
Caris Life Sciences, LLC
750 West John Carpenter Freeway
Irving, TX
27,188
2028
New
United States of America
(Office of the Comptroller of the Currency)
400 Virginia Avenue
Washington, DC
21,042
2022
Renewal
Covey Park Energy, LLC
One Lincoln Park
Dallas, TX
19,407
2022
Renewal / Expansion
Veterans United Home Loans
Las Colinas Corporate Center II
Irving, TX
18,847
2023
Renewal / Expansion
R-T Specialty, LLC
500 West Monroe Street
Chicago, IL
11,034
2029
Expansion
Bell Sports, Inc.
Las Colinas Corporate Center I
Irving, TX
10,972
2022
New
Heygood, Orr & Pearson
Las Colinas Corporate Center II
Irving, TX
10,416
2024
New

At the end of the second quarter of 2017, there were four tenants whose leases individually contributed greater than 1% in net Annualized Lease Revenue expiring during the eighteen month period including and following June 30, 2017. Information regarding the leasing status of the spaces associated with these tenants' leases is presented below.
Tenant
Property
Property Location
Net
Square
Footage
Expiring
Net Percentage of
Current Quarter
Annualized Lease
Revenue Expiring
(%)
Expiration
Current Leasing Status
Towers Watson
Arlington Gateway
Arlington, VA
123,286
1.0%
Q2 2017
The tenant vacated the space subsequent to quarter end in accordance with its June 30, 2017 lease expiration date. The space is actively being marketed for lease.
National Park Service
1201 Eye Street
Washington, DC
117,813
1.2%
Q3 2017
Of the 174,274 square feet currently leased to the National Park Service, 56,461 square feet have been leased to the International Food Policy Research Institute under its 101,937 square foot lease executed in 2015, leaving 117,813 square feet to be leased. The remaining available space is actively being marketed for lease.
Gallagher
Two Pierce Place
Itasca, IL
286,892
1.5%
Q1 2018
Of the 306,890 square feet currently leased to Gallagher, approximately 20,000 square feet have been leased to CivilTech Engineering under its lease executed in 2016. The remaining available space is actively being marketed for lease.
Goldman Sachs
6011 & 6031 Connection Drive
Irving, TX
234,772
1.1%
Q1 2018
The tenant will vacate upon lease expiration. The space is actively being marketed for lease.




6




Future Lease Commencements and Abatements

As of June 30, 2017, our overall leased percentage was 91.0% and our economic leased percentage was 84.4%. The difference between overall leased percentage and economic leased percentage is attributable to two factors:

1.
leases which have been contractually entered into for currently vacant spaces but have not yet commenced (amounting to 238,477 square feet of leases as of June 30, 2017, or 1.2% of the office portfolio); and
2.
leases which have commenced but the tenants have not commenced paying full rent due to rental abatements (amounting to 1,317,524 square feet of leases as of June 30, 2017, or a 5.4% impact to leased percentage on an economic basis).

The gap between reported leased percentage and economic leased percentage is anticipated to fluctuate over time as i) new leases are signed for vacant spaces and/or ii) abatements associated with existing or newly executed leases commence and expire (see page 8 for more detail on existing large leases with abatements). As presented on page 8, abatements related to large leases comprising nearly 510,000 square feet will expire by the end of the third quarter of 2017.

Piedmont has leases with many large corporate office space users. The average size of lease in the Company's portfolio is approximately 22,000 square feet. Due to the large size and length of term of new leases, Piedmont typically signs leases many months in advance of their anticipated lease commencement dates. Presented below is a schedule (1) of uncommenced leases greater than 50,000 square feet and their anticipated commencement dates. Lease renewals are excluded from this schedule.
Tenant
Property
Property Location
Square Feet
Leased
Space Status
Estimated
Commencement
Date
New /
Expansion
CSAA Insurance Services, Inc.
Desert Canyon 300
Phoenix, AZ
51,862
Not Vacant
Q3 2017
New
United States of America
(Social Security Administration Commissioner)
One Independence Square
Washington, DC
52,720
Vacant
Q1 2018
New
International Food Policy Research Institute (2)
1201 Eye Street
Washington, DC
56,461
Not Vacant
Q2 2018
New
salesforce.com (formerly Demandware, Inc.)
5 Wall Street
Burlington, MA
127,408
Not Vacant
Q4 2019 (75,495 SF)
Q3 2021 (51,913 SF)
New
Children's Hospital Los Angeles
800 North Brand Boulevard
Glendale, CA
50,285
Not Vacant
Q2 2021
New













(1)
The schedule is not specifically intended to provide details about the current population of executed but not commenced leases; it does, however, provide details for all uncommenced leases that are greater than 50,000 square feet in size and not renewals, whether or not the spaces for which the leases were signed are vacant.
(2)
The first phase of the lease, which consists of 45,476 square feet of previously vacant space, commenced in the second quarter of 2017. The second phase, consisting of 56,461 square feet of currently occupied space, will commence in the second quarter of 2018.


7




Many recently negotiated leases provide for rental abatement concessions to tenants. Rental abatements typically occur at the beginning of a new lease's term. The Company's current cash net operating income and AFFO are being negatively impacted, therefore, by the large number of recently commenced new leases. Presented below are two schedules related to abatements. The first is a schedule of leases with abatements of 50,000 square feet or greater that expired during the second quarter of 2017, and the second is a schedule of leases with abatements of 50,000 square feet or greater that are either currently under abatement or will be so within the next twelve months.

Abatements Expired During Quarter
Tenant
Property
Property Location
Abated Square Feet
Abatement Schedule
Lease Expiration
United States of America
(Corporation for National and Community Service)
One Independence Square
Washington, DC
84,606
December 2015 through May 2017 (total leased square feet: 85,183)
Q4 2030
Motorola Solutions, Inc.
500 West Monroe Street
Chicago, IL
150,345
July 2016 through June 2017 (total leased square feet: 204,053(1) )
Q2 2028
RaceTrac Petroleum, Inc.
Galleria 200
Atlanta, GA
114,850
October 2016 through June 2017 (total leased square feet: 133,707)
Q3 2032
Continental Casualty Company
500 TownPark
Lake Mary, FL
106,420
January through May 2017
Q4 2029
Akerman LLP
CNL Center II
Orlando, FL
55,212
January through June 2017
Q3 2027

Current / Future Abatements
Tenant
Property
Property Location
Abated Square Feet
Remaining Abatement Schedule
Lease Expiration
Nuance Communications, Inc.
One Wayside Road
Burlington, MA
200,605
April through August 2017
Q1 2030
Applied Predictive Technologies, Inc.
4250 North Fairfax Drive
Arlington, VA
87,786
June 2017 through May 2018
Q2 2028
Convergys Customer Management Group
5601 Hiatus Road
Tamarac, FL
50,000
June through August 2017
Q3 2024
RaceTrac Petroleum, Inc.
Galleria 200
Atlanta, GA
133,707
July 2017 through May 2018
Q3 2032
SunTrust Bank
SunTrust Center
Orlando, FL
120,000
October through December 2017
Q3 2019
Norris, McLaughlin & Marcus
400 Bridgewater Crossing
Bridgewater, NJ
78,088
October through December 2017 (78,088 square feet); October through December 2018 (61,642 square feet); November and December 2019 (61,642 square feet)
Q4 2029
Mitsubishi Hitachi Power Systems
400 TownPark
Lake Mary, FL
75,321
February and March 2018
Q1 2026
United States of America
(Social Security Administration Commissioner)
One Independence Square
Washington, DC
52,720
March 2018 through February 2019
Q1 2028
International Food Policy Research Institute
1201 Eye Street
Washington, DC
101,937
May 2018 through April 2019
Q2 2029

Financing and Capital Activity

Among Piedmont's stated objectives for 2017 is to be a net seller of assets by harvesting capital through the disposition of non-core assets and assets in which the Company believes values have been maximized, and to use the sale proceeds to:
invest in real estate assets with higher overall return prospects in selected markets in which we have, or plan to have, a significant operating presence and that otherwise meet our strategic criteria;
reduce leverage levels by repaying outstanding debt; and/or
repurchase Company stock when market conditions allow.
Information on the Company's recent accomplishments in furtherance of its strategic objectives is presented below.

Dispositions
On June 16, 2017, Piedmont completed the sale of Sarasota Commerce Center II, a three-story, 92% leased, 149,000 square foot office building located in Sarasota, FL, for $23.5 million, or approximately $158 per square foot. The sale marks the Company's exit from the Sarasota, FL market. The Company recorded a $6.5 million gain on the sale of the asset. Proceeds from the sale were used to reduce the balance of debt outstanding.
(1)
The tenant will not receive a rental abatement on the expansion space, which comprises the remaining 53,708 square feet under the lease.

8



Acquisitions
There were no acquisitions completed during the quarter ended June 30, 2017.

For additional information on acquisitions and dispositions completed over the previous eighteen months, please refer to page 37.

Development
On January 1, 2017, the following development and re-development properties were placed in service and are in lease-up phase:
500 TownPark, a 134,400 square foot, four-story office building that is well located within a master planned, mixed-use development in Lake Mary, FL, and leased predominantly to Continental Casualty Company;
3100 Clarendon Boulevard, a 260,900 square foot office property located in an amenity-rich area adjacent to the Clarendon Metrorail Station in Arlington, VA, which was upgraded to Class A after being occupied by a U.S. Government agency for over 15 years; and
Enclave Place, a 300,900 square foot office building located within a deed-restricted and architecturally-controlled office park in the Energy Corridor in Houston, TX.

The Company currently has no additional developments or re-developments underway. Additional detail on the Company's developable land parcels, all of which are adjacent to existing Piedmont properties, can be found on page 38.

Finance
As of June 30, 2017, our ratio of debt to total gross assets was 38.2% (which decreases to approximately 34% on a pro forma basis upon the pay down of the line of credit and the pay off on August 1, 2017 of a $140 million mortgage with proceeds from the sale of Two Independence Square which was completed on July 5, 2017; please see additional details under the Subsequent Events heading below and on page 48). This debt ratio is based on total principal amount outstanding for our various loans at June 30, 2017.
As of June 30, 2017, our average net debt to Core EBITDA ratio was 6.0 x (which decreases to the mid 5x's on a pro forma basis with the application of proceeds from the sale of Two Independence Square which was completed on July 5, 2017; please see additional details under the Subsequent Events heading below and on page 48), a decrease from 6.4 x at December 31, 2016.
Stock Repurchase Program
Since the Company's stock repurchase program was nearing the end of its authorization period, the Board of Directors of Piedmont renewed the program on May 2, 2017 by authorizing up to $250 million in share repurchases over the next two years. Repurchases of stock under the program will be made at the Company's discretion and will depend on market conditions, other investment opportunities and other factors that the Company deems relevant.

Since the stock repurchase program began in December 2011, Piedmont has repurchased a total of 28.3 million shares at an average price of $17.17 per share, or approximately $486.4 million in aggregate (before the consideration of transaction costs). No common stock repurchases were made during the second quarter of 2017. As of quarter end, Board-approved capacity remaining for additional repurchases totaled $250 million under the stock repurchase program.

Dividend
On May 2, 2017, the Board of Directors of Piedmont declared a dividend for the second quarter of 2017 in the amount of $0.21 per common share outstanding to stockholders of record as of the close of business on May 26, 2017. The dividend was paid on June 16, 2017. The Company's dividend payout percentage (for dividends declared) for the six months ended June 30, 2017 was 46% of Core FFO and 58% of AFFO.

Subsequent Events

On July 5, 2017, Piedmont completed the sale of Two Independence Square, a nine-story, 100% leased, 606,000 square foot office building located in Washington, DC, for $359.6 million, or approximately $593 per square foot. Net proceeds from the transaction were approximately $352.1 million, after deducting closing costs and buyer credits. The sale of the asset allowed the Company to:
Enhance its balance sheet through the pay down of approximately $350 million of outstanding debt;
Decrease the concentration of its revenues, NOI and square footage in the Washington, DC market; and
Decrease its exposure to the non-strategic Southwest submarket in Washington, DC.
Please see page 48 for a presentation of key metrics at June 30, 2017 for Piedmont, with and without the sale of Two Independence Square and the related use of proceeds.

On July 5, 2017, Piedmont repaid the entire $210 million outstanding balance under the Company's revolving line of credit using a portion of the proceeds from the sale of Two Independence Square in Washington, DC.

9



On July 27, 2017, Piedmont sold 8560 Upland Drive, a 149,000 square foot, 100% leased, office and industrial flex property located in Englewood, CO, for approximately $17.6 million, or $118 per square foot. Piedmont owned a 72% joint venture interest in the property. Through the sale, Piedmont was able to:
exit the Denver, CO market;
monetize a non-strategic asset; and
dispose of its last remaining unconsolidated joint venture investment.

On August 1, 2017, Piedmont paid off a $140 million mortgage loan with a 5.76% interest rate collateralized by 1201 Eye Street and 1225 Eye Street, both located in Washington, DC. The loan had a November 1, 2017 maturity date, but was open to prepayment without yield maintenance fees approximately 3 months in advance of the stated maturity date. The Company paid off the loan at the earliest possible date within the open prepayment window with a portion of the proceeds from the sale of Two Independence Square in Washington, DC.

On August 1, 2017, the Board of Directors of Piedmont declared a dividend for the third quarter of 2017 in the amount of $0.21 per common share outstanding to stockholders of record as of the close of business on August 25, 2017. The dividend is expected to be paid on September 15, 2017.

Guidance for 2017

The following financial guidance for calendar year 2017 has been updated based upon completed capital transactions to date and management's current expectations.
 
Low
 
High
 
 
 
 
Net Income
$172 million
to
$178 million
Add:
 
 
 
         Depreciation
121 million
to
126 million
         Amortization
73 million
to
78 million
Less:
 
 
 
         Gain on Sale of Real Estate Assets
(115) million
to
(123) million
NAREIT Funds from Operations applicable to Common Stock and
Core Funds From Operations
$251 million
to
$259 million
NAREIT Funds from Operations and
Core Funds from Operations per diluted share
$1.72
to
$1.78 **

** There are numerous variables that influence the Company's 2017 guidance range. Two such items that could significantly impact the range are the amount and timing of potential capital markets activities. As the year progresses and more definitive information is obtained on those and other factors, the guidance range will be adjusted and/or narrowed as appropriate. Additional disclosures and/or revisions will be made when warranted.

These estimates reflect management’s view of current market conditions and incorporate certain economic and operational assumptions and projections. Actual results could differ from these estimates. Note that individual quarters may fluctuate on both a cash basis and an accrual basis due to the timing of lease commencements and expirations, repairs and maintenance, capital expenditures, capital markets activities, seasonal general and administrative expenses, accrued potential performance-based compensation expenses, and one-time revenue or expense events. In addition, the Company’s guidance is based on information available to management as of the date of this supplemental report.

10



Piedmont Office Realty Trust, Inc.
Consolidated Balance Sheets
Unaudited (in thousands)

 
June 30, 2017

March 31, 2017

December 31, 2016

September 30, 2016

June 30, 2016
Assets:

 
 
 
 
 
 
 
 
Real estate, at cost:

 
 
 
 
 
 
 
 
Land assets
$
614,934

 
$
617,138

 
$
617,138

 
$
610,987

 
$
603,530

Buildings and improvements
3,639,291

 
3,647,718

 
3,610,360

 
3,567,801

 
3,438,834

Buildings and improvements, accumulated depreciation
(896,964
)
 
(881,861
)
 
(856,254
)
 
(845,590
)
 
(835,964
)
Intangible lease asset
179,540

 
205,061

 
208,847

 
194,493

 
167,702

Intangible lease asset, accumulated amortization
(94,551
)
 
(113,129
)
 
(109,152
)
 
(102,137
)
 
(95,908
)
Construction in progress
15,651

 
19,165

 
34,814

 
35,075

 
25,172

Real estate assets held for sale, gross
314,258

 
314,258

 
314,258

 
314,258

 
417,357

Real estate assets held for sale, accumulated depreciation & amortization
(89,187
)
 
(89,187
)
 
(88,319
)
 
(86,109
)
 
(117,235
)
Total real estate assets
3,682,972

 
3,719,163

 
3,731,692

 
3,688,778

 
3,603,488

Investments in and amounts due from unconsolidated joint ventures
7,762

 
7,654

 
7,360

 
7,351

 
7,413

Cash and cash equivalents
9,596

 
6,808

 
6,992

 
6,032

 
21,109

Tenant receivables, net of allowance for doubtful accounts
24,269

 
25,194

 
26,494

 
24,785

 
21,338

Straight line rent receivable
177,463

 
170,694

 
163,789

 
156,835

 
152,738

Escrow deposits and restricted cash
1,290

 
1,253

 
1,212

 
5,182

 
10,595

Prepaid expenses and other assets
29,454

 
20,993

 
23,201

 
28,356

 
29,386

Goodwill
98,918

 
98,918

 
98,918

 
98,918

 
99,278

Deferred lease costs, less accumulated amortization
278,366

 
290,100

 
298,695

 
281,057

 
253,722

Other assets held for sale
10,222

 
9,963

 
9,815

 
9,824

 
18,613

Total assets
$
4,320,312

 
$
4,350,740

 
$
4,368,168

 
$
4,307,118

 
$
4,217,680

Liabilities:
 
 
 
 
 
 
 
 
 
Unsecured debt, net of discount
$
1,720,986

 
$
1,733,343

 
$
1,687,731

 
$
1,661,066

 
$
1,508,449

Secured debt
332,196

 
332,471

 
332,744

 
333,012

 
375,865

Accounts payable, accrued expenses, and accrued capital expenditures
111,011

 
116,077

 
165,410

 
133,112

 
122,386

Deferred income
27,416

 
30,683

 
28,406

 
29,006

 
24,036

Intangible lease liabilities, less accumulated amortization
43,328

 
45,594

 
48,005

 
45,283

 
38,970

Interest rate swaps
5,061

 
5,475

 
8,169

 
17,835

 
22,079

Total liabilities
$
2,239,998

 
$
2,263,643

 
$
2,270,465

 
$
2,219,314

 
$
2,091,785

Stockholders' equity:
 
 
 
 
 
 
 
 
 
Common stock
1,455

 
1,453

 
1,452

 
1,452

 
1,452

Additional paid in capital
3,675,562

 
3,675,575

 
3,673,128

 
3,672,218

 
3,671,476

Cumulative distributions in excess of earnings
(1,603,119
)
 
(1,596,276
)
 
(1,580,863
)
 
(1,580,553
)
 
(1,536,948
)
Other comprehensive loss
4,547

 
4,466

 
2,104

 
(7,211
)
 
(11,110
)
Piedmont stockholders' equity
2,078,445

 
2,085,218

 
2,095,821

 
2,085,906

 
2,124,870

Non-controlling interest
1,869

 
1,879

 
1,882

 
1,898

 
1,025

Total stockholders' equity
2,080,314

 
2,087,097

 
2,097,703

 
2,087,804

 
2,125,895

Total liabilities, redeemable common stock and stockholders' equity
$
4,320,312

 
$
4,350,740

 
$
4,368,168

 
$
4,307,118

 
$
4,217,680

Common stock outstanding at end of period
145,490

 
145,320

 
145,235

 
145,234

 
145,230



11



Piedmont Office Realty Trust, Inc.
Consolidated Statements of Income
Unaudited (in thousands except for per share data)

 
 
Three Months Ended
 
 
6/30/2017
 
3/31/2017
 
12/31/2016
 
9/30/2016
 
6/30/2016
Revenues:
 
 
 
 
 
 
 
 
 
 
Rental income
 
$
124,248

 
$
123,450

 
$
119,564

 
$
113,821

 
$
111,767

Tenant reimbursements
 
24,044

 
24,500

 
23,961

 
24,163

 
23,086

Property management fee revenue
 
387

 
513

 
386

 
501

 
454

 
 
148,679

 
148,463

 
143,911

 
138,485

 
135,307

Expenses:
 
 
 
 
 
 
 
 
 
 
Property operating costs
 
55,779

 
55,384

 
57,496

 
54,867

 
52,292

Depreciation
 
30,059

 
30,768

 
32,785

 
31,610

 
31,556

Amortization
 
19,314

 
20,415

 
21,271

 
18,640

 
17,402

Impairment losses on real estate assets
 

 

 

 
22,951

 
10,950

General and administrative
 
8,036

 
8,596

 
5,726

 
7,429

 
8,316

 
 
113,188

 
115,163

 
117,278

 
135,497

 
120,516

Real estate operating income
 
35,491

 
33,300

 
26,633

 
2,988

 
14,791

Other income / (expense):
 
 
 
 
 
 
 
 
 
 
Interest expense
 
(18,421
)
 
(18,057
)
 
(16,566
)
 
(15,496
)
 
(16,413
)
Other income / (expense)
 
38

 
(100
)
 
454

 
(720
)
 
(41
)
Net recoveries / (loss) from casualty events and litigation settlements
 

 

 

 
34

 

Equity in income / (loss) of unconsolidated joint ventures
 
107

 
11

 
8

 
129

 
110

 
 
(18,276
)
 
(18,146
)
 
(16,104
)
 
(16,053
)
 
(16,344
)
Income from continuing operations
 
17,215

 
15,154

 
10,529

 
(13,065
)
 
(1,553
)
Discontinued operations:
 
 
 
 
 
 
 
 
 
 
Operating income, excluding impairment loss
 

 

 

 
1

 
(1
)
Income / (loss) from discontinued operations
 

 

 

 
1

 
(1
)
Gain on sale of real estate (1)
 
6,492

 
(53
)
 
19,652

 
(57
)
 
73,835

Net income
 
23,707

 
15,101

 
30,181

 
(13,121
)
 
72,281

Less: Net income attributable to noncontrolling interest
 
3

 
3

 
8

 
14

 
(3
)
Net income attributable to Piedmont
 
$
23,710

 
$
15,104

 
$
30,189

 
$
(13,107
)
 
$
72,278

Weighted average common shares outstanding - diluted
 
145,813

 
145,833

 
145,764

 
145,669

 
145,699

Net income per share available to common stockholders - diluted
 
$
0.16

 
$
0.10

 
$
0.21

 
$
(0.09
)
 
$
0.50

Common stock outstanding at end of period
 
145,490

 
145,320

 
145,235

 
145,234

 
145,230


(1)
The gain on sale of real estate reflected in the second quarter of 2017 was primarily related to the sale of Sarasota Commerce Center II in Sarasota, FL, on which we recorded a $6.5 million gain. The gain in the fourth quarter of 2016 was primarily related to the sale of Braker Pointe III in Austin, TX, on which we recorded an $18.6 million gain. The gain in the second quarter of 2016 was primarily related to the sales of 1055 East Colorado Boulevard in Pasadena, CA, on which we recorded a $29.5 million gain; Fairway Center II in Brea, CA, on which we recorded a $14.4 million gain; and 1901 Main Street in Irvine, CA, on which we recorded a $30.0 million gain.

12



Piedmont Office Realty Trust, Inc.
Consolidated Statements of Income
Unaudited (in thousands except for per share data)

 
Three Months Ended
 
Six Months Ended
 
6/30/2017
6/30/2016
 
Change ($)
Change (%)
 
6/30/2017
6/30/2016
 
Change ($)
Change (%)
Revenues:
 
 
 
 
 
 
 
 
 
 
 
Rental income
$
124,248

$
111,767

 
$
12,481

11.2
 %
 
$
247,698

$
226,505

 
$
21,193

9.4
 %
Tenant reimbursements
24,044

23,086

 
958

4.1
 %
 
48,544

45,837

 
2,707

5.9
 %
Property management fee revenue
387

454

 
(67
)
(14.8
)%
 
900

977

 
(77
)
(7.9
)%
 
148,679

135,307

 
13,372

9.9
 %
 
297,142

273,319

 
23,823

8.7
 %
Expenses:
 
 
 
 
 
 
 
 
 
 
 
Property operating costs
55,779

52,292

 
(3,487
)
(6.7
)%
 
111,163

106,571

 
(4,592
)
(4.3
)%
Depreciation
30,059

31,556