Document
0001042776false00010427762019-10-282019-10-28


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):  October 28, 2019
 
Piedmont Office Realty Trust, Inc.
(Exact name of registrant as specified in its charter)
 
Commission File Number:  001-34626
 
Maryland58-2328421
(State or other jurisdiction of(IRS Employer
incorporation)Identification No.)

5565 Glenridge Connector Ste. 450
Atlanta, Georgia 30342

(Address of principal executive offices, including zip code)
 
(770) 418-8800
(Registrant's telephone number, including area code)
 
Not applicable
(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))

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Common Stock, $0.01 par valuePDMNew York Stock Exchange

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 

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 2.01 Completion of Acquisition or Disposition of Assets.

Disposition of the 500 West Monroe Street building

On October 28, 2019, Piedmont Office Realty Trust, Inc. (the “Registrant”) sold a 46-story office building containing approximately 967,000 rentable square feet located at 500 West Monroe Street in downtown Chicago, Illinois (the “500 West Monroe Street building”) for a gross sales price of $412 million ($426 per square foot) exclusive of closing costs to an unaffiliated, third-party buyer, Spear Street Capital. As a result of the sale, the Registrant received net sale proceeds of approximately $405.7 million, which may be adjusted should additional information become available in subsequent periods. These proceeds were used to repay outstanding borrowings under the Registrant's $500 Million Unsecured 2018 Line of Credit, which were initially used to purchase the Galleria 100, Galleria 400, and Galleria 600 buildings, as well as 11.7 acres of developable land, earlier in 2019.

Item 2.02 Results of Operations and Financial Condition.

On October 30, 2019, the Registrant issued a press release announcing its financial results for the third quarter 2019, and published supplemental information for the third quarter 2019 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.

(b)  Pro forma financial information. The following pro forma financial statements of the Registrant are submitted at the end of this Current Report on Form 8-K and are filed herewith and incorporated herein by reference:

Unaudited Pro Forma Financial Statements

Summary of Unaudited Pro Forma Financial StatementsF-1
Pro Forma Balance Sheet as of September 30, 2019F-2
Pro Forma Statements of Comprehensive Income for the Nine Months Ended September 30, 2019F-3
Pro Forma Statements of Comprehensive Income for the Year Ended December 31, 2018F-4

(d) Exhibits:

Exhibit No.Description
99.1  
99.2  
101.INS  XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH  Inline XBRL Taxonomy Extension Schema Document
101.CAL  Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF  Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB  Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE  Inline XBRL Taxonomy Extension Presentation Linkbase Document







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:October 30, 2019By:/s/    Robert E. Bowers
  Robert E. Bowers
  Chief Financial Officer and Executive Vice President






Piedmont Office Realty Trust, Inc.
SUMMARY OF UNAUDITED
PRO FORMA FINANCIAL STATEMENTS


This unaudited pro forma information should be read in conjunction with the financial statements and notes of the Registrant included in its annual report filed on Form 10-K for the year ended December 31, 2018 and its quarterly report filed on Form 10-Q for the nine months ended September 30, 2019.

The following unaudited pro forma balance sheet as of September 30, 2019 has been prepared to give effect to the October 28, 2019 sale of the 500 West Monroe Street building as if the disposition had occurred on September 30, 2019. The Registrant owned 100% of the 500 West Monroe Street building prior to disposition.

The following unaudited pro forma statements of comprehensive income for the nine months ended September 30, 2019 and for the year ended December 31, 2018 have been prepared to give effect to the sale of the 500 West Monroe Street building as if the disposition had occurred on January 1, 2018, as well as an adjustment for property management fee revenue, which will have a continuing impact beyond twelve months from the date of sale.

These unaudited pro forma financial statements are prepared for informational purposes only and are based on information and assumptions available at the time of the filing of this financial information on Form 8-K that management believes to be reasonable and factually supportable. These unaudited pro forma statements of comprehensive income are not necessarily indicative of future results or of actual results that would have been achieved if the disposition of the 500 West Monroe Street building had been consummated as of September 30, 2019 or January 1, 2018, as applicable. Actual adjustments may differ materially from the information presented. Specifically, the accompanying pro forma statements of comprehensive income do not include the Registrant's nonrecurring gain that would have been recognized if the aforementioned property sale had occurred on January 1, 2018, as the gain does not have a continuing impact beyond twelve months from the date of sale. Further, the pro forma statement of comprehensive income for the year ended December 31, 2018 does not reflect the operational results associated with the Galleria 400 and Galleria 600 buildings, as these buildings were purchased on August 23, 2019. The pro forma statement of comprehensive income for the nine months ended September 30, 2019 includes operations related to the Galleria 400 and Galleria 600 buildings for approximately 38 days. Such properties were acquired using borrowings under the Registrant's $500 Million Unsecured 2018 Line of Credit, and were subsequently repaid using the sales proceeds from the 500 West Monroe Street building disposition mentioned above.


F-1


Piedmont Office Realty Trust, Inc.
PRO FORMA BALANCE SHEET
SEPTEMBER 30, 2019
(Unaudited)
(in thousands, except of share and per share amounts)
Historical(a)
Pro Forma AdjustmentsPro Forma
Total
Assets:
Real estate assets, at cost:
Land
$506,440  $—  $506,440  
Buildings and improvements, less accumulated depreciation
2,327,055  —  2,327,055  
Intangible lease assets, less accumulated amortization
88,371  —  88,371  
Construction in progress
13,866  —  13,866  
Real estate assets held for sale, net (b)
213,094  (213,094) 
(c)
—  
Total real estate assets3,148,826  (213,094) 2,935,732  
Cash and cash equivalents10,284  405,719  
(d)
416,003  
Tenant receivables
10,091  —  10,091  
Straight-line rent receivables147,197  —  147,197  
Restricted cash and escrows1,820  —  1,820  
Prepaid expenses and other assets27,143  —  27,143  
Goodwill98,918  —  98,918  
Deferred lease costs, less accumulated amortization
267,616  —  267,616  
    Other assets held for sale, net (b)
40,036  (40,036) 
(c)
—  
Total assets$3,751,931  $152,589  $3,904,520  
Liabilities:
Unsecured debt, net of discount and unamortized debt issuance costs
$1,689,793  $—  $1,689,793  
Secured debt, net of premiums and unamortized debt issuance costs
189,451  —  189,451  
Accounts payable, accrued expenses, and accrued capital expenditures
114,812  —  114,812  
Deferred income27,985  —  27,985  
Intangible lease liabilities, less accumulated amortization
34,970  —  34,970  
Interest rate swaps6,862  —  6,862  
Other liabilities held for sale (b)
7,275  (7,275) 
(c)
—  
Total liabilities2,071,148  (7,275) 2,063,873  
Commitments and Contingencies—  —  —  
Stockholders’ Equity:
Shares-in-trust, 150,000,000 shares authorized; none outstanding as of September 30, 2019
—  —  —  
Preferred stock, no par value, 100,000,000 shares authorized; none outstanding as of September 30, 2019
—  —  —  
Common stock, $0.01 par value, 750,000,000 shares authorized; 125,783,408 shares issued and outstanding as of September 30, 2019
1,258  —  1,258  
Additional paid-in capital3,685,504  —  3,685,504  
Cumulative distributions in excess of earnings(2,007,438) 159,864  
(e)
(1,847,574) 
Other comprehensive income(283) —  (283) 
Piedmont stockholders’ equity1,679,041  159,864  1,838,905  
Noncontrolling interest1,742  —  1,742  
Total stockholders’ equity1,680,783  159,864  1,840,647  
Total liabilities and stockholders’ equity$3,751,931  $152,589  $3,904,520  

(a)Historical financial information is presented in accordance with U.S. generally accepted accounting principles (“GAAP”) and has been obtained from the Registrant's quarterly report on Form 10-Q as of September 30, 2019.
(b)Reflects assets and liabilities held for sale as of September 30, 2019, consisting solely of the 500 West Monroe Street building.
F-2


(c)Amounts represent the necessary adjustments to remove net assets and liabilities associated with the 500 West Monroe Street building as of September 30, 2019.
(d)Reflects the Registrant's estimated net proceeds resulting from the sale of the 500 West Monroe Street building.
(e)Reflects the Registrant's estimated pro forma, non-recurring gain on the sale of the 500 West Monroe Street building.



Piedmont Office Realty Trust, Inc.
PRO FORMA STATEMENT OF COMPREHENSIVE INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2019
(Unaudited)
(in thousands, except of share and per share amounts)

Historical (a)
Pro Forma AdjustmentsPro Forma
Total
Revenues:
Rental and tenant reimbursement revenue$382,213  $(30,487) 
(b)
$351,726  
Property management fee revenue2,819  568  
(c)
3,387  
Other property related income13,993  (3,297) 
(d)
10,696  
399,025  (33,216) 365,809  
Expenses:
Property operating costs158,798  (13,881) 
(e)
144,917  
Depreciation80,004  (7,555) 
(f)
72,449  
Amortization55,666  (1,148) 
(g)
54,518  
Impairment loss on real estate asset1,953  —  1,953  
General and administrative29,736  (2) 29,734  
326,157  (22,586) 303,571  
Other income (expense):
Interest expense(46,750) —  (46,750) 
Other income/(expense)1,292  —  1,292  
Gain on sale of real estate assets39,370  —  39,370  
(6,088) —  (6,088) 
Net income66,780  (10,630) 56,150  
Net loss attributable to noncontrolling interest
 —   
Net income attributable to Piedmont66,783  (10,630) 56,153  
Other comprehensive income/(loss):
Effective portion of gain/(loss) on derivative instruments that are designated and qualify as cash flow hedges
(6,874) —  (6,874) 
Plus/(less): Reclassification of net loss/(gain) included in net income
(1,871) —  (1,871) 
Other comprehensive income/(loss)(8,745) —  (8,745) 
Comprehensive income applicable to Piedmont$58,038  $(10,630) $47,408  
Per share information – basic and diluted:
Comprehensive income applicable to common stockholders
$0.46  $0.38  
Weighted-average common shares outstanding – basic
125,684  125,684  
Weighted-average common shares outstanding – diluted
126,190  126,190  

(a)Historical financial information has been obtained from the Registrant's quarterly report on Form 10-Q for the nine months ended September 30, 2019.
(b)Removal of the 500 West Monroe Street building's rental and tenant reimbursement income. Rental income for the 500 West Monroe Street building is recognized on a straight-line basis.
(c)Addition of expected property management fee revenue to be earned by managing the 500 West Monroe Street building subsequent to sale of the property to an unrelated, third-party purchaser.
(d)Removal of other property related income, consisting primarily of parking income.
F-3


(e)Removal of the 500 West Monroe Street building's operating expenses.
(f)Depreciation expense for the 500 West Monroe Street building is recognized on a straight-line basis using a 40-year life for building assets and using the respective lease terms for tenant allowance assets.
(g)Amortization expense for the 500 West Monroe Street building is recognized on a straight-line basis over the terms of the respective leases to which the corresponding deferred leasing costs relate.



Piedmont Office Realty Trust, Inc.
PRO FORMA STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED DECEMBER 31, 2018
(Unaudited)
(in thousands, except of share and per share amounts)

Historical (a)
Pro Forma AdjustmentsPro Forma
Total
Revenues:
Rental and tenant reimbursement revenue$504,410  $(37,908) 
(b)
$466,502  
Property management fee revenue1,450  760  
(c)
2,210  
Other property related income20,107  (4,430) 
(d)
15,677  
525,967  (41,578) 484,389  
Expenses:
Property operating costs209,338  (17,389) 
(e)
191,949  
Depreciation107,956  (10,047) 
(f)
97,909  
Amortization63,295  (1,491) 
(g)
61,804  
General and administrative29,713  (3) 29,710  
410,302  (28,930) 381,372  
Other income (expense):
Interest expense(61,023) —  

(61,023) 
Other income/(expense)1,638  —  1,638  
Loss on extinguishment of debt
(1,680) —  (1,680) 
Gain on sale of real estate assets75,691  —  75,691  
14,626  —  14,626  
Net income130,291  (12,648) 117,643  
Net loss applicable to noncontrolling interest
 —   
Net income applicable to Piedmont130,296  (12,648) 117,648  
Other comprehensive income/(loss):
Effective portion of gain/(loss) on derivative instruments that are designated and qualify as cash flow hedges
692  —  692  
Plus/(less): Reclassification of net loss/(gain) included in net income
(300) —  (300) 
Other comprehensive income/(loss)392  —  392  
Comprehensive income attributable to Piedmont$130,688  $(12,648) $118,040  
Per share information:
Comprehensive income available to common stockholders- basic$1.00  $0.91  
Comprehensive income available to common stockholders- diluted$1.00  $0.90  
Weighted-average common shares outstanding – basic
130,161  130,161  
Weighted-average common shares outstanding – diluted
130,636  130,636  

(a)Historical financial information has been obtained from the Registrant's annual report on Form 10-K for the year ended December 31, 2018.
(b)Removal of the 500 West Monroe Street building's rental and tenant reimbursement income. Rental income for the 500 West Monroe Street building is recognized on a straight-line basis.
F-4


(c)Addition of expected property management fee revenue to be earned by managing the 500 West Monroe Street building subsequent to sale of the property to an unrelated, third-party purchaser.
(d)Removal of other property related income, consisting primarily of parking income.
(e)Removal of the 500 West Monroe Street building's operating expenses.
(f)Depreciation expense for the 500 West Monroe Street building is recognized on a straight-line basis using a 40-year life for building assets and using the respective lease terms for tenant allowance assets.
(g)Amortization expense for the 500 West Monroe Street building is recognized on a straight-line basis over the terms of the respective leases to which the corresponding deferred leasing costs relate.
F-5
Document

EXHIBIT 99.1
http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=13170911&doc=16

Piedmont Office Realty Trust Reports Third Quarter 2019 Results
ATLANTA, October 30, 2019--Piedmont Office Realty Trust, Inc. ("Piedmont" or the "Company") (NYSE:PDM), an owner of Class A office properties located primarily in select sub-markets within seven major Eastern U.S. office markets, today announced its results for the quarter ended September 30, 2019.

Highlights for the Quarter Ended September 30, 2019:

Reported net income applicable to common stockholders of $8.4 million, or $0.07 per diluted share, for the quarter ended September 30, 2019, as compared with $16.1 million, or $0.13 per diluted share, for the quarter ended September 30, 2018;
Achieved Core Funds From Operations ("Core FFO") of $0.45 per diluted share for the quarter ended September 30, 2019, comparable to $0.45 per diluted share for the quarter ended September 30, 2018;
Completed approximately 564,000 square feet of leasing during the quarter ended September 30, 2019, with approximately 195,000 square feet related to new leasing;
Reported a 9.8% and 23.5% roll up in cash and accrual rents, respectively, on executed leases for space vacant one year or less and a 5.0% increase in Same Store NOI-Cash Basis as compared to the quarter ended September 30, 2018;
Acquired Galleria 400 and 600, totaling approximately 860,000 square feet, and an adjacent land parcel. The Galleria is a master-planned, mixed-use development in northwest Atlanta that includes five buildings and three development sites. Piedmont's acquisition of Galleria 400 and 600 consolidates the 2.1 million square foot, multi-tenant, office component under a single owner for the first time in the development's existence;
Sold one non-strategic asset during the quarter, The Dupree, a six-story, approximately 138,000-square foot, office building located in Atlanta;

Subsequent to Quarter End:

On October 28, 2019, completed the sale of 500 West Monroe Street, a 46-story, approximately 967,000 square foot, 100% leased, trophy office building located in the West Loop submarket of downtown Chicago, IL for a gross sales price of $412 million, or $426 psf; and

The New York State Commissioner of General Services executed an approximately 20-year, 523,000-square foot, renewal and expansion on behalf of the State of New York at 60 Broad Street in New York City.

Commenting on the quarter's results, Brent Smith, Piedmont's President and Chief Executive Officer, said, "We are extremely pleased with our third quarter results. Leasing activity was robust, and overall, completed transactions had very attractive economics. The quarter also includes the acquisition of Galleria 400 and 600 which culminates our efforts to control the entire 2.1 million square foot Galleria



office development. These acquisitions with great growth potential were ultimately funded by the redeployment of 1031 exchange proceeds from the disposition of 500 West Monroe Street in Chicago earlier this week; as a result, no special distribution of the gain on 500 West Monroe Street will be required. Furthermore, the disposition substantially reduces Piedmont’s exposure to the market, with Chicago now generating less than 1% of the Company’s annualized lease revenue.

'Equally exciting is the execution post quarter-end of an approximately 20-year lease with the State of New York commencing November 1, 2019. The $550 million lease is a phenomenal outcome for Piedmont and encompasses more space and better economics than were originally anticipated," added Smith.

Results for the Quarter ended September 30, 2019

Piedmont recognized net income applicable to common stockholders for the three months ended September 30, 2019 of $8.4 million, or $0.07 per diluted share, as compared with $16.1 million, or $0.13 per diluted share, for the three months ended September 30, 2018. The decrease in the current quarter's results was primarily a result of approximately $4.7 million of additional amortization expense related to intangibles of the recently acquired Galleria 100, 400 and 600. In addition, the current quarter's results also included a $2.0 million loss on impairment of real estate assets associated with the sale of a non-strategic building, The Dupree, during the quarter.
Funds From Operations ("FFO") and Core FFO, which remove the impact of the impairment loss mentioned above, as well as depreciation and amortization, were both $0.45 per diluted share for the three months ended September 30, 2019 and 2018.

Total revenues and property operating costs were $135.4 million and $54.6 million, respectively, for the three months ended September 30, 2019, compared to $129.7 million and $49.7 million, respectively, for the third quarter of 2018, with both line items reflecting the commencement of new leases, the expiration of abatements, and net acquisition activity during the twelve months ended September 30, 2019.

General and administrative expense was $7.9 million for the third quarter of 2019 compared to $6.7 million for the same period in 2018, reflecting approximately $2.0 million of additional expense related to increased accruals for potential performance-based equity compensation as a result of the Company's relative stock performance during the current period, partially offset by lower compensation expense associated with the senior management transition that occurred at the end of the second quarter of 2019.

Leasing Update

During the three months ended September 30, 2019, Piedmont completed approximately 564,000 square feet of leasing across its portfolio, with approximately 195,000 square feet of that activity related to new tenant leases. Overall, the third quarter's executed leases for recently occupied space reflected a 9.8% roll up in cash rents and 23.5% increase in accrual rents. Highlights of the largest leases executed during the quarter include the following:


In Dallas: Commercial Metals Company renewed approximately 106,000 sf at 6565 North MacArthur Blvd, and Gartner, Inc. expanded their footprint with a new lease for approximately 55,000 sf at 6031 Connection Drive;




In Atlanta: WeWork signed a new lease for approximately 72,000 sf at 1155 Perimeter Center West;

In Minneapolis: Siemens Corporation renewed approximately 69,000 sf at Crescent Ridge II; and,

In Boston: Qualcomm Incorporated renewed approximately 49,000 sf at 90 Central Street.

Additionally, subsequent to quarter end the New York State Commissioner of General Services executed an approximately 20-year, 523,000-square foot, renewal and expansion on behalf of the State of New York at 60 Broad Street in New York City.

As of September 30, 2019, the Company's reported leased percentage and weighted average remaining lease term were approximately 92% and 6.4 years, respectively, with approximately 1.1 million square feet of executed leases for vacant space yet to commence or under rental abatement. Same Store NOI ("SSNOI") increased 5.0% and 0.5% on a cash and accrual basis, respectively, for the three months ended September 30, 2019 as compared to the three months ended September 30, 2018. The increase in cash basis SSNOI was attributable to the expiration of lease abatements. The slight increase in accrual basis SSNOI was related to the commencement of leases with higher straight-line rents, offset by down times between leases at 200 South Orange Avenue and 1155 Perimeter Center West, and lower overall occupancy levels. Details outlining Piedmont's largest upcoming lease expirations, the status of certain major leasing activity and a schedule of the largest lease abatement periods can be found in the Company's quarterly supplemental information package available at www.piedmontreit.com.

Transactional Update

During the three months ended September 30, 2019, Piedmont acquired Galleria 400 and 600, two office towers totaling approximately 860,000 square feet, and an adjacent 10.2 acre land parcel entitled for one million square feet of additional development, for a total of $231.2 million. The acquisitions are located within The Galleria, a master-planned, mixed-use development in northwest Atlanta with prominent visibility and access to I-75 and I-285. Since 2015, Piedmont has assembled 2.1 million square feet of office space across five buildings along with three development sites, consolidating the project’s multi-tenant office buildings and 6,000-space structured parking facilities under a single owner for the first time. Piedmont’s total investment in The Galleria is just under $500 million, or $216 psf, which represents a significant discount to estimated replacement cost.

Additionally during the third quarter, Piedmont sold a non-core asset, The Dupree, a six-story, approximately 138,000 square foot, office building located in Atlanta for $12.7 million.

Subsequent to the end of the third quarter, Piedmont also sold 500 West Monroe Street, a 46-story, approximately 967,000 square foot, 100% leased, trophy office building located in the West Loop submarket of downtown Chicago, IL for a gross sales price of $412 million, or $426 psf. Under the terms of the purchase and sale agreement, Piedmont will continue to manage the building for the buyer for an initial three year term.

Fourth Quarter 2019 Dividend Declaration

On October 30, 2019, the board of directors of Piedmont declared a dividend for the fourth quarter of 2019 in the amount of $0.21 per share on its common stock to stockholders of record as of the close of business on November 29, 2019, payable on January 3, 2020.




Guidance for 2019

Based on management's expectations, the Company has narrowed its previously provided guidance for the year ending December 31, 2019 by raising the low end of the range as follows:
(in millions, except per share data)LowHigh
Net Income$238-$240
Add:
Depreciation105  -107  
Amortization73  -75  
Impairment Loss - 
Less: Gain on Sale of Real Estate Assets(198) -(201) 
NAREIT FFO applicable to common stock$220-$223
NAREIT FFO per diluted share$1.74-$1.77
Less: Retirement and Separation Expenses Associated with Senior Management Transition
3-3
Core FFO applicable to common stock$223-$226
Core FFO per diluted share$1.77-$1.79

These estimates reflect management's view of current market conditions and incorporate certain economic and operational assumptions and projections, including the impacts of completed transactional activity. The guidance does not include any speculative acquisition or disposition activity for the remainder of the year. Actual results could differ materially from these estimates based on a variety of factors, particularly the timing of any future 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 expenses, 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 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 September 30, 2019 contain certain financial measures that are not prepared in accordance with GAAP, including FFO, Core FFO, AFFO, Same Store NOI (cash and accrual basis), Property NOI (cash and accrual basis), EBITDAre, 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.

Conference Call Information

Piedmont has scheduled a conference call and an audio web cast for Thursday, October 31, 2019 at 11:00 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 (844) 602-0380 for participants in the United States and Canada and (862) 298-0970 for international participants. A replay of the conference call will be available through 11 A.M. Eastern time on November 14, 2019, 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 54355. 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 third quarter 2019 performance, discuss recent events, and conduct a question-and-answer period.

Supplemental Information

Quarterly supplemental information as of and for the period ended September 30, 2019 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, redeveloper, and operator of high-quality, Class A office properties located primarily in select sub-markets within seven major Eastern U.S. office markets. Its geographically-diversified, almost $5 billion portfolio is currently comprised of approximately 17 million square feet (after the sale of 500 West Monroe Street). 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). At the end of the third quarter, three-fourths of the company’s portfolio was ENERGY STAR certified and approximately 40% was LEED certified. 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 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, 2019.

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, socio-economic and/or technology 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; lease terminations or lease defaults, particularly by one of our large lead tenants; adverse market and economic conditions, including any resulting impairment charges on both our long-lived assets or goodwill resulting therefrom; 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 regulatory restrictions to which REITs are subject and 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 and disposition of properties, many of which risks and uncertainties may not be known at the time of acquisition or disposition; 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; significant price and volume fluctuations in the public markets, including on the exchange which we listed our common stock; the effect of future offerings of debt or equity securities or changes in market interest rates on the value of our common stock; changes in the method pursuant to which the LIBOR rates are determined and the potential phasing out of LIBOR; 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, including an increased risk of default by government tenants during periods in which state or federal governments are shut down or on furlough; any change in the financial condition of any of our large lead tenants; changes in the financial condition of our tenants directly or indirectly resulting from the United Kingdom’s referendum to withdraw from the European Union; 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 Annual Report on Form 10-K for the year ended December 31, 2018.

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
 (in thousands)
September 30, 2019December 31, 2018
(unaudited)
Assets:
Real estate assets, at cost:
Land
$506,440  $470,432  
Buildings and improvements
3,099,177  2,839,640  
Buildings and improvements, accumulated depreciation
(772,122) (718,070) 
Intangible lease assets
165,854  165,067  
Intangible lease assets, accumulated amortization
(77,483) (87,391) 
Construction in progress
13,866  15,848  
Real estate assets held for sale, gross274,673  433,544  
Real estate assets held for sale, accumulated depreciation and amortization
(61,579) (102,476) 
Total real estate assets
3,148,826  3,016,594  
Cash and cash equivalents
10,284  4,571  
Tenant receivables
10,091  10,800  
Straight line rent receivables
147,197  136,762  
Restricted cash and escrows
1,820  1,463  
Prepaid expenses and other assets
27,143  24,691  
Goodwill
98,918  98,918  
Interest rate swaps
—  1,199  
Deferred lease costs, gross
441,106  413,117  
Deferred lease costs, accumulated depreciation
(173,490) (176,919) 
Other assets held for sale, gross
47,923  70,371  
Other assets held for sale, accumulated depreciation
(7,887) (9,138) 
Total assets$3,751,931  $3,592,429  
Liabilities:
Unsecured debt, net of discount and unamortized debt issuance costs
$1,689,793  $1,495,121  
Secured debt, net of premiums and unamortized debt issuance costs
189,451  190,351  
Accounts payable, accrued expenses, and accrued capital expenditures
114,812  93,739  
Dividends payable
—  26,972  
Deferred income
27,985  28,779  
Intangible lease liabilities, less accumulated amortization
34,970  35,708  
Interest rate swaps
6,862  839  
Other liabilities held for sale
7,275  8,780  
Total liabilities2,071,148  1,880,289  
Stockholders' equity :
Common stock
1,258  1,262  
Additional paid in capital
3,685,504  3,683,186  
Cumulative distributions in excess of earnings
(2,007,438) (1,982,542) 
Other comprehensive income
(283) 8,462  
Piedmont stockholders' equity1,679,041  1,710,368  
Non-controlling interest
1,742  1,772  
Total stockholders' equity1,680,783  1,712,140  
Total liabilities and stockholders' equity$3,751,931  $3,592,429  
Number of shares of common stock outstanding as of end of period125,783  126,219  




Piedmont Office Realty Trust, Inc.
Consolidated Statements of Income
Unaudited (in thousands, except for per share data)
Three Months EndedNine Months Ended
9/30/20199/30/20189/30/20199/30/2018
Revenues:
Rental and tenant reimbursement revenue$130,579  $124,518  $382,213  $372,491  
Property management fee revenue405  368  2,819  1,059  
Other property related income4,437  4,822  13,993  15,232  
Total revenues
135,421  129,708  399,025  388,782  
Expenses:
Property operating costs54,613  49,679  158,798  154,175  
Depreciation27,131  26,852  80,004  81,112  
Amortization19,505  14,840  55,666  46,818  
Impairment loss on real estate assets1,953  —  1,953  —  
General and administrative7,950  6,677  29,736  21,487  
Total operating expenses
111,152  98,048  326,157  303,592  
Other income (expense):
Interest expense(16,145) (15,849) (46,750) (45,294) 
Other income263  303  1,292  1,480  
Loss on extinguishment of debt—  —  —  (1,680) 
Gain on sale of real estate assets32  —  39,370  45,186  
Total other income/(expense)
(15,850) (15,546) (6,088) (308) 
Net income8,419  16,114  66,780  84,882  
Plus: Net income applicable to noncontrolling interest —    
Net income applicable to Piedmont$8,422  $16,114  $66,783  $84,886  
Weighted average common shares outstanding - diluted126,240  128,819  126,190  131,187  
Net income per share applicable to common stockholders - diluted$0.07  $0.13  $0.53  $0.65  





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 EndedNine Months Ended
9/30/20199/30/20189/30/20199/30/2018
GAAP net income applicable to common stock$8,422  $16,114  $66,783  $84,886  
Depreciation of real estate assets(1)
26,909  26,668  79,346  80,531  
Amortization of lease-related costs
19,491  14,828  55,622  46,773  
Impairment loss on real estate assets
1,953  —  1,953  —  
Gain on sale of real estate assets
(32) —  (39,370) (45,186) 
NAREIT Funds From Operations applicable to common stock*56,743  57,610  164,334  167,004  
Retirement and separation expenses associated with senior management transition
—  —  3,175  —  
Loss on extinguishment of debt
—  —  —  1,680  
Core Funds From Operations applicable to common stock*56,743  57,610  167,509  168,684  
Amortization of debt issuance costs, fair market adjustments on notes payable, and discounts on debt
526  550  1,574  1,561  
Depreciation of non real estate assets
214  176  634  558  
Straight-line effects of lease revenue
(1,531) (3,210) (7,437) (11,489) 
Stock-based compensation adjustments
(3,015) 1,661  1,949  4,462  
Net effect of amortization of above/below-market in-place lease intangibles
(1,923) (2,006) (6,009) (5,636) 
Non-incremental capital expenditures(2)
(14,352) (9,276) (27,410) (27,407) 
Adjusted funds from operations applicable to common stock$36,662  $45,505  $130,810  $130,733  
Weighted average common shares outstanding - diluted126,240  128,819  126,190  131,187  
Funds from operations per share (diluted)$0.45  $0.45  $1.30  $1.27  
Core funds from operations per share (diluted)$0.45  $0.45  $1.33  $1.29  

(1) Excludes depreciation of non real estate assets.
(2) 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 (that are not capitalized) 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 (that are not capitalized) 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.
EBITDAre, Property Net Operating Income (Cash and Accrual), Same Store Net Operating Income (Cash and Accrual)
Unaudited (in thousands)
Cash BasisAccrual Basis
Three Months EndedThree Months Ended
9/30/20199/30/20189/30/20199/30/2018
GAAP net income applicable to common stock$8,422  $16,114  $8,422  $16,114  
Net income applicable to noncontrolling interest
(3) —  (3) —  
Interest expense
16,145  15,849  16,145  15,849  
Depreciation
27,124  26,844  27,124  26,844  
Amortization
19,491  14,828  19,491  14,828  
Impairment loss on real estate assets
1,953  —  1,953  —  
Gain on sale of real estate assets
(32) —  (32) —  
EBITDAre*
73,100  73,635  73,100  73,635  
General & administrative expenses
7,950  6,677  7,950  6,677  
Management fee revenue
(203) (181) (203) (181) 
Other income
(47) (87) (47) (87) 
Straight line effects of lease revenue
(1,531) (3,210) 
Amortization of lease-related intangibles
(1,923) (2,006) 
Property NOI*77,346  74,828  80,800  80,044  
Net operating income from:
Acquisitions
(5,546) (431) (6,876) (694) 
Dispositions
(296) (7,019) (280) (6,811) 
Other investments(1)
(896) (132) (889) (141) 
Same Store NOI *$70,608  $67,246  $72,755  $72,398  
Change period over period in Same Store NOI5.0 %N/A0.5 %N/A





Piedmont Office Realty Trust, Inc.
EBITDAre, Core EBITDA, Property Net Operating Income (Cash and Accrual), Same Store Net Operating Income (Cash and Accrual)
Unaudited (in thousands)
Cash BasisAccrual Basis
Nine Months EndedNine Months Ended
9/30/20199/30/20189/30/20199/30/2018
GAAP net income applicable to common stock$66,783  $84,886  $66,783  $84,886  
Net income applicable to noncontrolling interest
(3) (4) (3) (4) 
Interest expense
46,750  45,294  46,750  45,294  
Depreciation
79,982  81,090  79,982  81,090  
Amortization
55,622  46,773  55,622  46,773  
Impairment loss on real estate assets
1,953  —  1,953  —  
Gain on sale of real estate assets
(39,370) (45,186) (39,370) (45,186) 
EBITDAre
211,717  212,853  211,717  212,853  
Loss on extinguishment of debt
—  1,680  —  1,680  
Retirement and separation expenses associated with senior management transition
3,175  —  3,175  —  
Core EBITDA*214,892  214,533  214,892  214,533  
General & administrative expenses
26,561  21,487  26,561  21,487  
Management fee revenue
(2,226) (531) (2,226) (531) 
Other income
(165) (475) (165) (475) 
Straight line effects of lease revenue
(7,437) (11,489) 
Amortization of lease-related intangibles
(6,009) (5,636) 
Property NOI*225,616  217,889  239,062  235,014  
   Net operating income from:
Acquisitions
(12,610) (1,038) (14,974) (1,653) 
Dispositions
(4,931) (18,368) (3,479) (16,845) 
Other investments(1)
(1,181) (1,456) (1,159) (1,292) 
Same Store NOI *$206,894  $197,027  $219,450  $215,224  
Change period over period in Same Store NOI5.0 %N/A2.0 %N/A

(1)Other investments consist of our investments in 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 Two Pierce Place in Itasca, IL are included in this line item.




*Definitions:

EBITDAre: The Company calculates EBITDAre in accordance with the current National Association of Real Estate Investment Trusts (“NAREIT”) definition. NAREIT currently defines EBITDAre as net income (computed in accordance with GAAP) adjusted for gains or losses from sales of property, impairment losses, depreciation on real estate assets, amortization on real estate assets, interest expense and taxes, along with the same adjustments for unconsolidated partnerships and joint ventures. Some of the adjustments mentioned can vary among owners of identical assets in similar conditions based on historical cost accounting and useful-life estimates. EBITDAre 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 EBITDAre is helpful to investors as a supplemental performance measure because it provides a metric for understanding the Company’s results from ongoing operations without taking into account the effects of non-cash expenses (such as depreciation and amortization) and capitalization and capital structure expenses (such as interest expense and taxes). The Company also believes that EBITDAre can help facilitate comparisons of operating performance between periods and with other REITs. However, other REITs may not define EBITDAre in accordance with the NAREIT definition, or may interpret the current NAREIT definition differently than the Company; therefore, the Company’s computation of EBITDAre may not be comparable to that of such other REITs.
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.


Document


EXHIBIT 99.2




http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=13170911&doc=17



Quarterly Supplemental Information
September 30, 2019










Corporate HeadquartersInstitutional Analyst ContactInvestor Relations
5565 Glenridge Connector, Suite 450Telephone: 770.418.8592Telephone: 866.354.3485
Atlanta, GA 30342research.analysts@piedmontreit.cominvestor.services@piedmontreit.com
Telephone: 770.418.8800www.piedmontreit.com




Piedmont Office Realty Trust, Inc.
Quarterly Supplemental Information
Index


PagePage
IntroductionOther Investments
Corporate DataOther Investments Detail
Investor InformationSupporting Information
Financial HighlightsDefinitions
FinancialsResearch Coverage
Balance SheetsNon-GAAP Reconciliations
Income StatementsProperty Detail - In-Service Portfolio
Key Performance IndicatorsCompany Metrics After 500 West Monroe Street Sale
Funds From Operations / Adjusted Funds From OperationsRisks, 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
Contractual Tenant Improvements & Leasing Commissions
Geographic Diversification
Geographic Diversification by Location Type
Industry Diversification
Property Investment Activity
Notice to Readers:
Please refer to page 46 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 may differ from actual results.
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.
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, EBITDAre and Core EBITDA. Definitions and reconciliations of these non-GAAP measures to their most comparable GAAP metrics are included beginning on page 38. 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.
In certain presentations herein, the Company has provided disaggregated financial and operational data (for example, some pieces of information are displayed by geography, industry, or lease expiration year) for informational purposes for readers; however, regardless of the various presentation approaches taken herein, we continue to evaluate and utilize our consolidated financial results in making operating decisions, allocating resources, and assessing our performance.




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, redeveloper and operator of high-quality, Class A office properties in select sub-markets located primarily within seven major Eastern U.S. office markets. Its geographically-diversified, $5 billion portfolio is comprised of approximately
17 million square feet (as of the date of release of this report, incorporating the sale of 500 West Monroe Street). 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. At the end of the third quarter of 2019, three-fourths of the Company's portfolio was Energy Star certified and approximately 40% was LEED certified. 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 ofAs of
September 30, 2019December 31, 2018
Number of consolidated in-service office properties (1)
5554
Rentable square footage (in thousands) (1)
17,01516,208
Percent leased (2)
91.9 %93.3 %
Capitalization (in thousands):
Total debt - principal amount outstanding (excludes premiums, discounts, and deferred financing costs)$1,887,033$1,694,706
Equity market capitalization (3)
$2,626,358$2,150,764
Total market capitalization (3)
$4,513,391$3,845,470
Total debt / Total market capitalization (3)
41.8 %44.1 %
Average net debt to Core EBITDA6.0 x5.8 x
Total debt / Total gross assets39.0 %36.2 %
Common stock data:
High closing price during quarter$20.91$18.90
Low closing price during quarter$19.21$16.49
Closing price of common stock at period end$20.88$17.04
Weighted average fully diluted shares outstanding during quarter (in thousands)126,240128,811
Shares of common stock issued and outstanding at period end (in thousands)125,783126,219
Annual regular dividend per share (4)
$0.84$0.84
Rating / Outlook:
Standard & Poor'sBBB / StableBBB / Stable
Moody'sBaa2 / StableBaa2 / Stable
Employees131134


(1)As of September 30, 2019, our consolidated office portfolio consisted of 55 properties (exclusive of one 487,000 square foot property that was taken out of service for redevelopment on January 1, 2018, Two Pierce Place in Itasca, IL), compared to 54 properties at December 31, 2018. During the first quarter of 2019, the Company sold One Independence Square, a 334,000 square foot office building located in Washington, DC. During the second quarter of 2019, the Company acquired Galleria 100, a 414,000 square foot office building, along with a 1.5 acre developable land parcel, located in Atlanta, GA. During the third quarter of 2019, the Company sold The Dupree, a 138,000 square foot office building located in Atlanta, GA, and we acquired Galleria 400 and Galleria 600, two office buildings comprised of 864,000 square feet in total, along with a 10.2 acre developable land parcel, located in Atlanta, GA.
(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, since January 1, 2018, it has excluded one out of service property. Please refer to page 26 for additional analyses regarding Piedmont's leased percentage.
(3)Reflects common stock closing price, shares outstanding and outstanding debt as of the end of the reporting period, as appropriate.
(4)Total of the regular dividends per share declared over the prior four quarters.

3


Piedmont Office Realty Trust, Inc.
Investor Information
Corporate
5565 Glenridge Connector, Suite 450
Atlanta, Georgia 30342
770.418.8800
www.piedmontreit.com

Executive Management
C. Brent SmithRobert E. BowersEdward H. Guilbert, IIIChristopher A. Kollme
Chief Executive Officer, PresidentChief Financial and Administrative OfficerExecutive Vice President, Finance,Executive Vice President,
and Directorand Executive Vice PresidentAssistant Secretary and TreasurerFinance & Strategy
Investor Relations Contact
Laura P. MoonJoseph H. PangburnThomas R. PrescottAlex Valente
Chief Accounting Officer andExecutive Vice President,Executive Vice President,Executive Vice President,
Senior Vice PresidentSouthwest RegionMidwest RegionSoutheast Region
George WellsRobert K. Wiberg
Executive Vice President,Executive Vice President,
Real Estate OperationsNortheast Region and Head of Development
Board of Directors
Frank C. McDowellDale H. TaysomKelly H. BarrettWesley E. Cantrell
Director, Chairman of the Board of Directors,Director, Vice Chairman of the Director, Chair of the Audit Committee, Director, Chair of the Governance
Chair of the Compensation Committee, andBoard of Directors, and Member of theand Member of the Governance CommitteeCommittee, and Member of the
Member of the Audit and Governance CommitteesAudit and Capital CommitteesCompensation Committee
Barbara B. LangDonald A. Miller, CFAC. Brent SmithJeffery L. Swope
Director and Member of the CompensationDirectorChief Executive Officer, PresidentDirector, Chair of the Capital
and Governance Committeesand DirectorCommittee, and Member of the
Compensation Committee

Transfer AgentCorporate Counsel
ComputershareKing & Spalding
P.O. Box 301701180 Peachtree Street, NE
College Station, TX 77842-3170Atlanta, GA 30309
Phone: 866.354.3485Phone: 404.572.4600

4


Piedmont Office Realty Trust, Inc.
Financial Highlights
As of September 30, 2019

Financial Results (1)

Net income attributable to Piedmont for the quarter ended September 30, 2019 was $8.4 million, or $0.07 per share (diluted), compared to $16.1 million, or $0.13 per share (diluted), for the same quarter in 2018. Net income attributable to Piedmont for the nine months ended September 30, 2019 was $66.8 million, or $0.53 per share (diluted), compared to $84.9 million, or $0.65 per share (diluted), for the same period in 2018. The decrease in net income attributable to Piedmont for the three months and the nine months ended September 30, 2019 when compared to the same periods in 2018 was primarily due to higher general and administrative expenses resulting from a) retirement and separation expenses incurred during the second quarter of 2019 resulting from the retirement on June 30 of two senior officers, including our former Chief Executive Officer, and related changes to the senior management team, and b) higher long-term performance incentive compensation expense accruals associated with the Company's total shareholder return outperformance relative to peers during the periods, and due to higher amortization expense attributable to over $470 million of acquisitions completed since the beginning of 2018.

Funds from operations (FFO) for the quarter ended September 30, 2019 was $56.7 million, or $0.45 per share (diluted), compared to $57.6 million, or $0.45 per share (diluted), for the same quarter in 2018. FFO for the nine months ended September 30, 2019 was $164.3 million, or $1.30 per share (diluted), compared to $167.0 million, or $1.27 per share (diluted), for the same period in 2018. The decrease in dollar amount of FFO for the nine months ended September 30, 2019 when compared to the same period in 2018 was largely due to higher general and administrative expenses in 2019 as described above for changes in net income, partially offset by growth in rental income attributable to increased occupancy in 2019 when compared to 2018.

Core funds from operations (Core FFO) for the quarter ended September 30, 2019 was $56.7 million, or $0.45 per share (diluted), compared to $57.6 million, or $0.45 per share (diluted), for the same quarter in 2018. Core FFO for the nine months ended September 30, 2019 was $167.5 million, or $1.33 per share (diluted), compared to $168.7 million, or $1.29 per share (diluted), for the same period in 2018. The decrease in dollar amount of Core FFO for the three months and the nine months ended September 30, 2019 when compared to the same periods in 2018 was primarily attributable to higher general and administrative expenses in 2019 as described above for changes in net income, partially offset by the positive revenue effects of increased occupancy in 2019 as described above for changes in FFO

Adjusted funds from operations (AFFO) for the quarter ended September 30, 2019 was $36.7 million, compared to $45.5 million for the same quarter in 2018. AFFO for the nine months ended September 30, 2019 was $130.8 million, compared to $130.7 million for the same period in 2018. The decrease in AFFO for the three months ended September 30, 2019 when compared to the same period in 2018 was primarily due to a greater amount of non-incremental capital expenditures incurred during the third quarter of 2019 when compared to the third quarter of 2018 attributable to recent leasing activity.

All of the per share results for the three months and the nine months ended September 30, 2019 were positively influenced by the Company's repurchases of common stock since the beginning of 2018, amounting to approximately 17.2 million shares, or about $314 million, funded through asset dispositions. No shares were repurchased during the third quarter of 2019.

Operations and Leasing

As of September 30, 2019, Piedmont had 55 in-service office properties located primarily in seven major office markets in the eastern portion of the United States and one, 487,000 square foot redevelopment property located in Chicago. This redevelopment property is excluded from Piedmont's in-service operating portfolio for the purposes of statistical reporting throughout this supplemental report. For additional information regarding this redevelopment project, please refer to page 37 of this report.

On a square footage leased basis, our total in-service office portfolio was 91.9% leased as of September 30, 2019, as compared to 92.6% at June 30, 2019 and 93.3% at December 31, 2018. Please refer to page 26 for additional leased percentage information.

The weighted average remaining lease term of our in-service portfolio was 6.4 years(2) as of September 30, 2019 as compared to 6.6 years at December 31, 2018. Our weighted average adjusted Annualized Lease Revenue(3) per square foot for our in service portfolio was $36.24 as of September 30, 2019.
(1) 
FFO, Core FFO and AFFO are supplemental non-GAAP financial measures. See page 38 for definitions of these non-GAAP financial measures, and pages 14 and 40 for reconciliations of FFO, Core FFO and AFFO to Net Income.
(2) 
Remaining lease term (after taking into account leases for vacant spaces which had been executed but not commenced as of September 30, 2019) is weighted based on Annualized Lease Revenue, as defined on page 38.
(3) Annualized Lease Revenue is adjusted for buildings at which tenants pay operating expenses directly to include such operating expenses as if they were paid by the Company and reimbursed by the tenants as under a typical net lease structure, thereby incorporating the effective gross rental rate for those buildings.
5


During the three months ended September 30, 2019, the company completed approximately 564,000 square feet of leasing activity. Of the total leasing activity completed during the quarter, we signed new tenant leases for approximately 195,000 square feet. During the nine months ended September 30, 2019, the Company completed approximately 1,403,000 square feet of leasing activity (exclusive of a short-term lease renewal signed with the State of New York (1) at 60 Broad Street in New York, NY during Q1 2019), of which approximately 567,000 square feet was related to new tenant leases. The average committed capital for tenant improvements and leasing commissions per square foot per year of lease term for all leasing activity completed during the nine months ended September 30, 2019 (net of commitment expirations during the period) was $5.10 (see page 32).

Of the 564,000 square feet of leases executed during the three months ended September 30, 2019, nine leases were greater than 10,000 square feet at our consolidated office properties. Information on those leases is set forth below.
TenantPropertyMarketSquare Feet
Leased
Expiration
Year
Lease Type
Commercial Metals Company6565 North MacArthur BoulevardDallas105,916  2028Renewal / Contraction
WeWork Companies Inc.1155 Perimeter Center WestAtlanta71,821  2035New
Siemens CorporationCrescent Ridge IIMinneapolis69,308  2030Renewal / Contraction
Gartner, Inc.6031 Connection DriveDallas54,920  2034Expansion
Qualcomm Incorporated90 Central StreetBoston49,036  2025Renewal
Morris Adjmi Architects P.C.60 Broad StreetNew York19,800  2029Renewal / Expansion
Smithsonian Institution400 Virginia AvenueWashington, DC12,440  2024New
Social Solutions International, Inc.400 Virginia AvenueWashington, DC11,761  2023New
Orange Business Services U.S., Inc.Galleria 100Atlanta11,671  2027Renewal / Contraction

At the end of the third quarter of 2019, there were two tenants whose leases individually contributed greater than 1% in Annualized Lease Revenue expiring during the eighteen month period following September 30, 2019. Information regarding the leasing status of the spaces associated with these tenants' leases is presented below.
TenantPropertyProperty LocationNet
Square
Footage
Expiring
Net Percentage of
Current Quarter
Annualized Lease
Revenue Expiring
(%)
ExpirationCurrent Leasing Status
State of New York60 Broad StreetNew York, NY476,996  4.9%  Q4 2019During the third quarter of 2019, documentation was finalized for an approximately 520,000 square foot lease renewal and expansion. Subsequent to the end of the quarter, the approximately 20-year lease renewal and expansion was signed by the Commissioner of General Services of the State of New York. The lease was completed with compelling terms, including no free rent.
City of New York60 Broad StreetNew York, NY313,022  2.1%  Q2 2020The Company is in advanced discussions with the tenant regarding a long-term lease renewal.

Future Lease Commencements and Abatements

As of September 30, 2019, our overall leased percentage was 91.9% and our economic leased percentage was 86.4%. 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 591,135 square feet of leases as of September 30, 2019, or 3.5% of the portfolio); and
2)leases which have commenced but are within rental abatement periods (amounting to 467,596 square feet of leases as of September 30, 2019, or a 2.0% impact to leased percentage on an economic basis).



(1) Since the lease renewal negotiations with the State of New York were not anticipated to conclude prior to the original lease expiration date of March 31, 2019, the lease was extended on a short-term basis to allow for an orderly resolution to the final outstanding items under negotiation.

6


The gap between reported leased percentage and economic leased percentage will fluctuate over time as (1) new leases are signed for vacant spaces (with the gap this quarter being heavily influenced by the Transocean lease for 301,000 square feet of vacant space at Enclave Place in Houston, TX, attributable for 1.8% of the 5.5% gap), (2) abatements associated with existing or newly executed leases commence and expire (see below for more detail on existing large leases with abatements), and/or (3) properties are bought and sold. Consequently, the absolute level of economic leased percentage and its growth over time are the primary management metrics and not the spread between reported and economic leased percentages at any one point in time. As additional leasing is completed for vacant space and the overall portfolio leased percentage increases, the economic leased percentage will naturally follow as new leases commence and any related abatement periods expire. Since the beginning of 2014, the reported leased percentage has increased approximately 5% and the economic leased percentage has increased almost 12%.

Piedmont has leases with many large corporate office space users. The average size of lease in the Company's portfolio is near 20,000 square feet. Due to the large size and length of term of new leases, Piedmont typically signs leases several months in advance of their anticipated lease commencement dates. Presented below is a schedule of uncommenced leases greater than 50,000 square feet and their anticipated commencement dates. Lease renewals are excluded from this schedule.
TenantPropertyProperty LocationSquare Feet
Leased
Space StatusEstimated
Commencement
Date
New /
Expansion
Transocean Offshore Deepwater Drilling, Inc.Enclave PlaceHouston, TX300,906  Vacant
Q4 2019 (1)
New
salesforce.com (formerly Demandware, Inc.)5 Wall StreetBurlington, MA127,408  Not VacantQ4 2019 (75,495 SF)
Q3 2021 (51,913 SF)
New
WeWork Companies Inc.200 South Orange AvenueOrlando, FL73,380  
Vacant /
Not Vacant (2)
Q2 2020
New
WeWork Companies Inc.1155 Perimeter Center WestAtlanta, GA71,821  VacantQ1 2020New
Gartner, Inc.6031 Connection DriveIrving, TX54,920  VacantQ2 2020 (27,150 SF)
Q1 2021 (27,770 SF)
New

New leases frequently provide rental abatement concessions to tenants and these abatements typically occur at the beginning of the leases. The currently reported cash net operating income and AFFO understate the Company's long-term cash generation ability from existing signed leases due to several leases being in abatement periods. 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 third quarter of 2019, 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 the Quarter
TenantPropertyProperty LocationAbated Square FeetLease Commencement DateAbatement Period Expired
During Current Quarter
Lease Expiration
VMware, Inc.1155 Perimeter Center WestAtlanta, GA50,442  Q3 2019 August 2019Q3 2027

Current / Future Abatements
TenantPropertyProperty LocationAbated Square FeetLease Commencement DateRemaining Abatement ScheduleLease Expiration
Transocean Offshore Deepwater Drilling, Inc.Enclave PlaceHouston, TX300,906  
Q4 2019 (3)
July 2019 through April 2021 (3) (4)
Q2 2036
VMware, Inc.1155 Perimeter Center WestAtlanta, GA50,442  Q3 2019                    October and November 2019; January and February 2020 Q3 2027
Norris McLaughlin, P.A.400 Bridgewater CrossingBridgewater, NJ61,642  Q4 2016November and December 2019 Q4 2029
WeWork Companies Inc.1155 Perimeter Center WestAtlanta, GA71,821